Kingfisher Stock

Good day, ladies and gentlemen, and welcome to the Kingfisher plc Half Year 2026-27 Results. [Operator Instructions] I'd like to remind all participants that this call is being recorded. I'll now hand over to Thierry Garnier, Chief Executive Officer, to start the presentation.

Good morning, and thank you for joining us for Kingfisher's half year results presentation. Bhavesh and I will take you through our performance for the first half, our upgraded outlook for the year and the continued progress we are making across our strategic priorities. We'll then answer your questions.

So let me start with the highlights. First, our strategy is delivering with momentum building across our key growth drivers. Screwfix continues to perform strongly, while Trade, E-commerce and Marketplace are becoming increasingly important sources of growth. Second, our focus on execution continues to pay off, reflected in gross margin expansion, disciplined cost control and strong profit growth despite a mixed market environment. Third, our performance gives us the confidence to upgrade our full year guidance. We are building a stronger, more resilient Kingfisher with significant opportunities ahead while remaining committed to attractive shareholder returns.

So let me now hand over to Bhavesh for the financial review.

Thank you, Thierry, and good morning, everyone. Overall, H1 was a solid delivery against our financial priorities. Sales, including GMS from our marketplaces, grew 1.6% in a mixed market environment. Adjusted profit before tax was up 9.9% to GBP 404 million, reflecting strong gross margin performance and disciplined cost control.

Through our profit performance and share buyback program, adjusted earnings per share grew 16%. After investing in our strategic priorities, we generated free cash flow of GBP 339 million. Net leverage stands at 1.4x, and we maintain a very healthy balance sheet. Our top line performance was underpinned by resilient core and good seasonal sales, more than offsetting weakness in big-ticket categories. In the half, we saw growth in customer transactions in a mildly deflationary environment.

Core sales saw broad-based growth across repair and maintenance categories, including tools and hardware, joinery and electrical. Our growing share of sales to trade customers supported resilience while DIY demand was softer. During the summer heat waves, core sales were impacted as the hot weather made it harder to undertake projects such as larger building works, tiling and painting. Within seasonal, demand for cooling and outdoor leisure products was strong, while categories such as plants, outdoor paint and fencing were weaker. We also saw a shift towards online purchases. Overall, seasonal sales grew in the half against strong comparators with all banners delivering growth in Q2.

In big ticket categories, we continue to outperform the kitchen market in the U.K. and Poland, reflecting the investments we have made into our ranges, showrooms and in Poland, design studios. On the other hand, the bathroom market remained challenging across our geographies, and our ranges underperformed the market. In response, we have initiated a comprehensive range review with encouraging early results from the launch of our new bathroom furniture range, Imandra 2.

In the U.K., the market continues to be soft, broadly consistent with recent quarters. B&Q performed in line with the market and outperformed when including Marketplace GMS. Marketplace contributed GBP 12 million of profit in the half. TradePoint continued to take share in a subdued trade market, capitalizing on investments we have made in our trade proposition. Screwfix delivered another outstanding performance with like-for-like sales growth of 5.6%, significantly outperforming the market.

Growth was volume-led and supported by momentum from our rewards program with existing customers increasing their spend and new customers joining the platform. Screwfix's strong proposition of proximity, availability and speed makes us confident it can continue to gain share. U.K. and Ireland retail profit increased 4.9% to GBP 361 million. This includes a GBP 14 million business rates refund in the period.

The French market was broadly flat in the period with strong seasonal demand in Q2. At Castorama, like-for-like returned to growth in Q2, a fourth consecutive quarter of sequential improvement, supported by our revamped stores, successful range reviews and strong seasonal performance. Like-for-like sales, including Marketplace GMS were plus 0.4% and performance was in line with the market. At Brico Depot, like-for-like sales declined 4.2%, reflecting weaker demand for building materials and larger projects during the summer heat waves as well as some temporary disruption in the customer experience following the implementation of our new website. Brico continued to make good progress in trade with sales up 21%.

France retail profit increased to GBP 74 million, with retail margin improving 10 basis points, reflecting our continued focus on margin and cost discipline. Our strategy to transform Castorama is delivering tangible results. We have now addressed 24 stores across the network with encouraging results. Rightsized stores are delivering double-digit improvements in sales densities, while revamped stores are generating a higher profit contribution than the Castorama estate average. Nine further stores are on track to be addressed in the second half of this year.

Following the successful open of 2 franchise stores last year, today, we also announced the transfer of a third store to franchise. This year, we are reviewing 20% of our ranges. Those ranges already reviewed are growing 5.1% with some growing double digits. Alongside strengthening our stores and ranges, Castorama is making good progress on trade and e-commerce, enabling growth into new customer segments and categories. Trade penetration increased 6.5 percentage points. E-commerce sales grew 11% and Marketplace is profitable after only 2 years.

Poland delivered a strong first half with total sales up 3.6% and like-for-like sales up 2.2%. We gained share in a growing market, supported by trade, e-commerce and design-led categories. Strength in core was driven particularly by internal building categories. Trade Sales grew 14%, E-commerce sales grew 39% and Marketplace reached breakeven. Retail profit increased 15.7% to GBP 60 million, with margin up 60 basis points.

Iberia also delivered a strong market outperformance with like-for-like sales growth of 7.7%. Growth was supported by our competitive price position and strong momentum in trade and e-commerce. We also opened 2 stores, our first Iberia openings in a decade. Retail profit increased 17% to GBP 13 million, with retail margin increasing 30 basis points. Screwfix France continues to build momentum with store like-for-like sales increasing 48%. We are seeing progress in the key leading indicators with growing brand awareness, strong repeat customer purchases, around 55% trade penetration and an increasing network effect as density builds. Importantly, the earlier cohorts are showing continuous strong growth.

This year, we have opened 2 stores. And in the second half, we'll be opening another 3, bringing our total store count to 37. We delivered solid profit growth of 9.9% in the half. Excluding the one-off business rates refund in the U.K., profit growth was 6.1%, reflecting good operational and financial discipline. To support future growth and enhance our e-commerce capabilities, we continue to invest in technology, including our Marketplace platform. We faced GBP 48 million of operating cost inflation, including 2 months of increased national insurance contributions in the U.K. These headwinds were more than offset by strong gross margin delivery and structural cost reductions.

Gross margin added GBP 40 million delivered through the strength of our group buying and sourcing, Marketplace and Retail Media growth, foreign exchange tailwinds and the disposal of Romania last year, partly offset by freight headwinds and a higher trade mix. We delivered GBP 44 million of structural cost reductions, including distribution center space optimization, procurement efficiencies and store operating model improvements. Looking ahead, we continue to see further opportunities from buying and sourcing, Marketplace, Retail Media and supply chain optimization. In parallel, we continue to drive productivity across the group with additional opportunities across stores, head offices and global business services.

We're also committed to generating strong free cash flow and to delivering attractive returns to shareholders. In H1, Kingfisher generated adjusted EBITDA of GBP 784 million. Working capital delivered a net inflow of GBP 5 million. We have made good progress on inventory since 2022 and see further runway for working capital improvement through multiple structural actions. Some examples of actions we are taking include reducing supplier lead times, negotiating lower minimum order quantities and moving slow-turning first-party ranges to Marketplace.

We invested GBP 171 million in capital expenditure, prioritizing growth, including 9 new stores, new ranges and technology. Overall, we generated free cash flow of GBP 339 million, and our strong cash generation continues to support attractive shareholder returns. We returned GBP 333 million to shareholders through dividends and share buybacks during H1. Today, we also announced an interim dividend of 3.8p per share, in line with last year. And by the end of December, we will have completed GBP 175 million of our GBP 300 million share buyback program.

When we set out our guidance at the start of the year, we observed a mixed consumer environment. We anticipated a limited impact from events in the Middle East on our energy and freight costs and rational pricing behavior across our markets. We also expected to continue our long track record of maintaining competitive prices while managing gross margin and cost effectively. Broadly, that is what we have seen in the first half. And so our assumptions for the second half remain largely unchanged.

Reflecting our solid H1 performance, we are upgrading our adjusted profit before tax guidance to a range of GBP 595 million to GBP 635 million, an increase of GBP 20 million at the midpoint. We are also upgrading our free cash flow guidance by GBP 20 million and now expect free cash flow between GBP 480 million and GBP 520 million. With that, I'll now hand back to Thierry.

Thank you, Bhavesh. Our first half performance reflects strong momentum across our 4 strategic priorities: growing our trade business, scaling our digital ecosystem, winning through our offer, own exclusive brands and services and growing our banners and format.

So starting with Trade, an important high-value customer segment for us. Group Trade Sales reached GBP 2.1 billion and grew 16% when excluding Screwfix. Trade penetration increased more than 3 percentage points to 31% of sales. A key foundation of this is the rollout of dedicated trade zones within our existing stores with tailored ranges, faster service and specialist colleagues serving our trade customers.

Outside Screwfix, trade zones are now present in 49% of our stores. At Castorama France, Pro zones are present across the estate, where Brico Depot France now has 14 Pro corners. The Pro zones are the starting point for building our relationship with the trade. It's where we identify and get to know them and where we educate them about our Pro-specific product and service offering over time, capturing more of their spend. 58% of our stores now host a trade sales partner. These colleagues provide a bespoke service to higher-value customers, helping them save time, adopt relevant services and consolidate more of their spend with us.

At TradePoint, we are seeing tangible results from this model. Sales from customers covered by a trade sales partner grew 23%, allowing TradePoint to gain market share in the half. Poland is following a similar pattern. Across our banners, we now have 438 trade sales partners enrolled and see significant scope to scale this model through further recruitment, sales training and our trade credit solution.

We believe that moving towards more relationship-based customer growth is our #1 lever to continue to take share in the trade market. As you heard from Bhavesh, Screwfix performed strongly in H1 as well as being a well-oiled machine with a dense store network, high availability and fast fulfillment, Screwfix is generating continued momentum with its rewards program and successfully growing customer share of wallet. Less than a year since launch, Rewards now has more than 2.3 million active customers and accounts for 44% of total sales.

Rewards also allows us to personalize our offers with features such as recommendations based on trade type, brand affinity and local weather. And this is resulting in an increase in average order value of our highest value customers as they dedicate more of their spend to Screwfix. Screwfix is also seeing strong customer demand for a broader product range. Given the compact footprint of our Screwfix stores, it will not be practical nor economic to stock the full breadth of product our customers are looking for. So to address this, as an example, we have partnered with Footshore, one of our vendors to offer more than 12,000 footwear SKUs across a wide selection of styles and sizes.

Products are picked, packed and shipped by Footshore directly to our stores with 70% of orders collected in stores. This partnership generated GBP 12 million of sales in its first year, demonstrating the opportunity to expand customer choice without adding complexity to our store operation. We are now ready to build on this success and scale the model.

Our stores sit at the heart of a digital ecosystem that creates a virtuous cycle. Stores support fast and convenient first-party fulfillment, Marketplace broadens choice and attracts traffic, apps and loyalty programs generate valuable data and that traffic and data support personalization, retail media and further profit growth. Our investments in AI and technology also position us for the next phase of commerce, including natural language search and agent-enabled shopping. This ecosystem continues to scale across Kingfisher. E-commerce sales reached GBP 1.6 billion and grew 16%, excluding Screwfix, while penetration increased to 22% of sales.

Screwfix remains the most digitally advanced banner with 60% of sales coming through digital channels, while the strongest digital growth in the half came from our other banners. B&Q reached 20%, Castorama France now 10%, and there is further opportunity, our target being 30% e-commerce penetration across Kingfisher. A key driver of our E-commerce growth is Marketplace, which complements our first-party offering. With a much broader range of third-party products, Marketplace GMV grew 42%, representing 18% of E-commerce sales and contributing more than GBP 13 million of retail profit.

With a robust foundation in place, we also see good momentum in Retail Media, which grew 75% in the half. An important area of Marketplace progress has been the further extension of customer choice. B&Q Marketplace now offers close to 5 million SKUs. Growth is coming from categories that complement our offer. A good example is cooling products, which were in high demand during the recent heat waves. We already have strong representation from U.K.-based vendors on our Marketplace. In addition, we have now onboarded more than 80 international merchants, which today account for less than 10% of GMV. Mature marketplaces generate 70% of their business with cross-border trade. So you can see the further potential ahead of us.

The strength of our model lies in combining the scale and choice of our Marketplace with the convenience and immediacy of our store network. Customers benefit from a broader product range and faster, more flexible fulfillment. And this includes Marketplace Click & Collect, 3-hour delivery direct to site at B&Q and the expanding reach of Screwfix 30-minute sprint delivery service. As we extend choice, we are also investing in making the shopping journey easier. With the introduction of Buybox, we are helping customers find the best available offer for products sold by multiple vendors.

In addition to enhancing our in-house digital agents with voice capability, we are rolling out natural language search on our website based on our partnership with Google. In parallel, we continue to deploy AI selectively with a clear focus on investment returns. Our new content platform, Fabric, creates high-quality product content in minutes, improving speed to market, search engine optimization and conversion. Our own exclusive brands continue to combine affordability, quality and innovation. In the half, our new outdoor ranges grew sales 8%, leaning into the growing outdoor living trend.

The launch of Imandra 2 marks the start of our comprehensive bathroom range review and is off to a good start. And in Power Tools, the sales of our expanded MacAllister and Titan ranges increased 11% since launch. The growth drivers I have outlined underpins Kingfisher's attractive investment story. We have leading positions in our markets. We operate a diverse portfolio of banners, each with distinct formats and proposition that address a wide range of customer needs. Our strategic growth drivers are allowing us to grow our market share and to move into new market segments, making Kingfisher a more resilient business and giving us confidence in our continued performance against our financial priorities, growing our sales ahead of our markets, increasing our profit ahead of sales and generating strong free cash flows.

So to summarize, we delivered strong momentum across our strategic growth drivers, along with solid profit growth by controlling what is in our control, and we have upgraded our guidance based on our first half performance and the opportunities ahead. We are building a stronger and more resilient Kingfisher, and we remain confident in our sustained performance.

With that, let us move to Q&A. Thank you, everyone.

[Operator Instructions]

Our first question comes from Richard Chamberlain with RBC.

Two questions from me, please, if I can start things off. So first on trade sales partners, you talk about scaling the model, Thierry. And I just wondered how we should think about that in terms of the number of partners you're looking for across the TradePoint and Castorama banners or the percentage of sales you'd expect those partners to generate? That's the first one. And then second, on the gross margin outlook, obviously, very strong performance in the first half. How do you see those main drivers that you talk about in the first half evolving in the second half?

Thank you, Richard. Let me start with the first question. I think the sales is a combination of number of trade sales partners and somehow the sales per trade sales partner. So we see on the first part -- we see more trade sales partners in the future. We are really very happy with the results. So you can -- if I draw few years from now, you could have 1 to 2 trade sales partner in every store in the medium term.

Then the other job we are doing is to -- and that's really a very, very important KPI of us is the sales per trade sales partner. So we are looking at the best trade sales partner in the network, the worst one. We are actively managing them. We are creating new bonuses to incentivize them. We have created specific software to help them to follow this portfolio of VIP customers. So a lot is going on training as well, a lot is going on in order to increase the sales per trade sales partner. So looking at this combination, in my view, you have a few years of growth ahead of you.

Richard, thanks for your question on gross margin. So again, really pleased with what we delivered in gross margin in the first half. A lot of it, things you heard me talk about before in terms of structural actions that we're taking. So what helped us in this first half was our buying and sourcing. So our group buying and sourcing scale, we continue to drive that. Marketplace, you heard us on our prepared remarks talk about the profitability of Marketplace. And what we delivered in the first half alone was more than what we delivered the entirety of last year in Marketplace profit. Retail Media, we had some FX tailwinds on our committed sort of purchases.

So all structural things largely that helped us in the first half. I'd remind you that about 10 of the 70 bps was our sale of Romania last year. So you won't see that in the second half. And then we had some headwinds, freight and a growing share of trade. So when you look to our second half, it's the same structural actions that we'll continue to push forward, right, Buying and Sourcing Scale, Marketplace, Retail Media. We are getting a little bit of supplier inflation, so price request increases. Obviously, we're mitigating and pushing that back. Our OE business and the scale of our sourcing gives us the ability to push back against that, but that's something we're watching closely in H2.

Our next question comes from Timothy Ramskill with Bank of America.

I've got 3, please. Three questions, if that's okay. Just a little bit on big ticket observations around difference in performance on kitchen versus bathroom. Just maybe you can scale that kind of degree of outperformance and underperformance in those 2 categories, please. Secondly, Poland, perhaps we don't spend enough time focused on it, but clearly, very material improvement, both in gross margin and overall margin in the first half. So just really interested in more of a medium-term question about the recovery potential in Poland, clearly was a much more profitable business once upon a time.

And then thirdly, just interested in your thoughts around Screwfix's performance relative to its closest peer, Toolstation. I might be wrong in saying this, but it feels like the gap in like-for-like performance between those 2 competitors is the widest it's been for a very long time. So maybe I'm sure you'll just focus on yourselves rather than them, but just interested in what you pick up in terms of feedback or anything else that you think explains that very meaningful advantage you seem to be enjoying there?

Thank you, Tim. Maybe I will answer 1 and 3, and Bhavesh will answer on Poland. I think big ticket, a few considerations. We are happy with our kitchen business. We have had a lot of range reviews. We have a lot of action in stores from dedicated training, a lot of sales force management in the U.K. We are creating design studio in Poland. France as well has a lot of additional action and really overall, pleased with kitchen.

Not happy with bathroom. I think the market is a bit softer than kitchen. But overall, we are not happy with ourselves. We believe we could do a better job on bathroom. We identified already months ago that our ranges were not modern enough. We were lacking some color, some design, and we have built a new range at group level called Imandra. You see that in the prepared remarks. We are now starting to roll out across the group this new range of bathroom, starting with Castorama in France, pleased with the early start of Imandra in France.

Last comment that we do, you need to look at digital as well. When we look at our bathroom business on Marketplace, it's extremely strong. So having a very big online business now on Marketplace allows us to capture some of the shift of the market. We believe as well the bathroom is moving more online, and that's something we are getting through our marketplace.

Screwfix U.K., really, I don't want to comment too much on competitor. I don't think it's for me to do that. I think we are really pleased with volume. We are really getting growth through the volume of items sold. And through new initiative, we are opening a few stores, but many is around share of wallet. I think that I said that in the past, we are broadly at 15% of share of wallet for Screwfix. So you see we have more to go after.

We have -- you have seen in our remarks, we have launched very successfully a new loyalty program, Rewards. It's allowing us to be more -- to personalize our offer and some are to increase the share of wallet. We're increasing choices through this vendor to stores model. When you keep -- you stay in the Screwfix ecosystem, but to enlarge your number of SKUs, that's something we are looking forward to scale up in the coming months. We are as well doing more B2B business, selling more to larger companies. So lots going on at Screwfix at the moment. And indeed, we feel good around the competitive position of Screwfix at the moment.

Tim, thanks for your question on Poland. Look, really pleased with the performance of Poland, 3 quarters of top line growth is fantastic to see. When you look underneath the numbers, what's really encouraging is strong core performance. So we saw a consistent and strong core performance Q1 and Q2. Trade and e-commerce, our strategic levers are performing well. So really pleased with the execution from the Polish team.

Significant outperformance in kitchen. We talked about design studios. So these are in shopping malls where we showcased some of our kitchen product, and that's really helping, early days, but really seeing meaningful impact from our design studio. So overall, really pleased. We outperformed the market. Over the medium term, we feel pretty optimistic about Poland. There's a lot of white space that we can go after the Tier 2 cities with our medium and compact format. So pleased with Poland against a supportive backdrop.

Where do you think the -- and just thoughts on launching now versus where it was before.

Yes. I think when you think about pre-COVID, Poland was above 10%. We felt probably was too much. I know we were in limited number of stores. The top line sales were not what it should be. So I don't think we'll ever come back at this level. But nevertheless, I agree with you that the profit margin of Poland will improve. You start to see that this year, and we expect Poland to improve its profit margin in the coming years.

Our next question comes from Izabel Dobreva from Morgan Stanley.

I had 3. The first one is just a follow-up on the bathroom range review. Could you tease out in a little bit more detail what you are changing in this offering? And do you currently offer a full project service in the same way you do for kitchens? And is that something you are studying? I guess the point of the question is to understand how quickly you expect to be able to turn this underperformance around?

Then my second question is on the marketplace. It appears that the drop-through rates and the profitability have improved. So could you comment where you are on that customer acquisition curve for the U.K. business and whether you would expect the profitability in France and Poland to ramp up more quickly now for those 2 geographies than they did for the U.K. in the early stage? And then my last question is a quick one, just on the gross margin. We've heard you loud and clear on the structural initiatives. Is there anything seasonal or cyclical that you would call out, which might have helped the performance this half?

Thank you, Izabel. On bathroom, what we changed is things like new colors, new design for cheaper price. So we are able to offer the new Imandra 2 collection for same quality of product, cheaper and as well introducing new color and new design. We already have a relatively full service. We have a team of designers in all our stores. We have software to create 3D design. We offer installation, we offer credit. So already a lot going on here.

If you ask me, I am fully happy with the way we do installation, et cetera. I think we can grow further, and we are growing this business. Then when you roll out across thousands of store, big showrooms, it takes a few months. You have to change part of the showrooms. So we have an approach step by step, starting with Casto France, Brico Depot, then you will see Poland and then B&Q in the coming months.

Quickly on -- maybe on Marketplace. First, potential to grow the sales. We are -- you probably heard that we are now pushing hard on non -- if you take the B&Q non-U.K. vendors, we are pretty happy with the U.K. vendors. We only have 80 non-U.K. vendors. It's less than 10% of our Marketplace sales. When we look at very mature marketplaces in the world, they are more at 70%. So we really are seeing a very strong traction on non-U.K. vendors. Functionality like Buybox increases, in fact, the price index and the price competitiveness because you allow competition on the same SKU of multiple vendors and somehow we organize this competition. So that's very helpful.

Then the profit is a combination of your fixed cost and your marketing cost. So the more you grow your sales, the more you reduce your fixed cost. Fixed costs are not very large, but that's still a consideration. And that is how much marketing you want to invest. What I said in previous calls, you usually start the first year of marketplace around 10% marketing cost. In the long run, you're probably around 3% marketing cost.

And so we are on this journey, and we expect more could drop through in the future. Another consideration is the take rates. We have between 10% and 15% of the take rates. One of the actions we are doing is increasing the services we can sell to vendors from retail media to fulfillment. We are as well testing fulfillment for vendors. There are many services you can offer to your vendors to increase their sales, and that will go through the take rates in the coming years. Now...

And then just on gross margin. So things that may not repeat, FX. So that obviously was a tailwind in the half. But as currency rates change, that can be another tailwind. As I said, Romania, 10 of the 70 bps in the first half is from our disposal of Romania last year. And then as I flagged, we are seeing a little bit of inflationary pressure. So a price increase request from suppliers.

Obviously, we'll push that back. What helped us in the first half as we benefited from some earlier purchasing of inventory last year, which we sold in the first half. But as we get that inflationary pressure, we'll see some of that. But look, confident in what we're doing. Our structural actions, you've seen us not just this half, but last year deliver it, continue to focus on that. That underpins our discipline on margin and cost as we look ahead.

Our next question comes from Mia Strauss with BNP Paribas.

I just wanted to maybe ask about sort of sourcing conditions maybe for 2027 and whether you've been doing any prebuying on the oil derivative. And then secondly, just looking at the core performance of B&Q, and it's pretty weak. So I just wanted to know what's driving that? And then thirdly, just on Marketplace, maybe in France and Poland, have you seen any changes in the market post the EU de minimis threshold being removed?

Let me take the first and the third question. I think Bhavesh will answer on the core U.K. I think sourcing, remember, we have -- broadly half of our sales is private label. So we have a long-term relationship with partners sometime in Asia. So we are able to really plan with them in advance. So somehow, you can expect to see some of the raw material increases now into 2027, but we are relatively confident that with a strong partnership with those vendors, that would be manageable.

Marketplace France Poland, we are seeing good traffic to our website. Good progress in our marketplace. I would not predict if it's coming from the de minimis EU new rules. You probably have access to traffic data to other marketplaces. There are some public information here, but we are very happy with the progress of our marketplaces for Casto France and Poland.

I think to your question on core, Mia, I think when we look at the U.K., core was down at 2.7%, a little bit more down in Q1, less in Q2. That's against a backdrop of a market that was also down low single digit. So core was sort of similar against what we saw in terms of the U.K. market. When you look at our banners, 2 very different models. So B&Q generally serves sort of general builders, more outdoor work. Some of the DIY traffic is also impacted by weather patterns. And so it was an interesting half, right?

Q1, we saw quite a little bit of weakness because of the later start to spring, impacting some outdoor projects. And then Q2, you saw a different impact because of heat wave. So there, we saw people shifting to online, real concentration of demand in cooling, outdoor and leisure and impacted store footfall, people going more online than into stores. And then when you look at Screwfix, actually, they tend to serve more electricians, plumbers who generally work more indoor. And I think that helped underpin their performance. But when you look at trade, TradePoint did well in the half, again, a function of the nature of trade, the resiliency of trade, and that was pretty positive in B&Q. So we're pleased with that.

If I could just follow up on the sourcing conditions. If you could just remind us about your energy and your freight hedging, that would be useful.

Yes, I can do that. On energy costs, it's a large -- it's a small part of our cost base, and we're pretty well hedged, so fully hedged this year. We tend to decline -- hedge on a declining basis to give us more sort of flexibility in the outer years as prices move up and down, but we're well hedged this year on energy. And freight, again, we typically sign annual contracts. We've seen a modest increase. All the contracts have what we have like a fuel-linked inflation clause. So that drives a little bit of increase. But again, it's a small percentage of our cost of goods.

[Operator Instructions]

Our next question comes from Yashraj Rajani with UBS.

A couple for me, please. So firstly, on gross margin, it seems like a couple of your peers have sounded a bit more cautious about inbound freight and also last mile. Can you give us an idea of, do those things affect you in the second half and also potentially how your negotiations are going for that for the next year maybe?

The second question is on Screwfix. So it did seem like a lot of that performance is being driven by your initiatives, namely the loyalty program. Given there's no change to the external market condition, is that like-for-like performance a good representation of what you're seeing in Q3 till date as well? Or do you think something has changed there?

And then the last one is on franchise stores. Can you please help us on how much that's potentially helped you in the first half or maybe how those economics mature in the second half and into next year as you do the transfer to franchise stores?

Thank you, Yash. Maybe I'll start and Bhavesh will complete on a few points. I think on the first question, we have a store-based model. So we are really using store to prep our orders over 90%. We have a high penetration of Click & Collect. And we try to use as much as we can a model whereby we deliver home from our stores. Therefore, yes, there is last-mile delivery cost, but that's not necessarily a big consideration for us.

Screwfix, H1, H2, remember, the peak of Screwfix is now starting September to end of November. That's a season for plumber, electrician, change of time in October. So that's a big part of the Screwfix season, and there are heavy preparation every year for peak. So we will anniversarize the Rewards loyalty program early October. But I'm very happy and confident in the Screwfix plan this year for peak with Black Friday and this preparation of the season. So I'm relatively optimistic for Screwfix in H2.

Last comment on franchise. We, by the way, have announced this morning in France, a third Castorama store franchisee. So it will be 3 for Casto, for Brico. And so far, the economics are very encouraging as expected. We see some are good top line, in line with expectation for Casto, probably above our expectation for Brico. Remember, Brico, it was a former Mr. Bricolage stores, becoming the Brico Depot stores. So we have seen a very, very significant sales increase. And we see overall a better profit by several points, between before and after. So very encouraged by this early start.

I think franchise in France is very strategic. It's not a tactical action. That's a way to manage better some stores that are difficult stores, especially for Casto. That's as well a way to open new stores quickly with very low or no CapEx involved. So we take franchise very seriously. That's several years of action, and I have high expectations in the future.

Yes, nothing much to add other than the 2 that we did were loss-making stores or -- and so by moving to franchise, that helps our profit margin. I think I'd just caveat, look, these are 2 stores, another one today. We're learning as we go. These are the first franchise stores that we are moving into. So encouraged by early results, but lots of learning, testing, trialing that the team are working through.

Our next question comes from Arthur Peel with Berenberg.

Just a couple from me. Just how to think about the operating cost environment into H2, particularly with the national insurance headwinds sort of annualizing out? And then just secondly, on Screwfix France and the phasing of profitability there through the different cohorts and just how that's looking going forward?

Maybe I'll start with Screwfix and Bhavesh will come back on cost. You have seen we have given you already in March and now after H1, the like-for-like per cohort. I'm really impressed by the fact we are able to keep even for 3 to 4 years old cohorts, the same level of very strong like-for-like. So that's very encouraging.

When you think about the P&L of Screwfix France, we have relatively significant fixed cost. We have established a DC in France. We have established a proper tech system for our Screwfix business in France. We have a small head office. So therefore, we have started this venture with relatively heavy or significant fixed cost.

But that's not our focus. Really, the focus is the sales density of the store and the maturation of the store to the point they are breakeven and making profit. Because if you reach that point, then you can scale the business massively in the future. So that's really our focus. Really pleased with H1 delivery on like-for-like on sales density. And we are on the right trajectory. We are very -- we find those sales very encouraging for the future.

Arthur, on cost, structural cost reductions is a strong focus in our business and things we will continue to look at in the second half. I'd just remind you, last year, remember, we had GBP 145 million of headwinds, national insurance, social taxes. And through our structural actions, we mitigated those and we grew profit last year. And we continue to look at those structural initiatives across a range of things, as you heard me in my prepared remarks, distribution center space rationalization as we use our stores differently, operating model changes, whether it's at B&Q or in Casto, store simplification, logistics, procurement.

So there's an ongoing engine of structural cost initiatives that we continuously look at, and you can expect us to keep doing that as we look forward.

Our last question comes from Kate Calvert with Investec.

Just 3 for me. So first of all, just on Poland, Thierry, we've had plenty of sort of full storms in the past here. You had a great first half. It feels more like that was self-help driven rather than market driven. Is that a fair assessment? And in terms of the second question, I think, for Bhavesh, you've talked about the sort of ability to continue taking working capital out. How should we think about the opportunity going forward? I mean, sort of any thoughts on what good might look like?

And a final question, just on back to Screwfix France. Can I try and pin you down on when you think the business might become profitable? I mean, how many stores do you need to cover that fixed cost? Because I assume it's probably more than the stores you've got today. That's my 3 questions.

Thank you, Kate. May I start with the first and the 3. I think -- it's a combination of market and self-help. I think the market has been better in H1. But as well, we gained clearly market share in H1. And that's kitchen and kitchen delivery, strong growth in trade, strong growth in e-commerce, a lots going on, on range review.

And you're right to say, I'm very impressed by the innovative spirit of the team. We launched our new loyalty program a few days ago, a lot of new ideas on design studio in shopping mall, lots going on to create quickly e-commerce hub across Poland. So lots going on. Now, my view is, if you think medium term, Poland is a good country to be in. It's strong GDP, one of the strongest or maybe strongest in Europe. We expect that to continue. We have -- we are #1 in this country. We have a really strong foundation. We can open more stores. There are more to go after on Trade.

Somehow, we feel the big-box model for Trade in Poland is very relevant. There is more space to grow on Trade. Allegro is super strong, but we could be a #2 clearly on online business. So a lots going on in Poland. It's true that it's a country where the changes can be relatively violent and that will stay the same. But if you think around the medium-term trajectory, it just makes me very optimistic.

Screwfix France quickly. The fixed cost is not really our key consideration for now. That's all around sales per stores. And we are really looking very much at the first 2, 3 cohorts because you want to reach breakeven and having store sales density and profit in the right place before scaling up meaningfully. And we are, I think, in a good trajectory. I'm really encouraged by like-for-like of the cohort 1 at plus 39% and then cohort 2 at plus 39% as well, et cetera.

So that's very strong after 4 years, and we are expecting a reasonable number of stores reaching breakeven and then profitability. And when we'll be there, we'll press a button to have a more significant expansion. I think we need to be a bit patient looking at the improvement of sales density. But up to now, I must say the trajectory is really good. And we are very encouraged by seeing those very old cohorts now because some of those stores opened in Q4 2022 keep growing 40%.

So very, very encouraging, but we consider we need to be patient because if we start the expansion is to open 600 stores broadly. So before going there, we need to be absolutely sure that the sales density is in the right place. Now moving to our...

Let me just add to Thierry's points on Screwfix France. I think as I said, we're seeing encouraging performance across all our cohorts on top line growth. The best stores do give us confidence. We are not solving for store count. We're solving for economics. So we're looking to prioritize proof over pace, repeatable, profitable economics. And we're encouraged by what we're seeing in our best stores, and we'll continue to progress in a disciplined way. So it's not store count only that we solve for.

On working capital, yes, look, well controlled in H1, a lot still to go after. You've heard me talk previously around inventory. We're far from best-in-class in inventory. So for us it's looking at structural actions, not tactical actions. You've heard me talk about some examples in my prepared remarks. If you look at the last 3 years, we've taken about 9 days of stock out, and we'll continue to focus on that whilst being mindful of sales and the impact that stock reduction has on sales. Payment terms, another area of focus by the banners. So I would say that it's an area that we look at closely, and you'll expect us to continue to look at working capital as we look forward.

There are no further questions. I'll now hand over to management for closing remarks.

Thank you. First of all, thank you for being with us. Thank you for all your questions, and it's always a pleasure to discuss. I would say I'm very proud of the job done by the team during this H1. We are pressing ahead at pace with our strategic delivery. We speak about E-commerce, Trade, Marketplace, Retail Media, Screwfix France. At the same time, we have been very disciplined on managing gross margin, cost and cash flow efficiently. And I think I'm very proud of the job done by the team. We are building a stronger, more resilient company by pushing and pressing on those strategic priorities, and that makes me very, very confident. So thank you, everyone, and talk to you soon. Bye-bye.

Thank you for joining today's call. You may now disconnect. Have a nice day.

Good day, ladies and gentlemen, and welcome to Kingfisher plc Full Year 2025-'26 Results Presentation. [Operator Instructions] I would like to remind all participants that this call is being recorded.

I will now hand over to Thierry Garnier to start the presentation.

Good morning, and thank you for joining us today for Kingfisher's Full Year Results Presentation. Bhavesh and I will take you through our full year results, our outlook for the coming year and provide an update on our key strategic initiatives. Following this presentation will be the usual Q&A.

So let's start with the key messages. 2025 was a strong year for Kingfisher as we continue to execute our strategy at pace and delivered on all our financial priorities. And there are three points I want to highlight. First, our strategic growth initiatives are driving market share gains, a key indicator of our progress. We grew market share across each of our banners in the U.K., France and Spain, and maintained share in Poland. Our sales growth was high quality, led by growth in volume and transaction. We delivered double-digit growth in both trade and e-commerce sales during the year, while our 1P commerce sales were strong. I am particularly pleased with our progress in our marketplaces now reaching GBP 518 million on a GMV basis and up 58% year-on-year.

Second, we maintained strong financial discipline amidst significant cost pressure. We grew gross margin by 80 basis points in the year, leveraging Kingfisher scales and sourcing power and benefited from marketplace and retail media, both of which are gross margin accretive. We delivered strong growth in adjusted profit before tax and in EPS. When excluding the business rates refund at B&Q in the prior year, profit is up 13%. And our profit growth, combined with a sharp focus on working capital management enabled us to deliver strong free cash flow.

Third, we delivered attractive returns to shareholders. We completed our GBP 300 million share buyback program in March. And today, we announced our fifth GBP 300 million share buyback program, reflecting the momentum in the business. We also announced today a dividend of 12.4p per share, in line with last year.

And let me now hand over to Bhavesh for the financial review and outlook.

Thank you, Thierry, and good morning, everyone. Let me start with an overview of our performance for the year. Total sales for the group were GBP 12.9 billion, with like-for-like sales up plus 1.4%, excluding a negative calendar impact of minus 0.3%. Our sales growth was led by strong performance from our U.K. banners. Adjusted profit before tax was GBP 560 million, up 6%. Adjusted EPS was 23.8p, up 15%, underpinned by our strong earnings growth in the year and supported by a 6% uplift from our share buyback program. Free cash flow generation was GBP 512 million. We delivered this while also increasing CapEx by GBP 71 million as we stepped up our investment in our stores, technology and property. Net leverage now stands at 1.4x, and we maintain a very healthy balance sheet.

Turning now to our markets. B&Q reinforced its market-leading position with total sales growth of plus 3.9% or plus 5.9% when we include marketplace GMV sales. Like-for-like growth is plus 3.3%, significantly outperforming a flat market with our market share at record levels. From a product category perspective, core remained resilient with 12 consecutive quarters of underlying like-for-like growth. Big-ticket delivered strong growth of plus 6% in the year and seasonal was plus 30% in Q1, benefiting from favorable weather, which we will lap this quarter.

We successfully captured the transference of customers from Homebase to B&Q and acquired 8 of their stores, which our team rapidly opened in time for peak trading. TradePoint sales grew by plus 5.2%, fueled by our enhanced loyalty program and an increased investment in trade sales partners. E-commerce sales grew by plus 21.5%, supported by marketplace growth. B&Q's marketplace is gross margin accretive and generated GBP 15 million of profit in the year.

Looking to the year ahead, we will further enhance our trade offering with investment in our people, our offer and our stores, and scale marketplace as we onboard cross-border vendors. You'll hear more on this from Thierry later on.

Screwfix delivered consistently strong performance throughout the year with total sales growth of plus 4.5% and like-for-like growth of plus 3.2%, significantly outperforming the market. Our Screwfix team have executed at a high level, enhancing the customer proposition through targeted marketing and promotional campaigns, competitive pricing, range improvements and deeper engagement with trade customers via app-driven reward initiatives. Screwfix opened 27 stores on a net basis during the year, further growing our footprint and convenience for customers.

Looking forward, our focus is on growing our share of the trade wallet. We also see further range and space opportunities. Our U.K. banners generated GBP 575 million in retail operating profit, representing 78% of our group total retail profit. Profit grew by plus 2.9% in the year or plus 9.4%, excluding the impact of last year's B&Q business rates refund. We delivered this profit growth despite the significant increases in wages, higher national insurance contributions and the impact from EPR packaging fees. In France, against a subdued consumer backdrop and a home improvement market decline of around minus 3%, we are encouraged to see both of our banners outperforming the market.

Castorama like-for-like sales were minus 2.2% in a year of significant change, particularly from the restructuring of several stores. I'll speak more on the progress of our Castorama plan shortly. From a strategic perspective, Castorama delivered a rapid rollout of its trade proposition across the estate, introduced CastoPro zones in 50 stores and implemented a trade loyalty program. Trade penetration reached 9% by the end of the year, up from below 1% a year ago. Good progress was also made on marketplace with 1.6 million SKUs now available to customers.

Brico Dépôt delivered total sales of minus 1.8% and like-for-like sales of minus 2.3%. Brico improved its price positioning by 2 points over the year and delivered strong progress in its trade proposition with trade sales up 26% and trade penetration increasing to 17% at the end of the year. This performance was driven by an expanded trade-focused range, investment in dedicated trade colleagues and enhancements to its loyalty program. Brico also successfully opened 1 store transferred from Castorama, doubling sales densities. We feel good about Brico Dépôt, a capital-light model with a clear customer offering of discounted prices and high product availability.

Our French banners delivered GBP 97 million of retail operating profit with a margin of 2.5%, up 10 basis points year-on-year. This was a strong performance as both banners offset sales deleverage from a declining market and higher social charges through gross margin expansion and structural cost reductions.

Turning now to an update on our restructuring plan for Castorama. Since the plan was announced in March 2024, the new management team has moved at pace to improve competitiveness and efficiency, delivering good progress despite a weaker market, which declined by over 7% in 2024 and a further 3% in 2025. We've already talked about our progress in trade and digital. In addition, the team undertook a significant number of range reviews, which benefited several core categories, including surfaces & décor, tools and tiling. We took cost price and supplier management actions, streamlining the head office organization and rationalized the distribution network space by 15%. The reduction since 2019 was over 35%.

Our store restructuring and modernization program is delivering tangible results. Right-sized stores are seeing much higher sales densities, while revamped stores are outperforming the Casto average. The two franchise stores have returned to profitability. This progress has been delivered against a backdrop of significant people change, including a 50% refresh of store managers and regional directors and a 40% change in category directors. We will continue to drive this agenda at pace in 2026, positioning the business to fully benefit when market conditions improve.

For France, overall, we remain confident in delivering our medium-term margin target of circa 5% to 7%, with the timing and trajectory of reaching this target dependent upon the pace of the market recovery.

In Poland, we remain optimistic about the medium-term growth opportunities. Castorama is a market leader with potential to increase space whilst building on both trade and e-commerce. Poland experienced a slow start to the year with unfavorable weather and political uncertainty weighing on home improvement spending. Like-for-like was minus 1.1% for the full year, though conditions improved in Q4 with a return to growth in both the market and our business. We continue to make good progress with our strategic initiatives, about GBP 1 in GBP 3 comes from trade customers, supported by the rapid rollout of CastoPro zones in more than half of the estate, the recruitment of specialized sales partners and a new trade loyalty program. And e-commerce sales increased 30% year-on-year, benefiting from the launch of marketplace in January 2025.

Poland generated GBP 87 million in retail operating profit, representing around 12% of group retail profit. During the year, we accelerated technology investment, resulting in a one-off circa GBP 5 million impairment of legacy systems. Excluding this charge, Poland retail profit was up and profit margin was broadly flat year-on-year.

Iberia had an excellent year with plus 8.8% like-for-like growth, outperforming a growing market, driven by competitive price positioning and strong progress in trade.

Moving now to our profit performance in the year. Adjusted profit before tax rose by 6% or plus 13% when excluding last year's GBP 33 million business rates refund at B&Q. A key driver of profit growth was gross margin expansion, which increased by 80 basis points, driven primarily by group buying and sourcing benefits, progress in marketplace and retail media with FX also providing a tailwind. We also delivered significant operating cost reductions. Some specific examples include a reduction in our supply and logistics network space of around 10% in France and nearly 30% in Poland, efficiencies in our stores from the rollout of self-service checkouts and the implementation of new store operating models and property cost reductions through store rightsizing and regears. For the year, we delivered 30 basis points of retail operating margin expansion to 5.7% and adjusted profit before tax of GBP 560 million.

Turning now to our group cash flow. Starting on the left of this chart. We generated adjusted EBITDA of GBP 1.3 billion. Working capital delivered a net inflow of GBP 74 million, driven by higher payables and our focus on inventory management. Tax, interest and other items amounted to GBP 13 million, including a GBP 60 million benefit from tax prepayment true-ups, which we will lap in H1 2026-'27. CapEx spend totaled GBP 388 million, an increase of GBP 71 million as we continue to invest in technology and our stores. Together, these drove free cash flow of GBP 512 million.

We returned GBP 474 million to shareholders through dividends and share buybacks, and total net cash inflow for the year was GBP 107 million. Our dividend payments and share buybacks in 2025-'26 build on our track record of attractive returns to shareholders. Over the past 5 years, we have returned GBP 2.4 billion, equivalent to around 40% of our market capitalization.

Looking ahead, we'll continue to build on this track record with a proposed dividend of 12.4p per share to be paid in July and the launch of our fifth share buyback program of GBP 300 million commencing shortly.

Looking ahead, we see further opportunities across gross margin, costs and working capital. On gross margin, we expect continued benefit from group buying and sourcing, marketplace, retail media and logistics efficiencies. On the other hand, we expect mix effects from our growing trade penetration and from maintaining competitive prices. We see further opportunities through cost action.

At store level, we will deliver savings through operating model enhancements and technology. We also see additional opportunities from improving head office efficiency and to further leverage our shared services center. Inventory also continues to be a priority. Our supply visibility tool is enabling us to reduce lead times and minimum order quantities with our OEB vendors.

Coming out of a strong year, we are confident in our ability to capitalize on the attractive growth opportunities in our markets and are well positioned to continue growing sales ahead of our markets, profit ahead of sales and to generate strong free cash flow. For the financial year '26-'27, with a mixed consumer environment, we expect adjusted profit before tax in the range of GBP 565 million to GBP 625 million, and are targeting GBP 450 million to GBP 510 million of free cash flow.

We remain mindful of the heightened macroeconomic and geopolitical uncertainty in recent weeks. Where we stand today, we estimate that the in-year direct impact on energy and freight cost is limited. As you know, the situation remains fluid. In similar situations, our markets have behaved rationally on pricing and margin. We have a strong track record of maintaining competitive prices, managing gross margin effectively and flexing our cost base. You can expect us to maintain our disciplined approach.

Let me now hand back to Thierry.

Thank you, Bhavesh, and I want to start by outlining the strategic growth drivers, which underpin our current performance and position us for future growth. You can see these priorities on this page.

And let me start with trade. We continue to grow our exposure to trade customers, a segment that shops more frequently, spends more and exhibits more predictable purchasing patterns. Our trade strategy leverages our existing store footprint and supports both market share growth and higher store sales densities with little to no incremental CapEx. As a result, trade is both revenue and margin accretive at retail operating profit level.

Screwfix treat penetration already stands at 75% across the rest of the group, trade sales grew by 23% and trade customers now account for GBP 1 in every GBP 3 of group sales. With this rapid progress, we are updating our medium-term ambition and now target GBP 5 billion of group sales from trade customers.

So looking at some of our initiatives in a little more detail and starting with our stores. We are expanding dedicated trade space within our stores and now have trade zones live across all our banners. We made particularly strong progress in Castorama France during the year as we rolled out our trade proposition across the entire estate and opened 50 new CastoPro zones. We're also excited to announce our first stand-alone TradePoint store opening in London this week. We also continue to invest heavily in our people, 279 dedicated trade sales partners are enrolled across our banners, circa 3x more than last year. We are empowering our trade sales partners and see this as a key lever to unlock additional share of wallet.

At Screwfix, our new rewards program provides an industry-leading proposition for our trade customers and is driving strong engagement via the Screwfix app. Customers who sign up to the program receive exclusive and personalized offers, but also surprise perks and gamified engagement. We now have 2.2 million active rewards customers showing higher frequency of visits and higher average order values. Screwfix is also a great example on how we have succeeded with an app-first approach with 41% of e-commerce sales now coming from the app.

Another example of where our trade focus comes to life is Brico Dépôt France, a capital-light model with a strong discounter DNA. Trade customers like the efficient shopping experience, competitive pricing and high product availability. We trialed new Pro zones during the year and signed up over 210,000 trade customers to a Pro loyalty program. We also improved price competitiveness by 2 points and introduced bulk-buy discount. These actions enabled Brico Dépôt to grow trade sales by 26% and reached a trade penetration of 17% at the end of last year. We will further build on our trade proposition this year with more Pro zones and enhance our trade value offering through additional volume discounts.

Moving now to the digital ecosystem we are building and it starts with a strong 1P e-commerce proposition with our stores at the center. In 2020, we made the strategic decision to leverage our store network to fulfill online orders. This enables us to offer market-leading fulfillment speed for click & collect and home delivery, while also driving incremental traffic to our stores. We continue to improve our core platform by transitioning of our e-commerce legacy systems towards modular and agile technology. This enables rapid feature innovation, faster site load times and market-specific feature deployment. We have developed a digital app store model to ensure excellent product availability for online orders, 94% of 1P orders are picked in-store and we offer rapid fulfillment options from store through our click & collect and home delivery propositions. All this, in turn, drives increased traffic, which supports the growth of our 3P marketplace.

Our marketplace offers a broad choice with several million SKUs, which in turn generates more traffic to our websites and fuels additional 1P sales. Our stores also play a critical role for our marketplace. All stores accept marketplace returns and B&Q now offers in-store click & collect for marketplace items, driving additional footfall.

Our loyalty programs provide us with rich customer data, enabling personalized offers and targeted promotions. The market is increasingly shifting towards mobile-first and app-based engagement, which provides us with access to data that allows us to improve and personalize customer interaction, and this leads us to monetization. With scale, traffic and comprehensive data, we can sell and grow retail media.

As you know, there is lots of current news flow when it comes to agentic commerce. Our platforms are ready to connect to agentic commerce apps, and I will come back to this topic shortly. So to summarize, our digital ecosystem drives a virtuous cycle of value, leveraging our store assets, our web traffic and is powered by Kingfisher technology.

So moving to Slide 22, which highlights our group e-commerce performance this year. Screwfix already generates 60% of sales from e-commerce. In the other banners, we grew e-commerce by 20%, and you can see progress in every one of our banners. At the group level, GBP 1 out of GBP 5 now come from e-commerce. Our target in the medium term is to reach e-commerce sales penetration of 30%, out of which 1/3 from marketplaces.

So moving to our marketplaces, and I'm going to focus here on B&Q, which is most advanced and provides a clear blueprint for scaling across our other banners. We launched our B&Q marketplace in 2022 and have already achieved a cumulative GBP 1 billion of GMV sales since launch. We have scaled our platform significantly over the past 4 years, adding 2,800 vendors and 3.7 million SKUs while also improving convenience for our customers with the introduction of click & collect, a first for our marketplace in the U.K. B&Q's marketplace has generated GBP 50 million retail profit contribution last year and the marketplaces in France and Iberia have now reached breakeven early in their journey.

So looking forward, we have ambitious growth plans, including the onboarding of more international cross-border vendors. And for context, cross-border accounts for broadly 50% of sales at mature pure-play marketplaces and only a few percent for us. An emerging income stream for us is the monetization of our customer data and our traffic. Our insight platform, Core IQ, underpinned by Kingfisher's first-party data enables us to monetize our data with our corporate vendors, having successfully built this capability in Castorama France, we plan to roll it out across all banners in 2026.

So moving to retail media. We have brought capabilities in-house, build a group Center of Excellence, and each banner now has a dedicated retail media team. We have also started piloting advertising on digital screens in stores. While at an early stage, we are very excited about this new income stream as adoption of retail media is strong. We target 3% of our e-commerce sales as additional revenues with a significant drop-through to profit.

Kingfisher is also a rapid adopter of AI. We see AI as a tailwind for our business and ourselves as leaders in this space. Our in-house AI agent, Hello Casto, was the first agentic agent in the global home improvement industry when we launched it in 2023, followed by Hello B&Q in 2025. Those early investments are paying off. We have seen an increase of over 60% of customers visiting Hello Casto online with conversion increasing by 95%.

Last week, we announced a new strategic partnership with Google Cloud. Through this, we'll introduce AI-powered search across all our banner websites and apps, helping customers find products more intuitively. We have also done extensive work to enable AI agents to discover our products and to transact autonomously when this functionality becomes available in the U.K. and in Europe. This partnership will expand our capabilities further, allowing customers to complete purchases via Gemini and other AI agents. Underlying our business are strong own exclusive brands where we provide innovative solutions at affordable prices and which are accretive to our margin.

In 2025, within our power tool categories, we launched our next-generation Erbauer range with best-in-class performance in power, in control and durability. Since launched, it has achieved plus 43% sales growth compared with the previous range, and Erbauer is now our #1 tool brand sold across the group. Our new Ashmead kitchen range delivers standout style at entry-level pricing. While our Pragma lowest-priced kitchen range, retails for less than EUR 200 and is 15% cheaper than branded alternatives. Our new kitchens have been a key driver of our strong big-ticket performance in the year. And alongside product innovation, we are developing a growing portfolio of complementary services that support customers with their project such as kitchen and bathroom design to rental, installation service and project finance.

Our banners hold leading positions in their markets, each with a distinct model and clear customer proposition where attractive space opportunities exist that meet our investment criteria, we continue to complement our existing store estate. Our mid- to long-term ambition for store space remains at 1.5% to 2.5% sales contribution per annum, and 27 new store openings are planned for the coming year. We believe compact stores will play a more important role in the future across our markets, allowing us to meet customer needs in high-density urban areas and offering convenience and fast fulfillment through click & collect and home delivery.

Let me now turn to Screwfix France, which is delivering plus 49% like-for-like store sales growth, in line with our expectation. Momentum continues across all KPIs with a 52% increase in unique customers year-on-year and growing national brand awareness. We continue to see good growth in our older cohorts after 3 years and particularly strong momentum in the north of France where we observe a network effect. So this performance gives us confidence in the future of Screwfix in France.

The strategic growth drivers I have outlined underpin Kingfisher's attractive investment story. We have leading positions in our markets, and those markets have attractive structural growth drivers. We operate a diverse portfolio of banners, each with distinct formats and propositions that address a wide range of customer needs.

Our strategic growth drivers are allowing us to grow our market share and give us confidence in our continued delivery against our financial priorities, growing our sales ahead of our markets, increasing our profit ahead of sales and generating strong free cash flow.

So to summarize, '25-'26 was a strong year. We have clear and attractive growth drivers, and we are confident in our continued delivery in '26-'27 and beyond. With that, let's move to Q&A. Thank you, everyone.

[Operator Instructions] I would like to remind all participants that this call is being recorded.

We will take our first question from Richard Chamberlain with RBC.

A couple of questions from me please to start. Can you hear me okay?

Yes, very good.

Yes. Excellent, excellent. Yes. So first is on the space target you're setting out for the longer term. I think you're talking about 1.5% to 2.5% per year net. I wondered if you can just talk through what the key drivers of that space ambition will be? And also what would the gross space growth be in that scenario? That's the first question.

Thank you, Richard. So I think, first of all, indeed, that's our medium-term target. We believe that Screwfix first is our -- this area where we have a lot of potential. In the U.K., with a format like Screwfix City, but moreover in France. We know that today, we are happy with the store maturity, we will go for a large number of stores in France.

In Poland, we have said that we'll probably cover about 50% of the city where we want to be. We have more store to open, not only big boxes as well as medium boxes, around 4,000 square meters of format, we really believe in and as well as smaller format, we call it Castorama Smart, about 2,000 square meters, a lot of potential in Poland.

But in France, Brico Dépôt 1,000 is the format we are having high expectations upon that we have a few stores. We're still looking at the results, but it could be an attractive format as well as Iberia.

So obviously, Richard, the expansion is not linear. Sometimes you have opportunities, sometimes you have up and down, but clearly, that's our medium-term target.

Great. Very helpful color. And my second question is on the marketplace. Obviously, growth very strong last year. Can you give us a sense of how much that's being driven by newer vendors and how much by a sort of broader range of SKUs from existing vendors on the platform?

I think it's both. We are -- now B&Q, it's the third year in '25, will be the fourth year this year. So we keep increasing the number of SKU, if you compare year-on-year, the number of vendors. In the other countries, you have really a very strong scale up in France, in Poland, in Iberia, we really continue to grow the vendors.

I think the big new things that started in '25 and that will be a bigger thing in '26 is what we call cross-border of vendors. In fact, today, when you look at the B&Q marketplace, we just have a few percent of our vendors that are not legally located in the U.K. And we know countries like Germany, for example, or other European countries, you have a very strong base of industrial vendors. It took us a while to find the tech solution to onboard and there is VAT and payment challenges. And now we are able to do that. So you will see a lot more cross-border vendors in the future.

And for large marketplaces, I will not give you names, but you can guess the names, in Europe and in the U.S., it's broadly 50% of their vendors are not local vendors. So we feel that's a big opportunity for us looking forward.

Maybe a couple of things to add, Richard, why we like marketplace, it extends our ranges, lets us play in categories, we wouldn't align with our proposition, but it wouldn't make sense for us to stock directly. So things like white goods, bulky things that take a lot of space in stores, maybe lower margin cap products.

But the other thing is marketplace that gets us to reach new customers, right? We have half of the customers that come to B&Q marketplaces are new to diy.com. And then they go on to buy 1P product as well. So we're attracting more customers onto our website to be able to sell them more 1P.

Our next question comes from Tim Ramskill with Bank of America.

I've got a few, so I'll maybe go one at a time. The first couple are kind of cash flow related. So I guess, you obviously highlighted the benefits delivered on inventory. But at the same time, looking at the balance sheet, that's sort of not immediately obvious numbers wise. So maybe you can just help me out. I think there may have been some Chinese New Year effects at play there. So maybe you can just sort of help us sort of square the kind of improvement of 5 days of inventory, please?

Maybe let me start and then we'll give you a few detailed color. I think we are very happy with our inventory program. You have seen it's not the first year we are decreasing our inventories days. I think number of days is really the way we are looking at it. And we had multiple programs from reducing the space of our DCs. And if you look at the past 5 years, we have been consistently reducing the number of DCs and the number of square meters, using better software to have real-time visibility on inventory across the group, from factories in China, ship DCs, providing real-time data to our vendors that allow us to negotiate lead time, minimum order quality.

And now we are starting to really work on forecasting with AI and more software. So I would say, you have seen that in the past few years, and we are still very confident looking forward to work hard on our inventories and being able to reduce inventories.

Yes, not much to add. It's a key focus area for us. As Thierry said, we took out 5 days this year, 7 days last year. We expect continued steady progress. It's a key driver of our working capital improvement. And as Thierry mentioned, we try to focus on structural things, not tactical. So for example, we've got the supply chain visibility tool that we know where our stock sits. And so that means when we work with our factories in China, we can give them better data to better plan their production, and that means that we order less, we have shorter lead times. We order fewer sort of our minimum order quantity sizes are lower. So we're getting the product we need when we need it. That really helps. Just one example, but just gives you a bit of color on some of the structural initiatives that we're taking.

Okay. Excellent. That's very helpful. The next sort of cash flow question was just a little bit around CapEx. Obviously, the guidance for GBP 400 million. What, if anything, is driving a little bit of a step-up? Is that just linked to the sort of store opening plans? And then maybe just some thoughts on how that sort of trends over the next few years, please?

Yes. So we spent GBP 388 million in CapEx this year, about 3% of sales, which is in line with our guidance. I guess the way we thought about it this year is as we navigated through, we had a good first half. And we're in constant dialogue with our businesses around where could we look for opportunity to deploy and invest more in our business first. That's the first pillar of our capital allocation strategy. That's what we focused on stores.

So B&Q, for example, bought a freehold store that was opportunistic that came up, wasn't in our plan, but we felt the right thing to do. We also felt continued investment in maintenance of our stores. That's important. So customer-facing things like LED lighting, entrances, et cetera. So we sort of navigated through the year. And as we saw, we're having a good first half, we chose to take some of that performance and reinvest it, obviously, in the right project parts of the business that drive good returns and help our customer experience.

Great. And then last one for me, if that's okay. Just in terms of marketplace, just help us think about how -- clearly, you've laid out ambition for where that gets to from a revenue contribution perspective. But what would be -- well, how do you expect to grow the costs to deliver that? So when should we start to see perhaps a sort of more dramatic drop-through to profitability? Just some parameters around that would be great.

Yes. Thank you, Tim. I think, first of all, I remind you that the market -- the B&Q marketplace delivered GBP 15 million of retail profit this year. So that starts to be meaningful. When I start from top line, the take rates, the commercial margin we are taking is around industry average for home improvement between 10% and 15%, and we are happy to see this margin across all our different countries.

Then you have a bit of tech, but broadly, the investment has been done. We are working with Mirakl. So that's relatively -- it's a SaaS model. So we are -- it's really a small amount. They are small teams. If you take B&Q, we speak about 20 people for over GBP 400 million GMV.

So the main variable is the marketing cost. And so when you start the marketplace, you want to be probably around 8% to 10% marketing investments. And then gradually, over time, you will decrease this marketing spend. And after a few years, you are at, let's say, a stable and standard level of marketing investment.

So we are gradually decreasing our market investment. And overall, when you do the math, we are seeing very strong flows through to profit. To give you even more color, we will probably be able in the future to increase the take rates because we'll be able to sell more services to our vendors, retail media, fulfillment option, advisers. So a lot of things on the table as well on the take rates in the medium term.

Our next question comes from Adam Cochrane with Deutsche Bank.

A couple of questions. First of all, you talked about the compact stores as being an area of growth. Can you just give us an idea of the dynamics on the compact stores. Are they -- despite a lower sales base, are they actually more profitable on a contribution margin than the larger stores? So where I'm going is, are they margin accretive across each of the different banners compared to where you currently are?

Maybe I'll start, and I think Bhavesh will give other views. I think firstly, you remember, we have started this journey a few years ago where we believe compact store format in DIY is an important trend. It's not an obvious format, there are countries that exist. When you look at France, we have in the market companies like Mr. Bricolage or Weldom that are, in fact, small format. In the U.K., you have less small format.

So in the U.K., we have B&Q locals, and that's really a high street format. And we will start to open more B&Q locals this year, and we have a target in the medium term about 30 stores. We have a format that is called B&Q retail park, around 2,000 square meters. We have Screwfix City, very successful, and we believe we can open 100. We have Brico Dépôt 1,000 in France. I mentioned that it's a very important format for the future.

In Poland, we have a great medium box, around 4,000 square meter, and we are working hard on the 2,000 square meter box that is not fully ready yet. And we are still working on our small format for Poland. And obviously, B&Q, we are as well very pleased with the medium box format.

So I would say, on average, our medium box and smaller formats are in line or better than the average of their markets. There are a few exceptions. For example, if you tell me in Poland, smaller format, we are not up yet, so Brico Dépôt 1,000, there's still some improvement to do. But overall, what you see is sales density and profit in line or slightly better than the average.

And not much to add there, Adam. I think on B&Q Locals, we've got 11, 8 of them are working pretty well. The other 3 are not. Of the 8 that are working well, we look at what are the right ranges, what's the right delivery into a city center location, logistics, how are consumers engaging with us. So we're constantly learning as we build and adopt these.

And the second question I've got is, if we look at the B&Q performance as the year progressed, there may have been some drivers from Homebase customer transference. Did that make a material difference as each quarter went on? Can you just remind us of maybe when that annualizes?

And the second part of that question is, if we assume that some of the B&Q like-for-like was from Homebase, and a decent proportion is coming through from the growth in trade, is there a question mark over the core U.K. DIY customer, which appears to be in reasonably low to mid-single-digit decline if you take into account the Homebase and your trade customer growth? And are you focusing so much on the trade customer that the DIY customer is getting less of a service than they were historically?

Let me -- thanks, Adam. Let me start with Homebase, and then I'll get Thierry answer the second one.

So we haven't disclosed specifics on Homebase, but a couple of data points. Firstly, Homebase went to admin in November 2024, and then stores closed in January and February of 2025. And the way we sort of modeled and looked at it was one of the stores that are with -- B&Q stores that are within 20 minutes of a Homebase, and how are they performing versus the rest of the portfolio. And there -- that's where we did see an uplift. Obviously, the teams executed well. The 8 stores that we acquired, we made sure we're open for peak. We made sure we have the right product availability. As you know, we had a super strong seasonal last quarter 1. But Homebase was one of a number of drivers of B&Q's performance, right? We had good performance in big-ticket, continued growth in our core categories. We've got profitable growth in trade and e-commerce. And then obviously, the strong seasonal that you saw in H1. So yes, it benefited us, but one of many levers.

Yes, Adam, a few more comments. I think, first of all, we have to look at B&Q, including marketplaces. So we have indeed the store, we have trade, we have marketplaces. So when we add marketplaces, what we call the GMV, the B&Q sales growth is plus 5.9% in 2025-'26 versus the flat market. So yes, trade is growing. But you can't say that the rest of the perimeter is having difficulties. And it's all based on the same assets. So we are leveraging our assets to grow e-commerce and to grow trade.

Another data I can give you is services installation. We're on 22% at B&Q. So clearly, we see a lot of good news on interaction with the customer. So you really have to keep looking at B&Q altogether, including marketplace.

And just to add, we performed above the market in the U.K. Well, that gives you a data point.

Okay. And final question is, you talked about growing sales ahead of the markets and profit ahead of sales. Your midpoint of the guidance implies a 6% increase in profits. Given that one number that today surprised me slightly was the OpEx growth, particularly in the U.K. is the implication to get to your midpoint that there's a low single-digit like-for-like in order to leverage that up to get to your 6% at the midpoint profit growth?

I think maybe to start, Adam, I think in the mixed consumer environment, we feel good with a 6% increase in the midpoint. We feel it's a good plan. It's predicated on continued progress in our strategy on trade and e-commerce and as well a lot of discipline on gross margin and costs. So in the current environment, we rather feel good around this midpoint guidance.

Our next question comes from Grace Gilberg with Jefferies.

Can you hear me?

Yes.

Perfect, perfect. First one is around gross margin actually. I mean, obviously, it was a pretty good year in terms of your gross margin expansion and continuing in the second half after what was a pretty good first half, and that was quite impressive. You've mentioned that these have to do with primarily better sourcing as well as just getting better deals with your suppliers. How structural is -- or how structural are these gains? And what is -- what are the things that your suppliers are seeing that are having you to be able to have these better deals, for example? That's the first question.

The second one is actually around France. It was a little bit weaker than the other two regions. Obviously, the market has been down, and it's very difficult to see, that hasn't been very helpful. But it seems from your perspective that the model is working particularly at Brico Dépôt. What are the benefits that we maybe haven't seen yet just because of the market? And what are you expecting to see going forward? I'll start with those two, and then I have one or two others.

Grace, so on gross margin, yes, look, we're really pleased with the performance in the year, right? We grew by 80 bps as we flagged. And as we look into the year ahead, we have different puts and takes. So on one hand, you're going to continue to see further expansion of marketplace, as Thierry mentioned earlier, that's margin accretive. We continue to look at the store as the heart of our digital ecosystem. So a lot of preparation and picking is done in the store. That means we need less logistics space. And so you'll see continued focus on logistics efficiencies.

And then buying and sourcing was quite successful in this year that helped drive our margin, and we expect to continue to see that in the year ahead, particularly the insight that we get from our private label business. We look at something called should-costs. We understand the components of all of our products, and that gives us real data to negotiate with our branded suppliers. And that will continue. And then we expect further FX tailwinds based on our hedging. We hedge 100% of our committed orders into next year. So we have a pretty good read on FX.

On the other hand, we have growing trade. We're really pleased with what we're doing with trade for all the reasons you heard us talk about. But at a gross margin level, it is dilutive. We always focus on maintaining competitive prices. And then freight is starting to turn into a headwind. So those are some of the pluses and minuses that we think about as we look at the year ahead on gross margin.

Now, I think to France, I think overall, I think we feel good about the progress in '25. Just to tell you what I have in mind. First, market was around minus 3%, so pretty difficult market. We did around minus 2%. So we overperformed the market. In a year where Castorama had significant disruption from store work, a lot of range reviews. We had a big head office restructuring. We were changing a lot of the team in the store. You heard in Bhavesh's comment that we changed about 50% of the store manager, 40% of the category manager.

And as well in France, we have to remember that it's a lot of new tax and high wages in '25, like in the U.K. So in this environment, being able to gain market share in all banners, to have a profit up, to see the strategic progress on trade, on e-commerce, to deliver on the Casto plan, but as well on the Brico plan, to answer your question on Brico, probably the two biggest progress we made was continue to have an even lower price index because it's a discount -- discounter banner. And we did a lot, a lot of progress on the Pro sales. You saw that.

And at the end, the team are in a good place. We see team engagement in France growing really in a strong position. So overall, I think it's a very strong year in a very difficult market. So indeed, we need the market to recover. But for me, the market recovery, the French market recovery is a question of time.

Okay. All clear. And then I suppose my last question is around the full year guidance for FY '27. Obviously, you do have some tough comparatives heading into Q1 given how strong B&Q was last year. And then many of your competitors have as well or just peers within the home market have cited that it's been pretty wet weather and hasn't been helpful for trading into the beginning of the year. What makes you confident in reaching your full year PBT numbers, given that you're facing some of these headwinds potentially?

Well, as you know, Grace, we don't provide current trading. So we don't guide for the current quarter. But factually, you're right, we had a very strong seasonal, so B&Q's Q1 seasonal last year was 30%. So it's a pretty tough comp to lap. But as we look ahead to sort of our guidance for the full year, we look at sort of what are of the drivers from a top line perspective. We've got a mixed consumer backdrop. But in the U.K., we expect continued momentum from our two banners, notwithstanding the tough comp in Q1 on Homebase transfers as we talked about earlier.

Top line in France, it's still a weak market. It's improving, but very slowly. Savings rates are still elevated, 400 to 500 bps above the long-term average. So very much in France is focused on what we can control, differentiated proposition, discount proposition of Brico, all the heavy lifting we're doing at Casto. You heard us talk about in our prepared remarks. And then Poland was flat last year. Q4 was good, but I'd say we need to see more quarters of good sustained consistency in Poland. So that's sort of how we think about the top line when we set our guidance.

And then we talked about in your earlier question, what things that we will continue to manage effectively got some puts and takes. And those will be the same things next year as we saw this year. And then continued focus on cost. We've got a track record of managing our costs pretty well. As and when trading environments change, we have the agility to flex our cost base. So those are some of the component parts that sort of set our full year guidance on profit and cash. Hopefully that adds.

Just to add a few words around general, how we feel, obviously, looking at the Middle East crisis. I think, obviously, we are very mindful. But we look at our top line first with resilient business. We have about 2/3 of our business is repair and maintenance, so less discretionary. We now have reached 30% of the group sales is delivered through trade. So as well more resilient. We really see the benefit of our strategy on e-commerce and trade. Looking again at B&Q in 2025, real growth, plus 5.9% in the flat market. So you start to see the benefit of the strategy. And as Bhavesh said, we have had a strong track record of discipline, margin management, cost management in all the past years.

Our next question comes from Yashraj Rajani.

I've got three, please. I'll ask them one by one. So the first one is on the cross-border vendor e-commerce, which you have fully highlighted. So is that just an element of introducing a different price point? Or do you think that you're missing something in the range architecture there, which is now being complemented with this cross-border vendor e-commerce? And how do you think about the right balance so that it doesn't cannibalize your own 1P sales?

So I think we -- thank you for the question, Yash, first of all. I think it's -- we really see that more as a range topic, as choice. In fact, we are already selling on our marketplaces, I think you should take the U.K., U.K.-based vendors. So you have a lot of very strong countries in the world with very strong industrial base. Germany, but even and as well China, we'll open gradually our marketplace to Chinese vendors. We see the potential here. But it's not around price competition.

To give you another color, we are working hard on what we call buy box. And I will not enter into the tech detail, but we could do that off-line, if you want. That will allow us as well to have more price competition between the same SKUs from 2026. So cross-border is really around choice.

And what I said earlier, right? Yes, there's probably a little bit of cannibalization, but look at our 1P sales, it's stronger than our store sales. And 3P traffic brings new people to diy.com that we wouldn't otherwise get, and a lot of them go on to buy 1P product. So that's a benefit of having the choice that Thierry talks about.

Sure, that's super helpful. And then the second question is, again, on France. So I appreciate you commented that the market is difficult, but there's obviously all the self-help initiatives that you highlighted. So even if you assume that the market stays where it is, what is the absolute margin improvement you can see from all the things that you control even if like-for-likes are negative?

Yes. I think, Yash, we are still confident in our 5% to 7% profit margin for France in the medium term. We always said part of it is really our self-help action, and we are progressing on this. To remind you as well that some of the self-help action, you have very short-term impact, when you do a head office restructuring, you have short-term impact. Some other, like range reviews or the store network restructuring, you need a bit of time to realize, to crystallize all the benefits. So one, self-help actions. Second part is the market improvement. Personally, I'm convinced that we'll see market improvement. It's a question of time, and we need both to achieve those 5% to 7%.

Got it. Got it. Super helpful. And the last one from my end, maybe quite a topical one is the Middle East. So can you just sort of quantify any sort of freight headwinds or more broadly disruption that you're seeing, which would probably create some availability issues, if any? Or just anything else you'd like to highlight on the Middle East?

So maybe I'll start with supply chain, and then Bhavesh will come on the cost side. First, it's obvious that we have no operation in the region. We have nearly two suppliers in the region. So you see it's really a very, very limited direct impact. And before Bhavesh will comment on gross margin and costs, again, remind you that 2/3 of our business is repair and maintenance and 30% is trade. We are high expectation to deliver on our strategy on trade and e-commerce in 2026 and beyond. So we expect this to give us resilience looking forward.

Yes. I mean you heard me mention it in my prepared remarks, but the direct impacts, based on what we know today, and as you know, things are changing every day, but the impact for us is fairly limited energy. On energy, our quantum energy costs are less than 1% of our sales, and the majority of that is hedged. And then on freight, again, a small proportion of our COGS, about 20% of our COGS are sourced from Asia, and we typically lock in annual contracts with carriers. So those contracts have what we call like a fuel index, so there may be a little bit of a headwind, but we've locked in those contracts for the year.

We looked at previous situations, the markets have behaved pretty rationally on pricing and margin. And we continue to stay focused on managing our margin and being super disciplined on cost. And so that's our focus, right, to continue to do that as we navigate our way through.

Our next question comes from Mia Strauss with BNP Paribas.

I just want to check a few. I think last year, you talked maybe about doing consumer surveys for your trade sales partners. And what sort of pipeline they're seeing over the next few weeks. Maybe if you can just give us a comment on that for the current year?

Yes, absolutely, Mia. And by the way, you will see that in the appendix of our document we released, Page 34. Indeed, we do a monthly survey for Screwfix. What you see on the Page 34 is that 93% of our trades people are working. So it's 2 points year-on-year. So slightly higher than last year. But we have a second category that is working and have more work to come, 79% of the survey and is 6 points up year-on-year. So we do this survey every month for the past few years. So it's pretty reliable. So we feel those results will remain strong.

And then maybe just on your share of the trade wallet. What share do you currently have? And essentially, what is the realistic opportunity of what share you could get in the future?

I think Screwfix, our estimate is around 15%, 1-5. So for our trade business, you could say it's still relatively low, and that's why we believe we have a lot of opportunity ahead on Screwfix share of wallet on the range, the size of the range, B2B. We have a plan that will address more of this share of wallet growth in the future. And you have seen as well in the presentation, the rewards program.

For all the big boxes, our estimate that is a few percent. Our share wallet in B&Q in France, in Poland is just a few percent of a very large market. Very often, the trade people, they already come to our stores, but mainly for urgencies. And that's why all this plan is finally leveraging your assets to sell more to people that are already in your stores through your loyalty program, traders sales partners. So we really feel starting from this very low base of share of wallet in our other big boxes, there is significant opportunities.

And look, in the U.K., it's a big market, right, it's GBP 30 billion, total trade market. TradePoint sales are close to GBP 1 billion. So a lot for us to still go after.

That's helpful. And then maybe just for you, Bhavesh, on the free cash flow. So the guidance is a little bit lower year-on-year. And I think it's -- last year, you also talked about achieving over GBP 500 million over the full current year. I guess, last year, you saw about a GBP 91 million increase in payables. What was that from? And I guess, going forward, why is it a little bit lower?

So look, yes, pleased with our free cash guidance. We've delivered more than GBP 500 million over the last 3 years. And our focus this year will be continued on the profit drivers we talked about and working capital, and particularly inventory. So again, some of the stuff we mentioned earlier, some of the structural initiatives.

We set a range of GBP 450 million to GBP 510 million, midpoint GBP 480 million. That's about GBP 30 million higher than the midpoint we set last year. And so confident that we'll continue to deliver cash flow well. We also still have spent more on CapEx this year. The question somebody asked earlier, as we saw and navigated through the year that we are trading well and had a good cash performance, we chose to redeploy some of that both in buying freehold, but also at our maintenance and tech. So we kind of navigate through the year. And then you always get fluctuations, right, in year-on-year. So sometimes one-offs. But over the medium term, we're still guiding to around GBP 500 million per annum free cash and have done that in the last 3 years.

Great. Maybe just on the -- if we look back to '25, what was the reason for that significant increase in payables maybe?

I think timing, largely. We look -- as you'd expect any retailer, we kind of look at payment terms as well as something we navigate, but also, our sales was higher, right? So that sort of drives our payables.

[Operator Instructions] Our next question comes from Georgina Johanan with JPMorgan.

Everyone, can you hear me okay?

Yes, Georgina.

Yes. Go ahead.

I've got three quick ones, please, really just following up some questions that have already been asked. The first one is very much appreciate that you prefer not to give current trading trends. But just in the context of maybe the consumer more broadly, particularly in the U.K., I think one of the early surveys that's been done since the start of the crisis and headlines around higher energy prices and so on, actually, we saw an 8-point fall in consumer confidence. So just wondering if you can kind of comment on how you're seeing consumer behavior rather than trading trends necessarily.

The second one was, I appreciate you don't provide a like-for-like guidance, and of course, there are changes that will be made depending on trading performance. But if you were to see perhaps only a flat like-for-like this year, can you just confirm that you'd be able to hold profits in that scenario, please?

And then finally, you very helpfully at the half year, I think, quantified some of the gross margin benefits from buying and sourcing initiatives. If I remember correctly, around 60 basis points. Is it reasonable to assume that you can actually achieve a similar level again in fiscal '27? And indeed, where did that land for fiscal '26 overall, please?

Thank you, Georgina. Let me start with the first one, and then Bhavesh will cover the two and three. So to be direct, indeed, we don't want to comment on the current trading. But I think it's an important topic, we have not seen up to now real impact on the customer. We have not seen a change of trend following the start of the Middle East crisis.

On your second question, we have different levers that we pull as we navigate through the year, margin, cost, investment in the business. We set our guidance range or profit range is the same as we said previously, GBP 60 million, around that midpoint, and we'll navigate and push and pull levers as trading evolves as you saw us do this year.

On gross margin, I'm not going to quantify it, but I'd refer you to my previous response on the various puts and takes. We've got lots of things that are tailwinds, but we also have some things that are headwinds on gross margins.

At this time, there are no further questions. I will now hand back to Thierry for closing remarks.

Just to thank you for joining us this morning, for your questions. Again, we are confident in our delivery of this year and our strategic progress. Confident in the fact we stay very disciplined on the thing we can control well as we did in the past. So again, thank you, and we are always available with the team if you have any questions. And for some of you, I think we'll meet in the coming days. Thank you very much. See you soon.

Thank you for joining today's call. We are no longer live. Have a nice day.

Hello, everyone, from the B&Q Harringay store we opened just 4 weeks ago, and it is great to visit this new store and to meet the team. I'm also here to share Kingfisher's performance for '25-'26 with you. And I want to start by thanking all of you, all our colleagues for your hard work and dedication. This enabled us to deliver a strong performance last year, driven by our strategic progress. And we grew significant market share in each of our banners in the U.K., in France and Spain, and we maintained market share in Poland.

Our sales growth was led by volume and transactions with underlying like-for-like sales up 1.4%. Adjusted profit before tax was up 6% and grew by 13% when we exclude a business rates over payment refund the previous year. Free cash flow was also up to GBP 512 million. This financial discipline meant we could invest significantly more in our stores and technology last year than in the previous year. B&Q and Screwfix in the U.K. were standout performers with sales up over 4% and B&Q sales were up by nearly 6% when we include marketplace.

Now let us hear more about what we are seeing across our stores from two of our fantastic colleagues. Over to you, Mariusz and Poppy.

[Foreign Language]

Thank you, Mariusz, and hi, everyone. I'm Poppy, the Melksham Store Assistant Manager. I've been with Screwfix for 2 years, and I was recently promoted whilst on my apprenticeship course, which has helped me build my confidence and skills in store. What I love most is helping busy customers get what they need fast. Something that made a real difference for us in store is the Screwfix app. Customers use it every day to check in, order quickly and earn rewards. They even get surprise perks. The feedback in store has been fantastic. That's everything from me. Back to you, Thierry.

Thanks, Mariusz, and thank you, Poppy. Two great examples of how we are executing our strategy at pace our trade and e-commerce, which both saw double-digit sales growth. First, we are growing our trade business by working hard to give trade customers what they need, and this includes dedicated trade space in stores, trade sales partners who understand their needs, offering bespoke services, but also targeted ranges, loyalty programs and apps.

Screwfix trade penetration is already at 75% and across our other banners, we grew our trade sales by 23%. Secondly, we are leveraging our stores to power our digital ecosystem. That means superfast click and collect and delivery and better product availability. Our marketplaces grew by 58% last year to now make up 15% of our e-commerce sales, boosting traffic across our sites, stores and apps and unlocking retail media potential. And it does not stop there. Over the last few years, we have rapidly adopted AI to help our customers shop. Our new partnership with Google Cloud will introduce AI-powered search on our banner website and in the future, enable shopping directly via AI agent.

So to summarize, 2025-'26 was a successful year for Kingfisher with excellent progress against our strategy, and we delivered all our financial priorities. So now looking ahead with a mixed consumer environment across our markets, we continue to focus on delivering our strategic priorities and maintaining cost discipline. This positions us well to capitalize on the attractive long-term structural growth opportunities within our markets. So once again, thank you to all our colleagues for your dedication over the last year. And I want to wish everyone a great trading for the year ahead. Thank you, everyone.

Good afternoon and thank you to those of you who are joining us today to hear from the team at Kingfisher plc [indiscernible]. If you haven't seen this already, find an updated note on our website at Equity Development. But the purpose of today is to take you through the investment story as it stands and then take Q&A at the end. [Operator Instructions]

But for now, I will hand over to the team to take you through the presentation.

Thank you very much, Hannah, and good afternoon, everyone. Thank you for joining us today for Kingfish's retail investor presentation. So my name is Richard Joyce. I am Kingfisher's Interim Head of Investor Relations, and I'm here today with Sean Curtis, our Investor Relations Manager And together, we're going to take you through our H1 results, our Q3 date, our outlook for the year and provide you an update on our key strategic initiatives. And following this presentation, we'll have a Q&A session to answer any questions that you might have.

So let me start with why we're here. We believe that a better world starts with better homes, and we strive to make this happen for our customers through our market-leading banners as we seek to deliver on our purpose of better homes, better lives for everyone. So turning now to an overview of Kingfisher's attractive investment story, which drives our medium-term financial priorities and our outlook. We have #1 or #2 leading positions in our markets. And those markets are large, they're worth GBP 160 billion combined and have attractive and structural growth drivers.

Secondly, our powered by Kingfisher model provides us with clear competitive advantages. We operate a diverse portfolio of banners, each with distinct formats and propositions that address a wide range of customer needs. Across these banners, we made a well-balanced mix of trade and retail customers. Our own exclusive brands are industry-leading and a powerful competitive advantage. Combined with our advanced technology and e-commerce proposition, we offer customers both speed and choice. As a group, our scale enables us to unlock synergies in buying and sourcing while also supporting continued investment in technology. And then on the right-hand side here, you'll see that our strategic growth initiatives are driving market share gains. A key part of this is expanding our reach across our trade customers with compelling propositions firmly established across all of our banners. Our trade strategy is now very much proven and delivers results.

Our online 1P and marketplace platforms significantly increased product choice for our customers and offer fast fulfillment times. And we also see exciting potential in retail media. Finally, we continue to expand on our store footprint, primarily through expansion of Screwfix and growth opportunities that we see in Poland. Bringing all of these elements together, we're committed to our medium-term financial priorities, which is to grow our sales ahead of our markets, to grow our adjusted profit before tax ahead of our sales and to generate strong free cash flows. We have a disciplined capital allocation framework, prioritize the investment in organic growth, maintaining a strong balance sheet and returning surplus cash to our shareholders.

So let me now move to our half year results, where we delivered a strong half. I think there are 3 key messages that we highlighted at the time. First, our strategic growth initiatives are driving market share gains. And we're particularly pleased with the strong contribution from these initiatives. We delivered double-digit growth in both trade and e-commerce sales during the half. And importantly, they offer a substantial runway for future expansion. Secondly, we're seeing some healthy growth indicators across our business. Growth in the half was of high quality and driven by increased volumes and transactions rather than inflation.

In our core categories, we saw our tenth consecutive quarter of underlying growth in the U.K. and Q2 marked our third consecutive quarter of underlying growth in big-ticket sales. Our banners in France and Poland showed improving sequential trends despite operating in more subdued markets. And third, we raised our profit and free cash flow guidance for the full year and said that we'd accelerate our share buyback program due to the combination of our strong free cash flow generation and some positive one-off cash inflows.

So let's dig a little deeper now into our H1 performance. And I'm going to start with the top line. So we're pleased with the relative outperformance of our banners in the half and our sales growing ahead of our markets. Total sales for the group in the half was GBP 6.8 billion, with like-for-like sales up 1.9%, excluding a negative calendar impact of minus 0.6%. Adjusted profit before tax was up 10.2% in the half and adjusted earnings per share of 15.3p was up 16.5%. Free cash flow generation in the half was GBP 478 million, an increase of 13.5%. And our net leverage at the end of July stood at 1.3x.

So turning now to our sales growth and starting with a view by our different categories in which we operate. All of our categories delivered growth in H1. So core products, which represents around 2/3 of our portfolio, we are pleased to see improving sequential growth trends there with underlying like-for-like flat in Q1 and rising to 1.2% in Q2. Key subcategories which performed well in the half included tools and hardware and indoor paint. Big-ticket delivered a third consecutive quarter of growth -- quarter of underlying growth, like I mentioned before. And this growth has been largely driven by group-led innovation in our kitchen ranges and some improvement in the kitchen and bathroom market, but mainly through our innovations. Seasonal sales benefited from record warm weather in the U.K. over the spring months. And it's worth noting that we'll be lapping the strong seasonal performance in Q1 next year.

If we now look at our sales by geography on the next slide. In the U.K., B&Q delivered a really excellent first half, significantly outperforming the market and driving growth across multiple fronts. These include TradePoint, which is our sales to our trade customers. They performed very well in the first half. We had e-commerce growth of 23.8% in the half. Our 1P and 3P operations work together to enhance conversion increased customer traffic and drive mutual growth. We got benefits from the closure of Homebase and transference of our customers -- of their customers to B&Q as well as the opening of 8 stores that we acquired which our team rapidly opened in order to be ready for peak trading. And of course, like I mentioned before, our seasonal product sales, which benefited from good weather in Q1. Screwfix also delivered a very strong performance across both quarters.

In France, against the subdued consumer backdrop, we are encouraged to see improving sequential trends in our like-for-like performance. And in Poland, where we remain very excited about the medium-term growth opportunities Castorama, which is a market-leading banner with the opportunity to increase space whilst building in both trade and e-commerce. But we had a slow start to the year with poor weather, high interest rates and political uncertainty weighing on the economic backdrop. We do have a slide in the appendix of this presentation covering our other international markets. But to summarize very briefly, our Screwfix France business had strong like-for-like growth of 52% at a store level which was in line with expectations. We completed the sale of our Romanian business in May, a few months ahead of plan, and Iberia had an excellent H1 with 10.2% like-for-like growth, outperforming a growing market.

So just turning to the next slide, and we said in March that we will continue to drive opportunities on cost and gross margin, which have been an important driver of our profit and free cash flow delivery in the first half. Let me give you a few examples. So at the gross margin level, we've seen benefits from group buying and sourcing efficiencies, which contributed meaningfully to our margin expansion in the half, and our marketplace platform, which is gross margin accretive, added 10 basis points to group margin growth. Our operational cost initiatives are also delivering tangible results. At the store level, we've achieved savings through contact center efficiencies and the rollout of more self-service checkouts. We've also driven head office efficiencies, particularly at Castorama France, where we are on track to reduce head count by 12%. Cost discipline will continue to be a key focus for us as we create the room in our P&L to invest for future growth and profitability.

So let me turn now to our profit performance in the half. One of the main drivers of our first half profit growth is the 100 basis points of gross margin expansion, which is driven by the positive top line growth and our margin initiatives, some of which I outlined earlier. In March, we said we faced around GBP 145 million of cost headwinds from higher wages, inflation and taxes. And in H1, our teams have done an excellent job in mitigating these headwinds. So the gross margin drivers, combined with our structural cost reduction programs enabled us to deliver 40 basis points of adjusted retail operating margin expansion to 6.6% and adjusted operating profit before tax of GBP 368 million.

EPS growth in the half was up 16.5%, and our profit delivery drove around 2/3 of this EPS growth, while our share buybacks contributed 1/3. In March, we announced our full share buyback program of GBP 300 million, and we repurchased about GBP 100 million worth of shares under this program in the half.

Turning now to our group cash flow. And starting on the left-hand side of this chart, we generated EBITDA of GBP 744 million. The change in net working capital that you can see here was a net inflow of GBP 100 million, driven primarily by an increase in payables reflecting normal buying seasonality. We continue to focus on inventory management, reducing year-on-year same-store stock by 6 days in the half. Net rent paid was GBP 261 million, we saw GBP 40 million of inflows from tax, interest and other as we benefited from tax prepayment true-ups. CapEx totaled GBP 145 million. And together, these drove free cash flow of GBP 478 million in the half, as I said before, a 13.5% improvement year-on-year. Our free cash flow generation of GBP 478 million is towards the upper end of our initial full year guidance. And this reflects both our profit delivery in H1 and the timing of marketing, technology and CapEx investments, which are going to be more second half weighted versus the prior year.

We also benefited from 2 exceptional nonrecurring cash inflows in the half, which sits outside of our free cash flow. First, there was the net proceeds of GBP 33 million from the sale of our Romania business in May. And second, we got proceeds of GBP 64 million from the successful resolution of an historic tax issue in relation to EU state aid. Net cash inflow in the half was GBP 277 million, therefore, an increase of 128% year-on-year, driven by free cash flow growth and these one-off items. We returned GBP 271 million to shareholders in the half through dividends and share buybacks, which is an increase of 8% year-on-year.

So that was a summary of H1. Turning quickly now to our Q3 trading update, which we published just yesterday. We delivered a 0.9% like-for-like growth in Q3. And I would say it was high quality growth because it was another quarter of double-digit growth in our strategic initiatives of trade and e-commerce. It was volume and transaction driven rather than price-led and it was driven by our core and big-ticket categories rather than just seasonal sales. We did see our markets in the U.K. and Poland softened slightly in the quarter, but our strong H1 performance plus what we delivered in Q3 has given us the confidence to upgrade our full year profit target with the middle of our new profit range being around 2% to 3% higher than what we guided to at H1.

So that was a financial update and our latest guidance to the market. Let's turn quickly now to the strategy update that we gave at the half year. And I want to start by sharing some of our strategic actions that are supporting our current performance and also setting us up for the future. So we continue to progress at pace with all of our strategic pillars, which we outlined in our half year RNS. But today, I'll go deeper into trade in our digital ecosystem. A group strategy that we applied in the U.K. first and serves as a successful blueprint that we've now rolled out across our other markets.

So let me start with Trade. We continue to expand our exposure to trade customers a segment that shops more frequently, spends more and follows more predictable purchase patterns. Our trade business is both revenue and margin accretive at a retail operating level. Our online e-commerce and marketplace platforms significantly expand product choice for our customers. Marketplace leverages technology built by Kingfisher and is a high-margin growth driver. And Retail Media also represents a compelling opportunity. And with minimum capital employed, it is a highly margin-accretive driver.

So digging a bit more into trade. So trade now represents almost 30% of our group sales, reflecting continued development of our trade proposition across our banners. And if you just want to move the slide on one more, that would be great. We're expanding dedicated trade space within our stores and improving our product range. We continue to rapidly develop our loyalty programs dedicated to trade as we sign up new members and offer enhanced price benefits tailored for each of our markets. Based on feedback from our customers, we've also improved our service offering, including enhancements to our Pro app, our direct-to-site delivery options our tool rental services, and we've launched new trade financing solutions. None of this is possible, obviously, without having the right people. And we've significantly increased the number of dedicated trade colleagues and have enhanced our training programs and data to better understand, serve and grow our trade customers.

As a consequence, in the half, like I said earlier, our trade sales grew by 11.9%. Looking at our banners on the next slide. TradePoint at B&Q now represents 22.4% of total B&Q sales with 6.9% growth in H1. This is supported by a strong increase in sign-ups for our loyalty program and our successful trade app accounts for around 25% of its online sales. We continue to leverage the learnings from the U.K. and France, Iberia and Poland, as you can see, we've now dedicated loyalty schemes in every banner.

Turning now to the broader digital ecosystem that we are building, and it starts with a strong first-party e-commerce proposition with our stores at the center. We strategically decided since 2020 to leverage our assets and to rely on our stores rather than on large fulfillment centers as our primary option to prepare online orders. This enables us to offer unbeatable fulfillment times for click & collect as for stores to home. In parallel, click & collect generates more traffic to our stores. We developed a digital hub store model, which ensures excellent availability of products to e-commerce orders. And we keep investing in agile technology to improve our online conversion. All of this, in turn, drives increased traffic, which supports our third-party marketplace offering.

So on marketplace, we are offering a large choice with several million SKUs. This large choice in turn generates more traffic to our websites, all of which fuels additional first-party sales. Our stores play an important role for our marketplace, too. So our stores accept marketplace returns and B&Q is now offering marketplace in-store click & collect, driving increased footfall in store.

Moving to our loyalty programs. They provide us with comprehensive customer data and enable us to deliver personalized offerings and targeted promotions. The market is increasingly shifting towards mobile first and app-based engagement. This allows us to get access to data, to improve and personalize customer interaction. And this leads us to monetization because we have traffic and comprehensive data we can sell retail media. So to summarize, our digital ecosystem drives a virtuous cycle of value, leveraging our store assets and powered by Kingfisher technology. This reports growth but also value across our business. Our 1P e-commerce with stores at the center is profitable, and this profitability is enhanced by our marketplace, our retail media and the monetization of our data.

So moving quickly to Screwfix France, where we see strong like-for-like growth in stores. We're happy with the progress with 52% store like-for-like growth in H1 and 74,000 unique customers, a 30% increase year-on-year. Moving now to the competitive advantage that we generate from our own exclusive brands. Our own product development provides simple and innovative solutions to our customers at affordable prices. While cheaper for customers, our scale and sourcing of these OEB products enables us to make higher gross margins than a branded equivalent. And this affordable innovation has driven a large part of big-ticket category growth in the half.

Slide 24 provides an illustration of these new ranges. So our Ashmead new kitchen range delivers standout style at entry-level pricing, while our Pragma, lowest-priced kitchen range retails for less than EUR 200 and is 15% cheaper than branded alternatives. We're all very proud of the strong work that our teams have done in this area across the group. Now to an update on our plan for France. In March 2024, we announced a strong plan to take France to the next level, simplifying the organization and significantly proving the performance and profitability of Castorama. We've made excellent progress in our plan since this announcement, but this is against a weaker market backdrop than expected with continued low consumer confidence and record household savings rates in a political environment that remains very uncertain.

Against this backdrop, we've focused our energy on delivering against our plans, gaining market share and managing effectively our gross margin and costs. In H1 specifically, we grew our market share in France and improved our retail operating profit margin by 20 basis points to 3.5%. And while we are pleased with the delivery of our plan since the announcement in March 2024 of our medium-term target of circa 5% to 7%, the French home improvement market declined by over 7% in 2024 and by a further 3% in the first half of 2025. We remain confident in delivering this target of circa 5% to 7% with the timing and trajectory of reaching this target dependent on the pace of the market recovery. Despite current headwinds, we remain optimistic on the outlook for the market in the medium term.

So finally, to summarize here on Slide 26. We operate in large and attractive markets with our leading banners. We had a strong first 6 months where we delivered on our financial priorities. We've grown sales ahead or in line of our markets. Our performance is underpinned by strategic growth initiatives. We drove profitable growth and strong high free cash generation. In Q3, we delivered another quarter of high-quality growth. And this performance to date has enabled us to raise our full year profit targets twice this year and to accelerate our share buyback program. Kingfisher is in its best operational shape for years. While we continue to navigate a challenging environment characterized by consumer caution and political uncertainty, we remain focused on executing our strategic growth priorities, maintaining discipline on margin and costs and driving shareholder returns.

So thank you very much for listening, and I'll now open it up to Q&A, and I'll turn our lights back on.

Lovely. Thank you to you both for that helpful counter through. Right. Well, we've just had a budget from [ Rachel Rees ]. I don't think it's going to make anyone any richer. Are you seeing on that basis, a stronger drive for your own brands and people seeking out better value for money options?

Yes. Thank you for the question. So yes, definitely, our customers are looking for value. And you can particularly see that we talked about it on the innovation and our big ticket, where we focused on kitchens and our lower tier offering. So you would have seen Richard refer to Pragma and Ashmead, where we've seen particularly strong growth. Our innovation allows us to look at improving efficiency for our products and to help customers save. So we'll also benefit on the OEB side from better efficiencies on electrical products and areas like that. So definitely, we see that.

Okay. AI is on the lips of everyone at the moment. How are you better deploying this within your business to provide a better experience for your customers?

So AI has obviously got a lot of areas where you can improve the business. But I think the focus has got to be where you can actually make a big financial difference. So if we look at where Kingfisher is focusing, I'd say it's across 3 main pillars. It will be around markdown and promo where we successfully rolled out across our banners. We've called out in H1 across Castorama France, where we've seen about a 15% saving around those markdown and promo tools. The other side would be around our supply chain visibility tool. This enables us to have a better understanding of where our stock is, how better to manage the stock across our stores, look for slow moving stock and be more efficient with how we manage it. And then lastly, we look at personalization and recommendation.

So if we're looking at this where we called it out around hello Casto, hello B&Q, this is sort of like a chat service where customers can get inspiration and help on how to form a project. It also helps drive some interaction with our customers. And if you look at sort of what we called out, we said we're delivering around GBP 80 million of group sales in H1 from this personalization and recommendation interactions. And then lastly, I'd say one of the area where AI plays quite a big role is around our customer service. So particularly in sort of Screwfix where if you -- we've got a sort of WhatsApp channel where people can directly message WhatsApp to get information on how to solve a problem or where to go to resolve an order query. So there's definitely opportunity there to be more efficient and provide better service.

Okay. We stick with the theme of remaining competitive. We see you've seen good growth. How much of that do you think is down to Homebase exiting? And perhaps you could also give us a little color on what you're doing to gain market share in terms of perhaps pricing and promotion?

So we won't comment on any sort of pricing or promotion. What we do say is we pay -- we remain very focused on our price indexes across our markets and that has sort of always been a key area. I'd say the DIY market has remained quite price rational. We haven't seen any sort of irrational pricing to date. For the half, you would have seen we've driven our sales through volume. And then through the quarter, that was continued for Q3.

In terms of Homebase transference, we don't quantify it, but we have said we are benefiting from it. This should continue into Q4 as we -- the stores closed in November last year and there was a sort of marketing and promo done by the Homebase stores as they sort of wind out. And in terms of market share, I'd say, where we're looking to target it is across our sort of strategic pillars. So where Richard's outlined on sort of trade and e-commerce, I'd say that's where it's been a key area for us, particularly with Thierry coming in, there's been a massive focus on sort of driving the trade sales, particularly with sort of rolling out dedicated trade personnel, our dedicated trade areas in stores. We've now rolled out the loyalty proposition across Castorama France. So yes, very exciting there.

And then on e-commerce, we've now got a marketplace live in France, in Iberia and in the U.K., and that's definitely helping us with our digital ecosystem, which Richard touched on extensively in the presentation. So definitely gaining share in those areas.

And well, the sort of you've covered off a little bit of a question here that we have on trade sales, which as you mentioned on in the presentation. But is it as much a strong underlying market? Or is it very much a question of market share wins?

So if you look at our performance on trade sales, it's definitely been very resilient. And if you look at our performance versus DIY for the Q3, it outperformed our DIY in -- particularly in the U.K. So I'd say that is very resilient. Where we've sort of had a lot of focus, particularly on the trade interaction, where, for instance, in Castorama France, we had limited trade proposition last year. And we've now rolled it out to all our stores. We're definitely seeing some uplift there as we start to capture and understand our trade personnel.

And if we look at sort of our pipeline of what's in the work from our Screwfix survey, that gives us confidence in terms of the resilience of the trade market. So we can see active and pipelines remain high. 80% of trades and expecting more work to come, and 93% of them are currently working and proportion of trade sales not working has remained fairly stable. So that gives us a bit of confidence in terms of the resilience in the trade market. And yes, I'd say that was sort of covers mainly by our area trade.

Yes. I mean trade is hugely exciting for us, right, because it's a different group of customers. They shop much more often, they spend more when they come in store, they've got more regular purchasing patterns and habits so we can plan a bit better for them. And what's great for us is that it's actually -- there's very little capital employed around this because we're actually utilizing our stores better now. If you go into a big B&Q store, there's just a separate space that's allocated for what we call trade point. It's a separate entrance, there's separate parking with bigger base for people to park their vans and a lot of things. So you're not actually incurring a lot more fixed costs on this but you're getting a whole new income and revenue stream, if you like. So this is why we're excited about it because, as I said, it's new, it's a fast-growing revenue stream for us, but it's also margin accretive sort of from a P&L perspective.

Well, I might use that then to segue into France. And obviously, you've rolled out trade within Castorama and the turnaround plan seems to be going well. What have you learned from rolling out the trade proposition there?

So if we look at France, I'd say, it's fairly early in the process of trade, particularly in Castorama. If you look at our group strategy, wherever we apply, we start in the U.K. and take those learnings and roll them out to France and Poland and our other markets. And as you say, in terms of the U.K., we probably the most evolved TradePoint has been around a long time. We're taking those learnings, we're now rolling them out to France. If we look at Castorama France, we've got the loyalty program rolled out across our stores. We need to understand what customers shopping at our stores before we can understand them and then grow them. So we always say find them, know them, grow them. They sort of like the motor for trade.

So I'd say, in that sense, you've got to do that first before you can really start seeing the same sort of initiatives we're doing in the U.K. whereas Brico France is a bit more targeted to the trade proposition already. It's already low-price discounter, high availability. You can walk in with a kitchen -- walk in, find your kitchen and walk out, which is more service to a trade customer. So you'll see the trade proposition there is slightly higher in penetration, whereas in Casto, it's fairly recent that we've rolled out this trade loyalty proposition. So there's lots of runway for us to go, and we'll keep taking the learnings from the U.K. where we've seen consistent growth over the last few years in trade, and we're exciting to see how that rolls out in France.

Yes, it's been quite impressive in Casto, actually, because like Sean said, at the beginning of the year, we were -- it was very early days. I think we've done 8 test or something. And then we took the decision at the beginning of the year to roll it out across the whole Casto estate, which is what we've done now. And for any of those of you that might have gone into a Casto store, I mean, Sean and I were over there in June and went into a few stores, and it's very, very visible. The Casto pro sign and the signing up to the more to scheme and all that sort of thing. So no, it's been good progress this year on trade in France.

Okay. Sticking with France, what do you think it will take for a macroeconomic recovery at plants to get you back to like-for-like positive growth? And I guess, how much do you think the strikes have cost you?

Yes. So if you look at the consumer environment in France, the macros are all very positive. So interest rates are low. Inflation is low. Savings rates are particularly high, about 4 percentage points higher than the long-term average. So if you look at sort of the macro level, the consumers got money in France. It's just we think that political uncertainty in France, where they haven't had a budget that had the national strikes, as you said during the quarter, which didn't help. We didn't quantify it, but it did have a small impact for obviously negative.

And in terms of what we said, we've got our medium-term target of circa 5% to 7%. And we're very clear in sort of our presentation that we're doing everything we can in terms of our plan, but we are dependent on the pace of the market recovery before we see that sort of reaction. It doesn't help with your markets going back 7% and 3% this year. So -- and it's continuing to sort of show lack of that sort of inflection yet.

Okay. Another question here it expresses, I guess, some frustration in the ongoing -- the share price despite some recent wins over the last few days. And a question about how realistic it is to unlock value with the spin-off of Screwfix as that's where the big proportion of the growth is and whether better value for shareholders could be recognized by some activities in that area.

Yes. Look, I think I mean I've only come in recently, but -- and I know that the share price has been a little bit stagnant over recent years, and we've gone through strategic changes and that sort of thing. I think Kingfisher is quite an interesting juncture at the moment because I think Thierry has come in and has been very clear about the strategy and move from a ONE Kingfisher strategy to a sort of a powered by Kingfisher. And we've got these very clear strategic growth drivers which are also margin accretive, okay? And the benefit of Kingfisher is obviously the benefits we're getting in sourcing and scaling and own exclusive brands and that sort of thing. And I think you can start seeing that coming through in the strong gross margin that we saw in the first half, right? We had 100 basis points of gross margin expansion, of which a good proportion of that was bought from our sourcing and buying synergies and that sort of thing.

Okay. So we've now started growing EPS. You saw the 16.5% growth in EPS in the first half. We've gone through 2 profit upgrades this year and there's some very good momentum in the business as we benefit from the difference and the strength of our banners with the powered by Kingfisher group benefits that we're getting. So look, the Board will always look at portfolio and that sort of thing, and you see they're not afraid to do things. I mean they sold off Romania. But I think there's a lot of interesting organic opportunities that we've got in the business as you've seen from this year and the share price is reacting accordingly.

And what you would have also seen is we've used Screwfix to roll out and Screwfix France. It always helps to have an established business there where you've got relationships with your suppliers, you understand the customer, you know the market. And that's particularly where you can leverage the group experience along with sort of the IT side. And if we had to look at rolling out Screwfix into another geolocation, the strength of the banners that we've got in our current locations, that helps to see for future opportunities.

Okay. And in terms of sort of sticking to the theme of shareholder value, Obviously, they've had a buyback program in place now for a little while. Do you think that, that is delivering value for money for shareholders? Or are there any plans to accelerate dividends?

Yes, sure. Let me deal with that. So first and foremost, the first priority is to invest in the business, okay? And so we'll always make sure we're investing appropriately. We invest around 3% of revenue in CapEx. We've seen we're pushing up CapEx more this year, and we will keep making sure that we invest in the business first. But look, we generate a lot of free cash flow. And because of the strength of our balance sheet and no need to deleverage, then it means a lot of our free cash flow can then be returned to shareholders, okay?

We've got an established and progressive dividend policy. And I know the Board looks at it every year, so we will keep looking at that. And then any excess cash after that, we can use to buy back shares. And you can see that it's actually making quite a difference to our earnings per share. At the half year, I think of the 16-odd percent that we grew, 4% came from share buybacks. And I'd quite like it with sort of EPS. If you can grow your earnings and increase the numerator and the share buybacks is the decrease in the denominator, you're getting that good double-wall benefit. But no, the order we always look at how to distribute surplus cash to shareholders. Happy to take any views from people if you want to just e-mail us. But no, look, invest in the business and then return surplus cash to shareholders.

Back to the U.K., big-ticket sales have grown so far this year. Can you talk about the changes made to your kitchen ranges that help this growth? Any other plans sort of range reviews?

Sure. So we touched on it briefly already in the earlier question. So we've really focused on the value proposition offering, so the lower tier. And you can sort of see that the customer sort of values us because if you look at our average order value year-on-year, it's basically remained flat. So that means that customers are looking for value, but quality. So I think we've done a really good job of addressing our lower-tier kitchens.

In terms of next steps, would be looked to the next years in terms of how we can refresh those ranges and drive some more customer interaction there and see better value. And then there's also a focus on sort of bathroom and storage, where we're looking at a number of options there to sort of towards Q4 and next year in terms of range of view refreshes and marketing and engaging our teams. So obviously, the main focus has been on kitchens, but we definitely also looking at bathroom and storage.

Okay. Going to Poland. Obviously, the consumer confidence there is recovering but some of the home market is a little slower. How much of this do you think is down to the political environment? And what do you think it's going to take to turn around sentiment there?

Yes, sure. Let me do with this one. I mean we remain very excited about Poland. First of all, from our position in the market, right? We're the market leader. And we only cover about 50% of Poland. So there's significant space opportunity in the medium term. It's also, we think, a very attractive market. If you look at the sort of the OECD guidelines or expectations around future GDP growth, it's quite attractive. You're seeing real wage growth in Poland. Interest rates have been higher over the past number of years, but we've seen something like 5 interest rate cuts this year.

And with most people or almost everybody's mortgage actually being variable rates, they're seeing a real increase in their disposable income as these rates come down. I think they've had presidential elections during the year, so there's a bit less political instability and inflation has also come down this year. So there's some very good positive macro drivers. We're not yet seeing that reflect in DIY sales. And I -- and we think it is because of the sort of the geopolitical environment. I mean there's -- unfortunately, there's a war happening on their border. And when you see sort of Russian drones coming into their air space during the quarter and stuff, it can be a bit unsettling. So I think it would be good to see this geopolitical situation resolved. And I suspect that will probably be a decent unlock.

But again, look, it's -- we're positioned well in the market, and I think there's some really good positive long-term macro drivers in Poland .

Okay. Well, perhaps a follow-on from the earlier question is there's no appetite for spinning out Screwfix and seeing value that way, and you talk about the potential opportunities there yourselves in Poland and France. Where are there further opportunities for expansion on the continent or beyond?

Yes. Look, I would say that we've got plenty of organic opportunities. I think there's further geographies we can potentially roll Screwfix out in. But again, it's a job of the CEO and the Board to look at other opportunities as well. So they will look at M&A opportunities, but be very disciplined about it. But as I said, I think the first priority is very much focused on the organic opportunities. I don't know if you'd add anything to that.

No. Just in terms of Poland, obviously, we have -- if we look at Poland, we do so, there's space opportunity there, but it's never a linear opening. So last year, we opened 5. We said we'll open up to 2. This year, probably only one. And then we said in previously, we had up to 75 store opening because we only cover 50% of the geography. But it all sort of comes down to the right side, having the right return, the right opportunity presents itself. So it won't be that we just see this sort of accelerated opening. It will be sort of a nonlinear as we've seen in the past.

What initiatives are driving the inventory reduction?

I can take this one. So there's a couple of things on the inventory that we're looking at. So I mentioned earlier, the supply chain visibility tool. This enables us to understand where our sort of stock is, how much stock we have at each store, where it is in terms of its distribution? Is it in the warehouse? Is it on the water? And this enables us to sort of better manage our stock. We've done simple things as well, like where we're stopping stores from ordering slow-moving stock, if one store is low on inventory and another store has got slow-moving stock. It sounds very simple, but these are the sort of initiatives we're doing.

We've also used our sort of OEB extensive offering that we've got, which is always 45% of our sales. And we're starting to share that sales data and inventory data with our suppliers and that enables them to see what our levels are and better manage their distribution and ordering system, so we can be more efficient and manage minimum order quantities. So that's helped us drive a lot. And we've got this initiative sort of buying for growth that we've mentioned on the margin side of the business, which enabled us to sort of release some cost savings on our supplier negotiations through actually having a complete understanding of how much our product takes to manufacture. For instance, if we take drill, we can take that drill and disassemble it and see exactly how much it could cost us to -- for energy-wise, for raw materials, commodities, et cetera.

And then when we go to negotiate with our branded vendors, we can take that and say, as a starting point, we're expecting circa 2% decrease in price instead of their normal increase of inflation. So it enables us to sort of be better prepared for negotiations, and we're seeing that come through, not interest on margin, but in our inventory costs. So I'd say those are sort of the 3 areas, I'd say, where we're seeing the biggest cost savings in all cost savings are inventory reductions. I don't know if there's anything else you'd add?

No, look, we've got a relatively new CFO. It's something that he's very focused on. He ensures that it's a standing agenda item in our monthly business reviews or performance reviews with all the banners. And obviously, where you focus, you're going to start talking about a job. So the combination of the tools and the focus, I think we feel good about the long-term opportunity and inventory reduction. I mean we're coming from a fairly low level, to be honest.

Obviously, we've also got to weigh that up with availability, right? So I wouldn't expect to see massive changes, but just good progress year-on-year as we focus on just getting much more focused and much better at managing our inventory.

Okay. A question on margins. Obviously, the target in France, for example, is 5% to 7%, which was still some way off. But what's -- I mean looking at a holistic group margin, what do you think is a realistic PBT margin for the group for the medium term?

Yes. Well, look, we haven't given any specific medium-term targets. What we have said is one of our medium-term financial priorities is to grow our profits ahead of sales, which obviously implies margin expansion. And I think what gives me the confidence around it is you've obviously -- okay, yes, you've got France, and that's partly going to be helped by -- well, there's our own initiatives, but there's also the improving markets.

But what gives me a lot of comfort is just the other initiatives that we've got, like the strategic growth initiatives like trade and e-commerce and retail media are all operating margin accretive. We've got the benefit that the Kingfisher buying synergies get for us, which Sean is alluding to. So we've got a number of different drivers that we've got that we can -- that will contribute to be able to grow margins. So yes, sorry, I don't mean to frustrate you. So no specific target there, but I certainly see a long-term runway for us being able to grow our profit ahead of our sales.

That's a good news story and well dodged. Super. You -- another -- you're investing in rolling out Screwfix in France, but it is still losing quite a lot of money. Is this sustainable and how many stores do you need to get to a profit?

I can take this one, Phil. So I think on Screwfix France, we've been quite clear to say we see sort of opportunities for up to 600 stores here. But the most important thing is not so much the rollout, it's more around the maturity curve. So you would have heard Thierry talk about it extensively to say we track a lot of sort of, let's say, industry KPIs that we look at. So basket size, repeat order and in terms of the like-for-like sales of store like-for-like sales.

And I'd say repeat order is one of the things we look at extensively because it told at our trade customers coming back. So they shop with us, they understand the offering and then they're coming back. So that's a key focus. And then the second is, obviously, the store like-for-likes and the maturity profile. We need to make sure that the stores that we've opened now are working towards a maturity profile we showed a couple of years ago in the presentation to say when the stores break even. Once we're happy with that, and we've got sort of another store that have hit that maturity profile, then we can talk about expansion. But the expansion we can, if we wanted to roll out more, but the main focus is making sure that our stores are in line with the maturity profile. And I'd say that's -- we're very happy and pleased with the progress to date. We've called out that at H1, our like-for-like stores were 52% and at Q3, it was 51%. So we're still very happy with what we're seeing so far in Screwfix France. And when it's time to accelerate, you'll see that. But at the time, we're focusing more on the maturity profile.

Okay. And then back to the U.K. Do you think both B&Q and Screwfix can grow 3% to 4% next year? Or has the one-off benefit of Homebase being a real boost and therefore, these numbers can't be annualized?

Right. Well, we're not giving any guidance on next year yet, as you can imagine. So apologies on being a bit vague. Sure, we're going to start lapping the benefit from Homebase, but we've obviously got a much larger customer base now because of that. Also, if you want to throw in some of the negatives, you also got the strong seasonal lap in H1 that we need to compare against, which is it's fine. Again, what gives me some comfort about the future growth of places like B&Q again, the strategic initiatives, right? I mean, we're very, very focused on growing TradePoint, which has been growing well. I think we've got further runway to go on our trade sales partners and grabbing a bigger share of wallet of the trade.

And in e-commerce, we've got a very strong 1P platform. I think we're in early days in our marketplace, which is already a profitable business and margin accretive. I mean, we've only just recently cracked cross-border vendors, haven't we, right? And so most of our marketplace sales are through local vendors and whereas if we compare to an Amazon, right, I think 50% of our vendors across borders. So there's a long way to go in marketplace. And with the stores at the center of all this, I mean, you're driving better sales densities through your stores. I think there's a bit of space opportunity in B&Q still. So there's a number of different drivers there, which is good.

And then Screwfix as well, you've got a bit more opportunity in space. Having said that, we're going to get to maturity at some stage. But I think there's other opportunities that -- to grow sales there. And I think -- I probably shouldn't go into them at the moment. We'll come back with some more detail on that at the appropriate juncture. But Screwfix is such a great business. I mean I -- when I first got here, actually, they said that Screwfix is almost a verb with the trade. I need a part of Screwfix it. I think that's phenomenal. So -- no, no, I think we feel very good about our U.K. businesses, the future runway for growth. And obviously, it's the U.K. businesses that generate 75-odd percent of our group profit. So obviously, an extremely important part of our portfolio.

Brilliant. Well, if we can just screw fix the U.K. economy, that would be marvelous. I'll send you rounds to see Rachel later. Listen, that is it for our questions today. Good luck with the strategic initiatives. We look forward to an update on them perhaps after the March numbers. And so just to thank you to our audience for attending and to you both for presenting today.

Thank you very much, everyone, for attending. And Hannah, thanks for coordinating. Have a good rest of your day.