TIDMKGF
RNS Number : 9424S
Kingfisher PLC
22 March 2021
Final results for the year ended 31 January 2021
Financial summary % Total % Total % LFL*
Change Change Change
--------- ----------- ----------
2020/21 2019/20 Reported Constant Constant
currency* currency
------------------------ ------------ ------------ --------- ----------- ----------
Sales* GBP12,343m GBP11,513m +7.2% +6.8% +7.1%
Gross profit GBP4,573m GBP4,255m +7.5% +6.9%
Gross margin %* 37.1% 37.0% +10bps -
Operating profit GBP916m GBP283m +223.7%
Statutory pre-tax
profit GBP756m GBP103m +634.0%
Statutory post-tax GBP592m GBP8m n/a
profit
Statutory basic EPS 28.1p 0.4p n/a
Cash and bank GBP1,136m GBP195m n/a
overdrafts
Total dividend (1) 8.25p 3.33p n/a
Adjusted metrics
Retail profit* GBP1,003m GBP786m +27.5% +27.4%
Retail profit margin
%* 8.1% 6.8% +130bps +130bps
Adjusted pre-tax
profit* GBP786m GBP544m +44.4%
Adjusted pre-tax profit
margin %* 6.4% 4.7% +170bps
Adjusted effective tax
rate* 23% 26% n/a
Adjusted post-tax
profit* GBP604m GBP400m +51.0%
Adjusted basic EPS* 28.7p 19.1p +50.3%
Free cash flow* GBP938m GBP191m +391.1%
Net debt*(2) GBP(1,394)m GBP(2,526)m n/a
Highlights
-- Supporting colleagues, customers and communities - swift and
robust action taken throughout the COVID crisis
-- New strategy delivering - empowered banners supported by Group scale, strength & expertise
-- Strong financial performance - driven by new strategy,
agility in management in response to the COVID crisis, and strong
demand for home improvement
-- Supportive market drivers and new trends - offering longer-term growth opportunities
-- Emerging from the COVID crisis stronger - improved
competitive position in all key markets and strong new customer
growth and digital adoption, with c.10 million new online
customers
-- Resuming dividends - progressive, sustainable dividend policy
established (target dividend cover* of 2.25-2.75x)
FY 20/21 Group results
-- Sales up 6.8% in constant currency, driven by strong trading from Q2 and reduced disruption
-- LFL sales up 7.1% with growth across all banners in the UK
& Ireland*, France*, Poland, Romania and Portugal
- LFL sales up 15.5% in Q4 20/21 with growth across all retail banners and categories
-- E-commerce sales* up 158%; now 18% of total Group sales (FY 19/20: 8%)
- Click & collect sales up 226%; 78% of Group e-commerce sales (FY 19/20: 62%)
-- Retail profit up 27.4% in constant currency, largely driven by B&Q performance
-- A djusted pre-tax profit up 44.4%, including c.GBP85 million
of non-recurring net cost savings* in FY 20/21
-- Statutory pre-tax profit up 634%, reflecting higher operating
profit and significantly lower exceptional adjusting items*
-- Free cash flow of GBP938 million, up GBP747 million,
reflecting higher operating profit, working capital inflow of
GBP376 million and lower capex
-- Net debt to EBITDA * of 0.9x as at year-end (31 January 2020: 2.0x)
-- Dividend payments resumed with a proposed total dividend per share of 8.25p for FY 20/21
Making good progress against 'Powered by Kingfisher' strategic
objectives
-- Announced new strategic plan in June 2020 - 'Powered by
Kingfisher' - distinct retail banners addressing diverse customer
needs, 'powered' by the Group
-- New strategy and leadership teams firmly established in the business
-- Progressing fix of issues from previous years, including:
rebalancing Group and local activities, improving operational
performance in France, implementing new trading approaches, and
pausing or stopping some initiatives to focus our resources
-- Making good progress with core strategic priorities, including:
- Clear positioning and growth plans for all retail banners
- Fundamental reorganisation of Kingfisher's commercial
operating model to enable a more balanced and agile local-Group
operating model (refer to Section 2)
- Acceleration of e-commerce growth initiatives
- Successful roll-out of more own exclusive brands (OEB)
including new kitchens and indoor lighting ranges
- Introduction of several new mobile-led and service
capabilities, including the acquisition of the services marketplace
NeedHelp
- Test and launch of new compact stores and partnership models
- Progressing ESG priorities - strong actions to engage, develop
and support colleagues, help tackle climate change and
deforestation, support our communities and promote greener,
healthier homes
- Multiple actions to control costs, inventory and working
capital during the COVID crisis; clear longer-term plan to further
reduce costs and same-store inventory
Clear financial priorities
-- Prioritise top line growth and grow sales ahead of market
-- Aim to grow adjusted pre-tax profit in line with sales (3) ;
gradually faster than sales over time
-- Generate strong free cash flow to underpin shareholder returns
Thierry Garnier , Chief Executive Officer, said:
"The dedication and commitment of our 80,000 colleagues has
enabled us to make substantial strategic, operational and financial
progress this year. Kingfisher is coming out of the COVID crisis as
a stronger business, with an improved competitive position in all
key markets, strong new customer growth and a step change in
digital adoption. I would like to express my personal thanks to all
our teams for their incredible efforts in the most testing of
circumstances.
"We rolled out our 'Powered by Kingfisher' strategy without
delay and even accelerated in many areas. Our distinct retail
banners are now empowered and much more agile, which enabled them
to react quickly in what was a volatile situation last year,
supported by the scale, strength and expertise of the Kingfisher
Group.
"We continued to 'focus and fix' key aspects of the business. We
have now finalised the fundamental reorganisation of our commercial
operating model, and introduced new trading approaches tailored to
local markets. In France, our performance and competitive position
have significantly improved as we've addressed operational issues
and strengthened our teams and ranges. There is still work to do,
but our progress and the overall engagement of our teams are clear
to see.
"We are making significant progress with our longer-term
strategic goals. In the area of e-commerce, by rapidly implementing
changes in our stores, IT systems and supply chain, we have met the
demand of our customers for speed and convenience. This approach,
supported by our model of placing stores at the centre, has driven
rapid click & collect growth along with faster home delivery
services. Group e-commerce sales grew by 158%, reaching 18% of our
sales. We have also accelerated the pace of development in the
areas of mobile, services, store concepts and partnerships, and
have many ongoing and exciting innovations in progress.
"Throughout this year, we have remained committed to making the
right decisions for our colleagues, customers, and our communities.
This has included upgrading our safe operating standards,
ring-fencing and donating PPE, supporting our colleagues and
rewarding frontline staff, returning government support, and
developing our plans to help tackle climate change and
deforestation.
"Current trading remains positive and, while visibility is
limited for the year as a whole, we are confident of continued
outperformance of our wider markets. The COVID crisis has
established new longer-term trends that are clearly supportive for
our industry - including more working from home, the renewed
importance of the home as a 'hub', and the development of a new
generation of DIY'ers - and we expect these to endure. With our
strategic progress, we are well positioned to capitalise on these
new and positive market trends."
Outlook for FY 21/22
-- The following guidance applies in the event of no adverse
change in COVID-related confinement measures (e.g. new lockdown
restrictions resulting in further store closures)
-- Good start to the new financial year, with strong demand in the UK and France
- Q1 21/22 Group LFL sales(4) up 24.2% (to 18 March 2021)
- Mindful of continued uncertainty related to COVID in continental Europe
-- H1 21/22 - expect low double-digit LFL sales growth,
supported by delivery of strategic objectives
-- H2 21/22 - planning for LFL scenarios of -15% to -5% (2-year LFLs* for H2 of -1% to +11%)
- H2 likely to be impacted by strong year on year comparables
(H2 20/21: Group LFL sales +16.6%) and uncertainty over the
macroeconomic and consumer environment
-- Aiming to grow full year adjusted pre-tax profit (before
c.GBP85 million of non-recurring net cost savings in FY 20/21 ) in
line with sales(3)
-- Strategic execution and supportive market trends provide opportunity for sustained
long-term growth
The remainder of this release consists of eight main
sections:
1) FY 2020/21 Financial performance summary and current trading
2) Group update (including ' Powered by Kingfisher' strategic plan)
3) Managing the impact of COVID
4) Trading review by division
5) FY 2021/22 Technical guidance
6) FY 2020/21 Financial review and, in part 2 of this
announcement, the condensed financial statements
7) Glossary
8) Forward-looking statements
Footnotes
(1) The Board has proposed a total dividend per share of 8.25p
in respect of FY 20/21, comprising an interim dividend of 2.75p in
respect of the six months ended 31 July 2020 (FY 19/20 interim
dividend: 3.33p) and a final dividend of 5.50p (FY 19/20 final
dividend: nil). The final dividend is subject to the approval of
shareholders at the Annual General Meeting on 30 June 2021, and
will be paid alongside the interim dividend on 5 July 2021 to
shareholders on the register at close of business on 4 June
2021.
(2) Net debt includes c.GBP2.4 billion lease liabilities under
IFRS 16 in FY 20/21 (FY 19/20: c.GBP2.6 billion).
(3) Group total sales growth and adjusted pre-tax profit growth
in constant currency.
(4) 'Q1 21/22 Group LFL sales' figures represent the period from
31 January 2021 to 18 March 2021 (compared against the equivalent
period in the prior year, from 2 February 2020 to 19 March 2020).
The figures are provisional and exclude certain non-cash accounting
adjustments relating to revenue recognition.
Non-GAAP measures and other terms
Throughout this release '*' indicates the first instance of a
term defined and explained in the Glossary (Section 7). Not all the
figures and ratios used are readily available from the unaudited
final results included in part 2 of this announcement. Management
believe that these non-GAAP measures (also known as alternative
performance measures), including adjusted profit measures, constant
currency and like-for-like sales growth, are useful and necessary
to assist the understanding of the Group's results. Where required,
a reconciliation to statutory amounts is set out in the Financial
Review (Section 6).
Contacts
Tel: Email:
Investor Relations +44 (0) 20 7644 investorenquiries@kingfisher.com
1082
Media Relations +44 (0) 20 7644 corpcomms@kingfisher.com
1030
Teneo +44 (0) 20 7420 Kfteam@teneo.com
3184
Final results announcement
This announcement can be downloaded from www.kingfisher.com . We
can be followed on Twitter (@kingfisherplc) with the full year
results tag #KGFFY.
Results presentation
We will host an online results presentation and Q&A today,
at 09.00 (UK time), for analysts and investors. A live audio
webcast of the presentation and Q&A will be available via the
Investors section of our website at www.kingfisher.com, and
subsequently available on demand. To join via telephone please use
the password already sent to you, or email
investorenquiries@kingfisher.com . The presentation slides will be
available on our website at 09.00 (UK time).
Financial calendar
Q1 trading update 20 May 2021(+/-)
Annual General Meeting 30 June 2021
Half year results 21 September 2021(+/-)
Q3 trading update 23 November 2021(+/-)
(+/-) These dates are provisional and may be subject to
change
American Depository Receipts
Kingfisher American Depository Receipts are traded in the US on
the OTCQX platform: (OTCQX: KGFHY)
http://www.otcmarkets.com/stock/KGFHY/quote .
Section 1: FY 2020/21 Financial performance summary and current
trading
Income statement summary
% Total % Total % LFL
Change Change Change
-------- -------- -------- --------- ----------
GBPm 2020/21 2019/20 Reported Constant Constant
currency currency
----------------------------- -------- -------- -------- --------- ----------
Sales 12,343 11,513 +7.2% +6.8% +7.1%
Gross profit 4,573 4,255 +7.5% +6.9%
Retail profit:
UK & Ireland 681 499 +36.3% +36.3%
France 181 164 +10.3% +7.9%
------------------------------ -------- -------- -------- ---------
Poland 146 151 (3.7)% (1.9)%
Iberia* 3 2 +66.3% +62.7%
Romania (14) (23) +38.7% +38.8%
Russia (3) (12) +85.7% +83.9%
Other (+/-) - (4) n/a n/a
Turkey (50% joint venture) 9 9 (2.7)% +22.4%
------------------------------ -------- -------- -------- ---------
Other International* 141 123 +14.5% +17.8%
------------------------------ -------- -------- -------- ---------
Retail profit 1,003 786 +27.5% +27.4%
Central costs* (54) (62) +15.4%
Share of JV interest
and tax (3) (7) +49.7%
Operating profit
(pre-exceptional adjusting
items) 946 717 +31.9%
------------------------------ -------- -------- --------
Net finance costs
(pre-exceptional adjusting
items) (160) (173) +6.2%
Adjusted pre-tax profit 786 544 +44.4%
------------------------------ -------- -------- --------
Exceptional adjusting
items (30) (441) +93.5%
Statutory pre-tax profit 756 103 +634.0%
------------------------------ -------- -------- --------
(+/-) 'Other' relates to Screwfix Germany, where all 19 stores
were closed during H1 19/20.
LFL sales by quarter
Quarterly sales % LFL Change
-----------------------------------------------------
Q1 20/21 Q2 20/21 Q3 20/21 Q4 20/21 FY 20/21
UK & Ireland (16.0)% +19.6% +19.9% +19.4% +10.7%
- B&Q (21.8)% +28.0% +24.0% +22.6% +13.0%
- Screwfix (4.7)% +2.4% +12.8% +14.7% +6.6%
France (41.5)% +27.0% +19.2% +15.4% +5.1%
- Castorama (43.6)% +25.3% +23.2% +20.5% +6.2%
- Brico Dépôt (39.2)% +28.9% +15.1% +10.0% +3.8%
Other International
(ex-Russia) (15.8)% +11.9% +9.5% +5.9% +3.5%
- Poland (9.6)% +15.0% +7.5% +5.3% +4.9%
- Iberia (47.2)% (1.1)% +18.1% +2.8% (7.0)%
- Romania(1) +2.3% +12.1% +10.6% +13.5% +10.8%
------------------------------- --------- --------- --------- --------- -----------
Group LFL (ex-Russia) (25.4)% +20.9% +17.7% +15.5% +7.4%
------------------------------- --------- --------- --------- --------- -----------
- Russia(2) +4.4% (32.4)% +6.3% n/a (8.8)%
Group LFL(3) (24.8)% +19.5% +17.4% +15.5% +7.1%
------------------------------- --------- --------- --------- --------- -----------
E-commerce sales(4) +120.7% +203.2% +152.6% +153.5% +158.4%
Current operational status
The vast majority of our c.1,390 stores remain open for in-store
purchasing and click & collect, under strict social distancing
and safety protocols. In the United Kingdom and Republic of
Ireland, restrictions imposed from late December 2020 mean that
discrete areas of certain B&Q stores (e.g., showrooms in
England and Scotland) remain temporarily closed. For those stores
where showrooms are closed, B&Q is operating a virtual sales
model for kitchens and bathrooms, and several thousands of virtual
showroom planning sessions have been conducted since the start of
this year.
Since late January 2021, the French government has gradually
instructed certain regions (départements) with higher coronavirus
infection rates to implement additional containment measures. While
Castorama and Brico Dépôt stores retain their 'essential' retailer
status, some départements have restricted trading for non-food
stores larger than a certain size, and others require the closure
of non-essential areas of stores.
As a result of these measures, as at midday on 21 March 2021, 12
Castorama stores are currently temporarily closed for in-store
browsing and purchasing. The majority of these temporary closures
took effect on 6 March 2021. At all 12 stores impacted, click &
collect, home delivery and virtual showroom planning services
remain available for the general public. In addition, seven
building external courtyards remain open, and seven of the 12
stores remain open for tradespeople. A further 26 Castorama stores
and 32 Brico Dépôt stores are impacted by the temporary closure of
non-essential areas of stores (e.g. showrooms and certain areas of
surfaces & décor), which took effect on 20 March 2021. Trading
continues to be strong across both retail banners in France.
In Poland, national restrictions are in place between 20 March
and 9 April 2021. Hardware retail continues to be classified as
'essential' and all Castorama stores remain open.
Trading in Q4 20/21
Group LFL sales increased by 15.5%, supported by e-commerce
sales growth of over 150%. Transaction volume and average basket
value both grew in the quarter. The performance reflects continued
strong execution together with increased demand for home
improvement.
Within the quarter we experienced slower growth in November,
relative to Q3, largely reflecting the impact in France of a
negative calendar effect year on year, and the less favourable
trend for trade-oriented businesses versus general home improvement
during the November lockdown in France. Sales growth in December
accelerated, helped by significantly stronger growth in France post
the November lockdown. The UK & Ireland also performed strongly
in December, with growth at Screwfix accelerating from November. In
January, despite further lockdown restrictions, sales growth
remained strong for most of our retail banners.
Trading since 1 February 2021
Q1 21/22 Group LFL sales (5) (to 18 March 2021) are up 24.2%,
reflecting strong demand in the UK and France, supported by
e-commerce growth of over 150%. However, we remain mindful of the
continued uncertainty related to COVID in continental Europe, as
described in the 'Current operational status' above. To update on
recent trading trends, the table below shows weekly sales data by
market for the last seven weeks.
Sales: 7 weeks % LFL Change
to
----------------------------------------------------------------------
18 March 2021 week week week week week week 6(6) week 7(6)
1(6) 2(6) 3(6) 4(6) 5(6)
-------------- -------- -------- -------- -------- -------- --------- ---------
UK & Ireland +20.9% +19.6% +24.0% +38.9% +42.1% +35.8% +3.4%
France +17.7% +12.7% +11.7% +23.3% +27.6% +13.3% +2,941.3%
Other
International +9.2% (4.1)% (2.3)% +2.4% +2.2% +1.8% +47.5%
- Poland +13.1% (5.5)% (3.4)% +0.8% (0.2)% (3.1)% +27.6%
- Iberia (8.8)% (2.3)% +2.6% +7.0% +11.2% +23.3% +997.6%
- Romania +14.1% +2.2% (2.8)% +5.2% +2.7% +3.5% +3.4%
-------- -------- -------- --------
Group LFL +17.8% +13.1% +15.2% +26.8% +29.9% +21.7% +59.1%
-------------- -------- -------- -------- -------- -------- --------- ---------
E-commerce
sales +165.8% +152.6% +153.9% +155.0% +168.1% +169.4% +119.3%
In the UK and France, trading has remained strong across all
banners, with growth in both transaction volume and average basket
value. Sales in Poland have been impacted by abnormally cold
weather conditions. E-commerce sales growth remained over 150% year
on year.
During the second and third weeks of March (weeks 6 and 7 of FY
21/22), certain Castorama and Brico Dépôt stores in France were
temporarily closed for in-store browsing and purchasing. Please
refer to the 'Current operational status' above. The third week of
March (week 7 - to Thursday 18 March 2021) also saw the first
significant impact in the comparable period in 2020 from lockdowns
and store closures, following the onset of the coronavirus in
Europe. During that week in 2020, France was severely impacted by
the closure of all its stores, and the UK saw strong growth ahead
of a national lockdown starting in the last week of March 2020.
2-year LFLs
The table below shows weekly sales data by market for the last
seven weeks, calculated on a 2-year basis(7) .
Sales: 7 weeks % 2-year LFL Change
to
----------------------------------------------------------------------
18 March 2021 week week week week week week 6(8) week 7(8)
1(8) 2(8) 3(8) 4(8) 5(8)
-------------- -------- -------- -------- -------- -------- --------- ---------
UK & Ireland +27.2% +19.6% +24.7% +36.7% +45.0% +47.5% +35.8%
France +19.6% +14.4% +13.0% +20.9% +27.3% +19.6% +19.0%
Other
International +16.3% +0.6% +5.6% (0.2)% +5.7% +3.5% +4.9%
- Poland +22.5% (0.1)% +5.4% (3.8)% +3.5% +0.6% +5.8%
- Iberia (8.0)% (2.6)% +5.0% +8.2% +12.1% +16.2% +22.3%
- Romania +19.2% +14.4% +9.2% +20.8% +12.1% +2.1% (3.4)%
-------------- -------- -------- -------- -------- -------- --------- ---------
Group LFL +22.7% +14.6% +17.4% +24.4% +31.8% +29.4% +24.1%
Footnotes
(1) Kingfisher's subsidiary in Romania prepares its financial
statements to 31 December. Its quarterly results presented are for
January to December 2020, i.e. one month in arrears. The weekly
results presented have no corresponding delay.
(2) Kingfisher completed the sale of Castorama Russia on 30
September 2020. As the business prepares its financial statements
to 31 December, its results presented are for 1 January 2020 to 30
September 2020.
(3) Group LFL includes e-commerce sales and excludes Koçta
(Kingfisher's 50% JV in Turkey).
(4) E-commerce sales are total sales derived from online
transactions, including click & collect. This includes sales
transacted on any device, however not sales through a call centre.
E-commerce sales change is in constant currency and covers the
total Group.
(5) 'Q1 21/22 Group LFL sales' figures represent the period from
31 January 2021 to 18 March 2021 (compared against the equivalent
period in the prior year, from 2 February 2020 to 19 March 2020).
The figures are provisional and exclude certain non-cash accounting
adjustments relating to revenue recognition.
(6) Weekly sales figures are for the Sunday-to-Saturday weeks
from 31 January 2021 (compared against prior year
Sunday-to-Saturday weeks from 2 February 2020). Week 7 is a partial
week (Sunday-to-Thursday). The figures are provisional and exclude
certain non-cash accounting adjustments relating to revenue
recognition.
(7) 2-year LFL is calculated by compounding current and prior
year LFL growth. For example, current year LFL growth of 10% and
prior year LFL growth of 5% results in 2-year LFL growth of
15.5%.
(8) Weekly sales figures on a 2-year basis are for the
Sunday-to-Saturday weeks from 31 January 2021 (compared against
Sunday-to-Saturday weeks from 3 February 2019). Week 7 is a partial
week (Sunday-to-Thursday). The figures are provisional and exclude
certain non-cash accounting adjustments relating to revenue
recognition. Group LFL on a 2-year basis excludes Russia.
Section 2: Group update (including 'Powered by Kingfisher'
strategic plan)
In June 2020, Kingfisher announced its new strategic plan -
'Powered by Kingfisher'. Under this plan we aim to maximise the
benefits of our distinct retail banners (which address diverse
customer needs) with the scale, strength and expertise of the
Kingfisher Group , to address the significant growth opportunities
that exist within the home improvement market. To serve customers
effectively today, we need to be more digital and service
orientated, while leveraging our strong store assets.
Overview
This section provides an update on the markets in which we
operate, and the progress made on our 'Powered by Kingfisher'
strategy, organised around the following key messages:
1) The home improvement market is attractive and resilient, with supportive new long-term drivers
2) Market trends offer us opportunities
3) We are emerging from the COVID crisis stronger
4) We are making progress fixing issues from previous years
5) Our new strategy is delivering - empowered banners supported
by the Group's scale, strength and expertise
6) Clear financial priorities and drivers
1. The home improvement market is attractive and resilient, with supportive new long-term drivers
The European home improvement market is large and attractive,
with long-term growth supported by structural demand drivers. The
market caters for a wide range of customer needs, ranging from
maintenance, to repair or decoration tasks, and to heavy renovation
projects. Kingfisher's total addressable market, based on the key
countries in which it operates, is approximately GBP130 billion.
This is comprised primarily of sales to private consumers and
tradespeople. Consumer needs are met by a wide range of product
categories (consisting of private label and branded products), from
decoration to building materials, to garden and outdoor. Services,
such as installation and design, complement these product
categories and help customers complete their projects. Larger
format home improvement stores and trade channels are the key
distribution channels, but generalist and specialist online
'pure-players', online marketplaces, home improvement specialist
stores and discounters also play a role.
Long-term structural market drivers are healthy due to
continuing population growth, the gradual trend of urbanisation,
stable home ownership levels (often supported by government
initiatives) and an ageing housing stock. Within our markets,
housing demand on average tends to exceed housing supply, which in
turn supports house prices and secondary housing market transaction
volumes. The housing stock in our markets is typically 50-60 years
old, regularly requiring heavy maintenance and improvement. As a
result, most of our markets are expected to experience a moderate
increase in housing construction over the next three years. This
new housing supply leads to a more dynamic housing market, with
more house moves and increased demand for home improvement.
As a core consumer spending area, home improvement has grown
steadily over time, and proven to be robust even during periods of
economic weakness. For example, according to data from national
statistical offices, between 2009 and 2019 the growth of
expenditure on hardware and DIY goods outperformed total consumer
expenditure growth across most of our markets.
Customers continue to be passionate about improving their homes,
and current market trends and demand indicators are positive. In
particular, the COVID crisis has established longer-term trends
that are clearly supportive for our industry. Customers are placing
a greater focus on improving comfort and wellness at home,
resulting in a larger share of their income being allocated to home
and garden spend. In addition, our homes are being transformed into
'hubs', where we work, exercise, entertain and rest. Longer term,
we expect that people will spend more time working from home than
they did before the crisis, resulting in more 'wear and tear' on
the home, and the need to organise living space differently,
thereby creating further demand for home improvement.
During the COVID crisis we've seen the emergence of a younger
generation of 'DIY'ers', where interest, new skills and enthusiasm
for DIY has grown considerably. While this accelerated trend is
still emerging, it is encouraging and enables us to capture a
broader range of customer segments. More generally, the more home
improvement projects people undertake, the more DIY skills they
learn - building confidence and ultimately increasing their
interest and appetite for the activity, which is seen as a 'hobby'
by some.
In summary, structural market drivers together with the
establishment of longer-term trends following the COVID crisis, are
clearly supportive for the overall growth prospects of our
industry.
2. Market trends offer us opportunities
While the overall home improvement market is growing, there are
also clear longer-term shifts within the market which provide us
with opportunities. Our 'Powered by Kingfisher' strategy is closely
aligned with, and seeks to address, these trends.
Before the COVID crisis, the overall shift towards online in our
industry was gradual. Screwfix, our trade-focused retail banner,
was the exception to this with 33% e-commerce sales penetration
even before the crisis. However, the online trend has rapidly
accelerated over the last year due to the COVID crisis, with all
our key markets experiencing significant e-commerce growth. Stores
are at the centre of our e-commerce proposition, providing support
for the significant proportion of retail online orders picked in
stores and fulfilled through click & collect (C&C),
in-person returns, and fast delivery. Further detail on how we have
enhanced our e-commerce capabilities is included below within 'Grow
e-commerce sales'.
Customers' increased demand for speed and convenience, along
with demographic trends, are also driving a shift towards smaller
and more localised compact stores. While the Screwfix format is
already addressing this shift, the trend provides our other retail
banners with the opportunity to widen their customer reach.
B&Q, Screwfix and Castorama France are in the process of
trialling more compact store formats, which are showing encouraging
early signs. Further detail is included below within 'Test compact
store concepts and adapt our store footprint'.
In more mature markets across Europe, discounter format stores
are growing and expanding their home improvement ranges. This
growth has been supported by the trend of a rising focus on value
for money and pricing transparency, which we are able to capture
through offering competitively priced own exclusive brands (OEB)
products, which represent 44% of total Group sales. Further detail
is included below within 'Differentiate and grow through own
exclusive brands'. In addition, we are well placed in this area of
the market with our renowned Brico Dépôt discounter banners in
France and Iberia , as well as our overall Group-wide focus on
attractive price positioning.
Before the COVID crisis, we saw a gradual shift in customer
preference towards Do-it-For-Me ('DIFM') versus DIY. To a certain
extent, this shift is linked to new generations of consumers having
fewer DIY skills, and a shift in spending priorities - but is
partly constrained by the limited supply of tradespeople and DIFM
being more costly. More recently, the COVID crisis has favoured the
DIY trend, which is seen as allowing better 'social distancing',
cheaper, a hobby, and an activity that contributes to wellbeing. We
expect the DIFM shift to remain gradual. New trends and innovations
in DIFM provide us with opportunities. For example, in November
2020, we acquired NeedHelp, one of Europe's leading home
improvement online services marketplaces. Further detail is
included below within 'Build a mobile-first and service orientated
customer experience'.
Being a responsible business is more relevant and important than
ever before. Customers are increasingly aware of the environmental
and societal impact of their purchasing choices, providing us with
tangible opportunities to build on our strong sustainability
credentials. Further detail is included below within 'Lead the
industry in Responsible Business practices'.
3. We are emerging from the COVID crisis stronger
We are inspired and humbled by the way our colleagues have
responded to the immense challenges brought about by the COVID
crisis. While the crisis is not yet over, we believe that it has
accelerated many elements of our strategy, and pushed us to be
bolder and more agile. As a result, we are emerging from the crisis
as a far stronger business:
-- Roll-out of company strategy fully on track - while
navigating through the COVID crisis has been incredibly
challenging, the roll-out of our plans is fully on track (and ahead
of plan in many areas). Our n ew strategy and new leadership teams
are firmly established in the business, with our focus on speed,
agility and 'done is better than perfect' approach yielding results
in the toughest of circumstances.
-- Acceleration of e-commerce progress by at least two years -
we believe that COVID has brought forward our e-commerce journey by
at least two years. We have transformed our operations and enhanced
our e-commerce capabilities to meet a surge in digital adoption,
with c.10 million new online customers. Group e-commerce sales
penetration is now at 18%, up from 8% in the prior year.
-- Leading with Responsible Business agenda - the crisis has
given us the opportunity to reinforce our Responsible Business
credentials and goals, as well as demonstrate our culture across
Kingfisher of 'doing the right thing'. We have been committed to
supporting our colleagues, customers, local communities, and
governments throughout the crisis, and took the painful but
necessary step to close our stores for several weeks in March and
April 2020 while we established safe store operating standards. We
have also made significant strides forward with our actions to
tackle climate change, deforestation, and sustainable home
development.
-- Improved banner awareness and brand reputation - through our
Responsible Business agenda described above, offering a reliable
omni-channel experience, and maintaining affordable prices and good
stock availability, our retail banners have benefited from much
improved awareness and brand reputation. This led to previous
customers reconnecting with us, increased satisfaction from
existing customers, and a rise in new customers.
-- Greater conviction in costs and inventory reduction - the
COVID crisis has underlined the longer-term opportunity to manage
our costs and inventory with greater efficiency. We took swift and
effective action during the crisis to manage our costs, and
same-store net inventory* has reduced by GBP50 million (in constant
currency) year on year. This is due to the exceptional demand
levels seen in H2, but also to more focused inventory management
initiatives. Further detail is included below within 'Source and
buy better, reduce costs and same-store inventory'.
-- Stronger balance sheet - our net leverage (net debt to
EBITDA) is one turn stronger year on year following our strong
trading and disciplined cash management measures, now at 0.9 times
(31 January 2020: 2.0 times). As of 18 March 2021, we have access
to over GBP2.2 billion in total liquidity, including cash and cash
equivalents of over GBP1.4 billion.
4. We are making progress fixing issues from previous years
One of the key drivers of our strategic progress over the last
year has been leveraging some of the strengths developed by
Kingfisher in previous years, such as Group sourcing and buying,
differentiated OEB development, and common SAP platform
investments.
However, going in to 2020, we were also faced with many issues
from previous years. As part of 'Powered by Kingfisher', we set out
our 'Focus and Fix' priorities aimed at addressing these. We are
pleased with the progress made so far, but there is still more work
to be done.
These actions have had a significant positive impact on our
trading in FY 20/21, enabling us to respond to the challenges of
the COVID crisis while also priming the roll-out of our new
strategy.
Build the new team:
-- Kingfisher's Group Executive team was completed in March 2020
(see FY 19/20 results for further detail). We have an experienced
team in place with a strong mix of functional expertise (including
in digital and supply chain) as well as experience from Kingfisher,
other home improvement companies and the broader retail and service
industries.
-- Additional key hires have been made at banner and Group level
to reinforce some of our key teams, including the supply chain team
in France and our Group Digital team.
Rebalance local vs. Group:
-- Initial steps were taken in Q4 19/20 to address the imbalance
and complexity of our previous operating model. The agility
demonstrated by Kingfisher during the COVID crisis is testament to
the move towards this approach.
-- In September 2020 we launched a formal reorganisation of our
commercial operating model, which is now fully implemented at Group
level and across all our banners.
-- We are also in the process of establishing new local-Group
operating models for our IT and digital teams.
Further detail is included below within 'Move to a balanced and
agile local-group operating model'.
New trading approach:
-- During FY 20/21 we trialled and implemented new trading approaches in all our retail banners.
-- This included placing a higher focus on promotion-based
trading events, targeted price investments at Screwfix (maintaining
its more favourable price position versus its nearest peers),
strengthening ranges, and introducing new services (both in-store
and online).
-- The new commercial operating model has enabled our banners to
reintroduce more well-known local ranges which had been removed
from the assortment in previous years (e.g. Sandtex, Dewalt and
Ryobi in the UK), as well as introducing some higher price-point
brands and reinforcing existing brands, such as Tarkett and
De'Longhi in Castorama France.
Focus:
-- As planned prior to the onset of the COVID crisis, we paused
or stopped several Group-wide initiatives this year, prioritising
key activities and enabling us to do fewer things quicker and
better.
-- During the year, we reduced the level of range reviews by
around 50%, and stopped all non-critical range changes, resulting
in lower store disruption and clearance.
-- Store net promoter scores (NPS) have improved across the
majority of Kingfisher, with customers reacting positively to the
renewed focus on the customer proposition.
-- We completed the SAP roll-out at Castorama France, Castorama
Poland and Brico Dépôt Romania in FY 20/21.
-- To increase focus on Castorama France's SAP implementation,
we paused the roll-out of our global SAP platform to Brico Dépôt
France and Brico Dépôt Iberia, with implementation shifted to
2021.
-- On 30 September 2020, we completed the sale of Castorama
Russia for a total consideration of GBP72 million (refer to Section
4 for further detail). As previously reported, we reversed the
original decision to exit Iberia and have plans to build a
profitable, sustainable business under the discounter Brico Dépôt
banner.
Fix France:
-- Established strong new leadership in France and strengthened key teams.
-- As part of the commercial operating model reorganisation
noted above , the teams now have more local autonomy to manage the
business needs and requirements of each of the French banners.
-- We stopped all non-critical IT projects and paused certain
elements of global SAP roll-out, to prioritise and focus on
Castorama France. During FY 20/21, a total of 18 key 'pain points'
were identified and addressed, significantly improving the
effectiveness of Castorama's SAP template.
-- This enabled us, without any material disruption, to
accelerate the implementation of our Group digital technology stack
at Castorama. This upgraded digital capability played a crucial
role in allowing the business to meet the exceptional levels of
demand seen in FY 20/21.
-- As part of the commercial operating model reorganisation
noted above, the supply chain and logistics team in France has been
strengthened with more than 25 critical hires, allowing for more
autonomy and agility. As a result of this and the SAP 'fixes', both
Castorama and Brico Dépôt have benefited from a more reliable
supply chain and healthy levels of stock availability, despite the
disruption and incremental demand brought about by the COVID
crisis.
-- The new trading approach described above was implemented,
including the reintroduction of local ranges, more trading events,
and restoring the 'discounter DNA' at Brico Dépôt with upweighted
special promotions (arrivages) and improved price positioning.
-- Fewer range reviews as described in the 'Focus' in itiatives
above, led to less store disruption.
The above mentioned actions have contributed significantly to
the improved performance in France, with FY 20/21 LFL sales at
Castorama and Brico Dépôt up 6.2% and 3.8%, respectively. Store and
website NPS scores also improved in both banners, with customers
reacting positively to the renewed focus on customer propositions.
We are also seeing significant improvements in our competitive
position, especially at Castorama, where the banner outperformed
the market for the first time in many years (based on Banque de
France* data). While the progress is promising, there is still much
work to do to further improve both the operational performance and
longer-term customer propositions of Castorama and Brico Dépôt.
5. Our new strategy is delivering - empowered banners supported
by the Group's scale, strength and expertise
Under our new strategic plan, 'Powered by Kingfisher', we aim to
maximise the benefits of our distinct retail banners (which address
diverse customer needs) with the scale, strength and expertise of
the Kingfisher Group , thereby addressing the significant growth
opportunities that exist within the home improvement market.
Our retail banners occupy number one or two positions in all our
key home improvement markets (number one in the UK, Poland and
Turkey). While some of our banners are focused on trade (Screwfix,
TradePoint at B&Q), others address more general DIY needs
(B&Q, Castorama France, Castorama Poland, Brico Dépôt Romania,
Koçta ), while Brico Dépôt France and Brico Dépôt Iberia are
positioned as discounters. This differentiation is a major
strength, especially in a world that is more volatile and
uncertain. In FY 20/21 every one of our retails banners has built
on their clear market positioning to develop long-term growth
plans.
Kingfisher's scale and resources, used intelligently, is an
important source of growth acceleration and competitive advantage
for our banners, through its OEB development, sourcing and buying
scale, access to technologies, shared services, and lower cost
functions. We are continuing our work to adapt our operating model
so that these Group functions are set up in the most efficient way
to 'power' growth in our retail banners.
This sub-section covers the progress made in FY 20/21 against
our key strategic areas of focus:
a) Move to a balanced and agile local-group operating model
b) Grow e-commerce sales
c) Differentiate and grow through own exclusive brands (OEB)
d) Build a mobile-first and service orientated customer experience
e) Test compact store concepts and adapt our store footprint
f) Source and buy better, reduce costs and same-store inventory
g) Lead the industry in Responsible Business practices
a) Move to a balanced and agile local-group operating model
We believe that striking the right balance between Group and
local responsibilities sets the right conditions for our distinct
retail banners to thrive.
In September 2020 we announced to our colleagues a fundamental
reorganisation of our commercial operating model. The overall aim
was to formalise the approach taken since Q4 19/20 to provide our
retail banners with the flexibility and agility to address specific
positioning and needs in local markets, while leveraging Group
scale and resources to provide critical capabilities. This approach
has had a clear positive impact on business performance in FY
20/21.
Under the new model we have established clear roles and
accountabilities:
-- Our retail banners are closest to our customers and are
responsible for category strategies, overall product range, non-OEB
buying, pricing and promotions, marketing, and merchandising.
-- The Group Offer & Sourcing (O&S) team drives the
development and sourcing of our market-leading OEBs, leveraging
strong sourcing, design, and engineering capabilities to enable
differentiation and higher OEB participation across our business.
They collaborate with the retail banners on OEB ranges and manage
global relationships with our top international brand
suppliers.
-- The Group Supply Chain & Logistics (S&L) team
provides expertise in the development and execution of new OEB
ranges, including contributing towards the selection of new OEB
vendors, the optimisation of logistics conditions and the selection
of the most appropriate routes to market. The retail banners are
responsible and accountable for making their own decisions relating
to local supply, availability, inventory, and logistics
performance.
The reorganisation is now fully implemented at Group level and
across all our banners, with France having been completed this
month.
We are also in the process of establishing new local-Group
operating models for our IT and digital teams, to provide speed,
agility and local knowledge to our retail banners. The Group will
continue to provide overall direction, technology and systems
infrastructure, and a framework for efficient ways of working. The
right balance of local and Group input has been critically
important in responding to the challenges of the COVID crisis.
Finally, we are in the process of implementing Group 'Centres of
Excellence' in the areas of e-commerce, digital journey, data,
store concepts, services and service platforms, property, and
supply chain. The role of these Centres is to set strategy and
targets, to share knowledge and best practices, to support
implementation, and to help steer progress.
b) Grow e-commerce sales
We are committed to delivering growth in e-commerce sales
through providing speed, convenience and choice to our
customers.
Following the onset of the COVID crisis and the rapid changes
seen in consumer habits, we accelerated several of our planned
e-commerce initiatives to offer greater convenience and faster
deliveries to our customers.
To meet a significant increase in C&C demand, we rapidly
transformed our operations in March 2020 to shift to store-based
picking and fulfilment as a priority. During FY 20/21, 92% of the
Group's online orders were picked in store, 11 percentage points
higher than the prior year. Excluding Screwfix, 89% of online
orders were picked in store, up 32 percentage points. To offer
customers more pick-up options, we are trialling the use of C&C
lockers at B&Q, Castorama France and Poland, and have
implemented contactless 'Drive-thru' and car park collections in
France.
Home delivery from store was also quickly introduced in all
markets, supported by improved store-picking processes and new
fulfilment relationships. Around 20% of our B&Q stores are
being used as 'digital hubs', enabling an expanded available range.
We are also testing 'same day' home delivery at B&Q which we
believe, over time, will drive a key competitive advantage over
online 'pure-plays'.
In addition, we are making progress with our plans to modernise
the front-end IT architecture of Kingfisher's banners through the
roll-out of our Group digital technology stack. Through cloud-based
components, this technology enables more efficient and agile
digital capabilities including scalable mobile apps, lower latency,
seamless payments, smart search, and more efficient web content
management. Roll-out has been successfully completed at B&Q,
TradePoint and Castorama France, without disruption, with
implementation planned for Poland in early 2022. This scalable
platform is currently supporting over 500,000 C&C orders a week
in B&Q and Castorama France combined, and helping to drive
increased website conversion rates, a better customer mobile
journey, and a smoother C&C and home delivery experience.
During the summer of 2020 we reached a milestone of over 1.5
million online orders in one week, across the Group.
In FY 20/21, e-commerce sales accounted for 18% of total Group
sales (FY 19/20: 8%) reflecting the substantial uplift in online
orders in all retail banners since the onset of COVID. E-commerce
sales penetration at our retail banners excluding Screwfix was 7%
on average in FY 20/21 (FY 19/20: 2%).
Group e-commerce sales grew by 158% during FY 20/21, and by 144%
excluding Screwfix.
C&C sales, the largest and fastest growing fulfilment
channel at a Group level, grew by 226% in FY 20/21, accounting for
90% of online orders (75% excluding Screwfix) and 78% of Group
e-commerce sales (61% excluding Screwfix). In the prior year
C&C accounted for 82% of online orders (63% excluding Screwfix)
and 62% of Group e-commerce sales (48% excluding Screwfix).
Finally, the Group continues to explore e-commerce marketplace
models, with common technology and vendor management, but tailored
customer propositions by retail banner.
c) Differentiate and grow through own exclusive brands (OEB)
As described above, under 'Move to a balanced and agile
local-group operating model', we believe that the Kingfisher
Group's OEB product development is a significant source of value
for our retail banners and their customers. OEB provides a strong
point of differentiation for our retail banners in terms of design,
functionality, sustainability, and value for money, as well as
carrying a higher gross margin. We aim to grow our OEB sales
further as we bring even more innovation to our ranges.
The performance of our OEB ranges in FY 20/21 was strong, with
total OEB sales of c.GBP5.3 billion, up 7.5% (+15.7% in H2 20/21).
This represents 44% of Group sales (FY 19/20: 44%; previously
reported comparable was 39%, updated due to a definitional
change).
During the year we implemented several new OEB ranges across our
markets. The roll-out of Kingfisher's new OEB kitchen range
completed in B&Q in H1 20/21, and will be fully implemented at
Castorama France and Brico Dépôt France this month. The range is
also in the process of being implemented at Castorama Poland.
Supported by attractive price positioning and the establishment of
both a socially-distanced and virtual sales model, the LFL sales
performance of the new B&Q kitchens range in H2 20/21 was at
double-digit growth. We also implemented our new indoor lighting
range at all banners, starting with Castorama France in June 2020
where we saw a positive customer reaction and strong double-digit
sales growth in FY 20/21.
In addition, we have seen a strong improvement in OEB brand
awareness this year, and our five leading OEB brands contributed
c.23% to total Group sales. Going forward, we plan to extend our
ranges so that they are more specifically designed to cater for
general home improvement, trade, or discounter banners. We are also
continuing to simplify our OEB development approach, including
engineering enhancements and prioritising key range reviews, to
bring new products to market more quickly. This should also support
more profitable sales growth over the longer term.
d) Build a mobile-first and service orientated customer experience
We intend to make it easier for customers to shop with us by
building a mobile-first, data-led and service orientated customer
experience. We also aim to provide customers with a more compelling
and complete services offer, including visualisation tools and
installation services.
More than ever, mobile is at the centre of our customers' home
improvement journeys and experiences, from research and
inspiration, all the way through to purchase, delivery, building
and installation. We believe that this channel will remain the
focal point of the end-to-end customer journey and experience.
Mobile is our fastest growing channel, with orders up by over 200%
in FY 20/21, accounting for c.56% of our total e-commerce orders
(FY 19/20: 40%).
Across our banners, we have made good progress in optimising the
mobile user experience through increasing page load speed,
enhancing search functions, and developing mobile tools and apps.
During FY 20/21, Castorama France launched its new website
(including visual search) along with its new mobile app. Screwfix
plans to rapidly roll out an upgraded mobile app in FY 21/22. In
addition, both B&Q and Brico Dépôt Iberia are trialling mobile
'Scan & Go' technology for customers, enabling a speedier
self-service store checkout process.
We also continue to test and launch new service propositions in
all our banners. During FY 20/21, B&Q restarted kitchen and
bathroom installation services, now available in all UK mainland
stores. We are encouraged by the early take-up rate.
B&Q also acted quickly to establish a virtual sales model
during the year for kitchens and bathrooms, which has proved to be
popular. Several thousands of virtual showroom planning sessions
have been conducted since the start of January 2021. Our showroom
design capabilities will soon be supported by our new tool for 3D
kitchen and bathroom design, which is currently being trialled in
some of our retail banners.
In response to customer demand and in partnership with Speedy
Hire we are trialling a comprehensive tool hire service. To date,
we have opened 14 Speedy concessions within B&Q stores in the
UK. We are also in the process of trialling new self-checkout
terminals at B&Q.
Finally, in November 2020 Kingfisher acquired NeedHelp (
www.needhelp.com ), one of Europe's leading home improvement
services marketplaces, for a total cash consideration of GBP9
million (before cash acquired of GBP1 million). The business is an
innovative online platform that connects customers who need home
improvement help, either in-store or online, with vetted
professional tradespeople and other skilled experts.
NeedHelp is growing rapidly, having tripled its gross
merchandise value and revenue every year since it launched in 2014.
Through its open IT architecture, NeedHelp already provides its
services to customers in over 500 stores, including Castorama
France, Brico Dépôt France and a growing number of leading home
improvement retailers. While most of its business is currently in
France, NeedHelp also operates in Switzerland and has recently
expanded into Germany, Belgium, Austria, and the Netherlands.
NeedHelp is targeting expansion into the UK and Poland in FY 21/22,
supported by B&Q, Screwfix and Castorama Poland.
e) Test compact store concepts and adapt our store footprint
We believe that stores have an increasingly important role to
play in the home improvement market. Our c.1,390 stores are key to
meeting our customers' needs, whether goods are purchased in-store
or ordered online.
Stores are a critical feature of the home improvement market,
due to the importance placed by customers on inspiration and
visualisation, the advice and design expertise of in-store experts,
serving as a 'one-stop shop' for projects, and the provision of
customised services. However, as highlighted by the COVID crisis,
our conviction is that stores also play an integral role in meeting
the increasing customer demand for convenience and speed, whether
through fast C&C or home delivery. After the onset of the COVID
crisis in early 2020, Kingfisher rapidly transformed its operations
to shift to store-based picking and fulfilment, in order to meet a
surge in online demand.
As described above in the section 'Market trends offer us
opportunities', we believe that the demand for speed and
convenience is driving both the shift towards online in our
industry, as well as the need for smaller and more localised
stores. In response, over the next few years, we have plans to
increase our overall store count, while at the same time reducing
the average size of our stores. We expect to achieve this through a
combination of opening more compact stores (less than 2,000 sqm),
rebalancing our 'new store' opening programme to focus on
'medium-box' stores (2 to 6,000 sqm), and rightsizing some of our
larger format 'big-box' stores (more than 8,000 sqm).
Compact stores are a key enabler for market share growth in
urban catchment areas. In 2020 we tested six compact store
concepts, including two new compact B&Q formats (in Merton and
Twickenham); two B&Q store-in-store concessions within ASDA
supermarkets (in Sheffield and Dagenham); one Castorama France
high-street format called 'Casto Solférino' (in Lille); and one
'ultra-compact' Screwfix outlet called 'Screwfix Collect' (in
central London). The performance of our new compact stores is
showing encouraging signs. We plan to trial two further B&Q
concession stores within ASDA stores in Q1 21/22, alongside several
more tests of compact store formats in the UK, France and Poland
during FY 21/22.
Screwfix, whose store operating model is based entirely around
compact stores, opened a total of 38 new outlets in FY 20/21 with
30 in the UK and eight in the Republic of Ireland. This brought its
total to 722, with an average sales floor size of 64 sqm per store.
Following the identification of further opportunities in certain
catchment areas, we now see a medium-term roadmap to over 900
stores in both the UK and Republic of Ireland (versus previous
target of 800 in the UK alone). In H1 21/22 the business will
commence its broader international expansion plans, initially
through an 'online-first' approach, similar to that applied to the
Republic of Ireland.
Medium-box stores in our banners tend to be well-located and
with good sales densities. In FY 20/21 we opened three medium boxes
in the UK and Poland.
In the UK and France, we have identified certain big-box stores
which we believe to be over-spaced based on our analysis of
catchment demand, store economics and proximity to other stores. As
a result, we have selected a small number of stores to be tested
for rightsizing at B&Q and Castorama France over the next two
to three years. B&Q Canterbury is the first of these, where our
rightsizing completed this month. The c.30% space reduction was
taken over by Aldi and is expected to generate c.33% of annualised
savings in store costs (including rent). Following the learnings
from these tests we will establish a plan to target a larger
sub-set of stores over the longer term.
As discussed above, we are testing store-in-store B&Q
concessions within ASDA supermarkets, as well as Speedy Hire (tool
hire) concessions within B&Q stores. More generally, we believe
partnership models can enable Kingfisher to attract new customers
and generate incremental revenues. As communicated earlier this
month, we signed a franchise agreement with the Al-Futtaim Group to
expand B&Q into the Middle East, with a first step being the
opening of two B&Q-franchised stores in Saudi Arabia in autumn
2021. The stores and support office functions will be fully
operated and staffed by the Al-Futtaim Group.
f) Source and buy better, reduce costs and same-store inventory
We believe there are significant opportunities to reduce costs
across Kingfisher - in areas such as store productivity, supply and
logistics, goods not for resale (GNFR*), property (including lease
renegotiations), IT and central costs, all of which will benefit
from reduced organisational complexity over time. In addition,
through the intelligent use of our scale, we expect to extract
further value from sourcing and buying. Reducing same-store
inventory levels is also a major priority.
Following the onset of the COVID crisis in 2020, we took swift
and decisive actions to reduce our costs while our stores were
temporarily closed for several weeks in March and April 2020. While
some of these cost reductions were temporary or one-off in nature (
refer to Section 3 for further detail) , the crisis has deepened
our conviction over the opportunity to operate effectively as a
Group within a more efficient cost envelope over the longer
term.
During the year, we validated and measured cost reduction
programmes over several key areas of the Group, including
identifying the capital and one-off expenditure required to achieve
these savings. All cost programmes were launched in the year and
are being managed by our retail banners and Group functions, with
robust overall governance at Group Executive and Board level. To
date we have made progress in the following areas:
-- Fundamental reorganisation of commercial operating model:
fully completed in the UK & Ireland, France, Poland, Romania
and Iberia. Recorded GBP16 million of restructuring costs in FY
20/21.
-- Commenced big-box rightsizing programme at B&Q; expect
further tests at B&Q and Castorama France in FY 21/22.
-- Completed nine B&Q lease renegotiations with a combined
net rent reduction of approximately 25%, alongside improved lease
terms.
-- Commenced trials of store productivity initiatives such as
'Scan & Go' and new self-checkout terminals at B&Q.
-- Commenced IT cost optimisation programme, covering areas such
as IT hosting, telecoms, and other network costs.
-- Launched GNFR efficiency initiatives across all retail banners.
In the area of sourcing and buying, we continue to deliver cost
price efficiencies through leveraging our scale, and believe there
is further potential for upside. In addition to driving sourcing
and engineering benefits from our large OEB product base (c.44% of
Group sales), we are also in the process of renewing strategic
partnerships with our top 20-30 international brands.
While we are not disclosing the expected value of our multi-year
cost reduction programmes, the net savings achieved are expected to
partially offset the cost of inflation, expansion and space
changes, and the investment requirements of our business over the
next few years.
While stock availability has been under significant strain due
to the COVID crisis and volatile demand levels, we have seen lower
clearance levels and an improvement in our inventory health year on
year, mainly due to a reduction in range review activity and lower
delisted stock. Net inventory at the end of FY 20/21 decreased by
GBP63 million to GBP2,488 million (FY 19/20: GBP2,551 million,
excluding Russia, in constant currency), largely driven by France.
Same-store net inventory (in constant currency) decreased by GBP50
million, reflecting exceptional demand levels in H2 20/21 and the
benefit of improved inventory management initiatives. Net stock
days reduced by c.10% in FY 20/21.
While we expect to rebuild inventory levels ahead of peak
trading periods during FY 21/22 (as our order cycle largely
'normalises'), our work to sustainably reduce same-store inventory
continues. This includes a combination of better ranging and
deployment (with a focus on removing and redeploying slow-moving
inventory) and better planning and forecasting (including tighter
control of purchase quantities and lead times). The completion of
our SAP roll-out in 2021 and the further implementation of our
Group digital technology stack will further support the above
initiatives.
g) Lead the industry in Responsible Business practices
We are committed to leading our industry in responsible business
practices, seeking to maximise our positive impact on the lives of
our customers, colleagues, communities and the planet. This
commitment has been at the forefront of our response throughout the
COVID crisis ( refer to Section 3 for further detail ). Building on
our strong ESG credentials, our 'Powered by Kingfisher' strategy
sets out four priority areas for Responsible Business, where
Kingfisher can apply its experience, scale and influence to achieve
a positive impact.
We are all seeing enormous political, social, economic and
environmental challenges within our world, many of which have been
amplified over the last year by the COVID crisis. Issues such as
wellbeing and mental health, housing standards, climate change and
inequality - to name a few - require urgent action. We want to play
our part in helping tackle them.
Our COVID response: Throughout the pandemic, we have been
focused on serving our customers ' essential needs as effectively
as possible, while protecting the safety of all concerned,
especially our colleagues on the frontline. We also demonstrated
our commitment to supporting communities and governments in
managing the pandemic. For further detail on the significant
actions we have taken, please refer to Section 3.
Responsible Business priorities: During the year, we set out
four priority areas where we can apply our experience, scale and
influence to achieve a positive impact. These priorities, and our
performance against them, are as follows:
-- Becoming a more inclusive company:
- In 2020, the Board approved our 'Inclusivity and Diversity'
strategy. As part of this, each of our retail banners has developed
an inclusivity action plan, showing how they will apply this
strategy at local level.
- During the year we launched an all-colleague share plan, as described further below.
-- Helping to tackle climate change and create more forests than we use:
- We continued to make strong progress with our Science Based
Targets Initiative (SBTi)-approved greenhouse gas reduction
targets, which are consistent with reductions required to help
limit global warming to 2degC. To date, we have reduced our
absolute Scope 1 and 2 (market-based) greenhouse gas emissions by
27%, compared with the baseline year of FY 16/17. This is a large
movement from the previous year (FY 19/20: 18%), driven by the
temporary closure of stores due to COVID as well as strong
underlying improvements.
- We have therefore reviewed our plans and agreed new
appropriate capital investment to now commit to a 1.5degC
trajectory to 2025. We recently made our updated submission to SBTi
and are awaiting their approval on this improved plan. Once
approved, this should put Kingfisher among c.2% of retailers
worldwide to have approved 1.5degC science-based targets.
- As part of our commitment to be 'forest positive' by 2025, we
have formed a partnership with the Rainforest Alliance to become a
founding member of its 'Forest Allies' initiative. In FY 21/22 we
will start investing in projects to protect, restore, and enable
the responsible management of tropical forests in some of the
countries at most risk of deforestation.
-- Helping to make greener, healthier homes affordable:
- Approximately 40% of our total Group sales now come from
products that create greener, healthier homes (versus a target we
set 10 years ago of 50% by FY 20/21). This includes LED lighting,
low-flow taps, and low VOC paint.
- In FY 21/22, we will be reviewing our approach with a view to updating this target.
-- Fighting to fix bad housing:
- During the year we launched a network of charitable
Foundations for our banners in the UK, France, Poland, and Romania.
These Foundations support charities who provide, maintain, repair
and improve housing and community spaces.
- Since FY 16/17 we have supported a total of 791,000 people and
are well on our way towards our goal of helping more than one
million people whose housing needs are greatest by 2025.
Including our response to the COVID pandemic, we made community
investments totalling over GBP5.5 million in FY 20/21. In addition,
our colleagues and customers raised over GBP2.7 million.
In FY 20/21, for the first time, we linked a portion of our
colleague bonus programme to our performance against our key
Responsible Business priorities, and will continue to do so in FY
21/22.
To support the governance of Responsible Business, facilitate
the setting of our priorities and monitor our performance against
these, we established a new Responsible Business Committee (RBC) in
FY 20/21. The RBC is a sub-committee of Kingfisher's Board, meeting
at least twice a year and chaired by Sophie Gasperment, a
non-executive director (NED) of the Board. The RBC also includes a
further NED, as well as our Group CEO.
Please visit www.kingfisher.com/sustainability for further
detail. Further data and performance against our priority areas
will be published in our Responsible Business Report in June
2021.
All-colleague share plan: As part of our commitment to build a
responsible and inclusive business, we were proud to launch our 1+1
'Sharing In Our Future' plan in September, giving all our
colleagues the opportunity to become Kingfisher shareholders. We
were very pleased with the take-up rate, with over 9,000 colleagues
(c.12%) electing to participate in the plan, of which nearly 75%
are store-based colleagues. Following a holding period of one year,
Kingfisher will match each participant's investment (awarding one
free share for every share bought), up to a value of GBP1,500. The
value of colleague contributions that Kingfisher will match in FY
21/22 is approximately GBP8.5 million.
Improved employee engagement: Our annual colleague engagement
survey, conducted in July 2020, showed a score of 81 for the
Kingfisher Group, an increase of two points versus the prior year.
This represents a top quartile score and is significantly higher
than the retail benchmark of 66. Strengths highlighted by the
survey included our ongoing support to ensure our colleagues and
customers were safe, the positive impact of our new strategy, and a
greater sense of empowerment to make decisions in a less
bureaucratic and more agile way. We are actively working to address
feedback from the survey, together with the output from our regular
Kingfisher Colleague Forum meetings, which includes representatives
from all parts of the Kingfisher business and is attended by Board
and Group Executive team members.
6. Clear financial priorities and drivers
Group financial priorities
Through the implementation of our 'Powered by Kingfisher'
strategic plan we are focused on growth and creating shareholder
value, with the following financial priorities:
-- Prioritise top line growth and grow sales ahead of market:
- Clear strategy and actions to drive market share growth
- Focused on store and website customer satisfaction
- Attractive market with new longer-term industry support
-- Aim to grow adjusted pre-tax profit in line with sales (+/-)
; gradually faster than sales over time:
- Focused on driving scale benefits and cost self-help, enabling
us to accelerate investment in top line growth
-- Generate strong free cash flow to underpin shareholder returns:
- Focused on driving inventory self-help and capital expenditure
discipline (targeting gross capex of c.3.0-3.5% of total sales per
annum, on average)
- Progressive, sustainable dividend policy, with target dividend cover of 2.25-2.75x
- Committed to efficient capital structure while maintaining
prudent position in times of uncertainty
(+/-) Group total sales growth and adjusted pre-tax profit
growth in constant currency.
Key drivers
We believe that progressing the following key drivers will
support the delivery of our financial priorities over time:
-- E-commerce sales growth and penetration - grow e-commerce sales and lead the industry;
-- OEB sales growth - grow total OEB sales, providing
differentiation, value for money, and margin;
-- New compact stores - test and roll out compact stores across our markets;
-- 'Big-box' rightsizings - starting with tests at B&Q and Castorama France;
-- Costs and same-store inventory reduction - opportunity for
self-help and to reverse inefficiencies; and
-- Responsible Business - 'forest positive' and helping to limit global warming to 1.5 degC.
Capital allocation
We aim to allocate capital, subject to strict returns criteria,
to meet the strategic needs of the business. Our target is gross
capex of approximately 3.0 to 3.5% of total sales per annum, on
average. The Group's objectives when managing capital are to
safeguard the Group's ability to continue as a going concern and
retain financial flexibility, invest in the business where economic
returns are attractive, provide attractive returns to shareholders,
target a solid investment grade credit rating and, over the medium
term, to maintain a target of c.2.0 times net debt to EBITDA on an
IFRS 16 basis (previously 2.0 to 2.5 times). To facilitate
additional liquidity headroom during this current period of
heightened uncertainty, net leverage is expected to be lower than
2.0 times in the short term (FY 20/21: 0.9 times).
Considering these objectives, the Board is pleased to announce a
new progressive and sustainable dividend policy, with a target
dividend cover range of 2.25 to 2.75 times, based on adjusted basic
earnings per share (previously 2.0 to 2.5 times). The new policy
will be applied from FY 21/22. The Board believes this target
dividend cover range provides a solid base from which to
sustainably grow the dividend over time while being consistent with
the ongoing capital needs of the business.
Dividend for FY 20/21
In March 2020, the Board took the difficult decision to not
propose a final dividend in relation to FY 19/20, given the
unprecedented challenges around the COVID crisis and the need to
preserve financial flexibility. Like many businesses, we continue
to face challenges associated with the COVID crisis. However, since
reopening our stores from mid-late April 2020, our sales
performance has been strong, supported by the significant progress
our business has made under our 'Powered by Kingfisher' strategy
and favourable demand trends for home improvement. While
uncertainty remains in the markets in which we operate, we are
confident that we can address the key risks we face and that, as
our strategy is delivered, we will continue to grow our
business.
As a result, the Board is pleased to confirm that we will be
resuming dividend payments beginning with a proposed total dividend
of 8.25 pence per share (approximately GBP175 million) in respect
of the year ended 31 January 2021. The proposed dividend of 8.25
pence per share comprises an interim dividend of 2.75 pence per
share in respect of the six months ended 31 July 2020 and a final
dividend of 5.50 pence per share. The final dividend is subject to
the approval of shareholders at the Annual General Meeting on 30
June 2021, and will be paid alongside the interim dividend on 5
July 2021 to shareholders on the register at close of business on 4
June 2021.
Brexit preparation
Kingfisher has been preparing for the new EU-UK trading
relationship since the outcome of the UK Brexit referendum in 2016.
Since the new Trade and Cooperation Agreement (TCA) came into force
on 1 January 2021, we have been working to ensure we comply with
the new requirements. We had taken several measures since 2016 to
mitigate delays at the border as far as possible in advance of the
new trading relationship, and continue to engage with our vendors
to provide support on the new requirements where needed. Our teams
are also continuing to work through the new requirements of the TCA
and to limit the risk of delays wherever possible - for example, by
introducing new IT and process changes. While we have experienced
some relatively minor issues in exporting products to the Republic
of Ireland due to overall market challenges, we are not
experiencing any material challenges to our EU-UK flows to date. On
tariffs, the direct impact resulting from rules of origin
requirements are broadly neutral in comparison with our pre-Brexit
position.
Outlook for FY 21/22
The new financial year has started positively, with Q1 21/22
Group LFL sales (to 18 March 2021) up 24.2%, reflecting strong
demand in the UK and France. However, we remain mindful of the
continued uncertainty related to COVID in continental Europe .
Recognising that these are highly unusual and uncertain times,
we would like to provide more specific guidance where we can, to
help frame expectations for the year ahead. The following guidance
applies in the event of no adverse change in COVID-related
confinement measures (e.g. new lockdown restrictions resulting in
further store closures).
Given the profile of trading during FY 20/21 , we expect
distinct performances in the two halves of the coming year. In H1
21/22 we expect low double-digit Group LFL sales growth, supported
by the delivery of our strategic objectives. In H2 21/22, we are
planning for Group LFL sales scenarios of -15% to -5% (representing
2-year LFLs for H2 of -1% to +11%), given the strong comparable
period performance (H2 20/21: Group LFL sales +16.6%) and
uncertainty over the macroeconomic and consumer environment.
Despite the uncertain outlook for sales growth, especially
through the latter half of the year, the Group is focused on
carefully managing its cost base and is targeting full year
adjusted pre-tax profit (before c.GBP85 million of non-recurring
net cost savings in FY 20/21) to grow in line with total sales.
While the exceptional demand we have seen over the last year may
moderate as vaccines are rolled out and restrictions for our
customers become less prevalent, the COVID crisis has established
longer-term trends that are clearly supportive for our industry -
including the renewed importance of the home, both as a 'hub' and
for general wellness, more working from home, and the development
of a new generation of DIY'ers. We now expect these broad trends to
endure. With our strategic progress, we are well positioned to
capitalise on these positive, long-term market trends and are
confident of continued outperformance of our wider markets.
Additional financial guidance for FY 21/22 is provided in
Section 5.
Section 3: Managing the impact of COVID
Throughout the COVID crisis, Kingfisher has taken swift and
effective measures to support our clear commitments - to serve our
customers as a retailer of essential goods, to look after our
colleagues as a responsible employer, to provide support to the
communities in which we operate, and to protect our business for
the long term. These commitments are ultimately about 'doing the
right thing' - one of the key cultural characteristics of our
'Powered by Kingfisher' strategy.
The following section provides a summary of how we have managed,
and continue to manage, the impact of COVID on our business.
Risk management
Kingfisher's central and retail business crisis committees
continue to meet on an ongoing basis to monitor and manage the
risks and impacts of COVID. These committees monitor the impact on
all areas of our business, as well as ensuring publicly available
advice is followed and appropriate safeguards are quickly
implemented.
Social distancing and safety measures
All our Kingfisher stores continue to operate under strict
social distancing and safety measures to protect customers and
colleagues. Similar measures are also in place at our distribution
and fulfilment centres, and our corporate offices. In addition, we
have provided support for safe home working where relevant,
including risk assessments and the provision of office equipment.
In most cases, the measures applied have gone beyond government
recommendations in each market, which has been met with strong
approval by both customers and colleagues.
Supporting our colleagues
Along with ensuring the safety of our colleagues, we are also
committed to providing proactive support for wellness and mental
health during this period of unprecedented challenges. We have
invested significant time and resources in Group-wide colleague
engagement activities and initiatives, as well as ensuring that the
tireless efforts of our colleagues during the pandemic are rewarded
through frontline staff bonuses.
We have made dedicated training and support available for all
line managers on leading through a crisis, leading remotely, and
supporting their teams' mental health and wellbeing. Following our
annual colleague engagement survey conducted over the summer, we
implemented several actions related directly to the provision of
advice and psychological support for colleagues, as well as support
on wellbeing.
Colleagues who are unable to work due to being high-risk,
vulnerable, or self-isolating, continue to have their salaries paid
by the Group.
Finally, as mentioned in Section 2 above, during the year we
launched an all-colleague share plan, giving nearly 78,000
colleagues the opportunity to share in our future. Over 9,000
colleagues elected to participate in the plan, of which just under
75% are store-based colleagues.
Supporting our communities and governments
Throughout the pandemic, we have been focused on serving our
customers ' essential needs as effectively as possible, while
protecting the safety of all concerned, especially our colleagues
on the frontline. We also demonstrated our commitment to supporting
communities and governments in managing the pandemic.
Our actions over the last year have included:
-- Closing our stores: Taking the painful but necessary decision
to close our stores in the UK and France for several weeks in March
and April 2020 (despite holding 'essential' retailer status), to
protect colleagues and limit the spread of the virus.
-- PPE: Ringfencing and donating stock of personal protective
equipment (PPE), worth over GBP2.5 million, for use by key health
workers across all our markets.
-- Charitable donations: Supporting our banners' charitable
Foundations and charitable partners who work with communities
affected by the pandemic, through donations worth over GBP2.5
million. Of this amount, over GBP1.5 million was raised by our
colleagues and customers.
-- Furlough: Repaying GBP25 million received under the UK and
Republic of Ireland furlough programmes.
-- Business rates: Foregoing GBP105 million of business rates
relief in the UK and Republic of Ireland in FY 20/21.
-- Government-supported debt: Repaying, in full,
government-supported debt in the UK (GBP600 million) and France
(EUR600 million), which was arranged earlier in 2020 to provide the
Group with additional liquidity headroom.
-- Executive pay restraint: Reduced Group Executive team pay and
Board fees for several months during the crisis to reflect the
challenging business environment; no bonus payments to the Group
CEO and CFO relating to FY 19/20.
Finally, supporting our local communities, Kingfisher hired
approximately 4,800 colleagues into its stores in the UK, France,
and Poland in FY 20/21.
Supply chain and availability
During the initial phases of the coronavirus outbreak in China,
and subsequently in Europe, we experienced only modest disruption
to our supply chain. There was a relatively limited impact on the
supply of goods to our retail banners from any temporary closures
of vendor factories.
From mid-to-late March 2020, following the decision to
temporarily close our stores in the UK and France, we acted quickly
to adjust the supply of certain goods in certain categories, to
manage to demand levels and control our costs. Since reopening our
stores from mid-late April 2020, the key risks around stock
availability have been driven by polarised demand within our
categories and, in particular, exceptional demand levels within the
paint, decorating materials, outdoor, building materials and
kitchen ranges, where our suppliers have been challenged in keeping
up with high order levels.
These challenges have been driven by a combination of capacity
constraints and extended lead-times from their own raw material
suppliers. In addition, the pandemic continues to place a
considerable strain, industry-wide, on the international logistics
infrastructure (in particular, port congestion and the cost and
availability of shipping containers). We expect these challenges to
continue for at least the next few months.
As a result of this, together with the consistently high demand
levels in recent months, in-store availability is currently below
last year, although is gradually improving. To date, we have been
able to manage our supply and logistics needs well and expect to
rebuild our inventory levels ahead of peak trading periods during
FY 21/22.
Financial impact
Significant actions were taken to limit the impact of store
closures and trading restrictions in FY 20/21 on our profitability,
and to preserve our financial flexibility.
Actions to reduce costs and preserve cash
We implemented multiple actions to reduce costs and preserve
cash, especially during H1 20/21, including the benefit from
several government support measures (many of which were
subsequently repaid). As described in Section 2 above, many of the
cost reductions achieved were temporary or one-off in nature. Total
non-recurring net cost savings in FY 20/21 were c.GBP85
million.
The actions we took to reduce costs and optimise our cash flow
were as follows:
-- Furloughing: From mid-March 2020, we announced furlough
programmes to some of our colleagues in the UK, Republic of
Ireland, France, Spain and Romania, such as the Coronavirus Job
Retention Scheme (CJRS) in the UK and 'activité partielle' relief
measures in France. Approximately 50% of our total Group colleagues
were furloughed in April 2020, reducing to c.10% by the end of May
as we reopened stores within the UK and France. With the exception
of those who were vulnerable and/or at a higher risk of infection,
all furloughed colleagues returned by 1 July. From this date we
decided to no longer claim under the furlough programmes in the UK,
Republic of Ireland and France, while our stores remain open. In Q4
20/21, we repaid GBP25 million received in the first half of the
year under the UK and Republic of Ireland furlough programmes. A
total of c.GBP45 million was claimed across other markets in FY
20/21, including France, Poland and Iberia .
-- UK and Republic of Ireland business rates: The UK government
announced in March 2020 that retail premises in England would be
granted a relief from paying business rates in the 2020/21 tax
year, effective from April. Similar measures (a combination of
payment deferrals and relief) were announced by the local
governments and assemblies of Scotland, Wales and Northern Ireland,
as well as the Republic of Ireland. Kingfisher's total business
rates bill eligible for relief in FY 20/21 was GBP105 million, of
which GBP42 million was claimed in H1 20/21. In December, we
decided to repay this and forego all UK and Republic of Ireland
business rates relief for the entire 2020/21 tax year.
-- Store operating efficiencies: Measures were put in place to
reduce store variable costs during those periods when our stores
were temporarily closed for in-store browsing and purchasing. These
measures included reducing non-essential store maintenance costs
and optimising store opening hours.
-- Discretionary costs: We temporarily reduced spend on
discretionary costs, including reducing or stopping travel,
marketing, advertising, consumables and other GNFR spend. As we
began to experience high levels of demand from Q2 20/21, it became
necessary to resume most of these costs, and in some cases
accelerate spend.
-- Inventory purchases: We rapidly adjusted our purchasing plans
in response to the significant changes in demand seen across the
Group, particularly in Q1 20/21 when we temporarily closed our
stores.
-- Capital expenditure (capex): From mid-March 2020 we paused
all non-committed development capex (for example, IT and new
stores), and reduced repairs and maintenance capex to essential
items. Following the reopening of stores from mid-late April 2020,
all expenditure plans were evaluated on a case-by-case basis by the
Group's investment committee. Obligatory contractual, legal or
health and safety expenditures continued as normal. Gross capex
during H1 20/21 was GBP76 million lower year on year. Spend on
capex accelerated in H2 20/21 as we resumed new store openings and
investment in IT initiatives, ending the year with total gross
capex spend of GBP281 million (FY 19/20: GBP342 million). In line
with our guidance, approximately GBP70 million of gross capex
originally planned for FY 20/21 was deferred to FY 21/22.
-- Dividend: As announced on 23 March 2020 and 22 September
2020, in light of the uncertainty caused by COVID, the Board did
not propose a final dividend in relation to FY 19/20 (FY 18/19:
GBP157 million) and did not declare an interim dividend for H1
20/21 (H1 19/20: GBP70m), respectively. As announced today, the
Board will be resuming dividend payments. For further detail please
refer to 'Dividend for FY 20/21' within Section 2.
-- Rent: In the UK and France, we paid a significant proportion
of our quarterly-in-advance rental payments as monthly payments. We
continue to negotiate rent reductions with landlords and in FY
20/21 we completed nine B&Q lease renegotiations with a
combined net rent reduction of approximately 25%, alongside
improved lease terms.
-- Deferral of indirect taxation (VAT) payments: The UK
government announced in March 2020 that all UK VAT-registered
businesses had the option to defer any VAT payments due between 20
March 2020 and 30 June 2020. Having initially made use of this
relief, all outstanding VAT payments were settled in June 2020.
-- Payments to suppliers: To help optimise our working capital
during H1 20/21, mutual agreements were reached with certain larger
suppliers to temporarily extend payment terms by 30 days or more.
Notwithstanding this, we maintained our policy to pay all suppliers
in full and according to contractual payment terms.
Board and Group Executive team remuneration
In recognition of the impact of the above measures on
Kingfisher's stakeholders and, at the request of the Board and
Group Executive team, in March 2020 the Company's Remuneration
Committee applied the following discretionary measures regarding
executive remuneration:
-- The entire Board and Group Executive team voluntarily reduced
their base salaries and Board fees by 20%, from 1 April. The Group
Executive team (excluding the CEO and CFO) returned to full
salaries on 1 July, with the CEO and CFO following on 1 August.
Board fees were restored from 1 October.
-- The Group CEO and Group CFO received no annual FY 19/20 bonus payment.
Cash and liquidity
As of 31 January 2021, Kingfisher had cash and cash equivalents
(net of bank overdrafts) of GBP1,136 million (FY 19/20: GBP195
million). Free cash flow for FY 20/21 was GBP938 million (FY 19/20:
GBP191 million), benefiting from Kingfisher's strong sales
performance as well as the cost and cash preservation actions
detailed above.
The Group also has access to undrawn Revolving Credit Facilities
(RCFs) of GBP225 million (due to expire in March 2022) and GBP550
million (most of which is due to expire in August 2023), totalling
GBP775 million. The Group cancelled its GBP250 million RCF in
February 2021 (which was due to expire in May 2021).
During H1 20/21, Kingfisher issued and subsequently redeemed
GBP600 million of 11-month commercial paper under the Bank of
England's Covid Corporate Financing Facility (CCFF). The Bank of
England intends to close the CCFF to new purchases on 23 March
2021.
In May 2020, Kingfisher arranged a EUR600 million term facility
with three French banks in support of its operations in France. As
required under the terms of the loan, the full amount was drawn
down on 18 May 2020. The term facility was repaid in full in
December 2020 and cannot be redrawn.
As of 18 March 2021, the Group has access to over GBP2.2 billion
in total liquidity, including cash and cash equivalents of over
GBP1.4 billion.
Section 4: Trading review by division
Note: all commentary below is in constant currency.
UK & IRELAND
GBPm 2020/21 2019/20 % Reported Change % Constant % LFL
Currency Change
Change
B&Q 3,707 3,284 +12.9% +12.8% 13.0%
-------- -------- ------------------ ----------- --------
Screwfix 2,036 1,828 +11.4% +11.4% 6.6%
-------- -------- ------------------ ----------- --------
Total sales 5,743 5,112 +12.4% +12.3% 10.7%
-------- -------- ------------------ ----------- --------
Retail profit 681 499 +36.3% +36.3%
-------- -------- ------------------ -----------
Retail profit margin % 11.9% 9.8% +210 bps +210bps
-------- -------- ------------------ -----------
Kingfisher UK & Ireland sales increased by 12.3% (LFL
+10.7%) to GBP5,743 million, reflecting strong trading from Q2
20/21 onwards, following the impact of COVID-related temporary
store closures and disruption in Q1 20/21. Gross margin % increased
by 80 basis points, largely reflecting higher full-price sales and
lower clearance in B&Q, partly offset by higher supply &
logistics costs in Screwfix.
Retail profit increased by 36.3% to GBP681 million, with a
strong performance from both B&Q and Screwfix. Operating costs
increased by 7.2% largely due to higher staff costs (headcount
increases, higher bonuses and wage inflation), 41 net new store
openings, and COVID-related costs. This was partially offset by
temporary cost reduction measures (e.g. reduced advertising &
marketing).
In H2 20/21, Kingfisher repaid the full amount of GBP25 million
received in H1 20/21 under the UK and Republic of Ireland furlough
programmes. In addition, in December 2020, Kingfisher decided to
forego all UK and Republic of Ireland business rates relief, worth
GBP105 million in FY 20/21. Of this, t he benefit in H1 20/21 from
business rates relief was GBP42 million, which was repaid.
B&Q total sales increased by 12.8% to GBP3,707 million. LFL
sales increased by 13.0% with building & joinery the strongest
performing category, followed by outdoor and surfaces & décor.
LFL sales of weather-related categories increased by c.22% while
sales of non-weather-related categories, including showroom,
increased by c.10%. B&Q's e-commerce sales grew strongly in FY
20/21, increasing by 117% and representing 10% of total sales (FY
19/20: 5% of total sales).
In FY 21/22 we plan to relaunch TradePoint , B&Q's
trade-focused banner. The business continues to be a significant
part of B&Q at c.19% of its sales, with sales growth of c.11%
in FY 20/21. Work is ongoing to address gaps in ranges, and to
improve the digital customer journey and services proposition.
Engagement from trade customers has been high in FY 20/21, with
TradePoint's H2 20/21 LFL sales growing at over 20%.
B&Q opened five new stores in FY 20/21, including three
compact stores.
Screwfix total sales increased by 11.4% (LFL +6.6%) to GBP2,036
million, with net space growth of nearly five percentage points.
E-commerce sales grew by 165%, representing 78% of total sales (FY
19/20: 33% of total sales). Screwfix's stores in the Republic of
Ireland continue to trade well (first store opened in December
2019). Screwfix orders were taken exclusively online from late
March to late July 2020, with all stores closed for in-store
browsing and purchasing during that period.
In FY 20/21, Screwfix opened 36 net new stores (including eight
in the Republic of Ireland). The total number of stores at year-end
is 722, including 12 in the Republic of Ireland. The business has a
longer-term target of over 900 stores in both the UK and Republic
of Ireland (versus previous target of 800 in the UK). In H1 21/22
the business will commence its broader international expansion
plans, initially through an 'online-first' approach, similar to
that applied to the Republic of Ireland.
FRANCE
GBPm 2020/21 2019/20 % Reported Change % Constant % LFL
Currency Change
Change
Castorama 2,265 2,145 +5.6% +3.3% +6.2%
-------- -------- ------------------ ----------- --------
Brico Dépôt 2,044 1,937 +5.5% +3.2% +3.8%
-------- -------- ------------------ ----------- --------
Total sales 4,309 4,082 +5.5% +3.2% +5.1%
-------- -------- ------------------ ----------- --------
Retail profit 181 164 +10.3% +7.9%
-------- -------- ------------------ -----------
Retail profit margin % 4.2% 4.0% +20bps +20bps
-------- -------- ------------------ -----------
Kingfisher France sales increased by 3.2% (LFL + 5.1 %) to GBP
4,309 million, reflecting strong trading from Q2 20/21 onwards,
following the impact of COVID-related temporary store closures and
disruption in Q1 20/21. The previously announced closure of eight
Castorama stores impacted total sales growth by c.-2%. LFL sales
growth also benefited by c.1% from our decision to gradually open
more stores on Sundays, from Q3 20/21, in order to satisfy higher
demand safely. Our banners significantly improved their competitive
position in the French home improvement market, in particular
Castorama, where the banner outperformed the market for the first
time in many
years (based on Banque de France data, which shows DIY retail sales +6.1% in FY 20/21).
Gross margin % decreased by 120 basis points, largely reflecting
more trading events at both banners, the upweighting of special
promotions (arrivages), and higher supply & logistics costs
(including storage costs arising from strike action at French
ports, and the impact during the French lockdown period from closed
ports and warehouses).
Retail profit increased by 7.9% to GBP181 million driven by an
overall decrease in operating costs of 0.9%. Operating costs
decreased largely due to cost saving initiatives and 'activité
partielle' relief, and the closure of eight Castorama stores. This
was partially offset by higher staff costs (headcount and higher
frontline staff incentives & bonuses) and COVID-related
costs.
Castorama total sales increased by 3.3% (LFL +6.2%) to GBP2,265
million. LFL sales of weather-related categories increased by c.12%
while sales of non-weather-related categories, including showroom,
increased by c.5%. Further commentary on many of the operational
improvements made at Castorama France are detailed in 'We are
making progress fixing issues from previous years', within Section
2. Castorama's e-commerce sales increased by 187% in FY 20/21,
representing c.5% of total sales (FY 19/20: 2% of total sales).
Brico Dépôt total sales increased by 3.2% (LFL +3.8 % ) to
GBP2,044 million. The upweighting of arrivages sales increased as
the business continued to re-establish its discounter credentials.
Brico's sales performance rebounded strongly in Q2 20/21, following
the COVID-related temporary store closures in Q1. In H2 20/21,
sales performance remained strong but (relative to Castorama) was
impacted by the less favourable trend for trade-oriented business
versus general home improvement during periods of lockdown. Brico's
e-commerce sales increased by 169% in FY 20/21, representing c.5%
of total sales (FY 20/21: 2% of total sales).
The store closure programme announced in March 2019 is now
complete. As part of this, we closed four loss-making Castorama
stores during H1 20/21 and a further four stores in H2 20/21,
resulting in an overall reduction in space in France of c.4% (year
on year). Two of the Castorama stores that were closed in H2 20/21
will be reopened in FY 21/22 as Brico Dépôt stores, given the
potential for discounter formats within these locations. In
December 2020, Castorama opened a new high-street compact format
store in Lille.
OTHER INTERNATIONAL
2020/21 2019/20 % Reported Change % Constant % LFL
Currency Change
Change
Sales (GBPm)
-------- -------- ------------------ ----------- --------
Poland 1,550 1,461 +6.1% +8.0% +4.9%
-------- -------- ------------------ ----------- --------
Iberia 310 326 (4.9)% (7.0)% (7.0)%
-------- -------- ------------------ ----------- --------
Romania 242 216 +12.1% +11.8% +10.8%
-------- -------- ------------------ ----------- --------
Other (+/-) - 5 n/a n/a n/a
-------- -------- ------------------ ----------- --------
Other International (ex-Russia) 2,102 2,008 +4.7% +5.6% +3.5%
-------- -------- ------------------ ----------- --------
Russia 189 311 (39.4)% (31.8)% (8.8)%
-------- -------- ------------------ ----------- --------
Other International 2,291 2,319 (1.2)% +1.2% +2.3%
-------- -------- ------------------ ----------- --------
Retail profit (GBPm)
-------- -------- ------------------ -----------
Poland 146 151 (3.7)% (1.9)%
-------- -------- ------------------ -----------
Iberia 3 2 +66.3% +62.7%
-------- -------- ------------------ -----------
Romania (14) (23) +38.7% +38.8%
-------- -------- ------------------ -----------
Other (+/-) - (4) n/a n/a
-------- -------- ------------------ -----------
Turkey (50% JV) 9 9 (2.7)% +22.4%
-------- -------- ------------------ -----------
Other International
(ex-Russia) 144 135 +6.1% +10.0%
-------- -------- ------------------ -----------
Russia (3) (12) +85.7% +83.9%
-------- -------- ------------------ -----------
Other International 141 123 +14.5% +17.8%
-------- -------- ------------------ -----------
Retail profit margin %
-------- -------- ------------------ -----------
Poland 9.4% 10.4% (100)bps (100)bps
-------- -------- ------------------ -----------
Other International (ex-Russia) 6.8% 6.7% +10bps +30bps
-------- -------- ------------------ -----------
Other International 6.2% 5.3% +90bps +90bps
-------- -------- ------------------ -----------
(+/-) 'Other' relates to Screwfix Germany, where all 19 of its
stores were closed during H1 19/20.
Other International (ex-Russia) total sales increased by 5.6%
(LFL +3.5%) to GBP2,102 million, with growth in Poland and Romania
offset by a decline in Iberia. Retail profit increased by 10.0% to
GBP144 million, largely reflecting a lower retail loss in Romania.
Including Russia, whose sale was completed on 30 September 2020,
Other International retail profit increased by 17.8%.
Sales in Poland increased by 8.0% (LFL +4.9%) to GBP1,550
million, reflecting strong trading (in particular in Q2 and Q3
20/21, following COVID-related footfall declines in Q1 20/21). In
addition, space growth contributed c.3% to total sales. LFL sales
of weather-related categories increased by c.13% while sales of
non-weather-related categories, including showroom, increased by
c.4%. Poland's e-commerce sales grew strongly in FY 20/21,
increasing by 171% and representing c.4% of total sales (FY 19/20:
2% of total sales). Gross margin % decreased by 60 basis points,
largely reflecting mix, price positioning, and higher distribution
costs. Retail profit decreased by 1.9% to GBP146 million with gross
profit growth offset by an increase in operating costs of 9.4%.
Operating costs increased largely due to space growth, wage and
general inflation, higher frontline staff incentives & bonuses,
and COVID-related costs. This was partially offset by the benefit
of a COVID-related employment support scheme . Three new stores
were opened during the year, including a new medium-box format.
In Iberia, sales decreased by 7.0% (LFL -7.0%) to GBP310
million, largely due to COVID-related temporary store closures in
Spain (in H1 20/21), partially offset by a strong recovery in H2
20/21 (LFL sales +10.8%). Despite the impact of lockdowns on sales,
operating costs were well controlled with retail profit increasing
by 62.7% to GBP3 million.
Romania sales increased by 11.8% (+10.8% LFL) to GBP242 million,
driven by higher demand across all product categories and the full
year benefit from the successful rebranding of former Praktiker
stores to the Brico Dépôt banner. As a result, the business reduced
its retail loss by c.40% to GBP14 million (FY 19/20: GBP23 million
reported retail loss), helped by lower operating costs.
Romania currently prepares its financial statements to 31
December. For FY 21/22, Romania will migrate to Kingfisher's
financial reporting calendar, meaning Kingfisher's Q1 21/22 results
will include an additional month of results for Romania (i.e.
January to April).
As previously announced, Kingfisher completed the sale of
Castorama Russia to Maxidom, a leading home improvement company in
Russia, on 30 September 2020. Of the total consideration of GBP72
million, GBP57 million was received during the year, with the
remaining GBP15 million to be received in equal instalments over
the next two years. As a result of the timing of the transaction,
Russia sales decreased by 31.8%, although on a LFL basis decreased
by 8.8% to GBP189 million. Up to 30 September, the business made a
retail loss of GBP3 million (FY 19/20: GBP12 million reported
retail loss).
In Turkey , Kingfisher's 50 % joint venture, Koçta , contributed
GBP9 million of retail profit (FY 19/20: GBP9 million reported
retail profit).
Finally, in November 2020, Kingfisher acquired NeedHelp, one of
Europe's leading home improvement services marketplaces. The
consolidated results of the business for the two-month period
post-acquisition are included in 'Other International' but, due to
its size and rounding, do not appear in the tables above. For
further detail please refer to 'Build a mobile-first and service
orientated customer experience' within Section 2.
RETAIL BANNER EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area(1)
(FTE) numbers at 31 Jan 2021 (000s m(2) )
at 31 Jan 2021 at 31 Jan 2021
B&Q 18,034 301 2,210
Screwfix 9,342 722 46
------------------------ ----------------- ------------------------- -----------------
UK & Ireland 27,376 1,023 2,256
Castorama 10,728 93 1,160
Brico Dépôt 8,124 121 847
------------------------ ----------------- ------------------------- -----------------
France 18,852 214 2,007
Poland 12,160 83 717
Iberia 1,849 31 195
Romania 2,254 35 253
Other International(2) 16,263 149 1,165
------------------------ ----------------- ------------------------- -----------------
Total(2) 62,491 1,386 5,428
------------------------ ----------------- ------------------------- -----------------
(1) Screwfix sales area relates to the front of counter area of
an outlet.
(2) Excludes NeedHelp employees.
Section 5: FY 2021/22 Technical guidance
The following guidance applies in the event of no adverse change
in COVID-related confinement measures (for example, new lockdown
restrictions resulting in further store closures). Please also
refer to Section 8 for further details regarding forward-looking
statements.
Income statement:
-- LFL sales outlook
- H1 21/22 - expect low double-digit LFL sales growth
- H2 21/22 - planning for LFL scenarios of -15% to -5% (2-year
LFLs for H2 of -1% to +11%). Range reflects uncertainty over the
macroeconomic and consumer environment in H2
-- Space
- Anticipate net space growth (excluding Russia) to impact total
sales by c.+1.5%, largely from the UK and Poland. Total sales
impact from the disposal of Russia will be c.-1.5%
-- Costs
- Central costs - expected to be broadly flat year on year (FY 20/21: GBP54m)
- COVID-related costs - expected to be c.GBP10m (FY 20/21: GBP45m)
-- Net finance costs
- Expected to decrease by c.GBP10m as a result of lower lease
liability balance and lower non-lease interest (FY 20/21:
GBP160m)
-- Adjusted pre-tax profit
- Aiming to grow full year adjusted pre-tax profit (before
c.GBP85 million of non-recurring net cost savings in FY 20/21) in
line with sales(1)
-- Tax rate
- Group adjusted effective tax rate expected to be c.23%(2) (FY 20/21: 23%)
Cash flow:
-- Capital expenditure - targeting gross capex of up to 3.5% of
total sales, including c.GBP70m of capex deferred from FY 20/21 (FY
20/21: GBP281m; FY 19/20: GBP342m)
-- Tax - as anticipated, in February 2021 we paid c.GBP57m
(excluding interest) to HMRC in relation to the EC state aid
challenge (contested and recorded as a receivable)
(1) Group total sales growth and adjusted pre-tax profit growth
in constant currency.
(2) Subject to the blend of profit within the Group's various
jurisdictions.
Section 6: FY 2020/21 Financial review
A summary of the reported financial results for the year ended
31 January 2021 is set out below.
Financial summary % Total % Total % LFL Change
Change Change
--------- ---------- -------------
2020/21 2019/20 Reported Constant Constant
currency currency
---------------------- ------------ ------------ --------- ---------- -------------
Sales GBP12,343m GBP11,513m +7.2% +6.8% +7.1%
Gross profit GBP4,573m GBP4,255m +7.5% +6.9%
Gross margin % 37.1% 37.0% +10bps -
Operating profit GBP916m GBP283m +223.7%
Statutory pre-tax
profit GBP756m GBP103m +634.0%
Statutory post-tax GBP592m GBP8m n/a
profit
Statutory basic EPS 28.1p 0.4p n/a
Cash and bank GBP1,136m GBP195m n/a
overdrafts
Total dividend 8.25p 3.33p n/a
Adjusted metrics
Retail profit GBP1,003m GBP786m +27.5% +27.4%
Retail profit margin
% 8.1% 6.8% +130bps +130bps
Adjusted pre-tax
profit GBP786m GBP544m +44.4%
Adjusted pre-tax
profit
margin % 6.4% 4.7% +170bps
Adjusted effective
tax
rate 23% 26% n/a
Adjusted post-tax
profit GBP604m GBP400m +51.0%
Adjusted basic EPS 28.7p 19.1p +50.3%
Free cash flow GBP938m GBP191m +391.1%
Net debt(1) GBP(1,394)m GBP(2,526)m n/a
(1) Net debt includes c.GBP2.4 billion lease liabilities under
IFRS 16 in FY 20/21 (2019/20: c.GBP2.6 billion).
Total sales increased by 6.8% on a constant currency basis, to
GBP12,343 million, driven by a strong sales performance in all our
key markets. On a reported basis, which includes the impact of
exchange rates, total sales increased by 7.2%. LFL sales increased
by 7.1%, which excludes the sales impact from an overall reduction
in space of -0.3%. During the year, we opened 47 new stores
(including 43 stores in the UK & Ireland, three in Poland and
one in France), closed 10 stores (including 2 stores in the UK
& Ireland and eight in France), and disposed of all 18 stores
in Russia as part of the sale of the business.
Gross margin % was flat on a constant currency basis, reflecting
higher full-price sales and lower clearance, offset by higher
supply & logistics costs and more trading initiatives at some
banners compared to the same period last year. On a reported basis,
gross margin increased by 10 basis points.
Reported retail profit increased by 27.5 % including GBP 1
million of favourable foreign exchange movement on translating
foreign currency results into sterling. In constant currency,
retail profit increased by 27.4 %, driven largely by a strong
performance in the UK & Ireland. Participation in government
support schemes, after amounts repaid, lowered the operating costs
of the Group by GBP45 million in the year.
Statutory pre-tax profit , which includes exceptional adjusting
items, increased by 634% to GBP756 million.
A reconciliation from the adjusted basis to the statutory basis
for pre-tax profit is set out below:
2020/21 2019/20 Increase/ (decrease)
GBPm GBPm
---------------------------------------------------------- -------- -------- ---------------------
Retail profit 1,003 786 27.5%
Central costs (54) (62)
Share of interest and tax of joint ventures & associates (3) (7)
Net finance costs (pre-exceptional adjusting items) (160) (173)
---------------------------------------------------------- -------- -------- ---------------------
Adjusted pre-tax profit 786 544 44.4%
Exceptional adjusting items before tax (30) (441)
Statutory pre-tax profit 756 103 634.0%
---------------------------------------------------------- -------- -------- ---------------------
Net finance costs of GBP160 million (2019/20: GBP173 million)
consists principally of interest on IFRS 16 lease liabilities. Net
finance costs decreased by 6.2%, largely due to lower lease
liabilities.
Net exceptional adjusting items were GBP33 million (2019/20:
GBP400 million), as detailed below:
2020/21 2019/20
GBPm GBPm
Gain/(charge) Gain/(charge)
------------------------------------------ --------------- ---------------
Transformation exceptional costs - (8)
Store closures - (67)
Russia impairments & other exit costs (27) (130)
Russia loss on disposal (49) -
Store impairments / reversals 42 (118)
Romania impairments - (39)
FTA settlement and business tax - (50)
Property disposals 13 15
Commercial operating model restructuring (16) -
Other 7 (44)
Exceptional adjusting items before tax (30) (441)
Exceptional adjusting tax items (3) 41
Net exceptional adjusting items (33) (400)
------------------------------------------ --------------- ---------------
Exceptional costs of GBP27 million have been recognised in FY
20/21 in relation to the sale of Castorama Russia in September
2020, mainly relating to additional impairments that reflect the
net proceeds from the sale of the business.
The sale of Russia also resulted in a loss on disposal of GBP49
million. This relates largely to the transfer of cumulative foreign
exchange losses previously recorded in the translation reserve and
arising on consolidation from the retranslation of the Group's net
investment in Castorama Russia.
Revised future store performance projections, reflecting the
Group's 'Powered by Kingfisher' strategy and judgements on the
sustainable benefits of the COVID pandemic on the market for home
improvement products and services, have resulted in net store asset
impairment reversals of GBP42 million. These comprise predominately
of reversals of impairment charges recorded in FY 19/20.
A profit of GBP13 million was recorded on the disposal of a
property in the UK. In September 2020 we announced to our
colleagues a fundamental reorganisation of our commercial operating
model, for which a restructuring charge of GBP16 million was
recorded.
' Other' exceptional adjusting items include a GBP14 million
liability that was held in relation to warranties as part of the
B&Q China disposal in 2014. This was released in FY 20/21
following the expiry of the warranty claims period. Of this amount,
GBP10 million has been recognised within operating profit and GBP4
million has been recognised within exceptional adjusting tax items.
'Other' exceptional adjusting items in FY 20/21 also include GBP3
million in relation to IT asset write-downs.
Taxation
The Group's adjusted effective tax rate is sensitive to the
blend of tax rates and profits in the Group's
various jurisdictions. It is higher than the UK statutory rate
because of the amount of Group profit that is earned in higher tax
jurisdictions. The adjusted effective tax rate, calculated on
profit before exceptional adjusting items, prior year tax
adjustments and the impact of future rate changes, is 23% (2019/20:
26%).
The overall effective tax rate includes the impact of
exceptional adjusting items and prior year adjustments. The impact
of these lower the rate from 23% to 22%. This mainly reflects the
applicable tax treatment of exceptional adjusting items, the
revaluation of deferred tax balances in the year due to the
repealed UK tax rate reduction, and the release of prior year
provisions which reflect a reassessment of expected outcomes,
agreed positions with tax authorities and items that have
time-expired.
Pre-tax Pre-tax
profit profit
GBPm Tax 2020/21 GBPm Tax 2019/20
GBPm % GBPm %
----------------------------- -------- ------- --------- ------- ------ ---------
Adjusted effective tax
rate 786 (182) 23% 544 (144) 26%
Exceptional adjusting items (30) (3) (441) 41
Prior year items - 21 - 8
----------------------------- -------- ------- --------- ------- ------ ---------
Overall tax rate 756 (164) 22% 103 (95) 92%
----------------------------- -------- ------- --------- ------- ------ ---------
The Group has been impacted by the European Commission's state
aid decision published in April 2019, which concerns the UK's
controlled foreign company rules. Along with the UK government and
other UK-based international companies, Kingfisher has appealed the
decision to the European courts. Refer to note 15 of the condensed
financial statements.
The statutory tax rates applicable to this financial year and
the expected statutory tax rates for next year in our main
jurisdictions are as follows:
Statutory tax rate Statutory tax rate
2021/22 2020/21
-------- ------------------- -------------------
UK 19% 19%
France 28% 32%
Poland 19% 19%
-------- ------------------- -------------------
Adjusted basic earnings per share increased by 50.3% to 28.7p
(2019/20: 19.1p) , which excludes the impact of exceptional
adjusting items and prior year tax items. Basic earnings per share
increased to 28.1p (2019/20: 0.4p) as set out below:
2020/21 2019/20
Earnings(1) EPS Earnings(1) EPS
GBPm pence GBPm pence
----------------------------------- -------------- -------- -------------- --------
Adjusted basic earnings per share 604 28.7 400 19.1
Net exceptional adjusting items (33) (1.6) (400) (19.1)
Prior year tax items 21 1.0 8 0.4
Basic earnings per share 592 28.1 8 0.4
----------------------------------- -------------- -------- -------------- --------
(1) Earnings figures presented reconcile adjusted post-tax profits to statutory post-tax profits.
Dividends
The Board has proposed a total dividend per share of 8.25p in
respect of FY 20/21, comprising an interim dividend of 2.75p in
respect of the six months ended 31 July 2020 (2019/20 interim
dividend: 3.33p) and a final dividend of 5.50p (2019/20 final
dividend: nil). The final dividend is subject to the approval of
shareholders at the Annual General Meeting on 30 June 2021, and
will be paid alongside the interim dividend on 5 July 2021 to
shareholders on the register at close of business on 4 June
2021.
A dividend reinvestment plan (DRIP) is available to shareholders
who would prefer to invest their dividends in the shares of the
Company. The shares will go ex-dividend on 3 June 2021. For those
shareholders electing to receive the DRIP the last date for receipt
of election is 14 June 2021.
For further detail on dividends please refer to 'Dividend for FY
20/21' within Section 2.
Return on capital employed (ROCE*)
In FY 20/21 Kingfisher's post-tax ROCE was 12.7% (2019/20:
8.6%). The increase was mainly driven by higher profit in the UK
& Ireland, and the impact on capital employed of favourable
movements in working capital. Kingfisher's weighted average cost of
capital (WACC) is 6.9%.
ROCE by geographic division is analysed below (Russia is
excluded from 2020/21):
Proportion of Capital employed Proportion of
Sales Group sales (CE) GBPbn Group CE ROCE ROCE
GBPbn 2020/21 2019/20
--------------------- -------- ------------------- ------------------- ------------------- ---------- ----------
UK & Ireland 5.7 47.3% 2.8 48.8% 19.6% 13.6%
France 4.3 35.4% 1.7 30.3% 7.0% 6.0%
Other International 2.1 17.3% 1.2 20.5% 9.3% 6.7%
Central - 0.4%
Total 12.1 5.7 12.7% 8.6%
--------------------- -------- ------------------- ------------------- ------------------- ---------- ----------
Free cash flow
A reconciliation of free cash flow is set out below:
2020/21 2019/20
GBPm GBPm
Operating profit 916 283
Exceptional adjusting items 30 434
Operating profit (before exceptional adjusting
items) 946 717
Other non-cash items(1) 570 566
Change in working capital 376 (127)
Pensions and provisions (29) (33)
Net rent paid (456) (469)
------------------------------------------------ -------- --------
Operating cash flow 1,407 654
Net interest paid (22) (17)
Tax paid (166) (104)
Gross capital expenditure (281) (342)
Free cash flow 938 191
Ordinary dividends paid - (227)
Share purchase for employee incentive schemes (14) (10)
Disposal of Castorama Russia and acquisition 19 -
of NeedHelp
Disposal of assets and other(2) (1) 49
Net cash flow* 942 3
Opening net debt (2,526) (2,542)
Lease liabilities disposed 27 -
Other movements in lease liabilities 136 40
Other movement including foreign exchange 27 (27)
------------------------------------------------ -------- --------
Closing net debt (1,394) (2,526)
------------------------------------------------ -------- --------
(1) Includes principally depreciation and amortisation,
share-based compensation charge and pension operating cost.
(2) Includes exceptional adjusting cash flow items, principally
relating to store closures and other restructuring costs.
Operating profit before exceptional adjusting items was GBP229
million higher than last year, largely reflecting higher profits in
the UK & Ireland and France.
The working capital inflow of GBP376 million reflects the
consistently strong sales performance of the Group from Q2 20/21
onwards. The inflow is driven by a GBP86 million decrease in stock,
largely due to the strong demand levels seen in H2 20/21; and an
increase in payables (net of receivables) of GBP290 million ,
reflecting timing of inventory purchases and higher payroll and VAT
creditors associated with stronger sales levels.
Gross capital expenditure for the year was GBP281 million
(2019/20: GBP342 million). After the onset of the coronavirus
crisis, expenditure was largely limited to essential areas during
the remainder of H1 20/21 (refer to Section 3 for further detail) .
Overall, approximately GBP70 million of gross capital expenditure
originally planned for FY 20/21 was deferred to FY 21/22 . Of the
expenditure in FY 20/21, 32% was invested on refreshing,
maintaining and adapting existing stores (including renewable
energy initiatives), 23% on new stores, 27% on IT and digital
development, 12% on range reviews and 6% on other areas including
supply chain investment.
Overall, free cash flow for FY 20/21 was GBP938 million
(2019/20: GBP191 million).
Kingfisher completed the sale of Castorama Russia to Maxidom, a
leading home improvement company in Russia, on 30 September 2020.
Of the total consideration of GBP72 million, GBP57 million was
received during the year, with the remaining GBP15 million to be
received in equal instalments over the next two years. This
resulted in a net cash inflow on disposal of GBP27 million, after
cash disposed with the business and transaction costs. Refer to
note 14 of the condensed financial statements.
In November 2020, Kingfisher acquired NeedHelp, one of Europe's
leading home improvement services marketplaces, for a total cash
consideration of GBP9 million (before cash acquired of GBP1
million), resulting in a net cash outflow on acquisition of GBP8
million. Refer to note 13 of the condensed financial
statements.
Net debt (including IFRS 16 lease liabilities) as of 31 January
2021 was GBP1,394 million (2019/20: GBP2,526 million).
Management of balance sheet and liquidity risk and financing
Management of cash and debt facilities
Kingfisher regularly reviews the level of cash and debt
facilities required to fund its activities. This involves preparing
a prudent cash flow forecast for the medium term, determining the
level of debt facilities required to fund the business, planning
for repayments of debt at its maturity and identifying an
appropriate amount of headroom to provide a reserve against
unexpected outflows and/or unexpected impacts to cash inflows (for
example, COVID-related temporary store closures).
Net debt to EBITDA
As a result of the Group's strong cash position, the Group ended
the period with GBP1.4 billion (2019/20: GBP2.5 billion) of net
debt on its balance sheet including GBP2.4 billion (2019/20: GBP2.6
billion) of total lease liabilities. The ratio of the Group's net
debt to EBITDA was 0.9 times as of 31 January 2021 (2.0 times as of
31 January 2020) . At this level, the Group has the necessary
financial flexibility during this current period of heightened
uncertainty, whilst retaining an efficient cost of capital. Over
the medium term, the Group's objective is to maintain a target of
c.2.0 times net debt to EBITDA.
Net debt to EBITDA is set out below:
2020/21 2019/20
GBPm GBPm
Retail profit 1,003 786
Central costs (54) (62)
Depreciation and amortisation 536 545
EBITDA 1,485 1,269
Net debt 1,394 2,526
------------------------------- -------- --------
Net debt to EBITDA 0.9 2.0
------------------------------- -------- --------
Credit ratings
Kingfisher holds a BBB- credit rating with Fitch, (P) Baa2
rating with Moody's, and a BBB- rating with Standard and
Poor's.
Revolving credit facilities
As of 31 January 2021, the Group had undrawn revolving credit
facilities (RCFs) of GBP225 million due to expire in March 2022 and
GBP550 million, most of which is due to expire in August 2023. The
Group also had access to a GBP250 million RCF (that was due to
expire in May 2021), which was cancelled in February 2021.
Other borrowings
In July 2018, following a reverse enquiry, a EUR50 million
Floating Rate Note (FRN) was issued under Kingfisher's EUR2.5
billion European Medium Term Note (EMTN) programme. The note
matured in July 2020.
The Group also has two fixed term loans: EUR50 million maturing
in September 2021 and GBP50 million maturing in December 2021.
Covenants
The terms of the committed RCFs and the GBP50 million term loan
require that the ratio of Group operating profit (excluding
exceptional adjusting items), to net interest payable (excluding
interest on IFRS 16 lease liabilities) must be no less than 3:1 for
the preceding 12 months as at the half and full year-ends. As of 31
January 2021, Kingfisher's ratio was higher than this
requirement.
Prêt garanti par l'État
In May 2020, Kingfisher arranged a EUR600 million (c.GBP537
million) term facility with three French banks in support of its
operations in France. The loan was guaranteed at 80% by the French
State (Prêt garanti par l'État) and had a maturity of one year,
extendable for up to five years. As required under the terms of the
loan, the full amount was drawn down on 18 May 2020. The term
facility was repaid in full in December 2020 and cannot be
redrawn.
Euro Commercial Paper (ECP) programme and Covid Corporate
Financing Facility (CCFF)
During FY 20/21, the Group established an ECP programme,
allowing it to issue short-term commercial paper for periods from
one week up to 12 months into the market to provide liquidity. The
establishment of this programme also enabled the Group to
participate in the Bank of England's CCFF.
Following the UK Government's announcement on 17 March 2020, the
Group successfully applied for the CCFF, which was made available
to assist UK businesses bridge COVID-related disruption to their
cash flows. During H1 20/21, the Group issued and subsequently
redeemed GBP600 million of 11-month commercial paper under the
CCFF. The Bank of England intends to close the CCFF to new
purchases on 23 March 2021.
Total liquidity
As of 18 March 2021, the Group has access to over GBP2.2 billion
in total liquidity, including cash and cash equivalents of over
GBP1.4 billion and access to GBP775 million of funding under the
RCFs.
Further detail on Kingfisher's debt and facilities can be found
at www.kingfisher.com .
Property
Kingfisher owns a significant property portfolio, almost all of
which is used for trading purposes. A valuation was performed for
internal purposes in October 2020 with the portfolio valued by
external professional valuers. Based on this exercise, on a sale
and leaseback basis with Kingfisher in occupancy, the value of
property is GBP2.7 billion as of 31 January 2021 (2019/20: GBP2.9
billion).
2020/21 2019/20 2019/20 Yields
GBPbn 2020/21 Yields GBPbn
-------- -------- --------------- -------- ---------------
France 1.4 8.3% 1.4 8.1%
UK 0.5 6.9% 0.6 5.8%
Poland 0.6 7.9% 0.6 7.4%
Other 0.2 n.a. 0.3 n.a.
-------- -------- --------------- -------- ---------------
Total 2.7 2.9
-------- -------- --------------- -------- ---------------
This is compared to the net book value of GBP2.2 billion
(2019/20: GBP2.2 billion) recorded in the financial statements
(including investment property and property included within assets
held for sale). Balance sheet values were frozen at 1 February 2004
on the transition to IFRS.
Pensions
As of 31 January 2021, the Group had a net surplus of GBP359
million (2019/20: GBP277 million) in relation to defined benefit
pension arrangements, of which a GBP504 million surplus (2019/20:
GBP404 million) was in relation to the UK scheme. The favourable
movement in the net surplus is driven by returns on the UK scheme
assets more than offsetting the actuarial losses on the liabilities
due to a lower discount rate assumption. This accounting valuation
is sensitive to a number of assumptions and market rates which are
likely to fluctuate in the future. Refer to note 10 of the
condensed financial statements for a sensitivity analysis.
Section 7: Glossary
Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures (APMs), also known
as non-GAAP measures, of historical or future financial
performance, position or cash flows other than those defined or
specified under International Financial Reporting Standards (IFRS).
These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those
used by other retailers. APMs should be considered in addition to,
and are not intended to be a substitute for, or superior to, IFRS
measurements.
Closest
equivalent Reconciling items
APM IFRS measure to IFRS measure Definition and purpose
Adjusted basic Basic earnings A reconciliation Adjusted basic earnings
earnings per share per share of adjusted basic per share represents profit
(EPS) earnings per after tax attributable to
share is included the owners of the parent,
in the Financial before the impact of exceptional
Review (Section adjusting items, FFVR (see
6) and note 8 below), related tax items
of the condensed and tax on prior year items,
financial statements divided by the weighted
average number of shares
in issue during the period.
The exclusion of exceptional
adjusting items, FFVR, related
tax items and tax on prior
year items helps provide
an indication of the Group's
ongoing business performance.
--------------- --------------------------- ----------------------------------------
Adjusted effective Effective A reconciliation Adjusted effective tax rate
tax rate tax rate to the overall is calculated as continuing
tax rate is set income tax expense excluding
out in the Financial tax on exceptional adjusting
Review (Section items and adjustments in
6) respect of prior years and
the impact of changes in
tax rates on deferred tax,
divided by continuing profit
before taxation excluding
exceptional adjusting items.
The exclusion of items relating
to prior years and those
not in the ordinary course
of business helps provide
an indication of the Group's
ongoing tax rate.
--------------- --------------------------- ----------------------------------------
Adjusted pre-tax Profit before A reconciliation Adjusted pre-tax profit
profit taxation of adjusted pre-tax is used to report the performance
profit is set of the business at a Group
out in the Financial level. This is stated before
Review (Section exceptional adjusting items
6) and the consolidated and FFVR. The exclusion
income statement of exceptional adjusting
of the condensed items and FFVR helps provide
financial statements an indication of the Group's
ongoing business performance.
--------------- --------------------------- ----------------------------------------
Adjusted pre-tax No direct Refer to definition Adjusted pre-tax profit
profit margin equivalent is used to report the performance
% of the business at a Group
level and is separately
defined. Adjusted pre-tax
profit margin % represents
adjusted pre-tax profit
as a percentage of sales.
It is a measure of overall
business profitability.
--------------- --------------------------- ----------------------------------------
Adjusted post-tax Profit after A reconciliation Adjusted post-tax profit
profit tax of adjusted post-tax is used to report the after
profit is set tax performance of the business
out in the Financial at a Group level. This is
Review (Section stated before exceptional
6) and note 8 adjusting items, FFVR and
of the condensed tax on those items. This
financial statements also excludes tax adjustments
in respect of prior years
and the impact of changes
in tax rates on deferred
tax. The exclusion of exceptional
adjusting items, FFVR and
tax items relating to prior
years and those not in the
ordinary course of business
helps provide an indication
of the Group's ongoing after
tax business performance.
--------------- --------------------------- ----------------------------------------
Central costs No direct Not applicable Central costs principally
equivalent comprise the costs of the
Group's head office before
exceptional adjusting items.
This helps provide an indication
of the Group's ongoing head
office costs.
--------------- --------------------------- ----------------------------------------
Constant currency No direct Not applicable Constant currency changes
equivalent in total sales, LFL sales,
gross profit, gross margin
% and retail profit reflect
the year on year movements
after translating the prior
year comparatives at the
current year's average exchange
rates. These are presented
to eliminate the effects
of exchange rate fluctuations
on the reported results.
--------------- --------------------------- ----------------------------------------
Dividend cover No direct Not applicable Dividend cover represents
equivalent the ratio of earnings to
dividends. It is calculated
as adjusted basic earnings
per share divided by the
total (full year) dividend
per share. It is used as
an indication of how sustainable
dividend payments are.
--------------- --------------------------- ----------------------------------------
EBITDA Profit before A reconciliation EBITDA (earnings before
taxation of EBITDA is interest, tax, depreciation
set out in the and amortisation) is calculated
Financial Review as retail profit less central
(Section 6) costs and before depreciation
and amortisation. This measure
is widely used in calculating
the ratio of net debt to
EBITDA, and is used to reflect
the Group's leverage.
--------------- --------------------------- ----------------------------------------
Exceptional adjusting No direct Not applicable Exceptional adjusting items
items equivalent are certain types of income
or cost that are excluded
by virtue of their size
and/or nature in order to
reflect management's view
of the ongoing performance
of the Group. The principal
exceptional adjusting items
are: non-trading items included
in operating profit such
as profits and losses on
the disposal, closure, exit
or impairment of subsidiaries,
joint ventures, associates
and investments which do
not form part of the Group's
ongoing trading activities;
profits and losses on the
disposal of properties and
significant write-downs
of goodwill and significant
write-downs (or impairment
reversals) of other assets;
the costs of significant
restructuring; and incremental
acquisition integration
costs; and significant one-off
tax settlements and provision
charges/releases and the
tax effects of other exceptional
adjusting items.
--------------- --------------------------- ----------------------------------------
FFVR No direct Included within FFVR (financing fair value
equivalent net finance costs remeasurements) represent
in note 5 of fair value fluctuations
the condensed from financial instruments.
financial statements
--------------- --------------------------- ----------------------------------------
Free cash flow No direct A reconciliation Free cash flow represents
equivalent of free cash the cash generated from
flow is set out operations (excluding exceptional
in the Financial adjusting items) less the
Review (Section amount spent on interest,
6) tax and capital expenditure
during the year (excluding
business asset disposals).
This provides a measure
of how much cash the business
generates that can be used
for expansion, capital returns
and other purposes.
--------------- --------------------------- ----------------------------------------
Gross margin % No direct Refer to definition Gross profit represents
equivalent sales from the supply of
home improvement products
and services (excluding
VAT), less the associated
cost of those sales. Gross
margin % represents gross
profit as a percentage of
sales. It is a measure of
operating performance.
--------------- --------------------------- ----------------------------------------
LFL Sales Refer to definition LFL (like-for-like) sales
growth represents the constant
currency, year on year sales
growth for stores that have
been open for more than
one year. Stores temporarily
closed or otherwise impacted
due to COVID are also included.
It is a measure to reflect
the Group's performance
on a comparable basis.
--------------- --------------------------- ----------------------------------------
2-year LFL Sales Refer to definition 2-year LFL is calculated
by compounding current
and prior year LFL growth.
For example, current year
LFL growth of 10% and prior
year LFL growth of 5% results
in 2-year LFL growth of
15.5%. It is a measure
to reflect the Group's
performance on a comparable
basis.
----------------- --------------------------- --------------------------------------
Net debt No direct A reconciliation Net debt comprises lease
equivalent of this measure liabilities, borrowings
is provided in and financing derivatives
note 12 of the (excluding accrued interest),
condensed financial less cash and cash equivalents
statements and short-term deposits,
including such balances
classified as held for sale.
--------------- --------------------------- ----------------------------------------
Net cash flow Net increase A reconciliation Net cash flow is a measure
in cash of net cash flow to reflect the total movement
and cash is set out in in the net debt balance
equivalents note 12 of the during the year excluding
and bank condensed financial the movement in lease liabilities,
overdrafts statements exchange differences and
other non-cash movements.
--------------- --------------------------- ----------------------------------------
Non-recurring No direct Not applicable Non-recurring net cost savings
net cost savings equivalent include discretionary cost
savings such as advertising
& marketing and government
furlough programme support.
This is net of one-off COVID-related
costs, including supply
& logistics costs, costs
of PPE and social distancing,
donations, new store layouts,
additional store security,
and additional bonuses to
frontline store staff.
--------------- --------------------------- ----------------------------------------
Retail profit Profit before A reconciliation Retail profit is stated
taxation to profit before before central costs, exceptional
taxation is set adjusting items and the
out in the Financial Group's share of interest
Review (Section and tax of JVs and associates.
6) and note 3 This is the Group's operating
of the condensed profit measure used to report
financial statements the performance of our retail
businesses.
--------------- --------------------------- ----------------------------------------
Retail profit No direct Refer to definition Retail profit is the Group's
margin % equivalent operating profit measure
used to report the performance
of our retail businesses
and is separately defined.
Retail profit margin % represents
retail profit as a percentage
of sales. It is a measure
of operating performance.
--------------- --------------------------- ----------------------------------------
ROCE No direct Refer to definition ROCE is the post-tax retail
equivalent profit less central costs,
excluding exceptional adjusting
items, divided by capital
employed excluding historic
goodwill, net cash and exceptional
adjusting restructuring
provision. The measure provides
an indication of the ongoing
returns from the capital
invested in the business.
Capital employed is calculated
as a two point average.
The calculation excludes
disposed businesses.
--------------- --------------------------- ----------------------------------------
Same-store net Inventory Refer to definition Same-store net inventory
inventory movement represents the
constant currency, year
on year change in net inventory
before the impact of store
openings and closures. Stores
temporarily closed or otherwise
impacted due to COVID are
also included. It is a measure
to reflect the Group's inventory
management on a comparable
basis.
--------------- --------------------------- ----------------------------------------
Banque de France data for DIY retail sales (non-seasonally
adjusted). Includes relocated and extended stores.
http://webstat.banque-france.fr/en/browse.do?node=5384326
E-commerce sales are total sales derived from online
transactions, including click & collect. This includes sales
transacted on any device, however not sales through a call centre.
References to digital or e-commerce sales growth relates to growth
at constant currency.
France consists of Castorama France and Brico Dépôt France.
GNFR (Goods Not For Resale) covers the procurement of all goods
and services a retailer consumes (including media buying,
mechanical handling equipment, printing & paper).
Iberia consists of Brico Dépôt Spain and Brico Dépôt
Portugal.
Other International consists of Poland, Iberia, Romania,
NeedHelp, Russia, Screwfix Germany and Turkey (Koçta JV). Screwfix
Germany was wound down in H1 19/20 and the sale of Russia was
completed in H2 20/21 (on 30 September 2020).
Sales refer to Group sales excluding Joint Venture (Koçta JV)
sales.
SKU (Stock Keeping Unit) is defined as the number of individual
variants of products sold or remaining in stock. It is a distinct
type of item for sale, such as a product and all attributes
associated with the item type that distinguish it from others.
These attributes could include, but are not limited to,
manufacturer, description, material, size, colour, packaging and
warranty terms.
UK & Ireland consists of B&Q in the UK & Ireland and
Screwfix UK & Ireland.
Section 8: Forward-looking statements
You are not to construe the content of this announcement as
investment, legal or tax advice and you should make your own
evaluation of the Company and the market. If you are in any doubt
about the contents of this announcement or the action you should
take, you should consult a person authorised under the Financial
Services and Markets Act 2000 (as amended) (or if you are a person
outside the UK, otherwise duly qualified in your jurisdiction).
This announcement has been prepared in relation to the financial
results for the full year ended 31 January 2021. The financial
information referenced in this announcement is not audited and does
not contain sufficient detail to allow a full understanding of the
results of the Group. Nothing in this announcement should be
construed as either an offer or invitation to sell or any offering
of securities or any invitation or inducement to any person to
underwrite, subscribe for or otherwise acquire securities in any
company within the Group or an invitation or inducement to engage
in investment activity under section 21 of the Financial Services
and Markets Act 2000 (as amended).
Certain information contained in this announcement may
constitute "forward-looking statements" (including within the
meaning of the safe harbour provisions of the United States Private
Securities Litigation Reform Act of 1995), which can be identified
by the use of terms such as "may", "will", "would", "could",
"should", "expect", "anticipate", "project", "estimate", "intend",
"continue", "target", "plan", "goal", "aim" or "believe" (or the
negatives thereof) or other variations thereon or comparable
terminology. These forward-looking statements include all matters
that are not historical facts and include statements regarding the
Company's intentions, beliefs or current expectations and those of
our Officers, Directors and employees concerning, amongst other
things, the Company's results of operations, financial condition,
changes in global or regional trade conditions, changes in tax
rates, changes to customer preferences, liquidity, prospects,
growth and strategies, acts of war or terrorism worldwide, work
stoppages, slowdowns or strikes, public health crises, outbreaks of
contagious disease, environmental disruption or political
volatility. By their nature, forward-looking statements involve
inherent risks, assumptions and uncertainties that could cause
actual events or results or actual performance of the Company to
differ materially from those reflected or contemplated in such
forward-looking statements. For further information regarding risks
to Kingfisher's business, please consult the risk management
section of the Company's Annual Report (as published). No
representation or warranty is made as to the achievement or
reasonableness of and no reliance should be placed on such
forward-looking statements.
The Company does not undertake any obligation to update or
revise any forward-looking statement to reflect any new
information, change in circumstances, or change in the Company's
expectations.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
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For further information about how RNS and the London Stock Exchange
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END
FR UAVBRABUOUAR
(END) Dow Jones Newswires
March 22, 2021 03:00 ET (07:00 GMT)
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