Kingfisher plc

Good day ladies and gentlemen and welcome to Kingfisher PLC full year 2025-26 results presentation. At this time all participants are in listen only mode. Following the presentation we will conduct a Q&A session with research analysts. If you wish to ask a question we ask that you please use the raise hand function at the bottom of your screen. If you have dialed in, please select star 9 to raise your hand and star 6 to unmute. Instructions will also follow at the time of the Q&A. I would like to remind all participants that this call is being recorded. I will now hand over to Thierry Gagné to start the presentation.

Good morning and thank you for joining us today for Kingfisher's full year results presentation. Bhavesh and I will take you through our full year results, our outlook for the coming year and provide an update on our key strategic initiatives. Following this presentation will be the usual Q&A. So let's start with the key messages. 2025 was a strong year for Kingfisher as we continue to execute our strategy at pace and delivered on all our financial priorities. And there are three points I want to highlight. First, our strategic growth initiatives are driving market share gains, a key indicator of our progress. We grow market share across each of our banners in the UK, France and Spain, and maintain share in Poland. Our sales growth was high quality, led by growth in volume and transaction. We delivered double-digit growth in both trade and e-commerce sales during the year. While our 1P e-commerce sales were strong, I am particularly pleased with our progress in our marketplaces, now reaching £518 million on a GMV basis and up 58% year-on-year. Second, we maintained strong financial discipline amidst significant cost pressure. We grew gross margin by 80 basis points in the year, leveraging Kingfisher scales and sourcing power, and benefited from marketplace and retail media, both of which are gross margin accretive. We delivered strong growth in adjusted profit before tax and in EPS, When excluding the business rates refund at B&Q in the prior year, profit is up 13%. And our profit growth combined with a sharp focus on working capital management enabled us to deliver strong free cash flow. Third, we delivered attractive returns to shareholders We completed our £300 million share buyback program in March, and today we announced our fifth £300 million share buyback program, reflecting the momentum in the business. We also announced today our dividend of 12.4 pence per share, in line with last year. Let me now hand over to Banesh for the financial review and outlook.

Thank you, Thierry, and good morning, everyone. Let me start with an overview of our performance for the year. Total sales for the group were £12.9 billion, with like-for-like sales up plus 1.4%, excluding a negative calendar impact of minus 0.3%. Our sales growth was led by strong performance from our UK banners. Adjusted profit before tax was £560 million, up 6%. Adjusted EPS was 23.8 pence, up 15%, underpinned by our strong earnings growth in the year and supported by a 6% uplift from our share buyback program. Free cash flow generation was 512 million pounds. We delivered this while also increasing CapEx by 71 million pounds as we stepped up our investment in our stores, technology, and property. Net leverage now stands at 1.4 times, and we maintain a very healthy balance sheet. Turning now to our markets, B&Q reinforced its market-leading position with total sales growth of plus 3.9% or plus 5.9% when we include marketplace GMS sales. Like-for-like growth is plus 3.3%, significantly outperforming a flat market with a market share at record levels. From a product category perspective, Cora remained resilient with 12 consecutive quarters of underlying like-for-like growth. Big Ticket delivered strong growth of plus 6% in the year, and seasonal was plus 30% in Q1, benefiting from favorable weather, which we will lap this quarter. We successfully captured the transference of customers from home base to B&Q and acquired eight of their stores, which our team rapidly opened in time for peak trading. TradePoint sales grew by plus 5.2%, fueled by our enhanced loyalty program and an increased investment in trade sales partners. E-commerce sales grew by plus 21.5%, supported by marketplace growth. B&Q's marketplace is gross margin accretive and generated 15 million pounds of profit in the year. Looking to the year ahead, we will further enhance our trade offering with investment in our people, our offer, and our stores, and scale marketplace as we onboard cross-border vendors. You'll hear more on this from Thierry later on. Screwfix delivered consistently strong performance throughout the year, with total sales growth of plus 4.5%, and like-for-like growth of plus 3.2%, significantly outperforming the market. Our Screwfix teams have executed at a high level, enhancing the customer proposition through targeted marketing and promotional campaigns, competitive pricing, range improvements, and deeper engagement with trade customers via app-driven reward initiatives. Screwfix opened 27 stores on a net basis during the year, further growing our footprint and convenience for customers. Looking forward, our focus is on growing our share of the trade wallet. We also see further range and space opportunities. Our UK banners generated £575 million in retail operating profit, representing 78% of our group total retail profit. Profit grew by plus 2.9% in the year, or plus 9.4%, excluding the impact of last year's B&Q business rates refund. We delivered this profit growth despite the significant increases in wages, higher national insurance contributions, and the impact from EPR packaging fees. In France, against a subdued consumer backdrop and a home improvement market decline of around minus 3%, we are encouraged to see both of our banners outperforming the market. Castorama like-for-like sales were minus 2.2% in a year of significant change, particularly from the restructuring of several stores. I'll speak more on the progress of our Castorama plan shortly. From a strategic perspective, Castorama delivered a rapid rollout of its trade proposition across the estate, introduced Castro Pro Zones and 50 stores, and implemented a trade loyalty program. Trade penetration reached 9% by the end of the year, up from below 1% a year ago. Good progress was also made on Marketplace, with 1.6 million SKUs now available to customers. Brico Depot delivered total sales of minus 1.8% and like-for-like sales of minus 2.3%. Brico improved its price positioning by two points over the year and delivered strong progress in its trade proposition, with trade sales up 26% and trade penetration increasing to 17% at the end of the year. This performance was driven by an expanded trade-focused range, investment in dedicated trade colleagues, and enhancements to its loyalty program. BRICO also successfully opened one store transferred from Castorama, doubling sales densities. We feel good about Brico Depot, a capital-light model with a clear customer offering of discounted prices and high product availability. Our French banners deliver 97 million pounds of retail operating profit with a margin of 2.5%, up 10 basis points year-on-year. This was a strong performance as both banners offset sales deleverage from a declining market and higher social charges through gross margin expansion and structural cost reductions. Turning now to an update on our restructuring plan for Castorama. Since the plan was announced in March 2024, the new management team has moved at pace to improve competitiveness and efficiency, delivering good progress despite a weaker market, which declined by over 7% in 2024, and a further 3% in 2025. I've already talked about our progress in trade and digital. In addition, the team undertook a significant number of range reviews, which benefited several core categories, including surface and decor, tools, and tiling. We took cost price and supplier management actions, streamlining the head office organization, and rationalized the distribution network space by 15%. The reduction since 2019 was over 35%. Our store restructuring and modernization program is delivering tangible results. Right-sized stores are seeing much higher sales densities, while revamped stores are outperforming the CASTO average. The two franchise stores have returned to profitability. This progress has been delivered against a backdrop of significant people change, including a 50% refresh of store managers and regional directors, and a 40% change in category directors. We will continue to drive this agenda up pace in 2026, positioning the business to fully benefit when market conditions improve. For France overall, we remain confident in delivering our medium-term margin target of circa 5% to 7%, with the timing and trajectory of reaching this target dependent upon the pace of the market recovery. In Poland, we remain optimistic about the medium-term growth opportunities. Kastorama is a market leader with potential to increase space whilst building on both trade and e-commerce. Poland experienced a slow start to the year with unfavorable weather and political uncertainty weighing on home improvement spending. Like for Like was minus 1.1% for the full year, though conditions improved in Q4 with the return to growth in both the market and our business. We continue to make good progress with our strategic initiatives. About one in three pounds comes from trade customers, supported by the rapid rollout of Castro Pro Zones in more than half of the estate. The recruitment of specialized sales partners and a new trade loyalty program. And e-commerce sales increased 30% year-on-year, benefiting from the launch of Marketplace in January 2025. Poland generated £87 million in retail operating profit, representing around 12% of group retail profit. During the year, we accelerated technology investment, resulting in a one-off circa £5 million impairment of legacy systems. Excluding this charge, Poland retail profit was up, and profit margin was broadly flat year on year. Iberia had an excellent year, with plus 8.8% like-for-like growth, outperforming a growing market driven by competitive price positioning and strong progress in trade. Moving now to our profit performance in the year. Adjusted profit before tax rose by 6%, or plus 13% when excluding last year's £33 million business rates refund at B&Q. A key driver of profit growth was gross margin expansion, which increased by 80 basis points, driven primarily by group buying and sourcing benefits, progress in marketplace and retail media, with FX also providing a tailwind. We also delivered significant operating cost reductions. Some specific examples include a reduction in our supply and logistics network space of around 10% in France and nearly 30% in Poland, efficiencies in our stores from the rollout of self-service checkouts and the implementation of new store operating models, and property cost reductions through store rightsizing and regears. For the year, we delivered 30 basis points of retail operating margin expansion to 5.7%, an adjusted profit before tax of 560 million pounds. Turning now to our group cash flow, starting on the left of this chart, we generated adjusted EBITDA of 1.3 billion pounds. Working capital delivered a net inflow of 74 million pounds, driven by higher payables and our focus on inventory management. Tax, interest, and other items amounted to £13 million, including a £60 million benefit from tax prepayment true-ups, which we will lap in H1 2026-27. CapEx spend totaled £388 million, an increase of £71 million, as we continue to invest in technology and our stores. Together, these drove free cash flow of £512 million. We returned £474 million to shareholders through dividends and share buybacks, and total net cash inflow for the year was £107 million. Our dividend payments and share buybacks in 2025-26 build on our track record of attractive returns to shareholders. Over the past five years, we have returned £2.4 billion, equivalent to around 40% of our market capitalization. Looking ahead, we'll continue to build on this track record, with a proposed dividend of 12.4 pence per share to be paid in July, and the launch of our fifth share buyback program of 300 billion pounds commencing shortly. Looking ahead, we see further opportunities across gross margin, costs, and working capital. On gross margin, we expect continued benefit from group buying and sourcing, marketplace, retail media, and logistics efficiencies. On the other hand, we expect mixed effects from our growing trade penetration and from maintaining competitive prices. We see further opportunities through cost action. At store level, we will deliver savings through operating model enhancements and technology. We also see additional opportunities from improving head office efficiency and to further leverage our shared services center. Inventory also continues to be a priority. Our supply visibility tool is enabling us to reduce lead times and minimum order quantities with our OEB vendors. Coming out of a strong year, we are confident in our ability to capitalize on the attractive growth opportunities in our markets and are well positioned to continue growing sales ahead of our markets, profit ahead of sales, and to generate strong free cash flow. For the financial year 26-27, with a mixed consumer environment, We expect adjusted profit before tax in the range of £565 to £625 billion and are targeting £450 to £510 million of free cash flow. We remain mindful of the heightened macroeconomic and geopolitical uncertainty in recent weeks. Where we stand today, we estimate that the in-year direct impact on energy and freight costs is limited. As you know, the situation remains fluid. In similar situations, our markets have behaved rationally on pricing and margin. We have a strong track record of maintaining competitive prices, managing gross margin effectively, and flexing our call space. You can expect us to maintain our disciplined approach.