Interim results for the 26 weeks ended 30 July 2011
15 September 2011
Trading Review – UK & IRELAND
|Sales £m||2011/12||2010/11||% Reported Change||% Constant Change||% LFL
|UK & Ireland||2,306||2,328||(1.0)%||(1.0)%||(1.5)%|
|Retail profit £m||2011/12||2010/11||% Reported Change||% Constant Change|
|UK & Ireland||182||171||6.1%||6.1%|
UK & Ireland includes B&Q in the UK & Ireland and Screwfix
2011/12: £1 = 1.14 euro (2010/11: 1.16 euro)
All trading commentary below is in constant currencies
Kingfisher UK & Ireland
Total sales were down 1.0% to £2.3 billion (-1.5% LFL) in a declining home improvement market (1) which was further impacted by stock clearance activity at Focus DIY (the UK's fourth largest DIY operator with 177 stores) ahead of its closure. Retail profit grew by 6.1% benefiting from continued gross margin and cost initiatives.
B&Q UK & Ireland's total sales were down 2.0% (-2.0% LFL) to £2.1 billion. Sales of outdoor seasonal products were down around 4% impacted by less favourable summer season weather and the Focus DIY stock clearance activity. Non-seasonal product sales were down around 1% reflecting the generally weak consumer backdrop.
The new in-store trade-only 'TradePoint' offer continues to grow and attract new customers. Around 650,000 professional tradesmen are now registered as 'TradePoint' customers, triple the number previously registered with the B&Q Trade Discount Card. This growing database enables B&Q to identify and directly market to this important customer segment for the first time.
Retail profit grew by 4.5% to £165 million. Gross margin was up 20 basis points against tough comparatives (2010/11: +140 basis points) driven by sales of higher margin products and more direct sourcing. A strong focus on operating cost efficiencies also continued with costs (SG&A(2)) percentage to sales held broadly flat across the first half.
During H1 Kingfisher paid £24 million to buy up to 31 leasehold properties from the administrator of Focus DIY and, following regulatory approval and discussions with landlords, 29 will reopen in the B&Q format, creating 230 extra jobs at these stores, in addition to the nearly 600 jobs saved in these communities. During H2, 28 of these stores will be converted into the B&Q format for a capital cost of around £20 million and an additional £11 million exceptional charge will be incurred integrating the stores before they open. The overall full year impact from the closure of Focus DIY is expected to be retail profit neutral before exceptional charges (H1 clearance disruption offset by H2 trading benefit).
(Note: of the 177 Focus DIY stores trading before its administration, 29 were subsequently acquired by Kingfisher, 13 by other home improvement businesses, resulting in 135 having ceased trading).
Screwfix grew total sales by 7.7% to £251 million in a challenging smaller tradesman market (3). Initiatives that drove market share gains included new ranges (e.g. safety and work wear), the addition of specialist trade desks exclusive to plumbers and electricians within Screwfix outlets and the continued roll out of new outlets. Thirteen net new outlets were opened during H1, taking the total to 175, now accounting for around two thirds of total sales.
Retail profit was up 25.3% to £17 million, reflecting the strong sales growth, gross margins benefiting from more direct sourcing and distribution efficiencies and continued tight cost control.
During H1 Screwfix developed a smaller format outlet (400 sq m compared with the typical 700 sq m) in order to access smaller or more densely populated urban catchments. Having now successfully trialled several of these smaller outlets in H1 Screwfix will now accelerate its UK expansion plans. In H2, it is intended that up to a further 40 Screwfix outlets will now open, 30 in the newer, smaller format. This accelerated expansion will cost an additional £5 million capital and add £3 million of further pre-opening costs in H2. A total of 1,000 new jobs will be created in the UK for the full year.
(1) This GfK data is only for five months to June and includes new space added but excludes private retailers e.g. IKEA
and smaller independents
(2) Selling, General and Administrative Expenses
(3) Based on the Builders' Merchants Federation data April-June 2011