Kingfisher plc (KGF) Earnings Call Transcript & Summary

Good morning and welcome to Kingfisher's 2019 and 2020 full year results presentation. Please note that this conference is being recorded. There will be a question-and-answer session for analysts at the end of today's presentation. At this time, I would like to turn the conference over to Thierry Garnier, Kingfisher's Chief Executive Officer. Please go ahead, sir.

Thank you, and good morning. Thank you for joining us today. I'm Thierry Garnier, the CEO of Kingfisher. And I'm here with our CFO, Bernard Bot. Unfortunately, we cannot meet in person today. However, I'm very happy to finally be able to update you on our full year results and our longer-term direction for Kingfisher. As outlined on Page 4, our agenda for today will start with an update on the COVID-19 response plan and latest trading performance. Bernard will then share the full year results and the latest view of our mitigation actions and liquidity situation. I will then present our diagnostic of the situation as we found it in 2019, and talk about Kingfisher's new strategic direction and priorities. And we'll then open up the meeting for Q&A. We have a lot to cover today. It will be a slightly longer presentation than you are used to. But I think it's important that we spend time on these topics. Since I joined Kingfisher at the end of September, I've spent my time and my energy deep in the business with my colleagues, our customers and our suppliers. I'm passionate about retail and have learned a lot. It was my immediate priority. I'm pleased to announce that our group executive team is now complete and has been hard at work through the crisis. As you can see on Page 5, we have 7 new appointments since September. This is an experienced team of executives with impressive track records with a combination of experience, both inside Kingfisher and in other sectors, such as hospitality, electronics, retail grocery and consumer goods. I'm confident that this team has what it will take to deliver on our ambitions for Kingfisher. How we have faced with COVID-19, our priority was to take care of our people, our customers and our communities. Page 6 is a summary of the actions we have taken to manage the impact of COVID-19 on the business. We have already published a lot of detail on our actions as we have gone through the crisis. We have acted responsibly above all else. All stores in our largest markets had essential status from day 1, but we decided to keep them shut at the start of confinement and reopen only when it was safe to do so. We have also been ring-fencing and donating PPE to health care workers. We have been agile. We have reacted fast. We made changes overnight to our operating models, for example, launched new click & collect and drive-through options that became leading practices in our markets. We have made a lot of progress in e-commerce while leveraging our stores for picking and fulfilling orders. E-commerce surged up to 4x in April, and continues to see strong growth. We have protected the financial position of the company by taking decisive action on costs, accessing government support and securing additional funding facilities. In short, we are on a very sound footing. And in fact, the crisis has put extra momentum behind some of our new strategic priorities. I will come back to this. Before I move on, let me say that I was humbled by the dedication and hard work of our teams. They have been the driving force behind our ability to manage through this crisis. And I want to say a big thank you to each one of my colleagues. On Page 7, the chart on the left shows the group like-for-like and e-commerce growth over the past 15 weeks. The sales profile in March and early April reflects our decision to close stores for several weeks. You can also see the strong e-commerce growth I referenced before. Then when stores started to reopen in the latter part of April, we have seen very strong like-for-like sales. We saw a significant surge in categories such as outdoor, building materials, paint, garden and flooring and tiling. Demand in May and June continues to be strong. This partly reflects pent-up demand post reopening, but it is now clear that home improvement is proving resilient through COVID-19. Due to the specific nature of this crisis, customers are spending more time at home with fewer leisure options, traveling less and turning to DIY. Moving to Page 8. For 2020, we have decided on 8 immediate priorities to be extremely disciplined. I already discussed the first 2 priorities around COVID-19 and our group executive team. Third is stabilizing our French business, and this remains a pressing priority. We have been fixing IT and supply chain issues, strengthening the supply chain team and in October last year, appointed a new experienced CEO for France. Availability and, indeed, like-for-like sales improved significantly before COVID-19. Fourth is a new trading approach we implemented in Q4. We have selectively reintroduced trading events and have invested in Screwfix prices with good early results. We have plans to relaunch installations in B&Q in 2020. Fifth is finding a better balance between local and group. We have launched 2 task forces to rebalance our group commercial and IT operating models. This will allow our banners to tailor their ranges to local needs, but also continue to realize group scale benefits in branded buying, on product and technology. Sixth, it is critical to continue to build our e-commerce capabilities. Our direction is to increasingly rely on stores to fulfill most of our e-commerce orders, their click & collect and home delivery from stores. Seventh is about focus. We must do fewer things but do them better. We have stopped several noncore initiatives and IT projects. We have slowed the rate of [ range ] reviews, implementing the planned exit from Russia is also part of refocusing our energy and resources. We hope to be in a position to share more soon. And lastly, cost reduction is a near and long-term priority under our new strategy. COVID-19 is reinforcing our focus here. Moving to Page 9. A few quick comments on our Q4 and February performance. Our new trading approach, better availability in France, reintroduction also local ranges were key to our performance. Many of these actions have been the results of the group [ tampering ] the banners. In particular, I'm pleased that our performance in France has been improving with plus 2.5% for Castorama and plus 4.3% like-for-like for Brico. Our banners did slightly better than the market in February. We also managed to improve like-for-like performance in Poland despite a soft market. So we're making progress but there is much work to do. And of course, we are mindful of the significant uncertainty in the current environment. Let me now hand over to Bernard.

Thank you, Thierry. Good morning, everyone. Let me turn to Slide 11 and an overview of our performance since the start of last year. Overall, Kingfisher's financial performance for the year '19/'20 was disappointing. We saw a decline in group sales of 0.8% in constant currency. Growth in Screwfix, Poland and Romania was offset by declines in B&Q, France, Russia and Iberia. Group gross margin percentage was flat, in line with guidance. Overhead costs were broadly flat with higher cost from inflation, digital and store openings in Screwfix in Poland, offset by lower transformation spend. Cash flow was lower than prior year at GBP 191 million. Net leverage was maintained at 2x, and we ended up the year net cash positive. Despite a disappointing first 9 months, our performance in Q4 and in the first 6 weeks of this financial year was more encouraging. Turning to the impact of COVID-19. As of mid-March, we started to be impacted by the pandemic. We took immediate and effective action to control our costs and protect cash while also arranging access to significant additional liquidity facilities. As already announced, the Board has decided that no final dividend will be proposed, given the ongoing uncertainty around COVID-19. This uncertainty also means that we are not able to quantify with confidence the impact of COVID-19 on our expectations for this financial year. Slide 12 is a dashboard of the key financials of the past year. Let me touch on our profits and return metrics here. Starting with retail profit. This was GBP 786 million, down 3.9%, with retail profit margin down 20 basis points to 6.8%. Adjusted pretax profit was down 5.2% to GBP 544 million. Statutory pretax profit was GBP 103 million after GBP 441 million of exceptional items. Statutory profit after tax was GBP 8 million. Our return on capital employed was flat at 8.6%, with the decline in profit offset by the impact on capital employed of property impairments. On to Slide 13. Purpose of this table is to explain 2 reallocations of costs that we have made in our results to bring them into line with the latest status of the business and our new strategy. Starting with the central support costs, which include the cost of central offer and sourcing and supply chain and logistics, which are normally allocated to Kingfisher's retail banners. We have updated our allocation based on the level and type of support provided. Although neutral at group retail profit level, this has resulted in a change to reported retail profits by geography with the principle effect of more costs being allocated to Poland and fewer to the U.K. The second reallocation relates to transformation P&L costs. As promised in our half year results, we are no longer reporting transformation P&L cost separately and have removed underlying PBT as a key performance measure. To effect this change, we have reallocated transformation P&L cost to retail profit and central costs on the basis of where the costs were incurred or who the beneficiary was. With the launch of our new strategy, any further start-up or incremental cost of change will not be carved out in the future. For comparability, the prior year has also been restated, and you [ can find ] the reallocation table within the appendices to this presentation. On to Slide 14 and gross margin for '19/'20. At 37%, gross margin was flat, both at reported and constant rates, in line with the guidance we gave at the start of 2019. Sourcing and buying benefits of 80 basis points were offset by net pricing and trading initiatives, incremental clearance and logistics and stock inefficiencies, mainly in Castorama France. You may recall that at H1, the gross margin percentage was up 60 basis points. While we continue to deliver sourcing benefits in H2, our margin was impacted by our new trading approach. Promotion-based trading events helped delivered a positive Q4 like-for-like sales performance. In line with expectations, clearance remained elevated reflecting significant rent change across the group, including the new kitchens range at B&Q. Let me now take you through the exceptional charges for the year of GBP 441 million, of which approximately GBP 300 million is noncash. Going down the middle column. The first significant item is a GBP 67 million net restructuring charge which, as you may recall, was booked in the first half of last year. These costs related to our plans to close 11 stores in France and 19 Screwfix Germany outlets. In relation to Russia, we recognized a GBP 130 million charge, mainly attributable to store asset write-downs. Russia is now classified as held for sale on our balance sheet and the sales process is ongoing. The charge of GBP 118 million related to store impairments in B&Q, Castorama France and Iberia, reflecting financial performance in full year '19/'20 and lower freehold market values. Exceptional costs of GBP 39 million in Romania reflects store and goodwill impairments. The next item relates to taxes in France, totaling GBP 50 million. About half of this relates to a settlement with the French tax authority as disclosed back in Q3. In addition, a provision for GBP 26 million has been booked for a noncertain position in relation to a multiyear business tax in France. Finally, other exceptional items of GBP 44 million relate mainly to IT modules and digital tools that will not be rolled out or have been discontinued. After all exceptional items, statutory profit before tax was GBP 103 million. To note, we reran our impairment test in light of the coronavirus crisis, and we concluded that the impact was not material. Slide 16 and the performance of our major geographies. There are slides in the appendix detailing the performance of each of our retail banners. To summarize, sales performance was mixed with like-for-like sales slightly down in the U.K., weaker in France, Russia and Iberia and up in Poland and Romania. Profit in the U.K., which accounted for around 2/3 of group retail profit was slightly up, offset by 9.7% decline in France and a 7.7% decline in Poland with the losses from the other remaining geographies, GBP 4 million higher at GBP 28 million. Slide 17 provides an overview of cash flows. We generated nearly GBP 1.3 billion of EBITDA and paid GBP 469 million of net rent. Working capital showed an outflow of GBP 127 million. This reflected an increase in stock of GBP 70 million, most of which related to store expansion in Screwfix and Poland and a net decrease in combined debtors and creditors position of GBP 57 million. After capital expenditure, tax and interest payment, free cash flow for the year was GBP 191 million. Income from property disposal was largely driven by a small number of sale and leaseback transactions at B&Q. Exceptional cash outflows related mainly to store closures and the settlement with the French tax authority. After dividends, net cash flow was positive GBP 3 million. Turning to Slide 18. Let me summarize how we have managed the financial impact of COVID-19 to date. The 3 months to April 30 was a tale of 2 halves with trading to March 14 continuing the positive trends of Q4, followed by a significant impact from COVID-related disruption. Overall, group sales were down 24% in the quarter. Since the start of crisis, we have taken significant and effective action to quickly adapt our operating model, reduce our costs and protect our cash. Access to liquidity has been a key priority in these uncertain times. Today, we have over GBP 3 billion of cash resources available, and this provides us with substantial headroom should we be faced with a prolonged period of reduced sales even if this is currently not expected. And with nearly all our stores open for in-store purchasing, I'm encouraged by our recent trading. Group like-for-like sales for Q2 to date are up nearly 22%. However, given the uncertainty in the external environment, we cannot quantify the impact of COVID-19 on expectations for this year. And therefore, no specific financial guidance has been provided. Moving to Slide 19. A reminder of some of the key initiatives we have taken on cost and cash. As these have been well covered in our Q1 release, I will not go through the slide in detail. However, let me point out a couple of updates. With regards to furloughing, by the end of May, we had approximately 10% of our colleagues covered by these programs as our stores reopened. With the exception of those who are vulnerable and/or at higher risk of infection, all remaining colleagues in France and Romania returned from furlough on the 1st of June, with remaining colleagues in the U.K. and Spain, expected back by the first of July. From this date, we have decided to no longer claim under the furlough programs in the U.K. and France, including for the higher risk population, who have not yet returned. With regards to capital expenditure, while we acted quickly at the start of the crisis to stop nonessential and development spend, we are reviewing our capital expenditure plans on a case-by-case basis, maintaining tight control in case we need to act quickly again. Finally, we have decided to no longer make use of opportunities to defer tax payments, and we will pay the balance of what was due in the coming weeks. Now moving to Slide 20 and our current liquidity and financial position. Over the last 3 months, we've arranged access to nearly GBP 1.4 billion of additional liquidity facilities, including a term facility guaranteed by the French state, access to the Bank of England CCFF program, plus an additional RCF of GBP 250 million. This comes on top of the existing RCF facilities totaling GBP 775 million. Currently, including around GBP 730 million of cash generated by the business since the beginning of the year, cash at bank is circa GBP 2 billion. This includes drawn amounts of approximately GBP 535 million from the French term facility and GBP 600 million from 11-month commercial paper issued under the CCFF. While both the amounts are not expected to be needed, even under our worst-case COVID-19 scenario, it could be required should the pandemic be significantly more prolonged or severe. Including around GBP 1 billion of undrawn RCFs, total liquidity that the group can excess is over GBP 3 billion. I'm also happy to report that as of April 30, we held our inventory balance flat year-on-year, despite a 24% reduction in sales in Q1. Our inventory balance was further helped by strong sales in May with the balance now lower than a year ago. Due to the durable nature of our goods, we have not recorded any meaningful stock provisions. And we are working hard to ensure good availability, despite exceptional demand levels over the last month. Finally, we started the year with limited financial debt and a leverage ratio at the lower end of our medium-term target range. Turning to my final slide. As I said earlier, we're not able to quantify the impact of COVID-19 on expectations for this full year. This slide, however, summarizes our performance to date. As already mentioned, Q1 sales were significantly impacted by COVID-19, with group like-for-like sales down 24.8%. Encouragingly, we have seen a strong sales recovery in Q2 following story reopenings with Q2 group like-for-like sales, up 21.8% to date. Our Q1 gross margin was down year-on-year. This was almost entirely linked to COVID-19 factors, mainly reflecting the fixed nature of some of our logistics costs and a greater relative share of home-delivered sales. With regards to pricing and promotion, our price index has remained below 100 in all of our key retail banners, and we have had less promotional-based activity relative to the fourth quarter of last year. And as I said out before, we have taken significant actions to reduce cost and preserve cash this year, including controlling our CapEx. As a result of these actions and the strong recovery of sales in May, our net cash inflow since January 31 is approximately GBP 730 million. This is a material improvement on the GBP 250 million outflow referred to in our Q1 trading update. This movement reflects a relative improvement in our sales trends over the last 5 weeks as well as from our actions to preserve cash, some of which are timing related. With that, let me now hand back to Thierry.

Thank you, Bernard. While managing COVID-19 has been our most urgent priority, it would equally be a mistake not to prepare the company for the future. And Kingfisher needs a new direction, our new plan is called Powered by Kingfisher. Kingfisher is a leading home improvement business in Europe. And I want to start by recognizing some of our fundamental strengths. This is on Page 23. The markets we are in are attractive. All our markets have been growing in the past 6 to 7 years, and this is expected to continue. Customers remain passionate about improving their homes and demand indicators are stable. In retail, this is quite a good situation to be in. And given the specific nature of the COVID-19 crisis, home improvement is proving resilient. Home improvement has higher profit margins than many other retail sectors, such as grocery. We do have growing online competition, but home improvement is partly insulated versus online pure plays. Because of the specific nature of DIY, the importance of advice and design expertise and the bulky nature of many of our products, we see a clear role for stores. Plus, as we have seen during COVID-19, stores are an asset to enable e-commerce. It is clear that we have leading positions in all our key markets and awareness of our banners is stronger than ever. We have strong commercial assets, including our 8 group sourcing offices and all exclusive brands. Our 77 colleagues are knowledgeable, skilled and have been with us for over 7 years on average. Our credentials in responsible business practices are industry-leading, especially when it comes to the sustainable sourcing of food and paper. And finally, we have a portfolio of distinctly positioned banners. These banners can address diverse customer needs and segments. I will talk more about this shortly. Looking back at the past 4 years, I can see some clear achievements as listed on Page 24, and we can build on this. Kingfisher has leveraged its scale to deliver sourcing and buying improvements. Kingfisher has built design and sourcing capabilities for its own exclusive brands. Bathroom and power tools are great examples. Investments were made to improve the price competitiveness in B&Q and Castorama France. Our index today is at 100 or lower versus peers, and more than GBP 100 million in GNFR and operational savings have been delivered. A common SAP template has been fully deployed in B&Q, and rollout is in progress for other banners. There have been some execution delays, but the underlying template is robust. Kingfisher established a finance shared service center in Poland, a good first step to driving back-office scale benefits. At the same time, we must recognize that Kingfisher's performance in the last 3 to 4 years has been disappointing, but I here believe that many of the issues were self-inflected. [ Let me be ] direct and share my diagnostic with you on Page 25. As a group, Kingfisher not only tried to do things together but tried to become one. There is absolutely no doubt that there is much we can do together, and that we should leverage our scale intelligently. But Kingfisher is comprised of distinctive retail banners, addressing diverse customer needs. We should not aim to become one with the same range, the same proposition, same marketing or same merchandising. The local group operating model was imbalanced. Many key customer-facing decisions, such as range creation, pricing, promotion were centralized. And as a result, the positioning of our banners was diluted. In the end, the proposition weakened and banners lost the agility to respond to local customer needs. Over time, trying to become one with such diverse banners ended up creating an overly complex operating model with duplication of activities, inefficiencies and an increase in central costs. Kingfisher became overly product-led versus being retail-led. It focused time, energy and capital on centralized product development. We need great product development. It should be balanced with investment in the retail proposition. And lastly, Kingfisher attempted to do too much too fast. There were multiple large initiatives running in parallel, such as changes to range, IT systems, supply chain and organization, and we must recognize that France was the most affected. These issues directly impacted the group results with declines in like-for-like sales and market share. Excluding Screwfix, e-commerce participation moved from less than 1% to just 3% over 4 years. And at last, significant costs and inventory were added to the business. Let me now discuss market's shift on Page 26. The shift towards online is clear in home improvement. Our markets are at different stages, but all our experiences impacted this change. And of course, there has been a further acceleration of this trend during COVID-19. Then there is gradual shift towards smaller stores, smaller and centrally located stores are increasingly meeting the need for convenience and speed. In mature markets, like the U.K. and France, discounters have been growing in home improvement. And finally, there has been a shift towards do it for me, as the urbanization and incomes have grown. But it is also constrained, for example, due to limited supply of tradespeople, and our data shows that the shift is very gradual. What we are seeing here recently is that COVID-19 has somewhat depressed demand for do it for me in favor of DIY. We also see new trends and innovation in this field with service platforms like Needelp. My primary focus in recent months has been to get close to our customers. What strikes me is that we need to be really nuanced in how we think about customer needs across our markets. As you can see on Page 27, there are indeed some share needs across our markets. This enables us to develop great own products and sell them across our banners. But it is wrong to assume a one-size-fits-all approach. If you take a category like painting, you will discover that frequency of repainting is different. Once every 2.5 years in the U.K., once every 8 years in France, on average. Budgets and price points are much lower in the U.K. than France, and the colors and brands sold are different across our markets. I could talk to many other categories where we can see differences. Not to mention that there are different customer segments, such as pro or extremely budget-conscious shoppers. The world is not one. The customer is not one and he's not becoming one in the future. And this is a key principle behind our new strategy. Moving now to Page 28 to talk about Kingfisher banners. Each banners has its own DNA, its tailored proposition and operating model to best serve its target customers. We operate general home improvement banners, such as B&Q and Castorama. They offer a broad choice and are positioned competitively on price. We have trade focused banners in Screwfix and TradePoint. Their proposition is specifically designed for the Pro and designed to guarantee convenience and speed. We also have Brico Dpt in France and Iberia where we operate a discounter model. What drives success here is tight ranges, great availability, basic levels of services and unbeatable prices and supported by a much lower cost operating model. We believe Brico Dpt can reclaim its DNA as a true discount model, which has great potential. Let me summarize our strategic direction on Page 29. Firstly, Kingfisher banners are not the same and this is a strength. They address diverse customer needs, operate different models and each will have a clear positioning and plan. We will power these banners as a group. The role of the group is to enable our banners to serve their customers better. We have a clear vision to build customer proposition for the future. E-commerce, with stores at the center, more compact stores, OEB-led differentiation, a mobile-first experience and a compelling services offer are at the heart of this vision. A balanced local group operating model and agile culture will support this direction. We'll build a culture led by trust, we'll adopt a 'done is better than perfect' mindset to test and learn. We will lead the industry with our responsible business practices. And we'll be simpler and leaner. This means doing less, landing in faster and reducing our cost and inventory. Let me now move to Page 30 and bring this to life. We are an expert in home improvement but our banners address diverse customer needs. It is important that we fortify each banner's role and proposition. A more balanced local group operating model is key, as I have talked about. We'll make sure our banners can take decision they need in order to serve their customers better. We have been working on clear priorities for all our banners. In the interest of time, let me pick up on 2 of them, Screwfix and Castorama France on Page 31. Screwfix is a unique retail model. Customers genuinely value the proposition and returns are very strong. There's clear potential for further growth. And we have a turbo plan for Screwfix. Firstly, we plan to open more stores and to maximize our share in the U.K. and Ireland. We are constantly looking at the return on investment from new stores and improving store operations. This is allowing us to unlock new locations more profitably. We also have plans to significantly improve the Screwfix proposition with targeted price investments, which we started in 2019, [ extending readies ] and innovative delivery options. There is also a large opportunity for Screwfix to expand internationally. We are confident that this model can work outside the U.K. and we are looking at asset-light ways to start with. We are starting to prove this in Ireland. And I can confirm that the opportunities are clear, but today is too early to share all the details. I'm fully committed to investing in Screwfix. Castorama France has been underperforming for many years. My view is that some of the issues are Castorama specific, and some have been infected by the group strategy. For example, fewer trading events, the listing of higher-end products and IT and supply chain disruption. On the positive side, we can build on Castorama enduring brand equity. The Castorama brand reputation has also improved, given the responsible actions and agility during the crisis. As mentioned earlier, our near-term priority is to fix the basics in the team structure, IT and availability. As you saw, we have very encouraging results. Medium-term, we must position Castorama to grow again. We are taking e-commerce very seriously, and we made significant progress during COVID-19. We will strengthen our ranges to OEB and with broader choice. We will reintroduce training events and reinvest in services. In parallel, we will drive cost and inventory reduction. Let me also briefly comment on Iberia. While there has been interest in the business, we have reviewed the original decision to exit. Brico Dpt is well positioned as a discounter in the market, and we believe our new strategic direction can take this, already profitable business, forward. It is important for our distinct banners to have their own priorities but will continue to unlock value from doing things together as a group. And as I said, there are many achievements from the past years on which we can build on. For example, OEB, our sourcing offices, our SAP IT platforms, our shared service center in Poland. And these are our group sources of power as outlined on Page 32. Let me start with our own exclusive brands. We have strong design and sourcing capabilities in place and already developed very successful own exclusive brands. They allow us to offer differentiation, great value and will bring growth and better margin. Linked to this, we have a strong sourcing and buying organization on which we can build further. On to technology, it is critical to use the scale of the group to invest together in strong technology platforms. It will remain an important area of investment in the future, like for many other retailers. As a group, we are able to strike global partnerships in this field. Next is how we will use group shared services, and we see further opportunities here. We are also establishing several Kingfisher centers of excellence to set the right ambition and accelerate innovation in key strategic areas. This includes e-commerce, digital customer journeys, customer data, store concepts, services and supply chain. We speak here about very small teams of experts who can move fast. And lastly, our group gives a framework for our people, our culture and our values, which is a strength. This is a role of the group. Our new plan, as on Page 33, has 2 different horizons. In 2020, our immediate priority is to fix the business and to manage COVID-19, which will require focus and discipline. Looking further forward, we also have 7 strategic priorities to simplify our business and bring Kingfisher back to growth. This is where we will put our time, energy and resources. As I mentioned, we have launched task forces to redesign the commercial and IT operating model. Let me now give you some colors on the other priorities. To Page 34, we have a clear vision for how we will build tomorrow's customer propositions. This vision is informed by the shifts that we see in the market and customer needs. A key priority is to grow e-commerce sales fast. And here, there are 2 significant shifts in our strategy. The first one is that we will leverage our stores as a primary way of picking and fulfilling orders, including click & collect, drive through lockers and same-day, next-day home deliveries. In the past couple of months, we have made rapid progress on this front, and we need to sustain it. And the second shift is that we will fully prioritize the rollout of the group e-commerce technology stack. In addition, looking to the future, we are also beginning to explore the potential for a marketplace offering, but it is very early days. Next is about building a mobile and a service-led customer experience. Services are another reason why stores will remain key in our core sector, and our offer must be compelling. This includes making sure we are market-leading on existing services such as [indiscernible] and [indiscernible]. But also, evolving our offer to a full suite of design, planning, visualization and installation services. We will also lead with mobile and leverage customer data and analytics to improve our reserve customers. Our own exclusive brands are also a key part of this vision. We continue to grow our OEB participation from a base of 39% today. To do this, we would shift our focus from unification ranges toward own exclusive branded products. We'll deliver even better value for money to our customers, which is important as we enter a tough economical cycle. We'll make sure our OEB portfolio is supporting each banner proposition for DIY, for trade and for discounter banners. We will test compact store concepts and adapt our store footprint. We already have high-ROI new store opportunities that we continue to invest in, especially Screwfix in Poland. Beyond this, we are increasing our trials of compact store concepts. We are also aware how big-box stores will need to evolve. This will include e-commerce, dark store space, customer experience and advice and rightsizing when required. And finally, we are exploring store-in-store concession and franchise partnerships. On Page 35, we have a clear cost and inventory reduction program, and we are committed to it. As you can see, it covers the full range of operating costs at group and in our banners. On buying and sourcing, Kingfisher delivered efficiencies in the past, and there is further potential for upside. We renew strategic partnerships with the top 20, 30 international brands, drive engineering and sourcing benefits in our own exclusive brands and reduce the level of clearance in the business. Significant excess inventory has been built up over the years, and we have a clear plan to reduce it. Moving to Page 36. Kingfisher has a long history of leading the industry on responsible business practices. I would like to take this a step further. We have chosen 4 areas of focus. One, to help tackle climate change by becoming forest positive by 2025; two, to help make greener, healthier homes affordable; three, to contribute to fixing bad housing; and four, to become an even more inclusive company by building skills for life. We have clear targets associated with each of these areas. And as you can see on the slide, for the first time, we are linking a part of our bonus incentives to these commitments. To Page 37, we started to prepare our new plan before the COVID-19 crisis. Reflecting on the last 3 months. I'm convinced that COVID-19 reinforces our strategic direction. In fact, it pushes us to be [ bolder ]. Let me start with our customers. As people emerge from confinement into economic downturn, we will see a fresh search for value. We already offer a price index of [ $400 or less ] versus closest competitors in all [ the ] banners, and we will use the power of our OEB and our discounter banners to do more. Customers have new improvements -- new home improvement needs as they spend more time at home, new ways to use their space or adjust to long-term working from home. And of course, being recognized as a responsible business, is even more important than before. Then we have seen a further acceleration towards online. In the past few weeks, we have proven the importance of putting stores at the center of e-commerce. And this is a key reason behind our strong [indiscernible] [ during the COVID crisis ]. And it is more important than ever to be lean and focused. We must retain the agility we have shown during the crisis. This means we must test and learn fast and empowering our banners has been a real source of this agility. In parallel, COVID-19 pushes us to be bolder in our existing cost reduction plans. Moving to Page 38. Beyond our immediate priorities, let me be clear that in retail, everything starts with topline growth. Our ongoing financial priorities are firstly to focus on sales growth in all retail banners. We will also drive benefits from buying, sourcing and product development. And it will [Audio Gap] at a reduced cost and inventory. At the end, our focus will be to grow like-for-like sales and absolute retail profit. Capital investment will be subject to strict returns criteria. We aim to maintain an investment-grade credit rating. We recognize the importance of dividends to shareholders, and we will review this as COVID-related impacts become clearer. Finally, to Page 39. Let me detail you the things, I really want you to take away. Our near-term priority is still managing the impacts of COVID-19 and our colleagues, our customers and our operations. We are very mindful of the significant uncertainty that exists, and we are working hard to be prepared for all scenarios. Looking forward, I believe that the opportunity for Kingfisher is significant. The home improvement market is a good market to be in and Kingfisher has many strengths. Our banners are not the same, and this is a strength. We have a clear new strategic direction, Powered by Kingfisher. I'm more convinced by this direction after the few past weeks of managing through this crisis with our teams. We have a strong new group executive team. We are committed to operate with new standards of execution discipline, this will mean remaining focused under most high-value initiatives. As you have seen this morning, our early actions have delivered encouraging results. There is much to do, but we are excited about the opportunities that are ahead of us and as a team, we are committed to returning Kingfisher to growth. Thank you for your time. I would now like to invite any questions. Over to you, operator.

And we will take our first question from Richard Chamberlain from RBC.

I've got 3 questions if that's all right. The first one's on availability. I wondered if you can give a bit more color on how that has improved year-to-date. Maybe give some idea of what metrics you're looking at for in-store availability and some idea of further upside to come? The second one is on the SAP rollout. I think you've said that you've paused it for Brico Dpt. So I wondered when you anticipate finishing the global or the full rollout of SAP? And then the third one is on Romania. It sounds like you've changed the longer-term projections. And I wondered what the cost-saving from the consolidation of the 2 distribution centers in Romania will be this year.

Yes. Thank you, Richard. Let me start with 2 first questions, and Bernard will comment on the last one. I would say there are 2 periods of time. I would say, up to March, we clearly had a big improvement in our availability, especially in France. I think it was due to IT disruption and as well a lack of management capability in France. So we recruited many additional managers. We spent a lot of time and energy on that. And the availability level before COVID reached back about 98% for Casto and Brico in France. And that's part of the good results of the sales in France is a clear improvement in our availability. I think you know that KPI are -- the standard one is really availability in stores. Usually, we follow all the total range or we follow the top 1,000 or top 500 best sellers and we follow that on a weekly basis. I would say after COVID, we are today in a situation when we have extremely polarized demand. So our, I would say, availability is well under control. But we could have, for very specific categories and for very specific markets, today, some availability issue. But that's really focused on limited number of categories. On SAP, you are right, we consider the rollout of SAP in France was delayed, was late, was -- let's say, was facing several issues. And for this reason, we have decided to pause Brico Dpt for 12 months and to have all the energy of the teams to Castorama in France. So I'm happy to see that the rollout of SAP in Castorama now is a question of weeks or months. And we will restart Brico Dpt rollout in France, early 2021. And it will be -- its SAP implementation has been fully done in Poland and Romania now. So finally, Brico Dpt will be the last banners for which we will implement SAP. In my view, I think we have a good template. We have more, let's say, rollout issues, execution issues. But the basic template of the SAP is rather good. One word on Romania, and then I leave it to Bernard. Indeed, following the acquisition of Praktiker, part of the job we have to do is to finalize the integration. So we have now SAP in Romania, in all the stores, Brico and now Praktiker, all the Praktiker became Brico. And we are as well working on, indeed, our supply chain. We have 2 distribution center, and we have the plan by the end of this year, before the end of this year, to merge those 2 DCs in Romania.

Yes, Richard, just to give a little bit more color. As you can imagine, the impairment that we took, it's mainly goodwill, sorry, and certain store assets, really related to the Praktiker acquisition. I think if you look at the business, the losses were really driven by Praktiker, also required some integration costs, as mentioned, rebrand, range implementation, some back-office implementation. I think the good news is that all that is now behind us. It's all progressing well. It's all been rebranded Brico Dpt, selling the same products. So I think we're in a good position. Now we expect still the business to be somewhat loss-making this year, but trending well to a breakeven position and then profit.

Next question comes from Simon Irwin from Crdit Suisse.

Three questions for you. The first is the store pick model, and how that's going to work if you are going to move towards more compact stores with limited range as those 2 appear to be somewhat contradictory? The second is just around stores generally is that I've been to them recently. They feel very under-invested, so I guess, it's because the business hasn't kind of committed to 2 stores. I mean do you recognize that? And is there a plan to start reinvesting in those stores that you really want to keep? And the third is on range. Obviously, you seem to be kind of committing to the effect of the kind of unique element of ranges. We've heard endlessly about kind of which bits have worked. We haven't really heard is what bits haven't worked. Can you just talk us through some examples of ranges that haven't worked? And what you think you can do about them?

Yes. Thank you, Simon. I come to your question. I think the first one is around store picking, and that's a topic that is very close to my heart. I have been lucky to spend several years in China. And that's something we learn in China, even in food retail is that you can go very far with a store picking proposition in e-commerce. And that's probably what help us so much during the crisis from day 1, we had decided to accelerate the store picking proposition. Because at the end, you have all the inventories, you have all the range, you can do very efficient click & collect. And furthermore, in the medium term, you will have more trends around the, what I call, the fast home delivery. It is the same-day delivery or few hours delivery. So I'm strongly convinced what I saw, what we -- you see in China, in the United States, what we have been doing at Kingfisher the past weeks that you can go very far in the store picking proposition. I can tell you that today, we are above 50% of the orders today are done with click & collect. I think it's not contradictory with compact stores. Even in compact stores, you have thousands of SKU. They are very flexible model. You can have store by store, a slightly different go-to-market and organization. And even with compact store, the store picking organization can be very efficient. Remind you that if you look at Screwfix, it's probably our most powerful format for store picking. We are speaking about 1,000 square meter store and small warehouse. So I'm strongly convinced that we can go far and the fact that we are moving to a bit more compact store is at all, not an issue. For Capex, I think you're right. What I said previously is that we were a bit too much product-led and not enough retail-led. It means we dedicated big part of CapEx to range reviews. Obviously, we need to continue to do range reviews. We need to continue to push our new products. But I think it's not balanced enough, and we need to, let's say, within the CapEx envelope you saw the past year to dedicate a greater proportion of our CapEx to store maintenance. On ranges as well, it's a very key topic. I've been mentioning that we need to do things together, but I don't believe that we should become one banner. And the different banner, they have different ranges and different size of ranges. Brico Dpt in France, we could consider that around 15,000, 16,000 SKU is correct because it's a discounter. And when you go to Castorama or to B&Q, we speak about 40,000, 50,000 SKU. So I strongly believe that in the long run to have powerful OED is a key role in retail, and it will help us to differentiate. OEB can be unique but can be as well value for money. When we say unique is really special design, a very innovative component or functionality. You could have a tap that save water. So this -- we have unique OEB that we have as well, value for Money OEB. You have OEBs that are a fantastic value for money balance. And that's as well part of our differentiation. On the other side, I don't believe anymore that to run for unification, absolute unification or range is the right direction. We'll have a core range across our banners, but we need to let the local flexibility to B&Q or to Spain or to France to add up local brands. I have in mind a British paint brand that are -- have been decided to be implemented all across our banners that sell very well in the U.K., but that sell only in the U.K. So it was part of a unified range, but it did not fit with the local customer needs. So the unification is a tool. It cannot be the target. The target is always a customer. And that's probably -- the key topic here is the strategy should start with the customer. The group is a tool, is a resources -- is our resources to support the customer proposition. The ultimate goal of a strategy cannot be to build the group, the ultimate goal of a strategy is to bring a better customer proposition.

Next question comes from Warwick Okines with Exane.

I've got 3 questions as well, please. My first question is on B&Q. You mentioned on Page 31, relaunching TradePoint. It's something that's hardly been mentioned in the last 5 years. Could you talk a little bit more about what you see for the TradePoint, which I'm guessing is still about 20% of B&Q overall? The second question is that the previous management team a year ago set out quite a radical role for the convenience format stores. Just wondering if you could flesh out a little bit more, how you see the convenience format going forward? And the third question is following on from the last one. You've been clear about how you think about ranges in terms of unique and unified. But just in terms of the number of SKUs across the whole business, do you think that continues to need to be rationalized? Or do you think there is actually some scope for increasing the SKU count as you move more local?

I think it's indeed, I believe that TradePoint is important for us. And it's -- your comment is very good. It means we never mentioned TradePoint recently because it was not at the center of the Kingfisher strategy. And to come back to my previous point, we start with customers. We start with different customer needs. And part of our customer, they are Pro. They go to Screwfix, but they go as well to TradePoint. So we want to revitalize TradePoint inside B&Q. And I must say the past weeks during COVID, we had very encouraging results for TradePoint. You are right that we are about 15% to 20% of B&Q sales are made through TradePoint. I think there are different categories than Screwfix. You have more heavy products so we can target different customer proposition. And as you understand, in my view, we need to push all our different banners and TradePoint is one of them. Convenience store and overall smaller format is as well a key priority. We strongly believe that in the long run, a big part of retail will be around smaller formats. I think in home improvement, many retailers are working on it. And I still believe it's a key topic for us. And what I wish here as well is to empower our banners to have more trials. You cannot just have one trials in the U.K. and wait for the results to take lessons for the full group. So we will do more trials. It will be done in a coordinated way by the different countries and banners. We might have slightly different solution, and we will learn from them. But indeed, I strongly believe that we need to find a good compact or express format in home improvement. Maybe another comment on that. I believe as well on the medium box. We usually say we have big box, and we have convenience stores. Interestingly, if you look at B&Q, a large part of B&Q are where they would qualify medium boxes that are a very efficient and successful model, and that's a good proportion of the B&Q store. So you could have different size of store, depending on the catchment areas. On the range, I would say there are a lot of plus and minus in my answer. Sorry, I would be a bit specific, maybe too complex. But when you are on discount brand like Brico Dpt, you need to stay on short ranges. And today, probably we have pushed Brico Dpt too high. So the ranges of Brico Dpt should come back to a slightly lower number. But on the opposite, when you are on choice, like B&Q and Casto, as you know, we wanted to become one, we have pushed Casto and B&Q to reduce their ranges. And I think it's not the right direction. We need to allow B&Q and even more Casto France to increase a bit their ranges because today, the choice level we have, for example, in Casto in France is not good, is not enough. At the same time, when I look at my inventory program, you always need to clean regularly your ranges because you have a slow-moving item. You have SKU with a very small level of sales. And those SKU, you need constantly to clean part of your ranges to, let's say, to stay on the active SKU. So I would say, overall, I would not expect a massive increase, I would say, for some of the banners, typically, Castorama in France, B&Q, we are a bit too low at the moment.

And let me just expand a little bit on the last point. Obviously, a subject where -- close to my heart, cost and inventory. If you look at the SKUs, we've got about 200,000 active SKUs. But of those, we probably have 20,000, 25,000, which we don't sell, and we've got another 60,000 where we sell less than 1% of our sales. And the GBP 75 million, GBP 100 million about tied up in inventory there, where there's a lot that we can do to offset maybe a range expansion somewhere else. In addition, I think if your point is to the overall inventory level, clearly, it's higher than we want. The stock days have increased in the last couple of years. But we've got a good plan together with [ Martin Lee ] who is responsible for our supply chain to not only address the shorter-term disruptions, which will cause some of them but also to look at the ranging and deployment, which I just discussed but also at planning, forecasting, making use that -- of the best tools so that we control even better the purchases quantities and our lead time. So I think there's -- it's definitely on our list and there's an opportunity there.

The next question is from Geoff Ruddell from Morgan Stanley.

A few questions, please, most of them very quick. The first couple of quick ones. Could you just give us some guidance on CapEx this year? I understand it's going to be down, but just what sort of level you're currently envisaging? Secondly, should we expect more freehold sales over the next few years? And if so, sort of what -- roughly what sort of quantum? Thirdly, on inventory levels, how big is the opportunity to free up capital from inventory over the next few years. If you could just give us some sort of idea of how much you think you can reduce it? And then finally, a sort of slightly more qualitative question. In terms of the buying function, obviously, the buying function was centralized and then a single buying function was created under the ONE Kingfisher strategy. Do you think that is the right way for the group to run going forward, given the greater freedom within the individual business units to have their own ranging?

Okay. Let me -- hi Geoff, let me start with the CapEx. Obviously, with the -- historically, we're investing about 3% or around GBP [ 350 ] million. We can do a lot for that. Obviously, this year, we're prioritizing. I would say if you'd asked me this question a month ago, I think it would be a lot higher. Now obviously, with the change in [indiscernible] we're still [indiscernible] will look at everything that [indiscernible] buy. [indiscernible] So I couldn't give you the exact answer within the prioritization because we also want to be able to [indiscernible] if things turn [indiscernible] again. But it is [indiscernible] likely to be lower than what we had. But obviously, we [indiscernible] keep watching it on [indiscernible] basis. In terms [indiscernible] of the free wholesales, obviously, we look at opportunities when they are [indiscernible] there, obviously, trading off [indiscernible] do with business. You should see some of that coming through [indiscernible] but nothing we can guide you on today. [indiscernible] of the inventory reduction [indiscernible] obviously, we've got some [indiscernible] plans there. If you look at it historically [indiscernible] and GBP 2.2 billion. If you look at this [indiscernible] year, we had GBP 2.5 [indiscernible] billion. And stock days have gone from [indiscernible] to 127. [indiscernible] some of that, obviously, is the [indiscernible] supply chain model is more [indiscernible] sourcing, which [indiscernible]. That's more difficult to do away with but and I think in that context, there is -- there's more to be done. If you look at the historic inventory level [indiscernible] where we can get there, but it gives you some of the differences that we're looking to bridge.

A few words [indiscernible] on buying and sourcing. I consider [indiscernible] we can build on [indiscernible] what have been done in the last 4 years. [indiscernible] was a very good job has been done on sourcing. We [indiscernible] build up for years 8 group sourcing offices in [indiscernible] and 13 in Central Europe, in Western Europe. So obviously, when you are relying on sourcing [indiscernible] sales. All [indiscernible] that is done together [indiscernible] team, we have quite [indiscernible] across those countries to control and to work with our suppliers. When you are typical international, large supplier, it will be [indiscernible] mention in the [indiscernible] of the presentation that we want to build more long-term [indiscernible] partnership with our [indiscernible] brands. [indiscernible] players that are [indiscernible] across our country, and this would be managed at group level. Now when you are only in the U.K., when you are only in Poland, we [indiscernible] are flexible. And we rely more on the banners for all the [indiscernible] for all the local purchasing. [indiscernible] technical issues. We'll be back in just a moment. Please stand by. [Technical Difficulty] Will now resume the question-and-answer session. Thank you for standing by.

Our next question comes from Anne Critchlow from Societe Generale.

One question from me, please. What is your view on Do It For Me? Are you thinking of bringing installation services back to any formats in the medium term?

Yes. Thank you for the question, Anne. First, indeed, there are -- as I mentioned, there is a very gradual shift to Do It For Me. It is a trend that all the survey we did recently that this shift is rather gradual. But we have brands for the pro. We have Screwfix. I mentioned TradePoints. And if you look at some of our countries, for example, in Poland, the proportion of pro going to our stores is significant. So I think we wish to address the Do It For Me market as a DIY market. I'm a strong believer in services. When you are in big box like Casto, B&Q or -- across our different countries, we need to have compelling service proposition, is just part of our business. I think here, we will restart at B&Q in the U.K., installation for kitchen this year, and that's a priority for us. And I think that's just our business. We need to offer compelling services in our main big boxes. Another area that is interesting, where we see interesting development is what I call service platforms. You have Internet platforms that can put in relationship jobbers or trade people with customers. I think Kingfisher is well positioned with Screwfix and with B&Q, for example, to think how we can bring together those 2 populations. And I think that's a topic at the service platform on which we will do some work in the future.

Our next question comes from Kate Calvert from Investec.

A slightly related question. The previous management did present this GoodHome future vision of DIY, one where the customer needs more project solutions. So is that your sort of view of the way you believe DIY will go? On another subject, in France, Casto and Brico, could you talk about how you see the price propositions differing between the 2 brands going forward? And a final question, just on promotional strategy. It feels as if you're buying into a more promotional strategy going forward. Is this likely to impact future gross margin? Or do you feel you can offset this with future buying efficiencies?

Yes. Thank you, Kate. I start with GoodHome. For me, GoodHome is a good product brand. We have many OEB brands like GoodHome, like Erbauer, like Site, like Titan, and GoodHome is a great brand, but this is a product brand. Again, as I said previously, I don't believe in -- that the world is one, that the customer are becoming one. The customer, they are different. We have different banners, and that's very good. So I don't believe that GoodHome is the ultimate banner strategy. And on the other side, I strongly believe on B&Q, on Screwfix, on Castorama and Brico. On France, I believe, we are lucky to have 2 different banners that are different. So Brico has already a very strong price positioning. And it's a typical discounter organization with low ranges, very efficient logistic organization, very efficient organization in France. Overall, lower cost base, limited services. And that's really the DNA on which we can build. So for me, Brico should dominate by the price, and we should keep our leadership on price for Brico in France and in Iberia. And for me, the promotion in Brico is not the goal. We should have very strong, permanent prices at Brico with arrivage. But you need to know that arrivage is usually not permanent offer. They are spot. They are onetime and one-off promotion. Casto should differentiate for Brico, should differentiate on choice, on great service proposition, greater e-commerce proposition and some trading events. We need -- it's part of our business to create events when you are in a big box format. So on the margin, again, for me, you will have opportunities and you will have additional trading events and probably price investments, for example, at Screwfix. But we have opportunities, I think, on margin. I said we have good capabilities in buying and sourcing, on which we can build further. We will have our mix of OEB, as we wish to grow the proportion of OEB. And our OEB are, as an average, higher margins at the average of the category, it will help for the margin mix. We'll have a bit less range reviews and then a bit less of clearance. So again, I would not guide on margin, but you have, indeed, we want to be competitive overall. We want to have a bit more trading events. We will need to invest for some of our banner positioning, but we have opportunities on the other side.

Next question is from Geoff Lowery from Redburn.

Two questions, please. Can you point us towards a nonfood retailer globally who has attempted to run a multi-banner, multi-format, multi-customer, multi-geography business of scale and has driven it successfully? Second, when we think about Screwfix, you've obviously been on a journey of tactical price investment. Are you comfortable with that being a double-digit EBIT margin business or is there a temptation to do more on margin to drive the overall sales potential of the format?

Yes. Thank you, Geoff. Start with number one. It's very, very clear, the answer. You look at ADEO, they have more banners than us. In many countries, they have 3 banners. I don't want to give you all the name. You can look at that. But they are many, many different banners, and they are creating more banners. Coming from food industry, usually, you have very different banners when you speak about discounter, when you have -- you are in a premium niche. So I think it's, on the contrary, a very common retail practice to be able to support different customer proposition. The world in the future will not be unique, will not be one. We are, in some ways, have to address the local customer proposition. And this is on the opposite, a global trend. I don't want to speak about consumer goods, but look at the consumer goods brand that are buying or developing additional local brands. So I strongly believe that this is a trend you see in retail. So we have diverse banners, but we need to be flexible enough, organized in our business model to power, to support those different banners. Screwfix, I think, is a fantastic business proposition. I can tell you that today, we are below 100. So the price index of Screwfix, when we speak, is below 100, we have very good price proposition at Screwfix, and we will keep it. And we will keep this leadership. And I consider that Screwfix has many options in this customer proposition. We are constantly looking at new technologies, new ideas, to improve our business model. I just said previously that we intend to open more store at Screwfix, probably a bit more than what we thought 1 year ago because when we always update our expansion software calculation, when we optimize our cost operating model, we discover that we can still open a bit more stores. So I think Screwfix has enough resources, innovation to continue to be a very strong business model, while being competitive, and I would say, stay below 100 on prices.

Who's in the peer group that you get to below 100 on the Screwfix pricing?

Well, you can guess that the main peer group is tool station, but we are looking at all the trades, let's say, the trade proposition.

Our next question comes from Georgina Johanan from JPMorgan.

Two questions from me, please. The first, just on market share, since you've opened -- reopened sort of your stores across markets, if you could just comment on how much share you think you've taken or not as the case may be and I assume there are perhaps a number of, perhaps, some of the smaller players that haven't reopened. But anything you can sort of share on that would be great. And then the second, just really how we should be thinking about the cost base next year in the medium term? Obviously, lots of moving parts, and you talked about COVID-related cost savings. You've talked about more sort of underlying cost savings in the business. And then presumably, there were also some costs going in near-term related to sort of maintaining health and safety around social distancing and so on. So if you could just help us think about how we should be putting all of that together, please?

Yes. Thank you, Georgina. I'll start with the market share. If I look at the U.K., we don't have Home Improvement market shares. I will not speak about competitors. I think we decided to close our store on day 1 and to rely on click & collect and home delivery. I think we did that overnight. We had very early -- really overnight. We had click & collect and online proposition for stores, which was incredibly successful because we were up to 4x growth. Then we decided to reopen our stores. And it is true that I think we have been the first one to reopen stores, big boxes in the U.K. in our sectors with, I think, the very extremely well organized health and safety measures. Screwfix. On this side, the same thing overnight, the first day of the confinement, moved to a new click & collect model and later on, has been copied by some others. So I have no market share in the U.K., but I think we were always early versus our competitors. In France, what I would say is we had a very good trend before COVID. If you look at the Banque de France data for years, we have been far below the market. And since November 2019, we have very clear improvement. We are very close to the market, and we even did better than the market in February. Then starting from March, as we decided to close and some of the competitors in France stay open, you know that you have a lot of franchisee in Home Improvement in France. Usually, they have one store, and they all stay open. So it's difficult to really read the commercial performance in France. In March, April and May, because, I guess, it's purely the local franchisees that will gain market share versus ADEO and versus us. But I'm very happy with the improvement in France up to mid-March. On the cost base, 2 comments and obviously, Bernard will complete. When I look on the 5 principles, I said on my page on the Page 29, the fifth principle for us is simpler and leaner. So you see how it is important for us to work on cost to have a simpler organization, but as well to reduce our cost base. So I can tell you, we are strongly determined. I think we have opportunities ahead of us. I think in the short term, and Bernard will give you the figures, obviously, COVID brings a little bit more costs to operate because of the PPE we need to provide. But overall, I think we have a lot of cost opportunities. We have as well, in the previous plan, some transformation costs that will fall away. I don't know, Bernard, if you want to comment on that.

Georgina, I think, it's an interesting question. Let me dissect it in 2 pieces, short term related to COVID. Obviously, interesting for store close and now very strongly selling. So we need to see, when is it going to stabilize and we'll have a little bit better view. But for now, PPE is costing us. We expect about GBP 25 million to GBP 30 million in the year. Obviously, we do have some higher operating costs in the stores at checkout with the marshalling. But interestingly, what we do see, we took some pretty significant actions immediately when the COVID pandemic started in areas such as marketing, head office, IT, GNFR, which till now has helped us offset that. Now we're also hiring more people, given the sales in the summer. So we'll see how that goes into the mix. I think for now, we've seen a reasonable offset, but obviously, we need to see how that evolves in the rest of the year. Obviously, for the longer term, simpler and leaner and growth of retail profit. And in that equation, cost will be an important one. There are [ peer ] areas where we've seen those increase, supply chain, central and support cost, IT, but also property. So those are all under review and that will contribute. Now obviously, there will be some offsets. We're still growing with our stores. There's still inflation. And as Thierry said, there's some change cost that we'll have to incur. But in the mix, we think all that should contribute to the improvement of our retail profits.

Next question is from Adam Cochrane from Citi.

A few questions from my side. I'm a little bit unclear as to how we should measure your success in terms of this plan? And would you have any, at some stage, milestones to share on what you intend to deliver? I can't really get a feel for what you're targeting? How much it's going to cost? And how long it's going to take? So if you think of an investor sitting there saying, how do we know if management is doing a good job compared to what they were expecting? Any thoughts on how we can help measure that? And maybe what some of your measures that you're targeting? Secondly, the staff turnover at Kingfisher has been, I would argue, high at the senior level in the last few years. Have you identified a cultural issue that's created this turnover in terms of senior staff? If you have identified it, have you been able to change it? What are you going to do to get them all behind the new plan to make sure it goes as smoothly as possible? And then finally, interestingly, you talked about doing less, but actually achieving it and getting things done. How does this fit in? You talk about doing less, but getting it done. But the number of initiatives that you're outlining is actually quite a lot. Does that mean this program will take a large amount of time to actually achieve?

Yes. Thank you, Adam. I think what I said is, it starts with growth. I strongly believe that in retail, you always have to start with growth, with customers, with customer needs, and at the end, like-for-like growth. So I think for me, the first criteria on which we want to be measured is the top line growth. And because of that, I would say, the second or at the same level is the absolute retail profit in value. So that's what is driving us today. I don't want to guide and will not guide on the margin or cost ratio. I think we'll -- and we told you that cost inventory are one of our key priorities, and we are committed to that. We see opportunities for the margin, but we should start with growth, with sales, and this should drive our profit in value. Obviously, I spoke about e-commerce, I spoke about OEB. So you can guess, we'll come back to you. We'll discuss about the OEB participation, our online, how much we do on click & collect, how much you order through mobile, et cetera, et cetera. But at the end, this is growth. You mentioned the turnover, I would say -- I don't want to spend too much time on the past. I'm sorry. I think probably when you do such a huge transformation, when you want finally to become one, you can expect that it's a major transformation, it's a change of mindset for the team. So probably, it explains that. And I'm very happy that we built a new GE with a lot of strengths inside Kingfisher with some people coming from outside. When you are in the middle of the crisis, you see the new team. You see all the banners reacted and I think because of -- starting from last year, we started to empower the banners to find the right level for the group to operate in a framework to support that at the end to let the banners be more agile and flexible. I think this is the reason, for which we have been relatively successful the past weeks. And that's the spirit of accountability of the banners, of freedom, of agility and somehow trust, it means we have to trust the teams. We don't need to control the teams. That's why I mentioned trust. So this is probably the part of the culture I want to push in the future. Indeed, I want to do less. Again, I don't want to spend time on the number of initiatives we stopped. I want to do less. We need to spend a lot of time on prioritization. I don't think when you look in detail that the number of actions that are mentioned are many. I think it will be done over time as well. I believe that it's more run race, short term -- 3 months, 6 months, short-term actions. And when you are done with it, you move to the next one. And during the crisis, the past weeks is what we have experienced small number of priorities extremely fast. And probably we are learning from the crisis here as well.

Just one follow-up on what you said the like-for-like growth and absolute retail profit. If you had to choose between the 2, either in the short and the medium term, is prioritizing like-for-like sales growth more important than margin expansion to deliver the absolute retail profit?

I think you need the momentum first. But it's not -- the link between both are coming up in a relatively short time, in my view, when I see the past weeks. So -- but you need the momentum first. You cannot say, well, I think about profit, I will discuss sales next year. We need the momentum of the top line first. But looking at the knowledge of the team the past weeks, I will not say there is years of discrepancy between both. No. I think we will drive both top line and retail profit in the future.

And we will take our last question from -- for today from Simon Bowler from Numis.

I have 3 quite quick ones. First of all, could I just revisit Geoff's question earlier around kind of current, but also kind of more medium-term plans around capital expenditure? Sorry, the line was kind of particularly poor at that point. And secondly, can you give a sense on kind of cash exceptions for this year and going forward? You [indiscernible] would be helpful. And then finally, kind of, reference back on the comment you made around kind of new banners and so on. Is that something that's under consideration yourselves in terms of introducing new banners or acquiring kind of service providers that you can kind of fit into the business? Or do you expect all of the [ structure ] to be organic in nature?

Yes. Thank you, Simon. Maybe I'll let Bernard start and I'll come back.

Yes. The man with the purse starts on CapEx. Look, we -- I think we've got an exciting new strategy. And obviously, we want to underpin it with the right investments. And we've got some great opportunity in Screwfix, in Poland, in e-commerce and different areas. Now I can assure you one thing is that we're looking at everything very strictly. We've got a new group investment committee, where, together with John Wartig, I really scrutinize all the investment and make sure that they are high return and high return on capital employed. So once that comes out there, we've invested, as I said, historically at about 3%, about GBP 350 million, I think, we can do a lot for that. So that's the number I'm looking at. Now we're also looking at extracting cash from inventory, as I just discussed, and working capital that we may put to use. But I think it's a little bit too early to tell. In terms of the cash exceptionals, what you see is it's puts and takes. We've got the proceeds from some of the freehold sales and sales on leaseback in the positive number of GBP 49 million, but there are also some negatives. There's a big one in there in the settlement with the French tax authority of GBP 75 million. And then there's a little bit of transformation and restructuring around GBP 50 million, GBP 60 million that -- and then a number of smaller items that upsets the GBP 188 million of proceeds. If you look at this year, we -- obviously, it's a very different year than we anticipated going into it. It will depend a little bit on what actions we take on our different plans. And it's -- if there were anything, it's more on the restructuring side that we would have to spend.

On the question on banners, on, let's say, other opportunities, I think, first, in my mind, we are an expert of Home Improvement. That's our knowledge, that's our business. And I think it's a good market. You understand, I would not say one more time that I'm [ a strong ] believer that it's good to have different customer proposition. And I think because of this new strategy Powered by Kingfisher, we're able to support different countries, different banners, different customer propositions. I think this is our core plan what we presented today. It's our core plan, it's a plan we believe we have the most value creation. Obviously, we will always keep watching every additional opportunities. That's because we consider we are in the Home Improvement market, and that's our market. So we will keep watching additional opportunities in this market. But the core plan is the one we presented to you today. Maybe last -- yes, operator, just a few last words. Again, thank you for your time. We're really very happy this morning to present our new strategy and to engage with you and to be able to answer your questions and get your comments. We are really glad with Bernard to have been able to do that this morning. I'm happy that, hopefully, in the future, we'll be able to meet face-to-face very soon. I hope you can feel our energy and passion. We are really convinced we have opportunities ahead of us, personally, I'm more happy than ever to have joined this company and these great teams. And I'm very energized and very convinced we will bring back customer growth. Thank you, and [ talk to ] you very soon.

This concludes today's call. Thank you for your participation. You may now disconnect.