UK and Poland drive sales for Kingfisher group

Kingfisher group saw underlying pre-tax profits of £787 million, up 14.7% thanks in part to strong like-for-like sales growth in the UK and Poland (in the financial year ending 31 January 2017)

Total adjusted sales in constant currencies were up 1.7% (UK & Ireland +2.4%; France (1.4)%; Other International +7.0%)

Kingfisher UK & Ireland sales were up 2.4% (+5.9% LFL) to £4,979 million benefiting from a broadly supportive backdrop and continued strong Screwfix performance. Retail profit grew by 9.9% to £358 million. Gross margins were down 80 basis points reflecting mix effects from strong growth in Screwfix, clearance related to the B&Q store closures and higher digital sales.

B&Q sales decline

B&Q saw total sales decline 3.3% to £3,680 million reflecting planned store closures partly offset by sales transference. LFL sales increased by 3.5% of which 2.6% resulted from sales transference associated with the store closures. LFL sales of seasonal products were up 3.1% while sales of non-seasonal products, including showroom, were up 3.6%.

Click & collect is now available on over 31,500 products (FY 2015/16: 16,700).

More growth for Screwfix

Screwfix remained a strong performer with total sales growing 23.2% (+13.8% LFL) to £1,299 million, driven by growth from the specialist trade desks exclusive to plumbers and electricians, strong digital growth (e.g. click & collect +60%, mobile +124%) and the continued roll out of new outlets. 60 new outlets were opened, taking the total to 517. Our overall target is to have around 700 outlets in the UK, up from 600 previously.

International

Kingfisher France sales declined 1.4% (-2.7% LFL) to £4,254 million. According to Banque de France data*, sales for the home improvement market were down 0.6%. Whilst holding a strong market position in France and benefiting from a well invested store estate, both businesses have delivered weaker sales compared to the market.

Castorama total sales declined by 2.4% (-3.0% LFL) to £2,308 million. LFL sales of seasonal products were down 4.6% and sales of non-seasonal products, including showroom were down 2.5%. Brico Dépôt total sales were broadly flat (-2.3% LFL) at £1,946 million reflecting store openings. Across the two businesses, one net new store was opened and four were revamped, adding around 1% new space.

Bright performance in Poland

Sales in Poland were up 10.1% (+7.5% LFL) to £1,191 million benefiting from a supportive market and new ranges. LFL sales of seasonal products were up 9.5% with sales of non-seasonal products, including showroom up 7.3%. Gross margins were up 90 basis points driven by strong trading and sales mix benefits. Retail profit grew by 15.8% to £144 million reflecting the sales growth and higher gross margins.

In Russia sales declined slightly by 0.2% (+0.3% LFL) to £349 million against strong comparatives (2015/16: +7.2% LFL). The business delivered a £1 million profit (2015/16: £6 million reported retail profit) reflecting a challenging environment and adverse foreign currency exchange movements. In Spain sales increased by 2.1% (+0.5% LFL) to £312 million, delivering a £2 million retail profit (2015/16: breakeven). In Turkey, Kingfisher’s 50% JV, Koçtaş, contributed retail profit of £5 million (2015/16: £7 million reported retail profit).

New Country Development:

New Country Development comprises our operations in Romania, Portugal and Germany. Sales were £140 million with losses of £16 million (2015/16: £17 million reported retail loss). Romania delivered a breakeven result (2015/16: £9 million loss) and Screwfix Germany opened ten new outlets, resulting in a £14 million loss (2015/16: £7 million loss).

UK & Ireland and Europe restructuring

Kingfisher has closed 65 B&Q stores (c.15% of space) in the two years ending 31 January 2017 (35 closures in FY 2016/17; 30 closures in FY 2015/16). In Q1 B&Q entered into a lease liability transaction with a third party to dispose of the remaining leases. As previously announced, there will also be a small number of closures of loss making stores across Europe. In FY 2016/17 two stores were closed, one in Russia and one in Spain, with an update on further closures to be made in due course. The total store rationalisation programme was originally expected to give rise to an exceptional charge of around £350 million, relating principally to onerous lease provisions. An exceptional charge of £305 million was reported in FY 2015/16. An overall exceptional gain of £15 million was reported in FY 2016/17 reflecting lower than expected B&Q store exit costs resulting from the lease liability transaction, and the decision to keep one B&Q store open that was originally planned for closure, partly offset by the forced closure of one other store.

The disposal of the remaining 30% stake in B&Q China for a net consideration of £63 million resulted in a gain of £3 million.

Supply chain

Kingfisher said: “We are moving away from an organisation structure with nine buying and logistics teams, in nine operating companies which source and merchandise their own ranges independently. Instead, we are reorganising as ONE organisation, starting with our offer, with planning underway to develop an integrated supply chain network.

“New unified global functions and roles started from June, mostly as a result of internal moves, leading to lower transformation exceptional costs than originally anticipated for this year. New range teams, located across the UK and France are working closely with operating companies, who retain responsibility for activities such as trading, range implementation, local pricing and customer needs.”

CEO Comment

Véronique Laury, Chief Executive Officer, said: “It has been a very productive and important year, a year which has again delivered sales and profit growth. I am really pleased that our performance has been achieved alongside delivering the key first year strategic milestones of our ambitious five year transformation plan, based on creating a unified company where customer needs come first. We have learned a lot and are aware of the challenges. We are well set up for next year and beyond as the level of activity increases.

“Looking forward, the EU referendum has created uncertainty for the UK economic outlook and we remain cautious on the outlook for France, especially in light of the forthcoming presidential elections. Looking longer term, supported by the expertise and energy of our colleagues, we remain confident in the size of the prize and our ability to deliver the plan – both the financial benefits the transformation will unlock and the stronger business it will create.”

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