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Kingfisher delivers mixed bag of results

B&Q new store front

Kingfisher has reported on full-year results for the year ended 31st January 2019.

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·     Total sales up 0.3% in constant currency; LFL down 1.6% with growth in Screwfix (UK), Brico Dépôt France and Poland offset by B&Q and Castorama France

·     Gross margin after clearance flat (-10bps in constant currency)

o  FY gross margin up in UK, Poland & Brico Dépôt France; H2 Group gross margin +30bps

·     Underlying PBT down 13.0%, with retail profit increases in the UK and Poland (56% of total sales) more than offset by weakness in Castorama France and losses in Russia & Romania

·     Statutory PBT down 52.8% largely reflecting property-related exceptional items

·     Balance sheet remains strong:

o  Working capital inflow of £24m with last year's mitigation stock eliminated

o  Returned £371m to shareholders (£231m ordinary dividend; £140m share buyback)

ONE Kingfisher transformation progress update

·     Building of Kingfisher 'engine' nearing completion

·     Substantially delivered strategic milestones for third year in a row: Unified 44% of product (COGS) (exit rate 50%), continued growth in sales and margin from unified and unique ranges; successful further rollout of unified IT platform; delivered £42m of operational efficiencies

·     Fulfilled commitment to return £600m via share buyback over first three years of plan

·     Estimated benefits from transformation after three years in line with 2016 plan

o  Benefits offset by weaker performance from underlying business due to external environment and underperforming parts of the business; clear priorities for year ahead

FY 19/20 and beyond

·     Expect FY 19/20 gross margin(2) to be flat after incremental clearance costs

·     Infrastructure to support more profitable future growth largely in place

·     Remain convinced in ability to deliver significant further financial benefits from transformation

·     Separation of transformation benefits ('£500m uplift in FY 20/21') from rest of business ('BAU') no longer reflects how we manage the business

·     Targeting growth in Group sales, gross margin, retail profit and ROCE over the medium term, reflecting improved underlying business performance and further transformation benefits 

Clear priorities for FY 19/20

·     Address underperformance of Castorama France and other parts of the business

·     Considering the closure of 15 poor performing stores across the business over next 2 years; also closing 19 Screwfix Germany outlets

·     Extend rollout of Screwfix outlets in the UK and enter new markets

·     Complete the building of the 'engine' and make our innovation more visible to customers

Véronique Laury, Chief Executive Officer, said:

"We have achieved radical organisational and behavioural change across Kingfisher over the last three years. We've done this against the backdrop of rapid structural change in retail alongside high levels of macroeconomic uncertainty, which are ongoing. Navigating these conditions while maintaining focus on a transformation of this scale has required huge commitment from our people. 

"During the year, the UK, Poland and Brico Dépôt France performed well, leveraging the benefits of our transformation. However, Castorama France has been disappointing and we are implementing a clear plan to sustainably improve its performance. Screwfix's leading omnichannel proposition has consistently delivered strong growth in recent years and we have identified additional expansion opportunities in both the UK and in new markets, initially in the Republic of Ireland. 

"Much of our focus over the last three years has been on building an 'engine' to deliver a superior customer proposition and the agility to succeed in the new retail environment. Our customers are starting to benefit from differentiated product, in store and online, at everyday low prices. Over the next year we will be accelerating our unique product activity and making our innovation more visible to customers including testing new store concepts.

"Our 'engine' is now largely built and we are confident in delivering significant financial benefits over time. We are targeting growth in sales, margin and returns over the medium term."

Leadership changes

Kingfisher is also today announcing some senior management changes.  Firstly, Steve Willett, Chief Transformation, Digital & IT Officer, has decided to retire after nearly 20 years with the business.  The Company would like to thank Steve for all his dedicated and tireless hard work during this time. In addition, the Company is pleased to announce the appointment of John Wartig, who replaces Karen Witts as Chief Financial Officer on an interim basis. John will join the business on 8 April 2019 and brings a wealth of international experience covering both financial and consumer facing businesses. John will not become a member of the Board of Directors.

Review the full results publication here.

Source : Kingfisher

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20 March 2019

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