Wednesday 19 March 2003

Preliminary results for the year ended 1 February 2003
Kingfisher reports pre-tax profits ahead 17% to £655 million
2003 / 2002
(Continuing) / % change
£m / £m
Retail sales / 10,654.0 / 9,618.7 / 11
Retail profit (before exceptionals and goodwill) / 694.3 / 614.4 / 13
Profit before tax (before exceptionals and goodwill) / 655.4 / 560.1 / 17
Profit before tax / 494.1 / 470.3 / 5
Earnings (before exceptionals and goodwill) / 353.5 / 266.8 / 33
Earnings / 169.7 / 181.4 / (6)
Basic earnings per share (before exceptionals and goodwill) / 16.7p / 16.0p / 4
Basic earnings per share / 8.0p / 10.9p / (27)
Full year dividend per share / 9.5p / 9.06p / 5
Net debt / 1,926.4 / 1,044.2 / n/a
·  Strong growth in Home Improvement – total sales up 15.8%, 4.3% like-for-like
·  Castorama integration progressing well
·  Review of International Home Improvement operations confirms focus on Poland, Italy and the Far East
·  Total sales growth in Electrical & Furniture sector of 3.0%, like-for-like down 1.2%
·  Underlying net debt fell by £0.2 billion driven by strong cashflow
“Our top priorities are to keep improving our customer offer, grow our market share, continue to drive profitability and improve shareholder returns”
Gerry Murphy, Chief Executive
“It’s been a very positive year for Kingfisher. I’m certain that the clarity and focus that will follow demerger will benefit shareholders, staff and customers alike.”
Francis Mackay, Chairman / Enquiries
Ian Harding, Director of Financial Communications
+44 (0) 20 7725 4889
Kingfisher website
www.kingfisher.com
Kingfisher plc
+44(0) 20 7724 7749
Company Profile
1. Kingfisher is Europe’s leading home improvement retailer and is ranked number three in the world. With more than 600 home improvement stores across the globe, the Group is the world’s most international home improvement retailer, enjoying market leading positions in the UK, France, Poland and Taiwan. Sales for the Home Improvement sector for the year to 1 February 2003 were over £6.7 billion, with retail profit of more than £534 million. Kingfisher also has a strategic alliance with Hornbach, Germany’s leading ‘big box’ home improvement retailer which operates 100 stores across Europe.
2. Kingfisher Electrical operates 650 stores in seven countries. It is Europe’s third largest electricals retailer by sales and number two by retail profit. As well as holding the leading position in France with Darty and BUT and the number two position in the UK through Comet, Kingfisher also enjoys leading positions in Belgium and in the Czech Republic and Slovakia. Sales for the year to 1 February 2003 were around £3.9 billion, with retail profit of £160 million. On 1 February 2003, Kingfisher completed the sale of ProMarkt, its German electricals business.

Kingfisher today announced full year preliminary results with retail sales ahead 11% to £10.7 billion and pre-tax profit before exceptional items and acquisition goodwill amortisation ahead 17% to £655 million.

The Home Improvement sector performed strongly with total sales growing by 15.8%, 4.3% on a like-for-like basis. Retail profit in this sector grew 24.0% to £534 million.

The Electrical & Furniture sector grew total sales by 3.0% but like-for-like sales fell by 1.2%. Excluding ProMarkt, the German business sold in January, total sales grew by more than 6% although like-for-like sales were down by 0.6%. While retail profit in the UK increased by nearly 10%, the effect of a declining electricals market across continental Europe led to an overall profit decline for the sector of 12.8% to £160 million.

After taking account of the doubling in the number of shares in August 2002 following the rights issue in connection with the Castorama minority acquisition, adjusted earnings grew by 33% and adjusted earnings per share by 4%. Unadjusted earnings fell by 6%, reflecting the exceptional items. The full year dividend will be increased by 5% to 9.5p, leaving dividend cover per share unchanged year-on-year at 1.8 times.

Net debt grew by £0.9 billion to £1.9 billion, reflecting the additional debt raised to part-fund the Castorama minority acquisition. Underlying net debt, after adjusting for the cost of acquiring the minority interests in Castorama and for the proceeds of the rights issue, fell by £0.2 billion during the year, despite continued investment in the business. Since the year end, net debt has been reduced further by the receipt of £0.6 billion net proceeds from property disposals.

The separation of Kingfisher’s electricals businesses is expected to be completed during the second quarter via the listing of a demerged company on the London Stock Exchange. It will be led by its current management team under Chief Executive Jean-Noël Labroue. Martin Reavley, who until recently was Managing Director of Chartwell Land and oversaw January’s retail park property sale, has joined Kingfisher Electrical and will become Finance Director at the point of demerger. A process is well under way to recruit a non-executive chairman and non-executive directors.

Kingfisher also confirmed today that, outside the UK and France, it will focus its international resources on growing market-leading businesses in Poland, Italy and the Far East where it is already successfully established. On a smaller scale, development work will continue in Spain, South Korea and Turkey. Kingfisher has already announced plans to withdraw from Castorama’s German business and today confirmed it is pursuing exit options for its Canadian, Belgian and Brazilian operations together with its NOMI subsidiary in Poland.

Gerry Murphy, Chief Executive, said: “Kingfisher has grown sales and profit, whilst at the same time controlling costs and cashflow. The integration of Castorama is gathering pace with the integration of the London and Lille head offices and the introduction of Kingfisher’s proven Cost Price Reduction Programme into Castorama.

“In Home Improvement - soon to be our sole focus - Kingfisher is now well positioned, has clear momentum and strong operational management teams throughout the business. Looking ahead, we can concentrate on growing our business and delivering real value for our shareholders. Our top priorities are to keep improving our customer offer, grow our market share, continue to drive profitability and improve shareholder returns. The current environment is uncertain but we remain cautiously optimistic for the year ahead.”

Francis Mackay, Chairman, said: “It’s been a very positive year for Kingfisher. We’re working on the demerger of Kingfisher into two focused businesses; the world’s leading international home improvement retailer on the one hand and one of Europe’s leading electricals retailers on the other. I’m certain that the clarity and focus that will follow demerger will benefit shareholders, staff and customers alike.”

This news release contains forward-looking statements based on current assumptions and forecasts made by Kingfisher’s management. Various known and unknown risks, uncertainties and other factors could lead to substantial differences between the actual future results, financial situation, development or performance of the Group and the estimates given here. The Group accepts no obligation to continue to report or update these forward-looking statements or adjust them to future events or developments.

- ends -

NB: Please note that as of 1 April 2003, Kingfisher’s new address will be:

Kingfisher plc
3 Sheldon Square
Paddington
London W2 6PX
Switchboard telephone: / +44 (0)20 7372 8008
Ian Harding, direct telephone: / +44 (0)20 7644 1028

HOME IMPROVEMENT

Sales £m / %
Total
change / %
LFL
change / Retail profit £m / %
Total
change
2003 / 2002 / 2003 / 2002
UK / 3,748.1 / 3,214.6 / 16.6 / 5.1 / 360.1 / 300.5 / 19.8
France / 2,045.2 / 1,833.5 / 11.5 / 2.4 / 127.0 / 119.9 / 5.9
International / 963.9 / 785.8 / 22.7 / 5.3 / 47.0 / 10.3 / 356.3
Total / 6,757.2 / 5,833.9 / 15.8 / 4.3 / 534.1 / 430.7 / 24.0

UK

The UK repair, maintenance and improvement market showed growth of 4% for the full year, with B&Q continuing to outperform the competition. During the year, B&Q’s market share grew from 12.3% to 13.5% driven by ongoing expansion, range innovation and lower pricing.

During the year, B&Q opened 14 new Warehouses and four new Supercentres. Total selling space grew by 138,000 square metres, an increase of 7.5%. Overall, B&Q sales increased by 15.9%, 3.8% on a like-for-like basis, with growth across all categories. B&Q continued to stimulate market demand through the introduction of quality new ranges at everyday low prices. Sales of ‘it’ kitchens, Performance Power tools, new laminate flooring and kitchen appliances were particularly strong.

B&Q continued to focus on lowering the cost of home improvement for its customers through its ‘Price Reverse’ campaign, which has seen the prices of many products reduced to levels lower than ten years ago. Additionally, the introduction of two new store cards, ‘Homeplan’ and ‘You Can Do It’, helped customers spread the cost of their purchases. Since its launch in December 2002, more than 30% of showroom purchases have been made on the ‘Homeplan’ card.

The Cost Price Reduction Programme (CPR) is now in its third year and continues to yield significant benefits. The programme, which seeks to build mutually-beneficial long term partnerships with key suppliers across the world, has enabled B&Q to improve prices for customers, introduce innovative new and exclusive product ranges and invest in store service and efficiency initiatives. CPR, combined with the introduction of more aspirational product ranges, helped lift gross margin during the year.

Screwfix Direct, the specialist catalogue and internet home improvement retailer, grew sales by 31% with the internet now representing 18% of total sales. B&Q Direct, which includes the transactional website diy.com and sells 14,000 products online, grew sales threefold during the year.

FRANCE

The French home improvement market grew by 4.6% in 2002/03. Together, Castorama and Brico Dépôt grew Kingfisher’s market share and achieved total sales growth of 11.5%, with sales of just over £2 billion. On a like-for-like basis, sales increased 2.4%.

Castorama reported total sales growth of 2.7%, up 1.4% on a like-for-like basis. Sales growth in paint, kitchens, flooring, lighting, bathrooms and in the garden and plants category was particularly strong during the year, driven mainly by Castorama’s continued focus on range improvements. Sales were also supported by increased advertising spend. During the year, two new Castorama stores were opened, four were relocated and two were transferred to Brico Dépôt. Total selling space grew by 3.9% to more than 977,000 square metres.

Gross margin improved as a result of product mix and benefits from central distribution and buying. However, costs grew faster with significant investment in existing stores, pre-opening expenses, staff costs and advertising. As a result, operating margin declined.

Since October, centrally driven product cross-marketing promotions and other sales initiatives have been successfully implemented in all stores. In addition, the Cost Price Reduction Programme was introduced into Castorama in the second half of the year.

Brico Dépôt had another strong year with total sales up 34.8% in local currency and like-for-like sales ahead 7.9%. This good overall performance was helped range improvements during the year with particular success in buildings materials. Operating margin increased as a result of scale efficiencies.

During the year, 13 new stores were opened, bringing the total to 56. A further nine are planned to open in the coming year.

INTERNATIONAL

Almost all businesses grew operating profit with particularly strong results from Castorama Poland, Réno-Dépôt in Canada and Castorama Italy.

Despite continuing high unemployment and poor consumer confidence, Castorama Poland grew total sales by 37.9%, like-for-like sales by 11.1% and profit by more than 40% over the previous year. Operating margin improved with careful management of both store and central costs. Four new warehouse stores were opened during the year, bringing the total to 16.

Castorama Italy generated total sales growth of 19.2%, up 8.0% on a like-for-like basis. Profit was ahead by more than 40%. Two new warehouse stores were opened during the year, bringing the total to 14.

B&Q Taiwan, which opened two new stores during the year, grew total sales by 26.8% in local currency, up 9.1% on a like-for-like basis, but reported flat profit as a result of a difficult consumer climate. B&Q China continued its expansion programme with a further three store openings during the year, almost doubling the existing selling space. Overall sales grew by 142.2% during the period, with like-for-like sales ahead by 18.9%. During the year the business established a market leading position in Shanghai. Before pre-opening costs, the business is now profitable.

In Canada, Réno-Dépôt achieved like-for-like sales growth of 1.7% in an increasingly competitive market. Profit has substantially improved compared to the previous year, benefiting from higher buying margin, a focus on store costs and a reduction in marketing expenditure following one-off costs associated with last year’s launch of The Building Box in Ontario.

ELECTRICAL & FURNITURE

Sales £m / %
Total
change / %
LFL
change / Retail profit £m / %
Total
change
2003 / 2002 / 2003 / 2002
France / 1,788.4 / 1,700.0 / 5.2 / (2.7) / 153.1 / 173.8 / (11.9)
UK / 1,319.3 / 1,253.2 / 5.3 / 1.6 / 47.9 / 43.7 / 9.6
International / 254.4 / 206.9 / 23.0 / 4.1 / (5.6) / (6.1) / 8.2
Sub-total / 3,362.1 / 3,160.1 / 6.4 / (0.6) / 195.4 / 211.4 / (7.6)
Germany(1) / 534.7 / 624.7 / (14.4) / (4.8) / (35.2) / (27.7) / (27.1)
Total / 3,896.8 / 3,784.8 / 3.0 / (1.2) / 160.2 / 183.7 / (12.8)

(1)  Includes 12 months to 31 January 2003 (last year: 13 months to 31 January 2002)

FRANCE

French consumer confidence continued to weaken in 2002/03. For the year to January 2003, the market for white goods - a key product area for the Group - declined by 1.6% and the market for brown and grey goods grew by 2.4%.

Against this background, sales at Darty in local currency declined by 0.6% to just over £1.3 billion, with like-for-like sales down by 2.8%. Darty held market share and achieved growth of 2.5% in brown and grey products such as home cinema systems, large-screen televisions, DVD players, laptops and digital cameras. Sales in white goods fell in line with the market.