Kingfisher plc
Wednesday 17 March 1999
Preliminary results for 52 weeks ended 30 January 1999
1999Euro m / 1999
£m / 1998
£m / Change
- Turnover
- Profit before exceptional items and tax
- Exceptional items
- Profit before tax
- Net operating cash flow
- Capital investment
- Net debt
£1=E1.425 / 693.4 / 203.5 / 3.4x
- Gearing
- Earnings per share before exceptional items net of tax (p)
- Basic earnings per share (p)
- Dividend (per share) (p)
ADDED EUROPEAN DIMENSION AFTER MILESTONE YEAR
- B&Q merged with Castorama
- Further expansion in electricals
- Around 40% of annualised sales now outside the UK
After a milestone year of strategic development, Kingfisher plc, the European home and family retailer, today reports sales up by 16.4% to £7.5 billion (Euros 10.6 billion) and profit before tax and exceptional items up 15.3% to £582.5 million (Euros 830 million).
The results reflect Kingfisher’s strategy to build leading, pan-European DIY and electricals sectors alongside a growing UK-based general merchandise sector. The figures highlight the effect of continuing organic expansion and like-for-like growth of the existing businesses as well as significant investment in achieving strategic growth, including the year-end merger of B&Q with Castorama Dubois Investissements SCA, of France.
After exceptional items, principally the release of a VAT provision of £44.7 million, profit before tax rose by 21.0% to £629.3 million. Basic earnings per share grew less strongly by 12.5% to 32.3p, largely because of a much higher tax charge and minority interests. Earnings per share before exceptional items increased by 8.2% to 29.9p. The proposed final dividend is 9.25p, making 13.0p for the year, an increase of 13.0%.
The results include the consolidation of Castorama for one month. The effect of this, together with the contribution of acquisitions, was to increase sales by £507.1 million and operating profits by £20.5 million.
During the year, Kingfisher’s like-for-like sales grew by 4.9%. Each of the retail sectors reported like-for-like progress with the DIY and general merchandise sectors leading the way.
Net store numbers increased by 477 and net selling space increased to a total of 42.7 million sq. ft. (4.0 million sq. m). Space expansion was strongest in DIY and electricals, which included the impact of the Castorama merger and acquisitions.
Capital expenditure on new stores, refurbishments and improving the operating infrastructure, notably systems and logistics, was £378.6 million. A further £365.0 million was invested in additional businesses to strengthen Kingfisher’s electrical and DIY sectors. As a result of this heavy investment in growth and increased efficiency, net debt rose to £693.4 million and gearing to 26.5%.
A major European player
Kingfisher ended the financial year having made significant progress towards its key strategic goal of reshaping the business to become a major European player, positioned to capitalise on further retail consolidation in the European single market. In doing this, Kingfisher’s objective is to use the benefits of scale to deliver improved value, choice and service to customers in existing markets and build a platform for further international growth.
At the year-end, Kingfisher operated 2,742 stores in 13 countries and employed 115,383 people. Of this total, 645 stores and 37,565 employees, accounting for around 40% of total pro-forma sales in excess of £9.4 billion, are outside the UK, mainly in France and Germany.
Europe’s largest DIY group
In DIY the merger on 18 December of B&Q, the UK market leader, with Castorama, the French market leader, created Europe’s largest DIY group – twice the size of its nearest European rival and number three in the world. Castorama remains listed on the Paris Bourse and Kingfisher owns 57.9% of the issued share capital (54.6% on a fully diluted basis).
With the acquisition of NOMI, the leading DIY operator in Poland, Kingfisher now operates 494 DIY stores in nine countries, soon to be 10 with the opening of a B&Q in China in June this year.
Overall growth in DIY in the UK and France was stronger in the first half of the year than the second. B&Q increased its overall share of DIY spending in the UK from 19.0% to 19.5% and captured the lion’s share of growth by DIY multiples. In France, Castorama is believed to have consolidated its leading DIY market share of around 15.0%.
Further expansion in electricals
Kingfisher Electrical, in which Darty is the market leader in France and Comet, the number two in the UK, saw additional expansion in France, Germany and the Far East.
In France, Kingfisher increased its holding in BUT, the furniture and electrical chain, from 26% to 98%. In Germany, it acquired 60% of Wegert, which operates 64 electrical superstores trading under the Pro Markt and Macro Markt brands, and in Singapore, Electric City, which has seven stores, was acquired.
With a total of 698 stores it is now one of Europe’s top three electrical chains operating in seven European countries – more than any other electrical retailer – as well as in Singapore.
The European market in electrical retailing was mixed, with growth on the continent offset by less buoyant trading in the UK. The football World Cup, new digital products and continuing strong sales of mobile telephones and multimedia products were key drivers of market growth in brown goods. However, price deflation remained a significant characteristic of the consumer electronics market across Europe.
Both Darty and Comet grew market share.
Outperformance in General Merchandise
In the general merchandise sector on the UK high street, both Woolworths and Superdrug outperformed competitors on the basis of like-for-like sales growth. Growth was driven by marketing initiatives and product developments in both chains, as well as continuing investment in store refurbishments. Christmas trading saw comparatively strong like-for-like growth against difficult conditions.
During the year Woolworths refurbished 98 stores and opened three. Meanwhile Superdrug continued its health and beauty repositioning programme and added 47 pharmacies to stores, giving a total of 177, making Superdrug one of the UK’s largest dispensing pharmacy chains.
Kingfisher’s strong position in entertainment was strengthened by 15 MVC store openings, now with a total of 61, and the acquisition of VCI, the music and video publisher. The Group’s total entertainment turnover now exceeds £800 million.
Investment and initiatives to drive growth
Kingfisher expects customers to remain cautious and most retail markets to be very competitive in the current year. This is likely to increase the pressure for further consolidation in retailing in the European single market, a trend which is being driven by several factors including increased, cross-border price transparency.
Kingfisher will pursue opportunities to increase its market-leading positions in the DIY and electrical sectors on a pan-European basis. It will also aim to maintain growth in its UK general merchandise sector by reinforcing value-for-money propositions and investing in store improvements and new developments.
Good progress has been made in key areas of co-operation since the merger between B&Q and Castorama. This includes regular meetings of the joint board, implementation of financial reporting processes, budget reviews and the creation of a joint project team to work on buying synergies.
Kingfisher plans to open a total of 103 new stores creating around 4,800 new jobs in the current year. Included in the opening programme are:
- 33 DIY outlets
- 31 electrical outlets
-39 general merchandise outlets
At a strategic level Kingfisher is progressing a number of important initiatives to drive its ambition to deliver an “unbeatable shopping experience based on outstanding value, choice and service.” These include projects on global sourcing and pricing, supply chain efficiency, customer satisfaction, international management development and the development of complementary channels, such as home shopping and on-line retailing.
Chief Executive’s Commentary
Commenting on Kingfisher’s progress, Group Chief Executive Sir Geoffrey Mulcahy said: “Today is the tenth anniversary of the Group’s change of name to Kingfisher. The name change signalled our determination to build a broadly-based retail Group with international ambition. Since then the Group’s market capitalisation has also increased almost tenfold to over £10 billion.
“Last year we made some significant strategic moves as well as achieving solid organic progress in each of our three retail sectors. Kingfisher is now a truly European company. A high proportion of our sales today comes from continental Europe and two of our sectors have their headquarters in France.
“Succeeding in today’s and tomorrow’s very demanding retail environment will require world-class performance. I am confident that Kingfisher is better positioned than ever to face the future thanks to its increasing scale and absolute focus on delivering unbeatable customer value, service and choice.
“However, we have some major challenges to address. Customers continue to be more demanding and careful with their money and new technology will impact on shopping habits. In addition our ambitious expansion plans have to deal with tight planning regimes in both the UK and France and we expect the European retail environment to remain competitive.”
-ends –
For further information:
Kingfisher plc:+44 (0) 171 724 7749
Michael Hingston, Director of Corporate Affairs
Andrew Mills, Director of Investor Relations
Web-site address:
SUMMARY RESULTS BY SECTOR
SECTOR / Retail sales (£m) / Retail profit (£m)1999 / 1998 / %
change / 1999 / 1998 / %
change
DIY / 2,055.4 / 1,753.7 / 17.2 / 191.1 / 161.6 / 18.3
ELECTRICALS / 2,458.1 / 1,937.9 / 26.8 / 173.4 / 146.8 / 18.1
GENERAL MERCHANDISE / 2,840.9 / 2,618.0 / 8.5 / 186.1 / 171.3 / 8.6
*KINGFISHER TOTAL / 7,354.4 / 6,309.6 / 16.6 / 550.6 / 479.7 / 14.8
*Retail sectors only, excludes property, financial services and other operating costs.
OTHER YEAR-END DATA
SECTOR / Store nos. / Selling space / Employees(FTE)
(000s sq.ft.) / (000s sq. m.)
DIY / 494 / 26,658 / 2,476.8 / 33,591
ELECTRICALS / 698 / 7,393 / 686.8 / 21,192
GENERAL MERCHANDISE / 1,550 / 8,696 / 807.9 / 23,350
KINGFISHER TOTAL / 2,742 / 42,747 / 3971.5 / 78,133
INDEX
Page
Operations review
DIY- Castorama/B&Q 8
- Other 9
Electrical- Darty 10
- BUT 11
- Comet 11
- Other 11
General Merchandise - Woolworths 13
- Superdrug 14
- Other 14
Property- Chartwell Land 15
Kingfisher data by sector and company 16
Financial Section*
Financial Review 17
Summary of Group results 20
Group balance sheet 21
Consolidated cash flow22
Reconciliation of net cash flow to movement in net debt 23
Statement of total recognised gains and losses 23
Retail turnover 24
Exceptional items 24
Net interest payable 24
Taxation 24
Earnings per share 25
Reconciliation of movement in shareholders' funds 25
Net cash flow from operating activities 25
Dividend 26
Annual Report information 26
* The Financial Review and accompanying financial schedules are a summary extract from the full annual report.
DIY SECTOR
Company / £m Sales98/99 97/98 / %
change / £m Retail Profit
98/99 97/98 / %
change
B&Q / 1,908.4 / 1,753.7 / 8.8 / 188.1 / 161.6 / 16.4
*Other / 147.0 / - / - / 3.0 / - / -
Total / 2055.4 / 1,753.7 / 17.2 / 191.1 / 161.6 / 18.3
*Includes one month of Castorama and two months of NOMI.
B&Q merged with Castorama to create the No 1 DIY retailer in Europe
- Strong performance by B&Q Warehouse and Supercentres
- One month of Castorama included
- A leading DIY retailer in Poland acquired
The major event of the year was the merger in December of B&Q with Castorama, creating a business with a combined annualised turnover in excess of £3.9 billion and comfortably the number one DIY retailer in Europe. The sales and profit figures reported reflect a full year of B&Q, but only one month of Castorama.
B&Q sales rose by 8.8% to £1,908 million in the year. The inclusion of £147 million contributed in January by Castorama and NOMI from the date of its acquisition, brings the sector total to £2.1 billion. B&Q’s profits were up 16.4% to £188.1 million. Total DIY profits for the year were £191.1 million.
Like-for-like sales growth of 5.5% in the year was the main driver of B&Q’s growth and reflected the continuing strong performance of both its large format Warehouse outlets and good growth in Supercentres. New store openings, particularly Warehouses, accounted for the remaining growth.
During the year, B&Q opened seven new Warehouse outlets in the UK, bringing the total to 35. Approaching half these outlets are achieving annualised sales in excess of £20 million, and Warehouse sales now account for over 29% of the B&Q total.
Range and merchandise development at B&Q were key to higher sales. Highlights included the launch of the B&Q Colours own-label paint range, which drove core paint sales to record highs; a significantly expanded and much improved canopy display of lighting, and innovations in building products, including a new decking range.
In addition to increasing its share of the DIY market, B&Q also increased its share of the bigger Repair, Maintenance and Improvement (RMI) market, to a total of 9.2%.
In the current year B&Q plans to open a further 11 Warehouses and two Supercentres. A major site acquisition programme is underway in order to meet the target of a total of 125 Warehouses in the UK.
Castorama has announced separately its results for 1998. In the year to December 1998 Castorama reported sales of £2.1 billion and profits after tax and interest of £56.4 million. Like-for-like sales growth was 4.7% for the Castorama Group as a whole.
Castorama (excluding B&Q) plans to open a total of 10 new stores in five countries during this year. Of these one will be in France and the others in Italy, Germany, Poland and Brazil.
In Taiwan B&Q opened two new stores last year bringing the total to four. Three new openings are planned this year, one of which, in Taipei, will be a flagship 75,000 sq. ft. store. In addition, B&Q will open a similar sized store in China in Shanghai in June.
Other
The year saw the acquisition by Kingfisher of NOMI, a leading DIY operator in Poland. During 1998, NOMI opened eight new stores, bringing its total to 22 and plans to open five new stores during 1999.
ELECTRICAL SECTOR
Company / £m Sales98/99 97/98 / %
change / £m Retail Profit
98/99 97/98 / %
change
Darty / 1,123.8 / 1028.3 / 9.3 / 115.1 / 107.0 / 7.6
Comet / 862.4 / 820.2 / 5.1 / 33.4 / 33.4 / 0.0
*Wegert / 253.0 / - / - / 7.5 / - / -
**BUT / 80.3 / - / - / 15.0 / 4.2 / -
Other / 138.6 / 89.4 / 55.0 / 2.4 / 2.2 / 9.1
Total / 2,458.1 / 1,937.9 / 26.8 / 173.4 / 146.8 / 18.1
*Includes 6 months to 31 December 1998.
**Includes 9 months’ associate retail profits at 26% share to 30 September 1998 and 3 months’ subsidiary turnover and retail profits to 31 December 1998.
Europe’s most widespread electrical chain
- French market recovery and further acquisitions drive growth
- World Cup and new products boost sales
- Both Darty and Comet increase market share
Growth in Kingfisher’s electrical sector was driven by a recovery in the French electrical market and the acquisition during the year of a 60% stake in Wegert in June and the majority of the outstanding shares of BUT in France later in the year.
Overall sales in the sector of £2.5 billion were characterised by continuing price deflation in brown goods, particularly strong growing categories such as mobile phones and multimedia products. Electrical sector profits totalled £173.4 million, an increase of 18.1 % over the previous year. The football World Cup and the introduction of new digital products helped electrical sales across European markets.
France
In France, Darty increased profits in sterling terms by 7.6% to £115.1 million. The increase was broadly similar in local currency terms, at 7.2% to FF 1.1 billion.
Last year saw a recovery in the French market for both brown and white electrical goods. Against this background, Darty once again increased its share of its core markets, and achieved strong growth in multimedia and mobile phones.
Like-for-like sales growth of 6.7% for the year compared with estimated market growth of 4.6%. Darty’s share of the market grew from 13.4% to 13.7%.
Kingfisher Electrical Retailing is now one of Europe’s top three specialist electrical chains and operates in more European countries than any other.
Key developments during the year were the opening of seven new stores, including a 2,000 sq. m. format at Nation in Paris, the roll-out of an enhanced multimedia offer and the launch of new customer call centres and helplines.
The results for BUT, the furniture and electrical retailer, are included as a subsidiary for the three month period from 1 October to their 31 December year end. Sales during this period were £80.3 million with profits of £10.9 million. For the nine months to 30 September only a 26% share of BUT’s profits are included, contributing £4.1 million.
During the current year Darty plans to open eight new stores, relocate one and refurbish another eight. BUT has six new openings planned.
UK
In the UK, Comet increased sales by 5.1% to £862.4 million with profits remaining flat at £33.4 million, in a difficult year in which average selling prices were more than 5% down over the previous year.
Despite a like-for-like sales decline of 0.6% in the year, Comet increased its market share from 11.7% to 12.3%.
During the year Comet opened eight new stores, relocated 17 stores and carried out major refits to nine stores. It also opened a new purpose-built, brown goods distribution centre at Corby, and towards the end of the year, launched a much improved, nationwide home delivery and installation service.
This year Comet plans to open eight new stores including a 26,000 sq. ft. trial store in Paisley near Glasgow.
Germany
The results include the contribution of Wegert for the period from 1 July until the year end. This amounted to sales of £253 million and profits of £7.5 million.
There were a total of 64 stores trading under the Pro Markt and Makro Markt names at the year-end. During this year a total of eight new openings are planned. Since the year-end Kingfisher has made an initial investment of 4.53 million DM for a 55% interest in Tangens GmbH, which will shortly start operations as a mobile phone service provider in Germany with immediate access to the Wegert customer base.
Other
At New Vanden Borre in Belgium, like-for-like sales increased by 14% against market growth of 6%, with sales of brown goods and telephones particularly strong. NVB increased the number of its new concept stores by four. Eight out of its 20 stores have now been renovated.
BCC in Holland increased sales by 12% against electrical market growth in the Netherlands of 6.5%. This sales increase was driven mainly by the opening of three new stores and the relocation of one, bringing the total number of stores to 20.
Electric City with seven stores in Singapore, which was acquired at the end of October last year, faced a depressed market.
GENERAL MERCHANDISE
Company / £m Sales98/99 97/98 / %
change / £m Retail Profit
98/99 97/98 / %
change
Woolworths / 1,763.2 / 1,662.8 / 6.0 / 114.4 / 105.1 / 8.8
Superdrug / 798.6 / 749.5 / 6.6 / 41.1 / 41.0 / 0.2
Other / 279.1 / 205.7 / 35.7 / 30.6 / 25.2 / 21.4
Total / 2,840.9 / 2,618.0 / 8.5 / 186.1 / 171.3 / 8.6
High street outperformance in difficult trading
- Market growth in key categories
- Continued pharmacy additions
- Strong Christmas trading
In the General Merchandise sector both Woolworths and Superdrug outperformed competitors on the basis of like-for-like sales growth during a year of difficult trading, particularly in the second half, and increased their market shares in most key categories.