Wednesday 22 March 2000
Preliminary results for 52 weeks ended 29 January 2000
2000Euro m** / 2000
£m / 1999
£m /
Change %
Turnover / 16,720 / 10,885.0 / 7,457.8 / +45.9%Retail Profit* / 1,162 / 756.7 / 554.3 / +36.5%
Pre-tax Profits* / 1,127 / 734.0 / 584.7 / +25.5%
Net operating cash flow / 1,327 / 863.8 / 698.3 / +23.7%
Property revaluation surplus / 218 / 142.0 / 58.4 / -
Capital investment / 1,255 / 816.8 / 743.6 / +9.8%
Net debt / 1,568 / 1,020.8 / 693.4 / +47.2%
Gearing / 33.1% / 26.5%
Earnings per share (p)*
Pre e-commerce and other new channel development / 32.8p / 30.3p / +8.5%
Earnings per share (p)*
Post e-commerce and
new channel development / 31.5p / 30.1p / +4.7%
Dividends (per share) (p) / 14.5p / 13.0p / +11.5%
*before exceptional items and acquisition goodwill amortisation
**£1= Euro 1.5361
- Highest Ever Sales and Retail Profits
- Strong Underlying Growth
- Group Margins Maintained
- Record New Store Openings
- E-commerce Strategy Announced
Kingfisher, the European retailer, today reported its highest ever sales and retail profits, a record number of new store openings and accelerated investment in other key areas.
Turnover at £10.9 billion was ahead by 45.9% and the retail profits earned by the three retail sectors grew by 36.5% to £756.7 million.
The Group maintained its overall gross profit margins. All its core businesses, B&Q, Castorama, Comet, Darty, Superdrug and Woolworths, increased their cash gross profits.
Pre-tax profits were strongly ahead by 25.5% at £734 million despite a strengthening of Sterling, which reduced profits by £14 million, and e-commerce costs of £23 million.
Both turnover and pre-tax profits benefited from annualisation of acquisitions made last year and this year. Turnover benefited by £2.56 billion, and pre-tax profits by £146 million. Like-for-like sales for the Group overall grew by 5.1%.
Cash generation continued to be very strong, enabling the Group to increase its capital investment programme to a record level of £817 million. The full year dividend of 14.5p, up 11.5% on last year, is covered 2.1 times by earnings.
Kingfisher’s Chief Executive Sir Geoffrey Mulcahy said:
“This was a year of strong growth driven by several key factors. Underlying growth was strong with like-for-like sales increasing 5.1%; we achieved a record store expansion programme with 120 openings; the benefits of the integration of Castorama and B&Q started to flow through; our global sourcing operations made a significant contribution and we expanded in our new markets.”
He continued: “The other major factor contributing both to our growth and margin control, was the impact of Every Day Low Pricing (EDLP) in B&Q and Comet, complementing similar policies in Darty, BUT and Brico Depot.”
“Customers, our research has shown us, want above all else, EDLP from brands they can trust, and this is supported by the performance of these brands. All of them have increased volume, profits and like-for-like growth.
“EDLP enables us to cut down on the very significant cost of promotions and associated advertising and to cut out store discounts. By smoothing out the peaks and troughs of sales we can work closely with our suppliers, who are therefore able to organise their businesses more effectively.
“These efficiencies, allied to the strength we gain from having leading retail brands and our scale, mean we have the right economics both to drive our businesses for volume and control our margins.”
Highlights Of The Year
Backing Success – New Store Openings at Record Level
Kingfisher opened a record 120 new stores during the year. This is in line with the company’s strategy of strengthening its core brands. There were two new formats launched - the innovative Comet interactive stores, which achieved immediate success, and the Big W stores. With their massive range and depth of product Big W has become a general merchandise destination store bringing a new dynamic to the market and Kingfisher sees the potential for a chain of 100. This year Kingfisher will accelerate its store expansion programme at an even faster rate with over 160 openings.
Sourcing Benefits Flow Through
During the year the Group’s Far East sourcing operation based in Hong Kong substantially increased in size and a new office will be opened in Shanghai this year. Kingfisher Electrical’s central sourcing operation, which increasingly sources for all of Kingfisher’s electrical businesses, was also strengthened.
Sourcing cost reductions of £29 million were achieved through our global sourcing activities of which over £15 million related to DIY, exceeding our sector target.
Further Growth in New Markets
Kingfisher achieved further growth in new markets. Store openings included: the first B&Q in China, two new B&Q’s in Taiwan, five Castorama stores and two NOMI stores in Poland. During the current year it is planned to open a total of 29 further DIY stores including openings in China, Taiwan, Poland and Brazil. Since the year end Kingfisher has announced its move into the Turkish DIY market.
Kingfisher announces Strategy for Rapid Growth in e-commerce
Kingfisher today announces plans for the rapid growth of its existing e-commerce activities and the development of new businesses.
In the year, Kingfisher invested in LibertySurf jointly with Group Arnault. The value of Kingfisher's stake following last week’s IPO is currently over £1 billion.
Other activities which have been operated as adjuncts of Kingfisher’s main businesses, such as B&Q and Comet, will become separate entities with their own dedicated management teams. There will be five discrete units, each capable of being externally financed and floated in the future.
The five units will be grouped into a new sector, e-Kingfisher, which will be headed by a Chief Executive, who will be on Kingfisher’s main board.
The five units will be: DIY; Electricals; Woolworths (also responsible for entertainment); Health and Beauty; and e-Kingfisher Investments. The overall objective for e-Kingfisher will be to achieve substantial and rapid growth following a three pronged strategy.
Firstly, to extend the current brands’ businesses by using the internet and other new channels to offer more products to more customers. Secondly, by using the Kingfisher brands as the basis for launching new initiatives across Europe including: a “home” portal, offering a wide range of products for the home; a health and beauty portal; and a DIY trade Business to Business portal. Thirdly, e-Kingfisher will invest in new businesses where it can leverage Kingfisher’s skills and assets.
Sir Geoffrey said: “During the year we have been preparing the way for e-Kingfisher taking all our main businesses on-line and developing our infrastructure. Excluding the £83.7 million investment in Screwfix, the e-commerce and mail order company, we invested a little over £50 million in this area, with a P&L impact of £23.3 million. This year we plan to step up that investment to an amount expected to be around £60 million with about half, excluding our share of LibertySurf losses, impacting the P&L.
“As e-commerce moves towards volume sales Kingfisher’s scale, sourcing capability and brand strength become relevant and a major advantage providing us with a unique opportunity for rapid and substantial new growth.”
Kingfisher also announced today that it is taking a minority stake in an e-commerce company, ThinkNatural.com, which focuses on health and beauty products.
Kingfisher said it would hold an analysts’ seminar in late May/early June when it would give further details about its e-commerce strategy.
Outlook
Sir Geoffrey said: “Sales in the current year are showing encouraging growth. Looking ahead with the growing strength we are gaining from our international activities, our successful brands and the important innovations I’ve outlined, I am confident that Kingfisher is on course to sustain future growth.”
SUMMARY RESULTS BY SECTOR
SECTOR / Retail sales (£m) / Retail profit (£m)2000 / 1999 / %
change / 2000 / 1999 / %
change
DIY / 4,528.3 / 2,055.4 / 120.3 / 372.6 / 191.1 / 95.0
ELECTRICALS / 3,188.0 / 2,458.1 / 29.7 / 197.0 / 173.4 / 13.6
GENERAL MERCHANDISE / 3,065.5 / 2,840.9 / 7.9 / 187.1 / 189.8 / (1.4)
*KINGFISHER TOTAL / 10,781.8 / 7,354.4 / 46.6 / 756.7 / 554.3 / 36.5
* Retail sectors only, excludes property, financial services, e-commerce and other new channels, acquisition goodwill amortisation and other operating costs.
OTHER YEAR-END DATA
SECTOR / Store nos. / Selling space / Employees(FTE)
(000s sq.ft.) / (000s sq. m.)
DIY / 506 / 32,521 / 3,020.8 / 38,863
ELECTRICALS / 733 / 8,884 / 825.5 / 23,760
GENERAL MERCHANDISE / 1,584 / 9,177 / 852.7 / 25,933
KINGFISHER TOTAL / 2,823 / 50,582 / 4,699.0 / 88,556
INDEX
Page
Operations review
DIY- UK 7
- France 8
- Other 8
Electrical- France 10
- UK 11
- Germany 12
- Other 12
General Merchandise - Woolworths 13
- Superdrug 14
- Other 15
Property- Chartwell Land 15
Central Costs- 16
E-commerce Costs- 16
Kingfisher data by sector and company 17
Financial Section*
Financial Review 18
Dividend 20
Annual Report information 20
Summary of Group results 21
Group balance sheet 22
Consolidated cash flow statement 23
Reconciliation of net cash flow to movement in net debt 24
Consolidated statement of total recognised gains and losses 24
Turnover 25
Operating profit 25
Exceptional items 25
Net interest payable 25
Taxation 26
Earnings per share 26
Reconciliation of movement in shareholders' funds 27
Net cash flow from operating activities 27
* The Financial Review and accompanying financial schedules are a summary extract from the full annual report.
DIY SECTOR
Company / £m Sales99/00 98/99 / %
change / £m Retail Profit
99/00 98/99 / %
change
B&Q* / 2,312.3 / 1,908.4 / 21.2 / 224.7 / 188.7 / 19.1
CASTORAMA** / 1,717.1 / 118.3 / N/A / 129.1 / 4.2 / N/A
Other*** / 498.9 / 28.7 / N/A / 18.8 / (1.8) / N/A
Total / 4,528.3 / 2,055.4 / 120.3 / 372.6 / 191.1 / 95.0
*B&Q includes all B&Q UK operations plus a 6 month contribution from Screwfix
**Castorama figures relate to Castorama domestic French operations only
***Includes all DIY activities outside of France and the UK. Nomi’s results are for the 13 months to 31 January 2000, B&Q China and B&Q Taiwan for the 12 months to 31 December 1999.
- Good Profits Performance
- Further Strong Growth Prospects
- B&Q/Castorama Integration Progressing
The DIY sector achieved a strong performance, aided by the continued strength of its main markets. In the UK, the RMI market grew by 7.0% in 1999 whilst the French DIY market grew by 4.1%. Sales for the sector were ahead 120.3% at £4,528.3 million, with profits of £372.6 million. On a proforma basis, assuming Castorama had been included for the whole of 1998/99, the sector’s profits would have increased by 18.4%.
In terms of the integration of B&Q and Castorama, we have successfully worked on sourcing cost reductions which have resulted in net benefits of £15 million. These have been incorporated in the individual companies’ profits for the year. We now have cross-business groups addressing a number of areas, including format development, sourcing, logistics and expansion in new markets.
UK
B&Q maintained its strong growth record, sales increasing by 21.2% to £2,312.3 million, another year of market share gains. Profits were ahead 19.1% at £224.7 million.
In the last two years, the B&Q Warehouse opening programme has contributed 67% of the total sales growth. Fourteen new Warehouses were opened during the year. Included in the opening programme were conversions of three ex-Dickens stores, two former CRS outlets and the reopening of the Leicester Warehouse. At the year end there were 48 Warehouse outlets open. Warehouse sales accounted for 37% of the B&Q store sales for the year, with almost two-thirds of the Warehouse stores achieving annualised sales of over £20 million.
In the current year B&Q plans to open a further 12 Warehouses, bringing it closer to its stated objective of a total of 125, and also plans to open a further three Supercentres. Overall B&Q will add around one million square feet of selling space by the year end.
Like-for-like sales for the B&Q chain were ahead 8.6%, the key elements in this growth being a focus on reducing prices, driving volume through best sellers and continued range innovation, including the introduction of “B&Q Value”, an entry price-point range. A particular feature in the second half of the year was the growth in basket size with an increased average number of items purchased and an increased average item value. This was driven by improved stock availability and great prices on highly visible lines such as power tools.
Included in the B&Q figures is a six month contribution from Screwfix. Since its acquisition in July, the performance of Screwfix has significantly exceeded expectations, with sales at £32.9 million for the six months representing an annualised increase of over 100%.
France
Castorama in France achieved sales growth of 6.5%, and increased like-for-like sales by 4.4%, driven in particular by a strong performance by Brico Depot which achieved a sales increase of 30.7% and like-for-like growth, driven by the increase in the number of transactions, of 16%. During the year one new Castorama France store was opened and there were two extensions and one relocation. In the current year it is intended to transfer five Castorama France stores to Brico Depot and to trial a Warehouse format, this opening in the second half of the year. During the year one new Brico Depot store was opened and two stores were refurbished. In the current year it is planned to increase the number of Brico Depot stores by 12, including the five that will be transferred from Castorama France.
Other
Outside of the UK and France, the DIY sector’s activities have grown rapidly during the year. The number of stores trading increased to 67. Sales increased to £498.9 million, partly as a result of the acquisition of Castorama. B&Q’s first store was opened in China and a further store is planned to open in Shanghai in June 2000. In the current year B&Q Taiwan plans to open four new stores.
In Poland, Castorama, which opened five new stores during the year, taking the total to eight, more than doubled its sales and profit. In the current year Castorama plans to open a further three Polish stores. The NOMI business, in which Kingfisher increased its stake to 75% in December 1999, suffered adverse trading conditions in the first half of the year but saw strong growth in the final quarter. A new format store has been developed and successfully launched and will be rolled out in new stores and rolled back into the existing chain. There are six new openings planned for the current year, taking the total to 30 stores by the year end.
Good progress was achieved in Italy where one new store was opened during the year, taking the total to 10 stores. In Canada, Reno Depot announced the planned opening of seven new stores in the current year, three in Quebec and four in Ontario, taking the total to 17. Other developments planned for the current year include expansion in Brazil and a further two new store openings in Italy.
Since the year end two further developments have been announced. In February, Kingfisher (through B&Q) acquired a 22.5% minority stake in Virtueller Bau-Markt AG, the operator of heimwerker.de, the leading German DIY e-commerce business. Also, in February, it was announced that B&Q International will enter the Turkish market in a joint venture with the KOC group, Turkey’s most important conglomerate. From an initial five stores it is planned to reach a total of 30 stores by the end of 2004, and over 60 stores by the end of 2009.
NOTE: The results include the first full year contribution from Castorama. At the time of the merger of B&Q with Castorama, Kingfisher took a 57.9% stake in the enlarged Castorama group, fully consolidating its figures and reporting a minority interest for the share of the business not owned. Since the merger, following the exercise of share options in Castorama, the stake has reduced to 56.6%.
Castorama, which retains its separate listing on the Paris Bourse, has reported separately under French Accounting Standards its results for the thirteen months, having changed its year end to January from December to come into line with Kingfisher.
Castorama’s results as reviewed here do not include B&Q and cover the year ended 31st January 2000. The figures are restated under UK GAAP, the main impact of which is the reversal of property depreciation, partially offset by the reclassification of certain exceptional charges against operating profits.
Although Castorama was owned for only one month in 1998/1999, on a proforma basis sales growth in the year reported would have been 9.3% and like-for-like sales growth would have been 4.6%, both figures stated at constant exchange rates.
On the same proforma basis Castorama’s profits rose by 18.8% to £148.4 million.
ELECTRICAL SECTOR
Company / £m Sales99/00 98/99 / %
change / £m Retail Profit
99/00 98/99 / %
change
Darty / 1,162.5 / 1,123.8 / 3.4 / 125.9 / 115.1 / 9.4
Comet / 982.0 / 862.4 / 13.9 / 38.6 / 33.4 / 15.6
*Wegert / 541.0 / 253.0 / N/A / (1.0) / 7.5 / N/A
**BUT / 329.6 / 80.3 / N/A / 38.2 / 15.0 / N/A
Other / 172.9 / 138.6 / N/A / (4.7) / 2.4 / N/A
Total / 3,188.0 / 2,458.1 / 29.7 / 197.0 / 173.4 / 13.6
*1998/99 includes 6 months to 31 December 1998 and 1999/00 includes 12 months to 31 December 1999
**1998/99 includes 9 months associate retail profit at 26% to 24 September 1998 and 3 months as a subsidiary to 31 December 1998 and in 1999/00 includes 13 months’ subsidiary turnover and retail profits to 31 January 2000
Sector Structure Delivering Benefits
Further European Expansion
- Revitalised Comet Delivers Strong Growth
- Darty Grows Strongly In PCs and Mobile Phones
The sector overall achieved sales growth of 29.7%, to £3,188 million, reflecting both the renewed organic growth during the year, with 49 new stores opened, and the significant impact of the acquisitions made in 1998/99 in France and Germany. Like-for-like sales growth for the sector was 5.0%, while on a proforma basis all store sales growth was 12.9%.
Strong growth was achieved in mobile phones, multimedia and, increasingly, digital products, despite price deflation remaining a feature of electrical retailing, particularly in brown goods.
Electrical sector profits increased by 13.6% to £197 million. Own brand development remains an important part of the sourcing strategy and the PROline own label brand was introduced to all sector formats during the year, as well as being sold through Woolworths. In the current year, it is planned to achieve sales of PROline in excess of £200 million.
France
Darty achieved sales growth of 8.7% in the year overall which after exchange translation reduces to 3.4%. Like-for-like growth in local currency was 5.8%. Profits in local currency terms increased by 14.6% to FF 1,269.4 million and in Sterling terms were 9.4% ahead at £125.9 million.
The main drivers of sales growth were strong performances in mobile phones and PC's and Darty again increased its market share in both areas.
In the year Darty opened 10 new stores, taking the total to 173 at the year end, and refurbished a further 10 stores. In the current year Darty plans to open eight new stores and refurbish another 20. Over the course of the next five to seven years it is intended to increase the number of outlets to a total of 240 in France.