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.

Let me now hand back to Thierry. Thank you, Babesh, and I want to start by outlining the strategic growth drivers which underpin our current performance and position us for future growth, You can see these priorities on this page. And let me start with trade. We continue to grow our exposure to trade customers, a segment that shops more frequently, spends more and exhibits more predictable purchasing patterns. Our trade strategy leverages our existing store footprint and supports both market share growth and higher store sales densities with little to no incremental capex. As a result, trade is both revenue and margin accretive at retail operating profit level. ScrewFix trade penetration already stands at 75%. Across the rest of the group, trade sales grew by 23%, and trade customers now account for one in every three pounds of group sales. With this rapid progress, we are updating our medium-term ambition and now target 5 billion pounds of group sales from trade customers. So looking at some of our initiatives in a little more detail and starting with our stores. We are expanding dedicated trade space within our stores and now our trade zones live across all our banners. We made particularly strong progress in Castorama France during the year as we rolled out our trade proposition across the entire estate and opened 50 new Casto Pro zones. We are also excited to announce our first standalone trade point store opening in London this week. We also continue to invest heavily in our people. 279 dedicated trade sales partners are enrolled across our banners Circa three times more than last year. We are empowering our trade sales partners and see this as a key lever to unlock additional share of wallet. At Scufix, our new rewards program provides an industry-leading proposition for our trade customers and is driving strong engagement via the Scufix app. Customers who sign up to the program receive exclusive and personalized offers, but also surprise perks and gamified engagement. We now have 2.2 million active rewards customers, showing higher frequency of visits and higher average order values. Screwfix is also a great example on how we have succeeded with an app-first approach, with 41% of e-commerce sales now coming from the app. Another example of where our trade focus comes to life is Brico Dépôt France, the Capital Light model, with a strong discounter DNA. Trade customers like the efficient shopping experience, competitive pricing, and high product availability. We trialled new pro zones during the year and signed up over 210,000 trade customers to a pro loyalty program. We also improved price competitiveness by two points and introduced bulk buy discounts. These actions enabled Brico to grow trade sales by 26% and reach a trade penetration of 17% at the end of last year. We will further build on our trade proposition this year with more pro zones and enhance our trade value offering through additional volume discounts. Moving now to the digital ecosystem we are building and it starts with a strong 1P e-commerce proposition with our stores at the center. In 2020, we made the strategic decision to leverage our store network to fulfill online orders. This enables us to offer market-leading fulfillment speed for click and collect and home delivery, while also driving incremental traffic to our stores. We continue to improve our core platform by transitioning off our e-commerce legacy systems towards modular and agile technology. This enables rapid feature innovation, faster site load times, and market-specific feature deployment. We have developed a digital App Store model to ensure excellent product availability for online orders. 94% of 1P orders are picked in-store, and we offer rapid fulfillment options from store, through click and collect, and home delivery propositions. All this in turn drives increased traffic, which supports the growth of our 3P marketplace. Our marketplace offers a broad choice with several million SKUs, which in turn generates more traffic to our websites and fuels additional 1P sales. Our stores also play a critical role for our marketplace. All stores accept marketplace returns, and BAQ now offers in-store click and collect for marketplace items, driving additional footfall. Our loyalty programs provide us with rich customer data, enabling personalized offers and targeted promotions. The market is increasingly shifting towards mobile-first and ad-based engagement, which provides us with access to data. that allows us to improve and personalize customer interaction. And this leads us to monetization. We scale traffic and comprehensive data. We can sell and grow written media. As you know, there is lots of current news flow when it comes to adjunct e-commerce. Our platforms are ready to connect to adjunct e-commerce apps. And I will come back to this topic shortly. So to summarize, our digital ecosystem drives a virtuous cycle of value, leveraging our store assets, our web traffic, and is powered by Kingfisher technology. So moving to slide 22, which highlights our group e-commerce performance this year. Screwfix already generates 60% of sales from e-commerce. In the other banners, we grow e-commerce by 20%, and you can see progress in every one of our banners. At the group level, one out of five pounds now come from e-commerce. Our target in the medium term is to reach e-commerce sales penetration of 30%, out of which one third from marketplaces. So moving to our marketplaces, and I am going to focus here on B&Q, which is most advanced and provides a clear blueprint for scaling across our other banners. We launched our B&Q marketplace in 2022 and have already achieved a cumulative 1 million pounds of GMV sales since launch. We have scaled our platform significantly over the past four years, adding 2,800 vendors and 3.7 million SKUs, while also improving convenience for our customers with the introduction of Click and Collect, a first for a marketplace in the UK. B&Q's marketplace has generated 50 million pounds retail profit contribution last year, and the marketplaces in France and Iberia have now reached break-even early in their journey. So looking forward, we have ambitious growth plans, including the onboarding of more international cross-border vendors, and for context, cross-border accounts for broadly 50% of sales at mature pure-play marketplaces, and only a few percent for us. An emerging income stream for us is the monetization of our customer data and our traffic. Our inside platform, CoreIQ, underpinned by Kingfisher's first-party data, enables us to monetize our data with our corporate vendors. Having successfully built this capability in Castorama France, we plan to roll it out across all banners in 2026. So moving to retail media, we have brought capabilities in-house, built a group center of excellence, and each banner now has a dedicated retail media team. We have also started piloting advertising on digital screens in stores. While at an early stage, we are very excited about this new income stream, as adoption of retail media is strong, We target 3% of our e-commerce sales as additional revenues with a significant drop-through to profit. Kingfisher is also a rapid adopter of AI. We see AI as a tailwind for our business and ourselves as leaders in this space. Our in-house AI agent, Elo Casto, was the first agent in the global home improvement industry. when we launched it in 2023, followed by Hello B&Q in 2025. Those early investments are paying off. We have seen an increase of over 60% of customers visiting Hello Castro online, with conversion increasing by 95%. Last week, we announced a new strategic partnership with Google Cloud. Through this, we'll introduce AI-powered search across all our banner websites and apps, helping customers find products more intuitively. We have also done extensive work to enable AI agents to discover our products and to transact autonomously when this functionality becomes available in the UK and in Europe. This partnership will expand our capabilities further, allowing customers to complete purchases via Gemini and other AI agents. Underlying our business are strong own exclusive brands, where we provide innovative solutions at affordable prices and which are accretive to our margin. In 2025, within our power tool categories, we launched our next generation air barrel range with best-in-class performance in power, in control and durability. Since launched, it has achieved plus 43% sales growth compared with the previous range and Herbauer is now our number one tool brand sold across the group. Our new Ashmeet kitchen range delivers standout style at entry-level pricing, while our Pragma lowest priced kitchen range retails for less than 200 euros and is 15% cheaper than branded alternatives. Our new kitchens have been a key driver of our strong big-ticket performance in the year and alongside product innovation, we are developing a growing portfolio of complementary services that support customers with their projects such as kitchen and bathroom design, tool rental, installation service and project finance. Our banners hold leading positions in their markets, each with a distinct model and clear customer proposition where attractive space opportunities exist that meet our investment criteria, we continue to complement our existing store estate. Our mid- to long-term ambition for store space remains at 1.5 to 2.5% sales contribution per annum and 27 new store openings are planned for the coming year. We believe compact stores will play a more important role in the future across our markets allowing us to meet customer needs in high density urban areas and offering convenience and fast fulfillment through pick and collect and home delivery. Let me now turn to Scufix France, which is delivering plus 49% like for like store sales growth, in line with our expectations. Momentum continues across all KPIs. with a 52% increase in unique customers year-on-year and growing national brand awareness. We continue to see good growth in our older cohorts after three years and particularly strong momentum in the north of France where we observe a network effect. So this performance gives us confidence in the future of Skoufix in France. The strategic growth drivers I have outlined underpin Kingfisher's attractive investment story. We have leading positions in our markets and those markets have attractive structural growth drivers. We operate a diverse portfolio of banners, each with distinct formats and propositions that address a wide range of customer needs. Our strategic growth drivers are allowing us to grow our market share and give us confidence in our continued delivery against our financial priorities, growing ourselves ahead of our markets, increasing our profit ahead of sales, and generating strong free cash flow. So to summarize, 2025-2026 was a stronger, we have clear and attractive growth drivers and we are confident in our continued delivery in 26-27 and beyond. With that, let's move to Q&A. Thank you everyone.

We will now begin the Q&A session. If you wish to ask a question, please use the raise hand function at the bottom of your screen. If you have dialed in, please select star nine to raise your hand and star six to unmute. I would like to remind all participants that this call is being recorded. We will take our first question from Richard Chamberlain with RBC. Please unmute your line and ask your question.

Thank you. Morning, guys. A couple of questions from me, please, to start. Can you hear me OK? Excellent, excellent. Yeah, so first is on the space target you're setting out for the longer term. I think you're talking about 1.5% to 2.5% per year net. I wondered if you could just talk through what the key drivers of that space ambition will be and also what would the gross space growth be in that scenario. That's the first question. Thanks.

Thank you, Richard. that's fixed first is our this area when we have a lot of a lot of potential in the UK which means format exclusivity but moreover in France you know we know that today we are happy with the store maturity will we go for a large number of store in France Poland we have said that you know we probably cover about 50% of the the city where we want to be we have more more store to open and uh not only big boxes that way as well medium boxes you know around four thousand square meters of format we really believe in and as well smaller format we call it uh castorama smarts about two thousand per meter a lot a lot of potential in poland uh but in france uh brico depot one thousand is a format we are having a high expectation upon you know that's we have a few store we're still looking at the results that could be could be an attractive format as well as iberia so if you see you know which are the expansion is not linear sometimes you have opportunities sometimes you have opened down but clearly that's that's our medium term target great thanks theory um very helpful color and my second question is on the marketplace um obviously growth very strong

Can you give us a sense of how much that's being driven by newer vendors and how much by a sort of broader range of SKUs from existing vendors on the platform?

I think it's both. We are, you know, now B&Q, it's a third year in 2020. So we keep increasing the number of SKU, if you compare year on year, the number of vendors. In the other countries, you have really a very strong scale-up. In France, in Poland, in Liberia, we really continue to grow the vendors. I think the big new things that started in 25 and will be a bigger thing in 26 is what we call cross-border vendors. In fact, today, when you look at the VHM marketplace, We just have a few percent of our vendors that are not legally located in the UK. And we know countries like Germany, for example, all the European countries, you have a very strong base of industrial vendors. It took us a while to find the tech solution to onboard and there is, you know, VAT and payment challenges. And now we are able to do that. So you will see a lot more cross-border vendors in the future. And for large marketplaces, I will not give you names, but you can get the names in Europe and the US is broadly 50%, but their vendors are not local vendors. So we feel that's a big opportunity for us looking forward.

But maybe a couple of things to add, Richard, you know, why we like marketplace that extends our ranges. Let's just play in categories. We wouldn't, you know, align with our proposition, but wouldn't make sense for us to stock directly. So things like white goods, bulky things a lot take a lot of space in stores maybe lower margins cap products um but the other thing is marketplace then gets us to reach new customers right we have you know half of the customers that come to bmq marketplace are new to diy.com um and then they go on to buy one p product as well so we're attracting more customers onto our website to be able to sell them um more one page sure excellent okay thanks guys

Our next question comes from Tim Ramsgill with Bank of America. Please unmute your line and ask your question.

Thanks. Good morning. I've got a few, so I'll maybe go one at a time. The first couple are kind of cash flow related. So I guess you obviously highlighted the benefits delivered on inventory. But at the same time, looking at the balance sheet, that's sort of not immediately obvious numbers wise. So maybe you can just help me out. I think there may have been some Chinese New Year effects at play there. So maybe you can just sort of help us square the kind of improvement of five days of inventory, please.

Maybe let me stop and then we give you a few details. I think, you know, we are very happy with our inventory program. You have seen it's not the first year we are decreasing inventories days. I think number of days is really the way we are looking at it. And we have multiple programs from, you know, reducing the space of our DCs. If you look at the past five years, we have been consistently reducing the number of DCs, the number of square meters, using better software to add real-time visibility on inventory across the group, you know, from factories in China, ship DCs. providing real-time data to our vendors that allow us to negotiate lead time, minimum order quality. And now we are starting to really work on forecasting with AI and more software. So I would say you have seen that the past few years and we are still very confident looking forward to work hard on our inventories and being able to reduce inventories.

Yeah, not much to add. You know, it's a key focus area for us. As Terry said, we took out five days this year, seven days last year. We expect continued steady progress. You know, it's a key driver of our working capital improvement. And as Terry mentioned, we try to focus on structural things, not tactical. So, for example, you know, we've got this supply chain visibility tool that we know where our stock sits. And so that means when we work with our factories in China, we can give them better data and a better plan of production. And that means that we order less. We have shorter lead times. We order fewer. Our minimum order quantity sizes are lower. So we're getting the product we need when we need it. That really helps. Here's one example that just gives you a bit of color on some of the structural initiatives that we're taking.

Okay, excellent. That's very helpful. The next sort of cash flow question is just a little bit around CapEx, obviously the guidance for 400 million. What, if anything, is driving a little bit of a step up? Is that just linked to the sort of store opening plans and then maybe just some thoughts on how that sort of trends over the next few years, please?

Yeah, so we spent 380 million in CapEx this year, about 3% of sales, which is along with our guidance. I guess the way we thought about it this year is as we navigated through, we had a good first half. And we're in constant dialogue with our businesses around where can we look for opportunity to deploy and invest more in our business first. That's the first pillar of our capital allocation strategy. And so we focused on stores. So B&Q, for example, bought a freehold store that was opportunistic, came up, wasn't in our plan, but we felt the right thing to do. um we also felt continued investment and maintenance of our stores that's important so customer facing things like led lighting entrances etc so um you know we sort of navigated through the year and as we saw we're having a good first half we chose to you know take some of that performance and reinvest it um you know obviously in the right parts of the business that you know drive good returns and help our customer experience

Right, and then last one for me, if that's okay. Just in terms of marketplace, just help us think about how, clearly you've laid out ambition for where that gets to from a revenue contribution perspective, but how do you expect to grow the costs to deliver that? So when should we start to see perhaps a sort of more dramatic drop through to profitability? Just some parameters around that would be great. Thank you.

Yeah, thank you, Tim. I think first of all, remind you that the market, the BAQ marketplace delivered 15 million pounds of return profit this year. So that starts to be meaningful. When I start from top line, the take rates, you know, the commercial margin we are taking is around industry average for home improvement between 10 and 15%. and we are happy to see this margin across all our different countries then you have a bit of tech but broadly you know the investment has been done we are working with miracles so that's relatively it's a sas model so we are it's really a small amount uh there are small teams you know if you think bnq will speak about 20 people for over 400 million gmv uh so the main variable is the marketing cost and so when you start the marketplace you want to be here or be around eight to ten percent marketing investments and then gradually over time you will decrease this marketing spend uh and after a few years you are at a stable and standard level of marketing investment So we are gradually decreasing our marketing investment and overall, when you do the math, you see a very strong flow through to profit. To give you even more colors, you know, we would probably be able in the future to increase the tech rates because we'll be able to send more services to our vendors, you know, return media, fulfillment option, advising. So a lot of things on the table as well on the tech rates in the future.

fantastic very helpful thank you very much our next question from adam cochran with deutsche bank please unmute your line and ask your question uh good morning guys a couple of questions um first of all we talked about the compact stores as being an area of growth um can you give us a an idea of the dynamics on on the compact stores are they Despite a lower sales base, are they actually more profitable on a contribution margin than the larger stores? So where I'm going is, are they margin accretive across each of the different banners compared to where you currently are?

Maybe I'll start and I think we'll give other views. I think first we remember we have started this journey a few years ago where we believe compact store format in DIY is an important trend. In certain obvious formats, you know, there are countries it exists. When you look at France, we have in the market companies like Monsieur Bricolage or Welldome that are in fact small format. you have less small formats. So in the UK, we have B&Q Locals, and that's really a high street format. And we will start to open more B&Q Locals this year, and we have a target in the medium term of about 30 stores. We have a format that is called B&Q Retail Park, around 2,000 square meters. We have Scufix City, you know, very successful, and we believe we can open 100. We have BRICODEPOT 1000 in France. I mentioned that it's a very important format for the future. In Poland, we have a great medium box, around 4,000 square meters. And we are working hard on the 2,000 square meter box that is not fully ready yet. And we are still working on our small format for Poland. And at UCB&Q, we are as well very pleased with the medium box format. So I would say, on average, uh our medium box and smaller format are in line or better than the average of the of their markets there are few exceptions for example if you tell me that poland smaller format we are not happy yet to brico depot what southern there's still some improvement to do but overall what you see is is a sales density and profit in line or slightly better than the average

And not much to add there, Adam. I think, you know, on B&Q locals, we've got 11. Eight of them are working pretty well. You know, the other three are not. Of the eight that are working well, you know, we looked at what the right range is, you know, what's the right delivery into a city center location, logistics, how are consumers engaging with us. So, you know, we're constantly alerting us as we build and adapt these.

The second question I've got is, if we look at the B&Q performance as the year progressed, there may have been some drivers from home base, customer transference. Did that make the material different as each quarter went on? Can you just remind us of maybe when that annualised is? And the second part of that question is, if we assume that some of the B&Q like-for-like was from home base and a decent proportion is coming through from the growth in trade, is there a question mark over the core... UK DIY customer, which appears to be in reasonably low to mid-single digit decline if you take into account the home base and your trade customer growth. Are you focusing so much on the trade customer that the DIY customer is getting less of a service than they were historically?

Thanks, Adam. Let me start with Homebase, and then I'll get Terry to answer the second one. So we haven't disclosed specifics on Homebase, but a couple of data points. Firstly, Homebase went to admin in November 2024, and then stores closed in January and February of 2025. And the way we sort of modeled and looked at it was one of the B&Q stores that are within 20 minutes of a Homebase store, And how are they performing versus the rest of the portfolio? And there, that's where we did see an uplift. You know, obviously the teams executed well. The eight stores that we acquired, we made sure were open for peak. We made sure we had the right product availability. As you know, we have a super strong season in the last quarter one. But Homebase was one of a number of drivers of the increased performance, right? We had good performance in Think Ticket. continued growth in our core categories with the profitable growth and trade and e-commerce uh and then obviously the strong seasonal that you saw h1 so yes it benefited us but was one of many levers yeah and then a few few more comment i think first of all we

We have to look at B&Q including marketplaces. So we have indeed the store, we have trade, we have marketplaces. So when we add marketplaces, what we call the GMS, the B&Q sales growth is plus 5.9% in 2025-26 versus the flat market. So, yes, trade is growing, but you can't say that the rest of the perimeter is having difficulties. And it's all based on the same assets. We are leveraging our assets to grow e-commerce and to grow trade. Another data can give you services, installation. We're up 22% at B&Q, so clearly we see a lot of good news on interaction with the customer. So you really have to keep looking at B&Q all together, including marketplace.

And just to add, you know, we performed above the market in the UK. So that gives you a data point.

Okay. And final question is, you talked about growing sales ahead of the markets and profit ahead of sales. Your midpoint of the guidance implies a 6% increase in profits. Given that one number that today surprised me slightly was the OPEX growth, particularly in the UK. is the implication to get your your midpoint that there's a low single digit uh like for like uh in order to to leverage that up to get to your six percent at the midpoint uh profit growth thanks i think maybe maybe to start you know adam i think you know in the mixed consumer environment uh

6% increase in the midpoint. We feel it's a good plan. It's predicated on continuous progress in our strategy, you know, on trade, on e-commerce. And as well, a lot of discipline on gross margin and cost. So in the current environment, we rather feel good around this midpoint guidance.

Thank you. Our next question comes from Grace Gilbert with Jefferies. Please unmute your line and ask your question.

Hi you guys, can you hear me?

Yes, good morning Grace.

Perfect, perfect. Thank you for taking my questions. First one is around gross margin, actually. I mean, obviously it was a pretty good year in terms of your gross margin expansion and continuing in the second half after what was a pretty good first half, and that was quite impressive. You've mentioned that these have to do with primarily better sourcing as well as just getting better deals with your suppliers. How structural are these gains, and what is – What are the things that your suppliers are seeing that are having you to be able to have these better deals, for example? That's the first question. The second one is actually around France. It was a little bit weaker than the other two regions. Obviously, the market has been down, and it's very difficult to see growth. That hasn't been very helpful, but it seems from your perspective that the model is working, particularly at Brico Depot. What are the benefits that we maybe haven't seen yet just because of the market, and what are you expecting to see going forward? I'll start with those two, and then I have one or two others.

Hi, Grace. Okay. On gross margin, yeah, I look really pleased with the performance in the year, right? We grew by 80 pips as we flagged. And as we look into the year ahead, you know, we have different puts and takes. So, you know, on one hand, you're going to continue to see further expansion of the marketplace, as Jerry mentioned earlier. That's margin and creative. You know, continue to look at the store as the heart of our digital ecosystem. So a lot of preparation and picking is done in the store. that means we need less logistics space and so you'll see continued focus on logistics efficiencies and then buying and sourcing uh was a you know quite successful in this year that helped drive our margin and we expect to continue to see that in the year ahead um particularly the insight that we get from our private label business when we look at something called cost we understand the components of all of our products and that gives us real data to negotiate with our branded suppliers and do that that will continue um and then we expect further fx tailwinds based on our hedging we hedge 100 of our committed orders uh into next year so we have a pretty good rate on on fx on the other hand we have growing trades you know really pleased with what we're doing with trade um for all the reasons you heard us talk about but at a gross margin level it is dilutive uh we always uh focus on maintaining competitive prices and then freight is starting to turn into a headwind um so those are some of the pluses and minuses that we think about as we look at the event on gross margin now i think to to france i think overall i think we feel good about the the progress in 25 just and you will have in my first market whether on my industry some pretty difficult markets

We did around minus two, so we overperformed the market. In a year where Castorama had significant disruption from store work, you know, a lot of range reviews. We had a big head office restructuring. We were changing a lot of the team in the store. You heard in that command that we changed about 50% of the store manager, 40% of the category manager. And as well, in France, we have to remember that it's a lot of new tax and high wages in 25, you know, like in the UK. So in this environment, being able to gain market share in all banners, to have a profit up, to see the strategic progress on trade, on e-commerce, to deliver on the CASTO plan, but as well on the BRICO plan, to answer your question on BRICO, you know, probably the two biggest problems uh progress we we made was continue to have an even lower price index because it's a discount it's counter banner and we did a lot a lot of progress on the pros on the process you saw that um and at the end the team are in a good place we see a team engagement in france growing in really in a strong position so overall i think it's a very strong year in a very difficult market, so we need the market to recover. But for me, the market recovery, the French market recovery is a question of time.

Okay, thank you, thank you. All clear. And then I suppose my last question is around the full year guidance for FY27. Obviously, you do have some tough comparatives heading into Q1, given how strong B&Q was last year. And then many of your competitors have as well, or just peers within the home market, have cited that it's been pretty wet weather and hasn't been helpful for trading into the beginning of the year. What makes you confident in reaching your full-year PPT numbers, given that you're facing some of these headwinds potentially?

Well, as you know, Grace, we don't provide current trading, so we don't guide to the quarter. But factually, you're right, we had a very strong seasonal. So B&Q's Q1 season last year was 30%. So it's a pretty tough column to lap. But, you know, as we look ahead to sort of our guidance for the full year, You know, we look at sort of one of the drivers from a top line perspective. You know, we've got a mixed consumer backdrop. But in the UK, we expect continued momentum from our two banners. You know, notwithstanding the tough comp in Q1 and home-based transfers we talked about earlier. Top line in France, you know, it's still a weak market. It's improving, but very slowly. Savings rates are still elevated, you know, 400 to 500 bps above the long-term average. So very much in France is focused on what we can control, you know, the differentiated proposition, discount proposition of BRICO. All the heavy lifting we're doing in CASTO, you know, when you heard us talk about our prepared remarks. And then Poland was flat last year. You know, Q4 was good, but I'd say we need to see more quarters of good sustained consistency in Poland. So that's sort of how we think about the top one when we set our guidance. and then we talked about GM your earlier question you know what things that we will continue to manage effectively got some puts and takes um those will be the same things next year as we saw this year and then continued focus on cost here we've got a track record of managing our costs pretty well you know as and when trading environments change we we have the agility to flex our cost base so those are some of the component parts that sort of set our full year guidance on profit and cash

Just to add a few words around, you know, how we feel, obviously, looking at the Middle East crisis. I think, obviously, we are very mindful, but we look at our top line first with resilient business. You know, we have about two-thirds of our businesses repaired now, so less discretionary. We now have reached 30% of the group sales is delivered through trade, so as well more resilient. we really see the benefit of our strategy on commercial trade. You know, looking again at BNQ in 2025, real growth plus 5.9 in the flat market. So you start to see the benefit of the strategy. And as Bhavesh said, we have had a strong track record of discipline, margin management, cost management in all the past years.

Perfect. Thank you.

Our next question comes from Yashraj Rajani. Please unmute your line and ask your question.

Hi. Thank you for taking my questions. I've got three, please. I'll ask them one by one. So the first one is on the cross-border vendor e-commerce, which you have fully highlighted. So is that just an element of introducing a different price point, or do you think that you're missing something in the range architecture there, which is now being complemented with this cross-border vendor e-commerce and how do you think about the right balance so that it doesn't cannibalize your your own one-piece sales

so i think we thank you for the question yeah i think it's we really see that more as a as a range topic as choice in fact we are really selling on our marketplaces should take the uk uk based vendors so you have a lot of very, very strong countries in the world with very strong industrial base. Germany, but even management in China, you will often run only our marketplace to Chinese vendors. You see the potential here. But it's not around price competition. To give you another color, we are working hard on what we call buy box and I will not enter into the tech detail but we could do that offline if you want. That will allow us as well to have more price competition between the same SKUs from 2026. So cross-border is really around a wrong choice.

And you know what I saw but look at our 1P sales. It's stronger than our store sales. And 3P traffic brings new people to DIY.com that we wouldn't otherwise get and allow them to go on to buy 1P products. So that's a benefit of having the choice that Thierry talks about.

Sure, sure. That's super helpful. Thank you. And then the second question is, again, on France. So appreciate, you know, you commented that the market's difficult, but there's obviously all the self-help initiatives that you highlighted. So even if you assume that the market stays where it is, what is the absolute margin improvement you can see from all the things that you control, even if like for likes are negative?

Yeah, I think, yes, we are still confident in our 5% to 7% profit margin for France in the medium term. We always say, you know, part of it is really our self-help action, and we are progressing on this. To remind you as well that some of the self-help action, you have very short-term impact, you know, when you do a head office restructuring, you have short-term impact. Some other, like range reviews, or the store network restructuring, you need a bit of time to realize, to crystallize all the benefits. So one, self-help action. Second part is the market improvement.

uh personally i'm convinced that we'll see a market improvement it's a question of time and we need both to achieve those five to seven percent got it got it super helpful and and the last one from from my end uh maybe quite a topical one is uh the middle east uh so so can you just sort of uh quantify any sort of freight headwinds or more broadly

uh disruption that you're seeing which would probably create some availability issues if any or just anything else you'd like to highlight on the middle east thank you so maybe i should i start with uh supply chain and then uh damage will come on the on the cost side but first it's obvious that we have no no operation in the region We have nearly two suppliers in the region, so you see it's really a very, very limited direct impact. And before, you know, Babesh will comment on gross margin and cost, again, remind you that two-thirds of our business is retail, not loss. 30% is trade. We are high expectation to deliver on our strategy and trade and e-commerce in 2026 and beyond. So we expect this, you know, to give us resilience looking forward.

Yeah, I mean, you heard me mention it in my prepared remarks, but the direct impacts, you know, based on what we know today, and as you know, things are changing every day, but the impact for us is fairly limited. Our energy, you know, our quantum energy costs are less than 1% of our sales, and the majority of that is hedged. And our freight, again, a small proportion of our COGS, about 20% of our COGS are sourced from Asia, and we typically lock in annual contracts to carriers. So those contracts have what we call like a fuel index. So there may be a little bit of headwind, but we've walked in those contracts for the year. You know, we looked at previous situations and markets have behaved pretty rationally on pricing and margin. And, you know, we continue to stay focused on managing our margin and being super disciplined on cost. And so that's our focus, right? To continue to do that as we navigate our way through.

Awesome. Thank you so much.

Our next question comes from Mia Strauss with BNP Paribas. Please unmute your line and ask your question.

Hi, good morning. I just want to check. I think last year you talked maybe about doing consumer surveys for your trade sales partners and what sort of pipeline they see over the next few weeks. Maybe if you can just give us a comment on that for the current year.

Yes, absolutely. And by the way, you will see that in the appendix of our document we released, page 34. Indeed, we do a monthly survey for SchoolFix. What you see on the page 34 is that 93% of our tradespeople are working. So it's two points year on year, so slightly higher than last year. But we have a second category that is working and have more work to come. It's 79% of the survey and it's 6 points up here on the earth. So, you know, and we do this survey every month for the past few years. So we're pretty reliable. So we feel those results now remain strong.

Thanks for pointing that out. And then maybe just on your share of the trade wallet, what share do you currently have? And essentially, what is the realistic opportunity of what share you could get in future?

I think Scrufix, our estimate is around 15%, 1.5%. So for a trade business, you could say it's still relatively low, and that's why we believe – We have a lot of opportunity ahead on Scufix share wallet, on the range, the size of the range, you know, B2B. We have a plan that will address more of this share wallet growth in the future. You have seen as well in the presentation the rewards program. For all the big boxes, our estimate, that is a few percent, you know, we all share a wallet in B&Q, in France, in Poland, it's just a few percent of a very large market. Very often the trade people, they already come to our stores, but mainly for urgencies, and that's why all this plan is finally leveraging your assets to sell more to people that are already in your stores. uh through your program transactions partners so we really feel you know what starting from this very low base of showing what it's another other big boxes there is significant opportunities and look in the uk it's a big market right 30 billion pounds uh total trade market trade point sales are close to a billion pounds so a lot of slots for us to still go out

It's helpful. And then maybe just for you, Bhavesh, on the free cash flow. So the guidance is a little bit lower year on year. And I think it's last year you also talked about achieving over $500 million over the full current year. I guess last year you saw about a $91 million increase in payables. What was that from? And I guess going forward, why is it a little bit lower?

So we're pleased with our free cash guidance. We've delivered more than $500 million over the last three years. And our focus this year will be continued on the profit drivers we talked about and working capital, and particularly inventory. So again, some of the stuff we mentioned earlier, some of the structural initiatives. We set a range of $450 to $510, midpoint to $480. That's about $30 million higher than the midpoint we set last year. And so... you know, confident that we'll, you know, continue to deliver cash flow well. You know, we also spent more on CapEx this year. You know, the question somebody asked earlier, you know, as we saw and navigated through the year that we were trading well and had a good cash performance, we chose to redeploy some of that, both in buying freehold, but also in our maintenance attack. So we kind of navigate through the year. And then you always get fluctuations, right, in year to year. So sometimes one-offs. But over the medium term, we're still guiding to around $500 million per annum, free cash. And have done that the last three years.

Great, thanks. Maybe just on the, if we look back to 25, what was the reason for that significant increase in payables, maybe?

I think timing, largely. We look, you know, as you'd expect any retailer, we kind of look at payment terms as well as something we navigate. But also our sales was higher, right? So that sort of drives our tables.

Okay, cool. That's clear. Thank you. Because you buy more.

As a reminder, if you would like to ask a question, please use the raise hand function at the bottom of your screen. And if you have dialed in, please select star 9 to raise your hand and use star 6 to unmute. Our next question comes from Georgina Joannan with JP Morgan. Please use star 6 to unmute.

Hi everyone, can you hear me OK?

Good morning, thank you.

I've got three quick ones please, really just following up some questions that have already been asked. The first one is very much appreciate that you prefer not to give current trading trends, but just in the context of maybe the consumer more broadly, particularly in the UK, I think one of the early Surveys that's been done since the start of the crisis and headlines around higher energy prices and so on actually saw an eight points fall in consumer confidence. So just wondering if you can kind of comment on how you're seeing consumer behavior rather than trading trends necessarily. The second one was appreciate you don't provide a like for like guidance. And of course, there are changes that will be made depending on trading performance. But if you were to see perhaps only a flat like for like this year, can you just confirm that you'd be able to hold profits in that scenario, please? And then finally, you very helpfully at the half year, I think quantifies some of the gross margin benefits from buying and sourcing initiatives. And if I remember correctly, around 60 basis points. Is it reasonable to assume that you can actually achieve a similar level again in fiscal 27? And indeed, where did that land for fiscal 26 overall, please? Thank you.

Thank you, Georgina. Let me start with the first one, and then I should cover the two and three. So to be direct, indeed, we don't want to comment on the current trading, but I think it's an important topic. We have not seen to now, you know, real impact on the customer. We have not seen change of trend following the start of this crisis.

On your second question, We have different levers that we pull as we navigate through the year. Margin, cost, investment in the business. You know, we've set our guidance range on profit. The range is the same as we set previously, $60 million around that midpoint. And we'll navigate and push and pull levers as trading evolves, as you saw us do this year. On gross margin, not going to quantify it, but I'm referring to my previous response on the various puts and takes. We've got lots of things that are tailwinds, but we also have some things that are headwinds on gross margins.

Okay, thank you anyway.

At this time, there are no further questions. I will now hand back to Thierry for closing remarks.

Just to say thank you for joining us this morning. All your questions, again, we are confident in our delivery of this year, in our strategic progress. Confident in the fact we'll stay very disciplined on the thing we can control well, as we did in the past. So again, thank you, and we are always available with the team if you have any questions. And for some of you, I think we'll meet in the coming days. Thank you very much.

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