Kingfisher : Annual Financial Report

Who we are

Kingfisher is an international home improvement company with over 2,000 stores in eight countries across Europe.

We offer home improvement products and services to consumers and trade professionals through our stores and e-commerce channels.

Our purpose

Better Homes. Better Lives. For Everyone. At Kingfisher, we believe a better world starts with better homes and we strive to help make that happen.

Our strategic principles

All figures on this page relate to the year ended 31 January 2024.

1. Turkey joint venture included.
2. Total, not full-time equivalent.
3. B&Q 311. Screwfix 922.

1. Castorama 95. Brico Dépôt 125. Screwfix 20.
2. Our stores in Turkey, Koçtaş, are operated as a 50% joint venture.
   Store figure as of 31 December 2023.

Chair's statement

This has been another busy year for Kingfisher, in which we made further progress laying the foundations for future growth, while managing the impact of challenging macroeconomic conditions in all the markets in which we operate. Now four years into our 'Powered by Kingfisher' strategy, the business is far more lean, agile and productive than it was. However the cost of living pressures on our customers proved a significant headwind throughout the year and this was reflected in our financial performance. Overall revenues for the Group were down 1.8% with adjusted pre-tax profits down 25.1%. Free cash flow, however, of £514 million was up significantly from the prior year. Geographically, the UK proved our most resilient market with B&Q and Screwfix both turning in solid performances and gaining market share. France, Poland and Iberia experienced tougher trading.

Good progress was made on our strategic agenda. The recent investments we have made in digital and data capabilities are producing good results, with higher e-commerce sales driven by rapid progression of our curated online marketplaces for third party merchants. Our greater focus on trade professionals is also paying off, especially in the UK, and we see this as a large and highly valuable opportunity in all our key markets. The development of the Screwfix business continues apace with 51 new trade counters opened in the UK and Ireland last year, together with 15 opened in northern France to provide a strong and effective bridgehead into that market. Screwfix also launched a new multi-language website to enable e-commerce for the brand across Europe.

We are committed to providing attractive returns for our shareholders. The Board is proposing a final dividend of 8.60p, which would make the total dividend for the year, 12.40p, in line with last year. Following the completion of our previous share buyback programmes totalling £600 million, we were pleased to announce the return of a further £300 million of surplus capital in a new programme which commenced in October. In total, £397 million was returned to shareholders in FY 23/24.

Kingfisher has a proud history as a pioneer in responsible business and the Board continue to champion the cause. Over the year we made further progress on all aspects of our environmental, social and governance (ESG) agenda including significant reductions in our carbon emissions, increasing the number of products we sell that reduce the impact on the environment, promoting diversity at every level in the business, and building up the support we give to apprenticeships and learning.

The Board considers good governance and diversity of thought as essential to our long-term success. Succession planning for roles at the Board and Group Executive level has been given a higher profile in Board meetings and additional opportunities have been sought to meet high-potential colleagues from other parts of the organisation. To enable this, the Directors have increased the amount of time they spend 'out and about' in the business with an expanded number of visits last year to stores, offices and distribution centres in the UK, France and Poland. Some of these visits were taken as a whole Board, others involved only one or two Directors. The additional time has allowed for more interaction with colleagues at all levels and helped the Board to observe, at first hand and in more situations, our strategy and culture in action. A programme of tailored 'teach-ins' has also helped the Board's understanding of some of the more technical or complex areas of the business. These included sessions on the trade proposition, Generative AI, and compact store formats.

The Board also recently completed an internal Board effectiveness review. This year we introduced a new component which allowed for individual feedback for each of the Directors. This was a valuable addition and will be repeated every third year from now on. Overall results of the review show the Board is working well together and is finding the right balance of supporting management while holding them to account. Board committees operate effectively and the culture around the board table is respectful, frank, transparent and trusting. I would like to thank my Board colleagues for their participation in the review and for their generous support through the year.

Our priorities for 2024 are clear, and are centred on things we can control. Maintaining and growing our market shares, improving our productivity, and delivering on our commitments on free cash flow and shareholder returns. We will also continue to invest behind our identified drivers of future growth, launching e-commerce marketplaces in France and Poland, further expanding the Screwfix network and getting behind our push to attract more trade customers. We are confident in the long-term returns opportunity from these investments, but the Board will continue to manage them thoughtfully and adjust as needed through what seems likely to be another year of economic uncertainty for our customers.

Our purpose is to help make better homes and better lives for everyone and that is something really worth striving for. The inspirational people who make up Kingfisher are doing exactly that and I would like to thank each and every one for their enduring commitment and support both to our mission and to the business.

Andrew Cosslett

Chair of the Board

24 March 2024

This year we have remained focused on supporting our customers and delivering on our long-term strategy, despite facing various macroeconomic and consumer challenges in our markets. I am immensely proud of all our teams, and I would like to say a huge thank you to all our colleagues for their hard work and dedication to our customers. Thanks to their efforts, we continue to make strong strategic progress and position the business for growth.

Business performance

Our financial performance for the year was in line in with

the revised guidance we set out at our Q3 results. Sales were down 1.8% to £12,980 million, adjusted profit before tax was down 25.1% to £568 million and we delivered strong free cash flow of £514 million.

Trading conditions varied across each of our key markets. In the UK & Ireland, B&Q, TradePoint and Screwfix each delivered resilient sales and market share growth. In France, where our sales performance was impacted by historically low consumer confidence, we have quickly made significant adjustments to the cost base and started to embed e-commerce marketplace and trade customer initiatives similar to those successfully implemented in the UK. In Poland, where we faced strong comparatives and a tough economic backdrop, sales trends are gradually improving in line with the consumer environment.

Encouragingly, on a Group-wide basis, we have seen sequential quarterly improvement in the volume trend in 'core' categories, which make up 77% of our total sales volumes, as retail price inflation tapers down.

Strategic progress and growth opportunities

We continue to execute against our strategic objectives at pace and invest in our multiple growth opportunities.

We are making strong progress against our priority to accelerate e-commerce by offering customers more speed and choice. This year we achieved e-commerce sales growth of 6.4%, supported by strong marketplace sales growth at B&Q, which reached 38% marketplace participation in January 2024. We are seeing growing adoption of last-mile fulfilment options including increased use of our Screwfix Sprint one-hour home delivery service, Click & Collect lockers in Poland and a new Screwfix partnership with Deliveroo. Our e-commerce sales penetration was 17.4% (FY 22/23: 16.3%), over twice the level of FY 19/20.

The success of our marketplaces in the UK and Iberia was well ahead of our expectations, and we have further marketplace launches planned in France and Poland this year. Our ambition is now to reach 30% e-commerce sales penetration, with one third of our Group e-commerce sales coming from our marketplaces.

We have also continued the expansion of Screwfix, with 51 new stores opened in the UK and Ireland this year and 22 stores now open in France, with encouraging results so far. We have also launched Screwfix as a pure-play online retailer in six European countries. We are planning for up to 40 store openings in the UK and Ireland and 15 in France over the coming year. Assuming the success of the format is confirmed, we see the potential for more than 600 Screwfix stores in France over the longer term.

Poland remains a market with attractive growth potential and Castorama Poland opened five stores in the year, bringing its total to 102 stores. We are targeting up to 75 new medium-box and compact store openings in Poland over the next five years.

Across the Group, we believe net space growth will drive an uplift in sales of c.1.5% to 2.5% per annum over the medium term, primarily driven by Screwfix and Castorama Poland.

Our plans to develop our trade business across our markets are progressing well. In the UK, we opened 21 new TradePoint counters at B&Q stores over the year and TradePoint delivered £834 million of sales. We have a strong plan to drive TradePoint's annual sales to more than £1 billion in the medium term, by growing its customer base and increasing our share of trade customer spend. Building on TradePoint's success, we are also seeing strong results from our trade proposition tests in France, Poland, Iberia and Romania. We will be accelerating their rollout this year and we are now aiming to double trade penetration in France and Poland over the medium term.

Our data, AI and retail media initiatives are also delivering positive results and we are accelerating their rollout to drive incremental revenue, profit and cash. For example, we have successfully implemented AI-powered product recommendation and personalisation engines in the UK, France and Romania, and deployed data and AI-driven tools to optimise markdowns and clearance. Our retail media offering is rapidly building momentum and is now live in France and at B&Q. Over time, we see the potential for retail media revenues to reach up to 3% of the Group's total e-commerce sales.

We have also outlined a new plan to simplify our French organisation, significantly improve the performance and profitability of Castorama France and realise the exciting potential of Brico Dépôt. The plan has three priorities for Castorama: restructuring and modernising the store network, improving operating margin efficiency and growing sales densities. We believe our overall plan for France will support a retail profit margin of c.5% to 7% over the medium term.

Responsible Business remains a vital part of our strategy and we have continued to make progress with our commitments. We remained well ahead of our 1.5°C aligned science-based scope 1 and 2 carbon reduction target, reducing our emissions by 62.0% against a 2016/17 baseline. We are increasingly leveraging our own exclusive brand (OEB) capabilities to build products that reduce impact on the environment. Sustainable Home Products (SHP) represented 49% of our Group sales this year (FY 22/23: 47%). Reflecting our commitment to supporting our people to build skills for life, we also announced a new target for more than 20,000 colleagues to have completed an apprenticeship, traineeship or external qualification by 2030, after we exceeded our previous learning target ahead of schedule.

Looking ahead

Looking forward, we remain confident in the attractive medium to longer-term growth prospects of the home improvement industry and our ability to grow ahead of our markets. We reaffirm our medium term financial priorities, focused on growth, cash generation and attractive returns to shareholders.

In the short term, while repairs, maintenance and renovation activity on existing homes continue to support resilient demand, we are cautious on the overall market outlook for 2024 due to the lag between housing demand and home improvement demand. In 2024 against this backdrop, we will remain agile and focused on what is within our control - leveraging our strategy to deliver market share growth, driving productivity gains, and managing our costs and cash effectively.

This has been another year of significant progress for Kingfisher, in which the increased agility enabled by our strategy has helped our teams to effectively manage a volatile environment. We are now strongly positioned going forward. We are more agile and efficient, with significant cost taken out across the Group, and we have multiple profitable growth drivers in which we are already investing.

I would like to warmly thank all our colleagues once again for their efforts this year. Together, we are building a stronger company with exciting prospects for growth, and we can look ahead to the future with confidence.

Thierry Garnier

Chief Executive Officer

24 March 2024

To hear more about our results from Thierry Garnier please use the link www.kingfisher.com/fullyearvideo

Grow by building on our

different banners

Our banners occupy number one or two positions in our key markets. These banners address a diverse range of customer needs, each operating different models tailored to these needs, with clear positionings and plans. Our goal is to grow by building on our different formats in existing and new markets, leveraging the power of Kingfisher. We believe net space growth will drive an uplift in sales of c.+1.5% to +2.5% per annum over the medium term.

Accelerate e-commerce through

speed and choice

We will continue to grow our e-commerce sales and participation, with the ambition of reaching 30% of Group sales from e-commerce channels (one third of which from marketplace). We will do this by offering our customers 'speed' - faster fulfilment of orders through leveraging our store estate - and 'choice' - broader product choice, including via our e-commerce marketplace propositions. This will be supported by the ongoing modernisation and simplification of our technology landscape, which is unlocking the rapid development of more customer-centric and personalised mobile apps, digital tools and services.

Build a data-led

customer experience

Powered by Kingfisher, our banners are leveraging data and artificial intelligence (AI) to build customer-centric tools and solutions, support better commercial decision-making and higher productivity, thereby unlocking significant new sources of revenue, profit and cash. In addition, with c.1bn customer visits per annum across our e-commerce touchpoints, we believe that many of our suppliers - including leading national and international home improvement brands - could become advertisers. Over time, we see the potential for retail media revenues to reach up to 3% of the Group's total e-commerce sales.

Differentiate and win through own exclusive brands (OEB)

Our OEB product development is a significant source of value for our banners and their customers. OEBs provide us with the ability to differentiate ourselves from the rest of the market by delivering simple and innovative solutions at affordable prices, with a focus on reducing environmental impact. OEBs also carry a higher gross margin (on average) than branded products. We aim to grow our OEB sales further as we bring even more innovative and affordable solutions to our customers.

Develop our

trade business

Trade customers are an integral part of the home improvement ecosystem and a key priority for Kingfisher. Trade customers tend to visit more frequently and spend more than the average retail customer. The significant opportunities to engage further with trade customers include the further roll-out of trade counters and expansion across our banners, range expansion and improved merchandising, building deeper relationships with trade customers, new services, loyalty programme optimisation and digital enhancements. We are aiming to reach more than

£1 billion of sales at TradePoint in the UK & Ireland, and double trade sales penetration in France and Poland, over the medium term.

Roll out

compact store formats

Our home improvement banners operate over 2,000 stores across eight countries in Europe. They play an integral role in meeting the demand for fast fulfilment via e-commerce channels, whether through C&C or delivery, to where the customer wants it. Compact stores are also playing an increasingly crucial role in addressing the consumer need for convenience. Through compact store expansion, our ambition is to grow market share, optimise our overall store footprint, and to grow sales densities and store profitability.

Lead the industry in Responsible Business

and energy efficiency

We are committed to leading our industry in responsible business practices and energy efficiency. Building on our strong environmental, social and governance (ESG) credentials, our 'Powered by Kingfisher' strategy sets out four priority areas for Responsible Business where we can maximise our positive impact on the lives of our customers, colleagues, communities, and the planet. As the 'green homes' agenda accelerates,

we see considerable potential for our Sustainable Home Products.

Human, agile

and lean

To deliver the best possible service to our customers and ensure our colleagues are engaged, fulfilled and able to realise their full potential, we are building a culture based on trust, agility, inclusion and curiosity. We have adopted a 'done is better than perfect' mindset to move faster and with more agility, given the rapidly changing environment in which we do business. And we continue to focus on becoming leaner and more productive, as well as lowering our same-store inventories.