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Kingfisher PLC (KGF)

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Thursday 30 May, 2013

Kingfisher PLC

Q1 Trading Update

RNS Number : 8497F
Kingfisher PLC
30 May 2013
 



 

 

Kingfisher reports Q1 total sales down 0.4% (-4.2% LFL) and retail profit of £114 million. Sales improved at the end of the quarter following a return to more normal weather patterns      

 

Group Financial Summary (13 weeks ended 4 May 2013)

 


 

Sales

 

% Total

 

% Total

% Like-for-likes

Retail Profit

 

% Total

 

% Total


2013/14

£m

Change

(Reported)

Change

(Constant currency)

Change

(Constant currency)

2013/14

  £m

Change (Reported)

Change

(Constant currency)

France

1,079

(0.9)%

(3.8)%

(5.6)%

66

(14.4)%

(16.9)%

UK & Ireland

1,068

(3.4)%

(3.4)%

(4.7)%

50

(32.1)%(1)

(32.0)%(1)

Other International

8.6%

5.6%

0.7%

(2)

n/a

n/a

Total Group

2,623

(0.4)%

(2.1)%

(4.2)%

114

(28.0)%

(29.2)%

Note: Joint Venture (Koçtaş) and Associate (Hornbach) sales are not consolidated. Retail profit is operating profit stated before central costs, exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of JVs and Associates.

(1)2012/13 comparatives restated by £1m to reflect reclassification of pension administrative expenses from finance costs to operating profit, as per the amended IAS 19.

 

 

Highlights in constant currencies:

·   Sales and profit impacted by:

On-going weak consumer confidence in our three major markets

Unfavourable cold weather through March and early April which impacted footfall, with sales of outdoor products down 10%. The chart below highlights the Group's sales volatility during the quarter:

 

http://www.rns-pdf.londonstockexchange.com/rns/8497F_-2013-5-29.pdf

 

 

Re-investment of self-help margin and cost benefits in affordability continued in Q1. This re-investment rate is expected to ease for the balance of the year

·   Progress continued with 'Creating the Leader' including the acquisition in the quarter of 15 stores in Romania, due to complete in Q2

·   Net cash was £264 million (28 April 2012: reported net cash of £165 million)



Ian Cheshire, Group Chief Executive, said:

 

"Market conditions have remained challenging in the first quarter compounded by the effects of an early Easter and unseasonably cold weather across Europe. As a result, general footfall was down and demand for outdoor maintenance, gardening and leisure products was adversely affected for a second year running. These impacts were particularly acute in March which resulted in that month accounting for the vast majority of the quarter's profit decline. However, our performance towards the end of the quarter was encouraging following a return to more normal weather patterns.

 

"Looking ahead, we still have our key summer season to come and we are ready to capitalise on any improvement in conditions during this peak trading period. We will continue to focus hard on our margin and cost initiatives helping us to reinforce our value credentials with customers during these challenging times.

 

"Our self-help plan, 'Creating the Leader', is progressing well, improving our customer offer whilst optimising the generation and use of cash to deliver shareholder value."

 

 

Company Profile

 

Kingfisher plc is Europe's leading home improvement retail group and the third largest in the world, with 1,030 stores in eight countries in Europe and Asia. Its main retail brands are B&Q, Castorama, Brico Dépôt and Screwfix. Kingfisher also operates the Koçtaş brand, a 50% joint venture in Turkey with the Koç Group, and has a 21% interest in Hornbach, Germany's leading large format DIY retailer.



 

Q1 TRADING REVIEW BY MAJOR GEOGRAPHY

 

FRANCE

 

Sales £m

2013/14

2012/13

% Change

% Change

% LFL




(Reported)

(Constant)

Change

France

1,079

1,089

(0.9)%

(3.8)%

(5.6)%

 

Retail profit £m

2013/14

2012/13

% Change

% Change





(Reported)

(Constant)


France

66

78

(14.4)%

(16.9)%


 

France comprises Castorama and Brico Dépôt

 

All trading commentary below is in constant currencies

 

Kingfisher France

Kingfisher France sales declined by 3.8% to £1,079 million (-5.6% LFL) in slower markets including a negative calendar impact of around 1.5% reflecting fewer trading days compared to Q1 last year (1). Two net new stores were opened during Q1, adding around 3% new space compared to Q1 last year.

 

Gross margins were up 10 basis points benefiting from on-going self-help initiatives, which coupled with continued tight cost control including lower levels of variable pay, resulted in retail profit of £66 million (2012/13: £78 million reported retail profit).

 

Castorama total sales declined by 2.3% to £597 million (-4.1% LFL). According to provisional Banque de France data, sales for the home improvement market were down around 7%. Castorama outperformed the market benefiting from its innovative 'Do-it-Smart' approach aimed at making home improvement projects easier for customers. Sales of outdoor seasonal products were down around 11% reflecting unseasonably cooler weather. Sales of indoor products were down around 3%.

Brico Dépôt, which more specifically targets trade professionals and heavy DIYers, was impacted by a slow house building market and tough comparatives (Q1 2012/13: +2.4%). Total sales declined by 5.7% to £482 million (-7.3% LFL). Self-help initiatives continued to progress well, including new ranges introduced last year (e.g. joinery and tiling ranges) and more 'arrivages' (rolling programmes of one-off special buys), reinforcing Brico Dépôt's value credentials.

 

 (1) Outside the UK & Ireland, figures are reported on a calendar month basis. In the UK & Ireland, figures are reported on a 13 week basis. There was one less trading day at Castorama and two less trading days at Brico Dépôt compared to last year.



UK & IRELAND

 

Sales £m

2013/14

2012/13

% Change

% Change

% LFL




(Reported)

(Constant)

Change

UK & Ireland

1,068

1,105

(3.4)%

(3.4)%

(4.7)%

 

Retail profit £m

2013/14

2012/13

% Change

% Change





(Reported)

(Constant)


UK & Ireland

50

74

(32.1)%

(32.0)%


 

UK & Ireland comprises B&Q in the UK & Ireland and Screwfix

2012/13 comparatives restated by £1m to reflect reclassification of pension administrative expenses from finance costs to operating profit, as per the amended IAS 19.

 

All trading commentary below is in constant currencies

 

Kingfisher UK & Ireland

Total sales declined by 3.4% to £1,068 million (-4.7% LFL) in a slow market impacted by weak consumer confidence and an early Easter coupled with record cold weather, through March and early April.

 

Reflecting the weaker sales, Kingfisher UK & Ireland reported retail profit of £50 million (2012/13: £74 million reported retail profit including the benefit of a one-off construction related claim for around £5 million). Gross margins were broadly flat, with the benefits from on-going self-help initiatives offset by investment in pricing. A strong focus on operating cost efficiencies continued across both businesses.

 

B&Q UK & Ireland'stotal sales declined by 5.7% to £913 million (-5.6% LFL) in line with lower footfall driven by the colder temperatures. Sales of outdoor seasonal products, which can represent up to 30% of total Q1 sales, were down over 10%. Sales of building products were also impacted by the cold weather. In the showroom category, bathroom sales were down, in a weak, price-aggressive market. However kitchen sales delivered a solid performance. Sales of indoor decorative products fared better as customers switched some of their home improvement activities indoors.

 

In Ireland, following the conclusion of the Examinership process, one store has now closed and significant rent reductions will be achieved across the remaining stores.

 

Screwfix grew total sales by 12.6% (+1.7% LFL) to £155 million, in an improving smaller tradesman market (1), benefiting from new ranges (e.g. paint and power tool accessories), the continued roll out of new outlets and the successful introduction of a mobile 'click, pay & collect' offer last year. Eight outlets were opened during Q1, taking the total to 283.

 

 

(1) Based on the Builders' Merchants Federation lightside trade data Jan-Mar 2013



 

OTHER INTERNATIONAL           

 

Sales £m

2013/14

2012/13

% Change

% Change

% LFL




(Reported)

(Constant)

Change

Other International

476

438

8.6%

5.6%

0.7%

 

Retail profit £m

2013/14

2012/13

% Change

% Change





(Reported)

(Constant)


Other International

(2)

7

n/a

n/a


 

Other International comprises Poland, China, Spain, Russia, Turkey JV and Hornbach in Germany. Joint Venture (Koçtaş) and Associate (Hornbach) sales are not consolidated

 

All trading commentary below is in constant currencies

 

Other International total sales increased by 5.6% to £476 million (+0.7% LFL) driven by LFL growth in Russia and China and new store openings. Three net new stores opened, two in Poland and one in Spain, adding around 5% new space compared to Q1 last year. However, economic uncertainty in Europe (with the exception of Russia and Turkey) and record cold weather in Poland impacted performance.

 

Q1 is by far the smallest quarter for this division reflecting slower demand in Eastern Europe (winter) and in China (New Year) but with a largely fixed cost base. The division reported a retail loss of £2 million for Q1 (2012/13: £7 million reported retail profit) with the biggest movement coming from Poland.

 

Sales in Poland were down 1.3% (-4.2% LFL) to £240 million benefiting from new store space but adversely impacted by the extreme cold March weather. Sales patterns were unusually volatile (February -0.8% LFL; March -16.7% LFL; April +5.1% LFL). Gross margins were down 170 basis points, with self-help initiatives more than offset by an on-going investment in pricing which annualises during Q2. Tight cost control, after around £1 million higher pre-opening costs, largely offset cost inflation resulting in a 35.3% profit decline to £14 million. 

 

In Russia, sales grew by 17.4% to £91 million (+13.0% LFL) benefiting from a strong market and new store space. Retail loss was £4 million (2012/13: £5 million reported loss). In Turkey, Kingfisher's 50% JV, Koçtaş, delivered a breakeven result, flat year on year, with sales up 4.3% (+2.9% LFL). Sales in Spain grew by 14.2% (-6.1% LFL) to £68 million reflecting new store openings offset by a difficult market, also resulting in a breakeven result (2012/13: £1 million reported profit). Hornbach, in which Kingfisher has a 21% economic interest, contributed a retail loss of £5 million (2012/13: £5 million reported loss).

 

B&Q China sales grew by 9.1% to £77 million (+9.5% LFL) driven by additional promotional activity and an improving property market. Retail loss was £7 million (2012/13: £5 million reported loss) reflecting £1 million of costs relating to work on the new format store trial, ahead of its opening in March this year and £1 million lower sublet rental income on vacant store space.



SUMMARY Q1 2013/14 DATA BY GEOGRAPHY

 

As at 4 May 2013

Store

numbers

Selling space

(000s m2)

Employees

(FTE)

Castorama

104

1,103

11,947

Brico Dépôt

105

583

6,901

France

209

1,686

18,848

B&Q UK & Ireland

356

2,565

21,793

Screwfix

283

20

3,893

UK & Ireland

639

2,585

25,686

Poland

72

529

10,764

China

39

322

4,156

Spain

21

123

1,073

Russia

19

170

2,344

Turkey JV

37

194

3,270

Other International

188

1,338

21,607

Total Group

1,036

5,609

66,141

 


Sales

% Total

Change

% Total Change

% LFL Change


£m

2013/14

Reported

Constant currency

Constant currency

Castorama

597

0.7%

(2.3)%

(4.1)%

Brico Dépôt

482

(2.8)%

(5.7)%

(7.3)%

France

1,079

(0.9)%

(3.8)%

(5.6)%

B&Q UK & Ireland

913

(5.6)%

(5.7)%

(5.6)%

Screwfix

155

12.6%

12.6%

1.7%

UK & Ireland

1,068

(3.4)%

(3.4)%

(4.7)%

Poland

240

2.0%

(1.3)%

(4.2)%

China

77

14.8%

9.1%

9.5%

Russia

91

16.8%

17.4%

13.0%

Spain

68

17.6%

14.2%

(6.1)%

Other International

476

8.6%

5.6%

0.7%

Total Group

2,623

(0.4)%

(2.1)%

(4.2)%

 

Joint Venture (Koçtaş JV) and Associate (Hornbach) sales are not consolidated.

  

 


Retail Profit

% Total

Change

% Total Change

Operating Margin

% 2013/14

Operating Margin

% 2012/13


£m

2013/14

 Reported

Constant currency



France

66

(14.4)%

(16.9)%

6.1%

7.2%

UK & Ireland(1)

50

(32.1)%

(32.0)%

4.7%

6.7%

Poland

14

(33.1)%

(35.3)%

5.8%

8.9%

China

(7)

(41.4)%

(34.3)%

(9.1)%

(7.5)%

Spain

-

(46.3)%

(47.9)%

-

1.7%

Russia

(4)

24.9%

24.5%

(4.4)%

(6.5)%

Turkey JV

-

n/a

n/a

n/a(2)

n/a(2)

Hornbach

(5)

(24.7)%

(21.0)%

n/a(2)

n/a(2)

Other International

(2)

n/a

n/a

(0.4)%

1.6%

Total Group

114

(28.0)%

(29.2)%

4.3%

6.0%

(1) 2012/13 comparatives restated by £1m to reflect reclassification of pension administrative expenses from finance costs to operating profit, as per the amended IAS 19

(2) Joint Venture (Koçtaş JV) and Associate (Hornbach) sales are not consolidated therefore not applicable

 

Average FX rates vs £ Sterling


2013/14

2012/13

Euro

1.17

1.20

Polish Zloty

4.85

5.01

Chinese Renminbi

9.50

10.00

Russian Rouble

47.14

46.90

Turkish Lira

2.75

2.82

 

CREATING THE LEADER

 

Progress continued with the next phase of our medium term development under the following eight steps:

 

EASIER

1.   Making it easier for our customers to improve their home

2.   Giving our customers more ways to shop

 

COMMON

3.   Building innovative common brands

4.   Driving efficiency and effectiveness everywhere

 

EXPAND

5.   Growing our presence in existing markets

6.   Expanding in new and developing markets

 

ONE TEAM

7.   Developing leaders and connecting people

8.   Sustainability: becoming 'Net Positive'

 

Further details on progress will be given with the interim results for the half year ended 3 August 2013.

 

FINANCIAL POSITION
No material events or transactions impacting the Group's strong financial position have taken place since the previously announced unaudited balance sheet as at 2 February 2013.

 

ENQUIRIES:

 

Ian Harding, Group Communications Director

020 7644 1029



Sarah Levy, Head of Investor Relations

020 7644 1032



Nigel Cope, Head of Media Relations

020 7644 1030



Matt Duffy, Investor Relations Manager

020 7644 1082



Clare Haines, Media Relations Manager

020 7644 1286



Brunswick

020 7404 5959

 

Further copies of this announcement can be downloaded from www.kingfisher.com or viewed on the Kingfisher IR iPad App available for free at the Apple App store.

We can also be followed on twitter @kingfisherplc. 

 

 

Forward-looking statements

 

This press release contains certain forward-looking statements, which should be considered, amongst other statutory provisions, in light of the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements. Such statements are, therefore, subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied because they relate to future events. We urge you to read our annual report and other company reports, including the risk factors contained therein, for a more detailed discussion of the factors that could affect our future performance and the industry in which we operate. Reliance should not be placed on any forward-looking statement. Our forward-looking statements speak only as of the date of this press release and the Company undertakes no obligation to update any forward-looking statement publicly, whether as a result of new information, future events or otherwise. Nothing in this press release should be construed as a profit forecast.

 

Please refer to page 116 of the Annual Report and Accounts 2012/13 for further details and definitions concerning forward-looking statements and how they should be considered.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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