Wednesday 18 September 2002
Interim results for 26 weeks ended 3 August 2002Kingfisher reports strong first half growth, with pre tax profits (1) ahead 26.5% to £274.7 million.
- Total retail sales growth of 10.1%, with like-for-like sales up 1.3%
- Retail profit ahead by 19.8% to £294.3m
- Profits before tax up 26.5% to £274.7m (1)
- Earnings per share ahead by 24.6% to 7.1p (2)
- Dividends at 3.45p per share are up 5.2% (2)
- Balance sheet strengthened by strong operating cash flow
Note (1) Before exceptional items and acquisition goodwill amortisation.
(2) Adjusted to reflect the bonus element of the recent rights issue and the share consolidation effected in August 2001.
Kingfisher today announced first half year results, with retail sales ahead by just over 10% to £5.1 billion and retail profit up almost 20% to £294.3 million. The period saw weak consumer confidence in France and Germany, along with relatively better conditions in the UK.
The Home Improvement sector performed strongly. Total sales grew 14.6%, up 2.8% on a like-for-like basis, with growth in the core categories offset by slower growth in seasonal areas in B&Q. Retail profit grew by 24.9% to £256.1 million, out-pacing sales growth, in large part due to the margin benefits arising from the ongoing cost price reduction programme in the UK.
The Electrical and Furniture sector grew total sales by 1.7%, but like-for-like sales were down 1.5%. Sales performance in the second quarter was stronger than the first, with consumer demand for vision products boosted by the World Cup. Retail profit declined by 6.1% to £38.2 million. Market share gains were achieved in the UK and France, but the slower rate of sales growth, combined with a mix shift into faster growing but lower margin products, led to the profit decline.
Overall the Group’s profit before tax and exceptional items grew by 26.5% and, after accounting for minority interests and an increased taxation rate, adjusted earnings per share grew 24.6% to 7.1p.
An interim dividend of 3.45p will be payable, up 5.2% on last year’s 3.28p.
Sir Geoffrey Mulcahy, Kingfisher’s Chief Executive, said:
“Overall, these are a strong set of results achieved in a tough consumer environment. We are on track to deliver our strategic transformation into Europe’s leading pure play Home Improvement retailer with a unified management team responsible for developing the business. In Electricals, our strong positions in France and the UK have enabled us to trade successfully in challenging market conditions, whilst in Germany we clearly have more work to do.
“In the short term we expect the slowdown in the rate of economic growth to result in a continuing difficult market environment. In Home Improvement, where we have market-leading positions in the UK and France through B&Q and Castorama, the strategic alliance with Hornbach in Germany and operations in eight other countries, we will be well-placed to compete in this exciting growth market. Meanwhile, we are committed to the separation of the Electricals business within the timetable previously announced.”
-ends-
Note to EditorsThis 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.
Company profile
Kingfisher is Europe’s leading home improvement retailer and is ranked number three in the world. The Company operates more than 590 home improvement stores in 11 countries and enjoys market-leading positions in the UK, France, Poland and Taiwan. Sales for the Home Improvement sector for the year to 2 February 2002 were more than £5.8 billion, with retail profit in excess of £430 million.
Kingfisher’s Electrical & Furniture business operates more than 830 stores in nine countries. It is Europe’s third largest electricals retailing business by sales and number two by retail profit. As well as holding the leading position in France and the number two position in the UK, Kingfisher also enjoys leading positions in Belgium and in the Czech and Slovak Republics. Sales for the year to 2 February 2002 were more than £3.7 billion, with retail profit of £184 million.
Broker and Institutional EnquiriesIan Harding, Director of Investor Relations / +44 (0) 20 7725 4889
Media Enquiries
Andrew Mills, Director of Corporate Affairs / +44 (0) 20 7725 5776
Media Enquiries, France
Graham Fairbank, Head of Corporate Communications / +33 (0) 1 43 18 52 26
Kingfisher plc / +44 (0) 20 7724 7749
Kingfisher website /
SUMMARY RESULTS
SECTOR / Retail sales (£m)2002 / 2001 / % total
change / % like-for-like change
HOME IMPROVEMENT / 3,421.9 / 2,985.0 / 14.6 / 2.8
ELECTRICAL AND
FURNITURE (2) / 1,650.1 / 1,622.9 / 1.7 / (1.5)
TOTAL / 5,072.0 / 4,607.9 / 10.1 / 1.3
SECTOR / Retail profit (£m) (1)
2002 / 2001 / %
change
HOME IMPROVEMENT / 256.1 / 205.0 / 24.9
ELECTRICAL AND
FURNITURE (2) / 38.2 / 40.7 / (6.1)
TOTAL / 294.3 / 245.7 / 19.8
(1) / Retail sectors only, excluding property, financial services, acquisition goodwill amortisation and other operating costs.
(2) / Electrical & Furniture includes ProMarkt for the six months to end July 2002 and the seven months to end July 2001 respectively. The prior year results for ProMarkt include sales of £52.0m and a retail loss of £5.0m relating to the additional month of January 2001.
SUMMARY OTHER DATA
SECTOR / Store nos. / Selling space(000s sq. m.) / Employees
(FTE)
2002 / 2001 / 2002 / 2001 / 2002 / 2001
HOMEIMPROVEMENT / 595 / 557 / 3,980.7 / 3,504.4 / 56,883 / 48,603
ELECTRICALAND FURNITURE / 838 / 806 / 1,055.8 / 965.4 / 26,711 / 25,012
TOTAL / 1,433 / 1,363 / 5,036.5 / 4,469.8 / 83,594 / 73,615
INDEX
Page
Operations review
Home Improvement - UK 6
- France 7
- International 7
Electrical and Furniture - France 8
- UK 9
- Germany 9
- International 10
E-Commerce 10
Property 10
Central Costs 10
Kingfisher data by sector and market 11
Financial Section
Consolidated profit and loss account for the half year ended 3 August 2002 12
Consolidated profit and loss account for the year ended 2 February 2002………...13
Consolidated balance sheet as at 3 August 02……………………………………….. 14
Consolidated cash flow statement for the half year ended 3 August 2002 ..... 15
Notes to the interim financial statements 16
Independent review report to the members of Kingfisher plc...... 23
HOME IMPROVEMENT
Retail sales (£m)2002 2001 / %
total change / %
like-for-like
change
UK / 1,940.3 / 1,672.0 / 16.0 / 3.0
France / 1,017.9 / 930.6 / 9.4 / 1.4
International / 463.7 / 382.4 / 21.3 / 5.5
Total / 3,421.9 / 2,985.0 / 14.6 / 2.8
Retail profit (£m)
2002 2001 / %
change
UK / 173.1 / 140.9 / 22.9
France / 63.6 / 61.3 / 3.8
International / 19.4 / 2.8 / n/a
Total / 256.1 / 205.0 / 24.9
UK
The Repair, Maintenance and Improvement (RMI) market showed growth of 4.0% for the first half of the year and B&Q continued to outperform the competition and grow overall market share through its focus on new range introduction and lower prices. New rangeing activity included the new “IT” takeaway kitchens, free standing kitchen appliances and contemporary bathroom suites. Prices continued to be rolled back, reinforcing B&Q’s commitment to bring down the cost of DIY for its customers.
Margin benefits have arisen from both a positive mix shift into higher margin internal decorative ranges and also the ongoing Cost Price Reduction (CPR) programme.
Eight new Warehouses (including one relocation) opened in the period including the new double-decker Warehouse at Sutton, a key initiative for the penetration of under-represented metropolitan locations. One of the Warehouse openings was in Dublin, B&Q’s first store in the fast growing Eire market. Also, two new Destination Supercentres opened during the period.
Screwfix, the specialist catalogue and Internet business, grew sales and profit strongly, with customers responding well to increased on-line marketing activity.
France
In France the market grew by 2.5% with the combined chains of Castorama and Brico Dépôt growing overall market share.
Castorama main chain stores in France reported total sales growth of 1.7% and like-for-like sales growth of 0.9% for the first six months. Strongest growth was delivered in the Garden category which achieved like-for-like growth of 5.0%, benefiting from new ranges and competitive pricing.
Gross margins improved, but costs grew faster, with significant investment in advertising and increased pre-opening costs. The first half saw two new stores and four relocations, which built on the experience from previous Warehouse style operating formats.
Brico Dépôt had a strong first half, outpacing market growth. Total sales grew 35.8% with like-for-like sales up 5.3%. Following a relatively flat first quarter, sales growth accelerated in the second quarter as Brico Dépôt reaffirmed its value proposition. Sales were adversely impacted following the introduction of the Euro, but highlighting French Franc equivalent prices restored customer confidence in the pricing structure. As a result of stronger gross margins and cost economies of scale, Brico Dépôt’s operating margins increased significantly in the first half.
International
Sales grew by 21.3% in the International businesses with growth in all countries except Brazil and Belgium which experienced small declines. Like-for-like sales grew by 5.5% with Castorama Poland showing double digit growth. Profit growth was stimulated by an improved performance from Réno-Dépôt and strong organic growth at Castorama Poland.
In Canada, Réno-Dépôt achieved like-for-like growth of 4.1% despite increasing competition. Profit has improved dramatically compared to the prior year, benefiting from higher buying margins and lower cost ratios. Store opening and marketing costs fell following the one-off expenditure relating to the launch of the Building Box last year.
Despite difficult economic conditions, Castorama Poland grew sales by 39.0% and profits by more than 50% on the prior year. There were three new store openings in the first half, bringing the total to 15.
ELECTRICAL AND FURNITURE
Sales (£m)2002 2001 / %
total change / %
like-for- like change
France / 767.8 / 731.8 / 4.9 / (1.3)
UK / 551.0 / 518.5 / 6.3 / 2.4
Germany (1) / 226.9 / 285.0 / (20.4) / (10.5)
Other / 104.4 / 87.6 / 19.2 / 1.0
Total
/ 1,650.1 / 1,622.9 / 1.7 / (1.5)Retail Profit (£m)
2002 2001 / %
change
France / 60.4 / 65.2 / (7.4)
UK / 4.8 / 3.4 / 41.2
Germany (1) / (21.6) / (23.4) / 7.7
Other / (5.4) / (4.5) / (20.0)
Total
/ 38.2 / 40.7 / (6.1)(1) / Includes six months to end July 2002; comparative results are for the seven months to end July 2001. The prior year results include sales of £52.0m and a retail loss of £5.0m relating to the additional month of January 2001.
France
The French electricals market suffered from weak consumer confidence and uncertainty over political elections in the first half. Between February and end July the market shrank by 1.0%, according to GFK.
Against this tough background Darty was able to increase its market share, growing total sales by 0.6% in local currency. On a like-for-like basis sales fell by 1.5% across the period, although the second quarter performance was stronger than the first. Overall Darty’s sales were £567.2 million and retail profit was £36.6 million.
Selling space grew by 3.9% during the first half of the year with four store openings, two relocations and the extension of a further six stores.
Darty’s sales were driven by digital technology. The business significantly increased its market share in this product segment, with strong growth in LCD and plasma screen TV’s as well as in digital cameras. Multimedia exhibited strong volume growth, particularly in laptop computers and high specification printers. White product sales remain in-line with the flat market trend over the period.
As a result of the sales mix changing towards faster growth but lower margin products, the gross margin rate declined slightly during the first half of the year.
BUT exhibited a similar impact from depressed consumer confidence and the weak state of the French market and, while total sales grew by 13.9% in local currency, like-for-like sales declined by 0.6%. BUT’s total sales were £200.6 million with retail profit ahead slightly at £23.8 million.
Product margins continued to improve reflecting the increasing shift to directly sourced products, although overall this was offset by the growing proportion of wholesale sales. During the period a further 11 franchisee acquisitions were completed.
UK
Comet’s core market grew by 3.8% between February and end July 2002. Comet increased its market share slightly (GFK white and brown products only) to 13.2% during the period.
Comet’s Every Day Low Prices (EDLP) policy continued to drive sales growth. Initiatives to improve the shopping experience including improved in-store product information, better in-store service and wider ranges continued to be a success. As a result, the average prices of products sold again increased compared to last year as customers bought more higher specification products, benefiting margins. Sales were fuelled by strong demand for large screen televisions, laptop computers and games, with mobile phone sales improving in the second quarter after the anniversary of the networks’ increase in handset prices.
Following the opening of a further six interactive destination stores in the first half there are now a total of 37. Another five stores are planned in the second half of the year. Destination stores contributed over 26% of sales during the first half.
Following positive trial results 20 existing core stores received new improved in-store layouts and a further 24 stores are due to be relaid in the next quarter.
Germany
The German electricals market declined further in the first half of the year. The recovery programme put in place last year has continued to deliver higher average selling prices, improved margins and lower costs. However, these improvements have been insufficient to offset the impact of the lower sales arising from the weak market conditions and intense competitor activity. Consequently, despite the early promising results delivered by the recovery programme, the business is now not delivering the required performance improvements. In the light of this it is clear that more work remains to be done.
International
This includes Vanden Borre in Belgium, BCC in the Netherlands and Datart in the Czech and Slovak republics. Each market has been tough, demonstrating similar sales trends in the various product categories to those seen in the UK, France and Germany. Total sales growth was mostly driven by new store openings and store refurbishment across all four markets.
E-Commerce
All of the Group’s principal brands have now been transactional on-line for over a year. Total on-line sales increased by over 150% compared to last year and, in the NetRatings on-line ‘Home and Garden’ category, the B&Q and Castorama websites consistently attract the highest number of visitors in their respective markets.
Comet’s multi-channel retailing approach is proving a success and the website is on target to break even this year. The website is the fourth most visited on-line retailer in the UK.
Average transaction values and sales conversion rates are increasing across the Group’s websites as the experience of the earlier established sites is shared throughout the businesses.
Property
In the first half Chartwell Land, the Group’s property development and investment business, increased income by 15% to £28.6 million. In addition to this, the Group as a whole disposed of fixed assets (mainly operating freehold and investment properties) generating proceeds of £148 million (2001: £15 million) and a net exceptional profit of £4.1 million (2001: £(0.3) million loss) during the period.
Central costs
These include the cost of centralised functions including business development, taxation, treasury and financial control. Also included are the statutory costs associated with a public listing, including company secretariat, corporate communications and investor relations. In the first half of the year, central costs fell by 9% to £19.8 million.
KINGFISHER DATA BY SECTOR AND MARKET
HOME IMPROVEMENT SECTORStore nos. / Selling space
(000s sq.m.) / Employees
(FTE)
UK / 318 / 1,920.5 / 24,871
France / 155 / 1,196.8 / 17,983
International / 122 / 863.4 / 14,029
TOTAL / 595 / 3,980.7 / 56,883
ELECTRICAL AND FURNITURE SECTOR
Store nos. / Selling space
(000s sq.m.) / Employees (FTE)
France (1) / 290 / 492.0 / 13,815
UK / 257 / 235.3 / 7,560
Germany / 189 / 229.2 / 3,182
Other / 102 / 99.3 / 2,154
TOTAL / 838 / 1,055.8 / 26,711
TOTAL / 1,433 / 5,036.5 / 83,594
(1) / The figures for Electrical and Furniture France include only those stores consolidated in the Group’s figures. Electrical and Furniture France also operates 130 non-consolidated franchise stores with 334,000 sq metres of selling space and 3,000 FTE employees.
KINGFISHER PLC
Consolidated profit and loss account (unaudited)
For the half year ended 3 August 2002
£ millions Notes / Half year* ended 3 August 2002 / Half year ended4 August 2001
Continuing operations / Half year ended 4 August 2001
Discontinued operations / Half year
ended 4
August 2001
Total
Turnover including share of joint ventures / 5,191.7 / 4,694.0 / 1,397.7 / 6,091.7
Less: share of joint ventures’ turnover / (70.0) / (48.2) / (3.3) / (51.5)
Group turnover 1 / 5,121.7 / 4,645.8 / 1,394.4 / 6,040.2
Group operating profit/(loss) / 276.8 / 126.9 / (26.2) / 100.7
Share of operating profit in:
Joint ventures / 1.8 / 3.5 / - / 3.5
Associates / 5.2 / 1.8 / - / 1.8
Total operating profit/(loss) including share of joint ventures and associates / 283.8 / 132.2 / (26.2) / 106.0
Analysed as:
Home Improvement / 256.1 / 205.0 / - / 205.0
Electrical and Furniture / 38.2 / 40.7 / - / 40.7
General Merchandise / - / - / (23.1) / (23.1)
Property / 28.6 / 24.8 / 21.4 / 46.2
E-commerce and other new channels / (6.8) / (11.0) / (11.1) / (22.1)
Other operating costs / (19.8) / (21.7) / - / (21.7)
Exceptional items – operating 2 / (3.3) / (97.9) / (9.6) / (107.5)
Acquisition goodwill amortisation / (9.2) / (7.7) / (3.8) / (11.5)
Total operating profit/(loss) including share of joint ventures and associates / 283.8 / 132.2 / (26.2) / 106.0
Exceptional items – non-operating: 3
Profit/(loss) on the disposal of fixed assets / 4.1 / (31.3) / (17.5) / (48.8)
Demerger costs / - / - / (27.2) / (27.2)
Loss on the sale of operations / - / - / (342.5) / (342.5)
Profit/(loss) on ordinary activities before interest / 287.9 / 100.9 / (413.4) / (312.5)
Net interest payable / (21.6) / (20.6) / (22.2) / (42.8)
Profit/(loss) on ordinary activities before tax / 266.3 / 80.3 / (435.6) / (355.3)
Taxation on ordinary activities / (85.0) / (64.9) / 21.2 / (43.7)
Profit/(loss) on ordinary activities after tax / 181.3 / 15.4 / (414.4) / (399.0)
Equity minority interests / (67.9) / (54.8) / - / (54.8)
Profit/(loss) attributable to the members of Kingfisher plc / 113.4 / (39.4) / (414.4) / (453.8)
Earnings/(loss) per share (pence) 5
Basic / 6.8 / (2.4) / (27.3)
Diluted / 6.6 / (2.5) / (27.3)
Adjusted basic / 7.1 / 5.7 / 4.4
Adjusted diluted / 6.9 / 5.5 / 4.2
Memorandum:
Profit/(loss) before tax, exceptional items and acquisition goodwill amortisation / 274.7 / 217.2 / (35.0) / 182.2
*The profit and loss account for the half year ended 3 August 2002 relates entirely to continuing operations
KINGFISHER PLC
Consolidated profit and loss account
For the year ended 2 February 2002
£ millions / Notes / Continuing
operations / Discontinued operations / Total
Turnover including share of joint ventures / 9,819.4 / 1,532.3 / 11,351.7
Less: share of joint ventures' turnover / (109.9) / (3.7) / (113.6)
Group Turnover / 1 / 9,709.5 / 1,528.6 / 11,238.1
Group operating profit/(loss) / 474.8 / (26.0) / 448.8
Share of operating profit in:
Joint ventures / 9.4 / - / 9.4
Associates / 4.3 / - / 4.3
Total operating profit/(loss) including share of joint ventures and associates / 488.5 / (26.0) / 462.5
Analysed as:
Home Improvement / 430.7 / - / 430.7
Electrical and Furniture / 183.7 / - / 183.7
General Merchandise / - / (29.6) / (29.6)
Property / 45.3 / 29.0 / 74.3
E-commerce and other new channels / (18.8) / (12.0) / (30.8)
Other operating costs / (39.6) / - / (39.6)
Exceptional items – operating / 2 / (97.9) / (9.6) / (107.5)
Acquisition goodwill amortisation / (14.9) / (3.8) / (18.7)
Total operating profit/(loss) including share of joint ventures and associates / 488.5 / (26.0) / 462.5
Exceptional items – non-operating: / 3
Loss on the disposal of fixed assets / (34.7) / (19.4) / (54.1)
Demerger costs / - / (27.2) / (27.2)
Profit/(loss) on the sale of operations / 57.7 / (342.5) / (284.8)
Profit/(loss) on ordinary activities before interest / 511.5 / (415.1) / 96.4
Net interest payable / (41.2) / (27.2) / (68.4)
Profit/(loss) on ordinary activities before tax / 470.3 / (442.3) / 28.0
Taxation on ordinary activities / (168.1) / 12.1 / (156.0)
Profit/(loss) on ordinary activities after tax / 302.2 / (430.2) / (128.0)
Equity minority interests / (120.8) / - / (120.8)
Profit/(loss) attributable to the members of Kingfisher plc / 181.4 / (430.2) / (248.8)
Earnings/(loss) per share (pence) / 5
Basic / 10.9 / (14.9)
Diluted / 10.6 / (15.0)
Adjusted basic / 16.0 / 14.4
Adjusted diluted / 15.6 / 14.0
Memorandum:
Profit/(loss) before tax, exceptional items and acquisition goodwill amortisation / 560.1 / (39.8) / 520.3
KINGFISHER PLC
Consolidated BALANCE SHEET (unaudited)As at 3 August 2002
£ millions / 3 August 2002 / 4 August 2001 / 2 February 2002
Fixed assets
Intangible assets / 299.7 / 389.9 / 295.4
Tangible assets / 3,505.5 / 4,177.9 / 3,503.9
Investments in joint ventures
- share of gross assets / 169.7 / 167.6 / 66.9
- share of gross liabilities / (139.8) 29.9 / (141.4) 26.2 / (40.8) 26.1
Investments in associates / 91.4 / 14.1 / 87.6
Other investments / 149.3 / 109.9 / 122.4
4,075.8 / 4,718.0 / 4,035.4
Current assets
Development work in progress / 50.6 / 104.1 / 61.5
Stocks / 1,683.6 / 1,951.8 / 1,575.3
Debtors / 692.4 / 796.9 / 962.0
Securitised consumer receivables / - / 275.8 / -
- -
Less: non-recourse secured notes / - - / (225.1) 50.7
Investments / 74.7 / 191.7 / 174.7
Cash at bank and in hand / 2,127.8 / 123.9 / 387.4
4,629.1 / 3,219.1 / 3,160.9
Creditors
Amounts falling due within one year / (2,929.0) / (3,725.1) / (3,233.2)
Net current assets/(liabilities) / 1,700.1 / (506.0) / (72.3)
Total assets less current liabilities / 5,775.9 / 4,212.0 / 3,963.1
Creditors
Amounts falling due after more than one year / (621.5) / (800.0) / (780.2)
Provisions for liabilities and charges / (49.1) / (61.0) / (44.9)
5,105.3 / 3,351.0 / 3,138.0
Called up share capital / 348.6 / 175.8 / 177.7
Reserves / 4,027.2 / 2,552.5 / 2,295.0
Equity shareholders’ funds / 4,375.8 / 2,728.3 / 2,472.7
Equity minority interests / 729.5 / 622.7 / 665.3
5,105.3 / 3,351.0 / 3,138.0
Approved by the Board