Preliminary results for the year ended 29 January 2011
24 March 2011
Our aim has been and remains to deliver more value for Kingfisher shareholders by focusing on three key priorities - Management, Capital and Returns.
The Group Executive, comprising the Group CEO, Group FD and the three divisional CEOs, have collective responsibility for overall Group direction and performance. Kingfisher is now managed in a more integrated way with a growing number of cross-group networks established to accelerate key initiatives throughout the business. This new way of working is known internally as the 'One Team' approach. Clear goals and share-based incentives extend from the Group CEO to store managers in our largest markets: the UK, France and Poland.
A rigorous approach to capital over the last three years has resulted in over a £500 million reduction in gross working capital (before the negative impact of French LME(1)) and a reprioritisation of new capital expenditure to faster payback investments. This discipline, combined with focus on generating higher cash profitability from the business, has resulted in net cash of £14 million at the year end (£1.6 billion net financial debt as at 2 February 2008).
(1)Legislative changes shortening French payment terms, implemented over the 3 years to 2012
Aim - to place greater focus on generating higher cash returns from the retail businesses
The seven step programme to improve cash returns, known as 'Delivering Value', is progressing well. The programme was mobilised during 2008/09, commenced in 2009/10 and is due to be completed by the end of January 2011/12. The initiatives are supporting the trading performance in the shorter term and also better positioning the Group for its next stage of development.
After two full years of the programme, Kingfisher is now a significantly stronger, higher returning business. Adjusted basic EPS has increased by 93% since 2007/08 and dividends have started to rise again for the first time in five years. The Group's standard return on capital has increased from 5.8%(1) to 9.6%, ahead of its cost of capital. The balance sheet is robust, providing financial strength and flexibility, whilst the talent of our people is being better harnessed to deliver common goals. We have a high quality global sourcing capability and a developing product innovation capability.
The financial year 2011/12 will be a year of transition as we complete the final milestones for the 'Delivering Value' phase and mobilise the activities that will drive the next phase of our development. A summary of progress to date since January 2008 for each of the seven key 'Delivering Value' steps is set out below.
- Driving up B&Q UK & Ireland's profit
Self-help measures have rebuilt B&Q's retail margin to 5.6% (from 3.2% in 2007/08) despite weak markets throughout this period. B&Q is on track to achieve a sustainable 7% operating margin.
- Exploiting our UK Trade opportunity
Sales to the trade were £828 million in 2010/11, up from around £700 million in 2007/08. Over 415,000 trade professionals are now registered with 'TradePoint' and 2.4 million registered with Screwfix.
- Expanding our total French business
10% net new space added and profits up 18% in constant currencies since 2007/08, supported by buying optimisation and more direct sourcing.
- Rolling out in Eastern Europe
59% space added, profit up 43% in constant currencies since 2007/08.
- Turning around B&Q China
Repositioning plan on track. Annual losses of £62 million(2) at peak in 2008/09 have been reduced to £8 million with the business now positioned for potential breakeven in 2011/12, subject to a stable Chinese home improvement market.
- Growing Group sourcing
Direct sourcing shipments through the Kingfisher Sourcing Organisation (KSO) is now at US$1.3 billion per annum, up over 60% since 2007/08.
- Reducing working capital
Net working capital reduced by over £500 million(3) since 2007/08 excluding around £180 million negative impact of French LME(4)
- Since January 2009
- In constant currencies
- At reported rates
- Legislative changes shortening French payment terms, implemented over the 3 years to 2012