Kingfisher plc

Of course, we've got Thierry Garnier, CEO, Bernard Bott, CFO. We've also got the chair of our board, Andy Coslett, as well. So just a couple of small housekeeping items before we kick off. So first of all, there are no planned fire alarm drills today. So if you do hear the buzzer, it is time to go. But staff will be on hand to... Guy just said fire exits. Secondly, we're going to take a quick two or three minute break after the presentation before Q&A. So I'll ask you guys to stay in the auditorium, give the guys a couple of minutes to catch their breath, and then we'll kick off with Q&A. And then finally, very sadly for a few of you like Tony, I'll be moderating the Q&As. So... But I'll have a couple of my colleagues on hand with microphones. So usual protocol, state your name, institution, etc. So I think that's it actually on the housekeeping side. So make yourself comfortable. It is just before nine. So maybe Paul, give it 30 seconds and we'll kick off. Just give me a thumbs up when we're ready. You might as well stand up there.

Good morning, everyone. Welcome to everyone here in person at the London Stock Exchange and also to those of you joining online. On behalf of our group executive and board, I would like to begin by thanking my 80,000 colleagues across the group for their commitment and dedication. They continue to deliver incredible work in an environment that stays very demanding, We are proud of them and proud to be part of this team. Turning now to our agenda for today on slide three, as usual, Bernard will provide a detailed review of our financial performance and outlook for the year ahead. I will then update on our operational and strategic progress, as well as our medium-term financial priorities before we take your questions. But first of all, let's start with the key messages here on slide four. It has been a year of solid execution. We delivered in line with our expectations, in line with our guidance and against a market backdrop that saw many new economic challenges. We have outperformed the home improvement industry and our sales are significantly ahead of pre-pandemic levels. We are pursuing multiple growth opportunities at pace and we are well positioned to navigate the year ahead. We maintain a sharp focus on pricing to deliver value to our customers and we continue to manage cost inflation pressures effectively. Strong supply chain management has ensured good product availability and a firm grip on our inventories. Bernard will say more on the outlook for the year, but overall, we're in good shape. Finally, we're announcing today a new medium-term financial priorities, including our commitments on growth and cash generation, and I will come back to this shortly. Turning to slide five and our full-year performance across retail and trade channels, sales have been resilient. lower by just 0.7% or 2.1% on a like-for-like basis. On a three-year basis, like-for-like sales were up 15.6%. Over this period, sales have grown ahead of our markets, growing by an average of 5.9% every year, versus a market growth of 4.9%. and the underlying resilience of our sales has continued into the new year. In February, total sales growth was plus 1.9%, with like-for-like sales up 0.5%, although we expect seasonal categories in March to be impacted by weather. E-commerce has been a big success for us. Sales have grown by 146% over three years, and our e-commerce penetration is now 16.3%, twice the level of 2019. Adjusted PBT was £758 million, at the top of the range we gave in November. This is nearly 40% ahead of the 2019 level. And during the year, we also exceeded our near-term scope 1 and 2 carbon reduction targets. At last, on shareholder returns, including dividends and buybacks, we returned over £580 million to shareholders during the year. We are now proposing a final dividend of 12.4 pence, which is in line with last year. We also intend to announce a new share buyback program following completion of the existing program later this year, subject to our capital allocation framework and market conditions. I will now hand over to Bernard. Thank you.

Thank you, Jerry. Good morning, everyone. And moving to slide seven and the key financials for the year. Total sales in constant currency were down 0.7% to 13.1 billion, reflecting a resilient top-line performance against strong prior-year comparatives. Like-for-like sales were down 2.1% and up 15.6% versus three years ago. We generated gross profit of 4.8 billion, with gross profit margin down 70 basis points year-on-year. This movement, which was largely UK-driven, was mainly the result of favourable banner and category weightings last year and more normalised level of promotional activity in H1. We also incurred some one-off logistics spend in H1 this year to secure and manage seasonal and buffer stock. While our H1 gross margin was down 130 basis points a year, in H2 our gross margin was flat at 36.8%. In constant currency, retail profit decreased by 19.2% to 923 million, with retail profit margin down 160 basis points to 7.1%. Adjusted PBT decreased by 20.2% to 758 million, which is 39% higher than 2019. Free cash flow was negative 40 million, absorbing a negative working capital impact for the year, a large portion of which we expect to unwind this year. And our total liquidity position remains strong at over 800 million. Our net debt, which is mainly comprised of lease debt, is just under 2.3 billion, with net leverage of 1.6 times EBITDA. Moving to slide 8 and the performance of our major geographies. All year-on-year variances are in constant currency, starting with the UK and Ireland, where like-for-like sales for the year were 6.9% lower, reflecting very strong prior-year comparatives in H1. On a three-year basis, like-for-like sales were up 15.3%, with the trend accelerating from Q3 to Q4 in both P&Q and Screwfix. Total sales decreased by 4.7% to 6.2 billion, with base growth contributing plus 2.2%, mainly from Screwfix. Of note, in H2, sales increased by 1.5%, with Screwfix growing plus 8%. Looking by banner, like-for-like sales at B&Q were down by 8.8%, with sales trends improving markedly in H2 versus H1. Three-year like-for-like sales for the year were up 15.8%. TradePoint outperformed the rest of B&Q with like-for-like sales down just 1.2% and up 31.5% on a three-year basis. TradePoint's penetration of B&Q sales increased two points to 22%. Like-for-like sales at Screwfix were down 3.4%, however, with growth returning through the year, ending with a like-for-like of plus 4.9% in Q4. Space growth contributed plus 5% for the year, for total sales growth of 1.6%. Over the last three years, B&Q, including TradePoint and Screwfix, have grown their respective market shares in the UK. UK and Ireland retail profit decreased by 24% to 603 million and retail profit margin for the year decreased 250 basis points to 9.7%. This reflects the exceptionally high sales and gross margin in H1 last year. In H2, retail profit increased 22.4% to 264 million. Operating costs in the UK and Ireland were 1.3% higher year on year. This was driven by 86 new store openings, higher technology spend, the normalization of COVID related underspend last year and operating cost inflation, including significantly higher energy cost. Increases were substantially offset by lower staff cost and cost reductions achieved as part of our strategic cost reduction program. Turning to France, where like-for-like sales were down 1.4% against a strong prior year comparative in H1, and up by 13.2% on a three-year basis. In H2, like-for-like sales increased by 0.5%. Both Castorama and Brico Depot continued to focus on strengthening their respective competitive positions in the market. improving their digital capabilities, product ranges, and overall customer propositions, all resulting in higher store and online NPS scores. Overall, sales decreased by 1.2% year-on-year. Retail profit decreased by 12% to 195 million, with a 50 basis points decrease in the retail profit margin. The gross margin rate in France decreased by 30 basis points, largely reflecting category mix impacts. Operating costs decreased by 0.6% due to lower staff costs and cost reductions achieved as part of our strategic cost reduction program. In the year, the French banners absorbed operating cost inflation, including significantly higher energy costs. Performance in Poland was strong. Like-for-like sales grew by 13.8%, with space growth contributing 2.9% for a total sales increase of 16.7%. This performance partly reflects the temporary store closures in the prior year first quarter, but the business also delivered strong market share gains during the year. Nearly all categories achieved double-digit like-for-like growth, with the standout performance in the kitchens category, where its new OEB kitchen ranges delivered over 40% like-for-like growth. Like-for-like sales were up by 19.8% on a three-year basis. Poland's growth margin rates decreased by 30 basis points, largely reflecting normalized promotional activity versus the prior year. Retail profit increased by 12.4% to 148 million, with growth in gross profit partially offset by an increase in operating costs of 16.8%. These were driven by higher staff and operating cost inflation, including higher energy costs, space growth, and new store opening costs. In Iberia, like-for-like sales increased by 1.9% and by 16.7% on a three-year basis. Retail profit of 9 million were 3 million lower than the prior year as a result of lower gross margin and a 1.2% increase in operating costs. Romania's sales increased by 1.7% to 285 million, despite the inclusion of one additional month of sales in the prior year comparative and the impact of COVID-related trading restrictions earlier in the year. On a like-for-like basis, growth was 7.8% and 38% on a three-year basis. Excluding the additional months of business included in the prior year comparative, which is there to align with Kingfisher's reporting calendar last year, the retail loss of the business increased slightly to 10 million. This represents significant progress from the 23 million loss recorded three years ago. Other consists of the consolidated results of our new businesses, Screwfix International, Need Help and Franchise Agreements. Due to these businesses being in their early investment phase, a combined retail loss of 30 million was realized, up 20 million year on year. This was largely driven by Screwfix France as the business invested to support the opening of its first stores. Our Turkish joint venture, Kostas, contributed an equity-accounted retail profit of 8 million, up from 7 million in the prior year. To slide 9, and the movement in group retail profit. In constant currency, this was down 219 million, or 19.2% for the year. Lower like-for-like sales at a constant gross margin rate contributed 106 million to this decline, all of which related to H1. The lower like-for-like gross margin rate, as already described, was also H1-driven, contributing 97 million to the overall decrease. Operating cost inflation was 153 million, largely driven by increases in pay rates, significantly higher energy costs, and the normalization of COVID-related underspend in the prior year. We were able to substantially offset this increase by flexing our staff cost, and through savings achieved as part of our strategic cost reduction program, while absorbing higher technology spend. The contribution from our new stores was 31 million before the allocation of any fixed IT and overhead cost. This was mainly driven by our new stores at Screwfix and in Poland. And finally, we spent 20 million more year on year on the development of our new businesses, primarily related to the investment in Screwfix France. So slide 10 and the summary of cash flow movements during the year. We generated an EBITDA of circa 1.5 billion in the year. The working capital outflow of 469 million was the result of an increase in inventory of 234 million and a negative movement in payables and receivables of 235 million. Over 100% of the increase in inventory was driven by inflation, with further increases resulting from higher levels of carryover seasonal items and stock to support store expansion. These were partially offset by lower stock purchases and our ongoing strategic actions to reduce inventory. The decrease in payables largely reflects higher level of inventory purchases in the prior year as we rebuilt product availability, built seasonal and buffer stock, and secured lower cost stock. Overall, we expect a large portion of this working capital outflow to unwind this year, which I will cover shortly. Capital expenditure in the year was 449 million, which at 3.4% of sales was in line with our guidance. Free cash flow was minus 40 million. As disclosed in H1, we paid 40 million euros or 34 million pounds to the French tax authorities with regard to historic tax liability. The amount was fully provided for in prior periods. Dividends of 246 million were paid, and a further 337 million was returned to shareholders via our share buyback programs. Overall, this resulted in a net decrease in cash of 654 million. Now moving to slide 11 and our current liquidity and financial position. As of 31st of January, we had over 800 million of total liquidity available, including 270 million of cash and an undrawn credit facility of 550 million. Our financial debt consists of two fixed-term loans totaling 100 million, which were taken out in H2 to top up our liquidity and help manage our working capital cycle. Net leverage was 1.6 times EBITDA at the end of the year, below our maximum threshold of two times. On slide 12, I'd like to cover how we successfully responded to the pressures of an uncertain and increasingly challenging economic backdrop last year. We delivered a gross margin that was broadly aligned with our pre-pandemic level of 37%. Over this period, we maintained a sharp focus on price, investing significantly in Screwfix and France, and managed unprecedented increase in product input costs and doubled our e-commerce sales penetration. Last year, we engaged with our suppliers and purchased stock early in order to reduce import cost pressures. We managed our retail prices effectively while maintaining a price index across all key banners, either below or close to 100 throughout the year. We also maintained a disciplined approach to promotions and clearance and achieved lower overall logistics and distribution costs. Turning to OPEX, it's important to highlight that we brought forward pay awards and support for colleagues during the year to help them manage higher cost of living. This was mainly focused on our store colleagues. And it comes as no surprise that our energy costs increased significantly year on year for an overall bill of circa 1% of our sales. Through a combination of planned and technical initiatives, we managed to reduce our overall energy consumptions by 15% year on year. Measures included installing air source heat pumps in screw-fixed doors, further rollouts of LED lighting, and introducing controls over store temperatures. As demonstrated in our retail profit bridge, we continue to deliver on our strategic cost reduction programs across the group, helping to substantially offset cost inflation. Finally, I have already mentioned that inflation was a principal driver of the increase in inventory. This masked our ongoing strategic actions to reduce inventory, which resulted in units or volume being lower year on year. Since Q1 2022, product availability has been back to pre-pandemic levels, and in H2 we started to reduce our buffer stock levels. Our stock provisioning and delisted stock rates remain below pre-pandemic levels. turning to slide 13 and the puts and takes for the year ahead. First, on cost prices. While we continue to expect input cost inflation year on year, including in H2, we are seeing some easing of the inflation rate and anticipate this to moderate further as we go through the year. Declines in several raw material prices, for example, metals and plastics, is expected to lead to an easing of product cost inflation. For container shipping from Asia, which applies to around 20% of our purchases, maritime freight prices have eased significantly. Please note that there is a delayed impact of these reductions due to the time lag between ordering and shipping of products and their subsequent sale. Our foreign exchange exposure from US dollar purchases are substantially hedged, but overall US dollar strength is anticipated to be a year-on-year headwind. I remind you that circa 20% of our COGS are purchased in US dollars. On operating costs, we aim to continue delivering cost reductions to help relieve some of the OPEX pressure we will face this year, which includes our expectation of higher staff, technology and energy costs. We are currently around 50% hedged on forecast energy consumption this year. While we have recently seen some moderation in market prices and we continue to work hard to reduce overall consumption, as of today, we still expect total energy costs to be higher year on year. In addition to our ongoing cost reduction program, we continuously plan for a wide range of different trading scenarios to ensure we can tailor our costs to reflect different demand levels. We therefore have the ability to pull tactical levels where and when appropriate. Finally, to our inventory management, we anticipate a working capital unwind as our seasonal and buffer stock continues to sell through and our supply payables normalize. As a reminder, most of our stock is neither perishable nor seasonable, and therefore we have no pressure to clear. We are working hard to further optimize our supply chain and sourcing footprint to reduce same store inventory levels and improve our stock turn. Finally, moving to slide 14 and our outlook for the year ahead. Further technical guidance can be found in the appendix on slide 41. We have seen resilient underlying sales trends in the new financial year. Total sales in February were up 1.9%, with like-for-like sales up 0.5%, largely reflecting a good performance at both B&Q and Screwfix. Group big ticket sales, which is kitchen, bathroom and storage, are broadly flat year on year. We expect some impact in March from adverse weather conditions and a strong prior year comparative in Poland. Looking forward, you can continue to expect from us a focus on the top line and market share gains. New store openings, largely from Screwfix and Castorama Poland, are expected to contribute circa 1.5% to total sales growth. We also remain committed to actively managing our costs, which will help offset against higher staff, technology and energy costs year on year. Additionally, we expect P&L investments of circa 40 million in new businesses, 10 million higher year on year to drive further store rollouts and brand building of Screwfix France. Even after these additional investments, we are comfortable with the current consensus for full year adjusted PBT, which is 633 million. We also expect to generate more than 500 million of free cash flow this year, supported by the unwind of prior year working capital outflows. Given our confidence in our cash generation, our intention is to announce a new share buyback program following completion of the current program this year, subject to market conditions and our capital allocation framework that Thierry will discuss shortly. And with that, let me indeed now hand back to Thierry.