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TTG.L 2025 Q2 财报电话会议

Eric Lakin: Good morning. I'd like to welcome everyone in the room and on the webcast to the TT Electronics 2025 Half Year Results Presentation. I'm delighted to be here today to present the results as Chief Executive of TT. This follows a permanent appointment decision by the Board of Directors last month, and I'm grateful for the trust placed in me by the Board and for their support. I'm also very happy to introduce you to Richard Webb, our Interim CFO, who joined us in May this year. It's been a remarkably busy 5 months since the 2024 results were announced in April, and we have made significant progress since then. In the first section today, I will cover the headlines for the half, including the key financials and an update on the actions taken to stabilize the business. Then Richard will take us through the results in more detail. In my second section, I will share more of my early impressions of TT's business. I'll also talk about the overall direction of travel and provide more color on the outlook for the remainder of the current year. We will then take Q&A. Before I start, however, I wish to recognize and thank all of my colleagues for their hard work, commitment and support during what has been a challenging time with significant change. Overall, TT has made solid progress over the past few months, including significant strides with the business improvement in North America, and we're on track to meet expectations for the full year. Our European region has once again performed well as momentum continues, benefiting from our strong long-term positions on several Aerospace & Defense programs. For the Asian region, business operating margins held up through our Lean business program in Suzhou despite being impacted by some order delays for certain customers. With regard to our North American business, there have clearly been a number of challenges to navigate over the past 12 to 18 months. In the first half of this year, we have taken prompt action to stabilize this North America region. In April, we announced that we were launching a strategic review of the underperforming components business. As a result of this ongoing review, we took the decision in June to close our loss-making Plano site in Texas, which lost around GBP 6 million last year. We also established a separate management team for components to focus and provide greater oversight. We stepped up action to turn around the loss-making Cleveland site. We deployed external consultants to undertake a full operational review of the business, which has now concluded, and the local management team is now at full strength. I feel confident that we have turned a corner with the performance of this business. More about that later. Our drive for inventory reduction continues to progress well, which contributed to an excellent cash conversion outcome of 135% in the half and leverage of 1.9x, which is within our target range of 1 to 2x and slightly ahead of our previous guidance. Richard will cover this in more detail. Overall, I would summarize the first half as a transitional period. While the performance in the half doesn't reflect many of the operational improvement actions taken, these actions do underpin both the second half improvement in profitability and future run rate profits. Importantly, we continue to expect full year adjusted operating profit to be in line with market expectations. So let's take a closer look at the operational turnaround projects in turn. Firstly, the Components' strategic review. The Components business has a different operating model and characteristics from the other TT businesses of Power Electronics and Manufacturing Services. We are, therefore, undertaking a strategic review that was started in the second quarter. Components is a more transactional higher-volume business with shorter lead times and therefore, has less future visibility than other parts of TT. The route to market is predominantly through distribution channels, which also tends to exacerbate the stocking and destocking trends. Consequently, I believe it is the right decision to give this business separate management focus within TT, and we are already seeing benefits from this new structure, including tailored initiatives for pricing, marketing and product development. This will ultimately drive improved performance through volume, margin and overhead recovery, especially when we see a positive turn in the industry cycle. We continue to monitor levels of our Components' product inventory held by distribution partners. And as you can see from this graph, encouragingly, the stock levels have been showing a consistent downward trend. Although we haven't yet seen a significant uplift in new order intake, it is encouraging to see a stabilization of order levels. A key action to improve the performance of the Components business was the decision to close the Plano site to stem the losses. Production is planned to discontinue by the end of this year. The factory is currently fulfilling demand from last time buy orders, which also helps underpin the second half improvement for the business. We are now expecting cash closure costs of around GBP 4 million, which is lower than originally anticipated and delivers a payback of less than 1 year. Now for an update regarding the ongoing activities to improve performance at the Cleveland, Ohio site. There has been a lot of activity at this site, and I'm pleased to share some recent data. In fact, Richard and I were there last week along with the Board, and we were heartened to see the significant progress being made. I'm glad to report we have turned the corner in Cleveland, having implemented a detailed improvement plan, which was developed with our local site team in collaboration with the external consultants. The plan incorporates multiple margin and cash flow initiatives, including pricing, production planning, inventory optimization, procurement and efficiency measures manufacturing processes at the site have become more efficient, supported by improved factory layout, process optimization and waste reduction. You can see the outcome of these initiatives in the two charts on this slide, which show encouraging trends. In the blue column chart, productivity, which is defined as standard hours earned divided by total labor hours paid, has been consistently improving during the year and has now reached our target level. June was an expected temporary dip due to a planned 1-week factory shutdown to improve the layout and flow. Productivity improvement has been delivered partly through a reduction in scrap and rework hours, which can be seen in the purple column chart. In addition, we have further reduced headcount at the site, which is down 17% since the beginning of the year. More efficient operations has led to improving service levels to our customers, including on-time delivery, which puts us in a better position to tighten our commercial terms for legacy low-margin contracts. The benefit of this work stream will be delivered over several months as existing contract terms come up for renewal. We have also completed a comprehensive balance sheet review, which has resulted in a largely noncash restructuring charge in the first half of GBP 5.7 million, predominantly related to aged and obsolete inventory. Now that the external consultants have completed their assignment, the improvement project work streams are owned by the Cleveland team. There is full commitment from this team to continue to deliver on the improvement plan, and it was very encouraging to hear updates from them last week. So hopefully, that gives you a good feel for the progress with our short-term priorities, especially as we focus on improving the operational performance in North America. Now I'd like to hand over to Richard to go through the first half numbers in more detail. Richard Webb: Thank you, Eric, and good morning, everyone. This is my first set of results with TT having joined the group in May, and I'm really pleased to be part of the great TT team. It's been a busy few months, but I'm pleased with what has been achieved and the actions taken to stabilize the business. Clearly, it's been a mixed half with continued strong profit progression in Europe, offset by specific challenges at two North American sites and order delays for our Asia business. Now moving on to the group financial metrics. Throughout the presentation, I'll refer to organic performance. This reflects the performance on a constant currency basis and with the impact of last year's Project Albert divestment removed. Revenue was down by 6% organically. If we exclude the Plano site from both periods, we would have been down by 4.3% organically. As already communicated, Plano will be closed by the end of the year. Adjusted operating profit declined by 29.7% organically to GBP 13 million as strong operational gearing in Europe was more than offset by 2 loss-making North American sites. Adjusted operating margins dropped by 180 basis points on an organic basis to 5.5%. Adjusted EPS declined to 1.9p, reflecting the reduction in operating profit and the impact of a much higher effective tax rate in the current year as we cannot currently recognize a deferred tax asset for the U.S. We've taken the prudent decision to focus on strengthening the balance sheet and have decided to continue the pause on the dividend and will not be paying an interim dividend. Return on invested capital was flat at 10%. This metric benefited from a reduced denominator following the December 2024 impairments of North American goodwill on components assets. And just to flag, half 1 2024 has been restated, mirroring the restatement of the 2024 full year we highlighted in our announcement of the 10th of April. This all relates to North America. On this slide, we're showing the revenue bridge, which adjusts for the Albert divestment and FX and shows the makeup of the 6% organic revenue decline. Our positioning on long-term programs in the strong Aerospace & Defense end market has driven the growth in Europe, offset by the issues at two sites, Plano and Cleveland in North America and the order delays impacting our Asia business. Similarly, for adjusted operating profit, you can clearly see the strong drop-through on the European revenue growth. However, this was more than offset by circa GBP 3.5 million of losses at Plano and the Cleveland challenges, which Eric explored earlier. On a more positive note, we're really pleased with the strong cash conversion of 135% in the first half. Net debt, excluding leases, reduced further to GBP 73 million. This is a GBP 36 million reduction since the end of June last year, and we're very happy with the good progress on cash conversion and debt reduction. Free cash flow was GBP 6.4 million. Over the last 18 months, there's been a significant focus on reducing our inventory levels, and this initiative resulted in a GBP 5 million contribution to the half 1 cash flow, putting us well on track to delivering the commitments to a GBP 15 million reduction in inventory by the end of 2026. We closed the half with covenant leverage at 1.9x. As profits recover and cash generation continues, we expect to see a slight further reduction in leverage over the remainder of this year. Looking at the cash conversion in a bit more detail. Working capital movements were a net inflow of GBP 0.9 million in the half. This comprises the GBP 5 million of underlying inventory reduction mentioned just now, partially offset by a GBP 3 million creditor reduction and a GBP 1 million receivables increase. It's a much better picture than half 1 last year, where there was an GBP 18 million working capital outflow. We expect working capital movements in half 2 to remain broadly neutral. Before we move on to the performance of the regions, it's worth looking at end market revenue, which shows similar themes to 2024. Aerospace & Defense continues to grow strongly with the main benefit showing through in our European performance. Healthcare was down 6% organically, driven by the well-documented reduction in U.S. research grants and funding into the sector. Automation and Electrification declined by 14% organically, reflecting end market weakness for our customers. And finally, Distribution, which is where we have continued to experience our main challenges, with a 17% organic reduction. The biggest impact was in the North America region, particularly for our Plano site. As Eric mentioned earlier, we are now seeing distributor inventory levels stabilize. Now moving on to the regional performance. The European region continues to perform well, reflecting our long-term positioning with key customers in the A&D sector. We have built on a strong 2024 performance to deliver a 5% revenue increase on an organic basis and a 34% organic increase in adjusted operating profit. Operating margins have further improved, up 330 basis points, to 15.6%, benefiting from a favorable product mix in the half, good operational leverage on growth and further efficiency improvements coming through. Order cover for the region remains very strong, and we expect to deliver further organic revenue growth for the year as a whole. Clearly, North America has faced another difficult half given the slow components market and the execution challenges at our Cleveland site. However, as Eric has explained, action has been taken. And although not visible in the first half results, we expect to see evidence of these actions in our second half performance. Revenue was down 10% on an organic basis with some good growth in Kansas City, where a successful turnaround has been achieved from the challenges noted last September, more than offset by declines in Cleveland and in Components. If we exclude Plano from both periods, the organic revenue decline is 5.8%. The GBP 5 million loss in the region includes a circa GBP 3.5 million loss at the Plano site, which will be closed in the second half. In the half, we have booked restructuring costs taken below adjusted operating profit with GBP 6.7 million booked in relation to the Plano site closure and GBP 5.7 million for restructuring of Cleveland, which is mainly inventory related. As we look into the second half, a combination of higher revenue, management actions taken, such as the Plano closure and the Cleveland improvement plan means we expect the region to return to profitability in the second half, although the region is expected to be loss-making for the year as a whole. Finally, Asia, which has made another good contribution to the group despite lower levels of revenue, reflecting order delays due to geopolitical and related uncertainties. On an organic basis, revenue was down by 9%. Operating profit reduced by 14% organically, driven by the adverse impact of volume reductions. 2025 is a transition year for the region with the ongoing transfer of production for a major customer at their request from China to Malaysia. This is progressing to plan. The region is still delivering a strong margin performance with margins broadly maintained at 13.2%. Revenue in the second half is expected to be slightly lower as the order delays are expected to continue. The drop-through impact will result in half 2 margins being marginally lower than half 1. I wanted to highlight on this slide the ongoing balance sheet derisking. Inventory has reduced by GBP 22 million in total. GBP 5 million was a result of the sustained hard work on our ongoing inventory reduction initiatives, as I mentioned for the cash conversion slide earlier. These initiatives are expected to further reduce inventory in the second half, and we are on target for achieving the previously stated GBP 15 million reduction by the end of 2026. This is on top of the GBP 14 million reduction in inventory delivered in 2024. Separately, the Plano closure announcement has resulted in around GBP 5 million of inventory being written off below adjusted operating profit and the comprehensive balance sheet review at Cleveland also resulted in a circa GBP 5 million of inventory being written off, also below adjusted operating profit. As previously flagged, profit in 2025 is expected to be weighted to the second half. This slide gives some of the building blocks, not drawn to scale, to deliver the step-up in second half profitability. The Plano and Cleveland sites were significant drags on half 1 profitability. The decision to close the Plano facility and subsequent last time buy activity into the site in half 2 will provide a positive contribution. The Cleveland improvement plan will start to deliver improved performance. We have also factored in the impact of the ongoing order delays for our Asia business. We expect full year adjusted operating profit to be in line with market expectations. With that, I'll hand back to Eric. Eric Lakin: Thanks, Richard. So having spent much of the presentation so far looking back and reviewing the turnaround activities and progress, what's next? It is still early days in my tenure, which has been focused significantly on steadying the ship, but I do want to share with you some of my early take and direction of travel. TT has foundational capabilities, but there remain areas where we still need to improve our operational efficiency and leverage all of our assets across the business. We must continue to develop our people, products and market positioning to drive sustainable shareholder value in the long term. I'll shortly be covering examples of where we have been investing, technology, for future growth. In the meantime, our short-term priorities are clear. We must complete the fix of operational issues, complete the Components business strategic review, including performance improvement and restore confidence and deliver on our commitments to all stakeholders. I also want to mention that early on in post, I empowered the three regional heads by bringing them onto the executive team. This brought clear lines of responsibility and accountability and encourages collaboration across the organization. The executive team also now includes a leader for the Components business. Beyond our short-term focus, we also need to look further out strategically and drive top line growth. I've been impressed by many things that I've observed, getting to know our business and our employees over the last few months, which I think goes to the heart of the underlying investment case. TT is focused on structural growth end markets driven by megatrends and rising demands. While there have been some short-term softness related to geopolitical uncertainties, I believe ultimately that these are the right strategic markets to be in. Our engineering, manufacturing and sales teams have deep domain and application knowledge across these sectors. TT has particularly strong capabilities in Power Electronics, including Conditioning and Conversion and Electronic Manufacturing Services, known as EMS. TT offers high specification, highly customized electronics for mission-critical applications, which provide strategic advantage through differentiation. We collaborate with our blue-chip customers on long-term programs, and I believe there's a real opportunity to accelerate targeted investment in innovative technologies and products compatible with customer needs. A good representation of TT's strength is demonstrated by some significant recent customer wins, including a GBP 23 million contract this month with long-standing customer Kongsberg. Next, I want to remind you of the broad customer relationships we have across our end markets, which is so important for the business. We are proud to work with many blue-chip customers with whom we have long-term relationships. In fact, our top 10 customers have all been working with us for over a decade and many have been partners for 20 years or more. First, in Healthcare, Asia has secured some notable contract wins this year, reinforcing our regional strategy supporting life sciences OEMs with local production capabilities. In North America, our Minneapolis site is working with a medical equipment partner on next-generation surgical device development that use electromagnetic tracking technology. In Aerospace & Defense, we see continued growth opportunities with the NATO commitment to raise Defense spending targets from 2% of GDP to 5% by 2035. And we're also seeing momentum in civil aviation, driving demand for new aircraft and spares. For Automation and Electrification, we are well placed for growth through the cycle with strong brands across different specialist sectors, including semi equipment, power, security, rail and data centers. This chart may be familiar to you, but it illustrates our business model and customer spend patterns and how we seek to partner to support our customers from the concept stage through to full-scale production, leveraging our global footprint for engineering and manufacturing at each stage of the product life cycle. This development path varies by market and some programs can extend for many years with high barriers to entry in regulated markets, which provides visibility over long-term revenue streams. We have established a group-wide engineering and R&D function to leverage TT's expertise across all regions with product road maps for all sites. I've been greatly impressed with the technology and industry experts at our sites who help develop solutions for our customers' challenges. The image on the left shows how TT combine a fully integrated offering. For example, the use of our magnetics devices on our PCB assemblies, which along with our hybrid microelectronic devices can be designed into high-level assemblies. A core product of TT is our power units, which can incorporate our own PCBs as well as TT connectors and cable assemblies. On the right, it is an example of our customer-led approach to investment. Silver sintering is a key manufacturing capability that enables cutting-edge power modules for critical applications to be fabricated using the latest silicon carbide semiconductor devices. This represents the next-generation technology, enabling higher power with superior reliability and thermal performance within a smaller, lighter package, which are particularly valued by Aerospace customers. Another investment example is Altitude DC, our high-voltage direct current power system that was launched at the Farnborough Air Show last summer. We developed this in collaboration with the Aerospace Technology Institute as well as shared investment with them. This platform provides efficient and reliable power conversion solutions to enable longer duration flights at higher altitudes in civil aerospace, defense and air mobility vehicles. The modular design means reduced development time and costs and simplifies the qualification process. So that's just a couple of examples I wanted to share with you to illustrate our investment in the future. Let's finish with an outlook for the remainder of the year. We are clear on our short-term focus to deliver improvement in operational performance and margin and have taken decisions to accelerate this. This includes a component strategic review and the planned closure of Plano as well as the Cleveland turnaround project. Very important to me this year is -- and the future for TT is that North America is expected to show a step change in performance, leading to a return to profitability in the second half. Yes, it's still expected to be loss-making for the year as a whole, but it's good to have positive momentum in the region. This sequential improvement, together with further second half progress in Europe and a resilient contribution in Asia is expected to underpin a significant uplift in profitability in the second half of this year compared to H1. As stated earlier, we expect adjusted operating profit to be in line with market expectations. While our short-term priorities are clear, I plan to share further thoughts for the longer-term strategy in the new year. In conclusion, following my first few months in the business, I am convinced that we have a robust platform for growth with leading products and capabilities, deep customer partnerships in attractive end markets, and this makes me excited for TT's future. So now we're happy to open up to questions, initially from those in the room. There's also a facility for those on the webcast to submit questions, which we'll cover after those in the room. Thank you. Eric Lakin: Okay. First hand up. Mark Jones: I'm sure that's working. Mark Davies Jones from Stifel. Could I ask about the Asian business, please? Because clearly, the U.S. has been a priority and you're getting scripts with that, but delays seem to be drifting onwards in Asia. When does delay come -- become work that's not coming your way? And if you're relocating business from Suzhou to Malaysia, what does that mean in terms of ongoing capacity utilization at the China plant? Eric Lakin: Yes. Thanks, Mark. So overall for Asia, First, in terms of the production transfer, that's going very well and to plan. That was quite a significant transition for one customer in particular. It represented GBP 20 million or more of annual revenues. That will be complete this year. There was some safety stock that was purchased last year in the first half of this year. So that will contribute to some short-term softness as that safety stock is sold and consumed by the customer. I mean, overall, that does mean there is capacity for the Suzhou site. We have 4 SMT lines there and a very capable workforce. We have taken some modest adjustment to the headcount there to counter the transfer of business from Suzhou to Kuantan. But the underlying growth, if we look at the -- there's two large customers in particular, where we're seeing some softness in end customer demand patterns, partly due to the geopolitical uncertainty we've been talking about, specifically with the ongoing uncertainty around tariffs, it's difficult to know where they will be in 3, 6, 9 months' time. Some of the decisions made to agree the supply chain and location of fabrication has meant that there are some delays in those orders, which feeds into short-term softness in revenue. The good news is we're not losing business. We have a diverse portfolio with different geographies to provide offshore, both China and Malaysia, but also nearshore with Mexico, with the Mexicali EMS facility, but also indeed Cleveland. We're having increasing discussions with some of our key accounts and new accounts about onshoring production and EMS into the Cleveland site. So we're doubling down on our regional Asia for Asia projects. In fact, we're increasing our resource for business development headcount in Asia, including China, to grow our book of business with local customers in China. And we're having some good early traction with wins within the region so far. So I think I see it as temporary short-term softness in Asia, which we've not seen before due to specific end customer demand patterns and uncertainty. But over time, and as we go into certainly the second half of next year, we see a return to growth from our existing customers, but also as we see benefits for new business opportunities and new customers. Mark Jones: And maybe one for Richard. Lot of moving parts in the numbers. I wouldn't say I've read every page of the release yet from this morning. But in terms of setting the baseline for revenues, obviously, you restated the first half. Have we got full restatements on the same basis for the full year numbers? And how much of that revenue is Plano? So how much drops out next year from that? Richard Webb: So we're not going to give specific guidance on Plano specifically. But in terms of the restatement, so we've restated 2024 half 1 on a consistent basis with the 2024 full year restatement, which is about GBP 1.1 million of revenue that was taken out of the 2024 half 1. Vanessa Jeffriess: Vanessa Jeffriess from Jefferies. Just to start on a really positive note in Aerospace & Defense, obviously, seeing a lot of momentum there. Can we continue to expect double-digit growth over the next couple of years? And is the margin improvement in Europe all from operating leverage? Or is there more self-help to come through? Eric Lakin: Yes. So in terms of the first question, we're seeing continued growth momentum in Aerospace & Defense, as you'd expect, particularly on the Defense side. That's largely in Europe, but also increasingly in North America as well. We're getting defense contract wins in Kansas and Cleveland. I mean, this month, in particular, is a particularly strong month. We'll have -- this year will represent a record order intake for our Europe business. So certainly very strong demand and a lot of these contracts are multiple years. It gives us good visibility over the future years and particularly underpins a continued growth into next year. I couldn't -- I wouldn't comment on double-digit growth for the next 2 years because it's -- you're starting from a higher base, but we certainly expect continued growth over the next couple of years, if not beyond, which is very good from that tailwind. And ongoing discussions with customers, we expect to see more of that. I think in terms of the operational leverage, it's largely down to increased revenue and over a well-maintained cost base. There's some other initiatives as well in there, partly mix. We have some increase in some spares, which is higher margin, but also some other self-help initiatives, including some pricing reviews and changes, which helps the margin as well. Vanessa Jeffriess: And then on Asia -- obviously, you've just explained all the drivers behind the delays. But I think it's fair to say that your decline was maybe a little bit bigger than some of your peers. Coming into the business, do you think that you are as well set as peers to deal with the volatility that's arisen from tariffs? Richard Webb: Yes. It's -- I mean it's a fair observation. I'd say we've got specific large customers that have impacted the revenue for this year. And in particular, it's the extra stocking and safety stock from last year is partly contributing to that. And we're seeing, as I mentioned, some order delays. And some of these -- we're having live discussions with them right now. They're looking ahead and trying to understand, for example, U.S. import duty from Malaysia is currently 24%. Is it going to go down to 15%, 10% or less or stay where it is? So the -- we're set up, so we don't incur direct tariff costs through our Incoterms, it's a customer that bears those costs. So we don't see that, but our customers do. And it can be, in some cases, quite significant. So they are choosing to consider where to place business with us and whether that's Asia or Mexicali or Cleveland. So we are seeing that perhaps more acutely than the general market because of the nature of some of our customers. There is some also compounding that some specific end customer softness, particularly in healthcare, you've got some reduced R&D spend in North America, which is affecting some of the equipment devices that we sell into in OEMs. And for other specific reasons, some current softness in the automation electrification space. But we don't expect those conditions to prevail for the indefinite future and expect -- I think -- we expect certainly, by the middle of next year, return to growth for the Asia region. Vanessa Jeffriess: And then just finally, on North America, you said that for a while that there's been no customer losses. But maybe if you can talk about how your customers are responding to hearing the business under review, under separate management? Eric Lakin: For the Components business specifically? Vanessa Jeffriess: Yes. Eric Lakin: It's -- yes, I think the -- I mean, the immediate impact was quite acute in Plano. We've got some last time buys, which I mentioned at premium pricing, which is obviously contributing to the second half uplift. But more generally, what -- because it's quite a different business, as I've explained, it hasn't really had the focus to support our customers as it might have done in the past under the previous divisional structure. So by addressing that and having separate management and focus on individual customer conversations, both with the distributors, which is most of the -- mostly sold through indirect channels but also end customers. We have a lot of touch points with them on engineering, product design, pricing. We're already seeing the benefits of that anecdotally and more generally. And we've just had very little marketing, for example, in that business when you're competing with much larger competitors, Bourns, Vishay and so on. It's really important to keep getting the message out there of new products and the capabilities and the specifications of those products. So that's certainly helping. In terms of the fact that it's under strategic review, we're not -- I mean, it's not really impacting our day-to-day business. I mean my position on that is we're keeping options that -- the priority is to improve performance. And whatever we choose to do in the future, whether or not we decide with the best owners, it will only help that. Unknown Analyst: Just starting with capital allocation. Clearly, deleveraging has been a key aspect of that. I was just wondering if we could get any color on what -- whether there's kind of any key milestones we should look out for the resumption of the dividend? I'll just start with that one. Eric Lakin: Yes, fair question. Yes, so I'm not going to predict when we would resume the dividend at this point. But it's fair to say some of our investors really value the dividend, and it's a good discipline as well to distribute surplus cash. We will review it at the end of the year. And as Richard outlined, we expect to continue to deleverage at the end of the year, and we'll reflect on the -- I mean, the priority is to get balance sheet strength and support the lending banks and make sure that we got very good covenant headroom. But at the right time, we'll certainly look to reintroduce the dividend. Unknown Analyst: Perfect. And just one more, if I may. I mean, it feels like the business is stabilizing as you've kind of alluded to in your presentation. I guess I'm just keen to get more of a sense of how you're kind of managing the culture through what's been obviously a very turbulent time. And are you still able to kind of attract and retain the best talent? And what are you doing around that? Eric Lakin: Yes, that's an interesting question. Yes, it's really important for the organization because it often gets overlooked with a huge amount of change and disruption at the top management team within the organization, with the plant closure as well. I've made it a very high on the list to communicate a lot internally. We have regular meetings. We've reinstated pulse surveys around engagement and responding to those -- the most useful part about that is you get the sense of how people are feeling and what to do about it. And the [ heart ] of it, as you'd expect, is communicate, communicate. And we're doing lots of explaining what we're doing, why we're doing it and the benefits of what we're doing and making the business stronger. And that's really, I think, resonating. We're seeing improvement in the survey results that are coming through. And I make a point of having regular town halls, both all hands and the sites I go to. And I think what's the -- how does that manifest? The attrition rates we are seeing are higher than I'd like them to be generally. But if you look across the manufacturing sector as a whole globally, we are no worse, about -- better than the average. So it is a challenge, particularly some of the sites we're at. It's notoriously difficult to attract and retain people at all levels, including direct labor. But I think we're actually -- we're measuring up okay. There's room for improvement. But I'm feeling it's getting appropriate attention because it really matters, obviously, business is heart of it is our people. Harry Philips: It's Harry Philips, Peel Hunt. A couple of questions, please. The -- just thinking about tariffs in Asia and what have you and obviously, the relocation of some business into Malaysia. And I appreciate sort of -- it's directly outside your control, but do you envisage sort of going forward that there might be more sort of moves out of China by some of your customers and the need to follow? So I suppose the question is, how much sort of residual capacity have you got outside China to sort of facilitate that change? Eric Lakin: Yes. No, great question. We have -- I mean, specifically, that one customer move was largely triggered, not so much by tariffs, by the U.S. CHIPS Act and wanting to not have China in the supply chain and IP. So we've addressed that, and that's been well received by the customer. Not seeing any signs of other customers needing to do that in the other sectors we're in. So it really becomes -- and obviously, the quality, in particularly our Suzhou factory is best-in-class. So generally, the decisions being made are economic. And we're not seeing any -- expecting other known transfers from Suzhou. I think, in terms of capacity, we've deliberately made a point of investing in capacity to support changes. So we -- the SMT line in Kuantan is now being well utilized also in Mexicali, EMS, and we've got spare capacity in the PCB assembly for the Cleveland site. So we're well placed. I mean our issue fundamentally is we need more orders and grow the revenue and volume. And that's the most fundamental way of improving our operating profit margin, by getting the leverage up and covering our overheads. So we are not short of capacity. That's not a constraining factor. So one of the things I'm doing now is a reorganization of the sales and marketing team, and we're investing more in business development resource across all regions, in particular in Asia and North America, to fill the factories. So we're well placed for any further moves or increases in orders. Harry Philips: And then second question is just on working capital, so apologies in advance. Just -- I think your comment was that working capital will be broadly flat second half. And I'm just thinking, against the context of last time buy Plano, where clearly, by the year-end, you'd expect obviously cash in, if you like, against that last time buy, maybe it runs over a little bit into next year, but sort of -- and then also the rundown in the sort of safety stock. You were talking about in the context of the Asian switch, which doesn't sort of makes flat working capital sort of seem -- well, I would hope to expect maybe a reduction rather than just simply running at the same levels. Richard Webb: So we're not going to see sort of 135% of cash conversion for the full year as a whole, but we will see very strong cash conversion. So there will be a kind of positive contribution for the full year. We will be seeing kind of balance sheet delevering continue, and we'll be within the kind of range of 1.5 to 2x but will be a kind of decrease from where we are at, 1.9x. So there will be a kind of good strong full year cash conversion for the group. Eric Lakin: Yes. I mean specifically on second half working capital movement, I don't want to share -- go into the details. But I think there's certainly, the last time buy opportunity you referenced, and that is very much back-end year loaded. So a lot of the receivables we picked up in the second half of the year. So I wouldn't be surprised to see a growth in receivables at the end of the year. But it's -- we continue to drive down all parts of working capital where we can. And there's more to go with inventory reduction over time as well. Okay. Any other questions in the room? Otherwise, Kate, have you got any on the webcast? Kate Moy: Yes. A question from Joel at Investec, and we touched on it a little bit. But can you talk a little more about the weakness in the automation segment? And to what extent is that an end market customer issue as opposed to a TT-specific issue? Eric Lakin: Yes. So I mean, it's -- I would say, broadly, it is specific end customer demand softness. If I look at the -- in effect automated electrification is a lot of specialty industrial sectors that includes semiconductor equipment, in particular, rail, power, also bespoke postal equipment, smart card readers, ePassport. And we've got -- there's a handful of customers that they've just got current reduction in their end customer demand for different reasons. It's not -- certainly not a TT issue. We haven't had any issues in terms of production, supply, quality, on-time delivery. And so we are delivering to the customers' demand, requirements and production plan. And -- but ultimately, as I said, that sector should be growing. We're seeing -- I mean, it's probably without exaggerating the point, the semiconductor equipment market, some parts of the semi sector are going extremely well, as you'd expect, given the demand for increased amount of semi chips and AI and so on. Within that, though, the second order of the growth in the semiconductor equipment does vary by customer. And the U.S. CHIPS Act whilst offering significant opportunity, I think the last number was around $100 billion investment, there's so much uncertainty around that, and it takes time and a lot of planning to build up new fabs in the U.S. It has caused a pause in demand for a couple of our customers. So that's a contributing factor. So again, we expect long-term trends to improve, but short-term softness. So that's it from the webcast. Any final questions in the room? In which case, thank you all very much for coming. It's great to see a full turnout. That's heartening. Thanks for the questions, and I look forward to chatting to you later on. Okay. See you next time. Richard Webb: Thanks, everyone. Eric Lakin: Thanks.

Operator: Good day, ladies and gentlemen, and welcome to Kingfisher plc's Half Year 2025 to 2026 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. Thierry Dominique Garnier: Hello, everyone. Today, I am at our Camden Screwfix store in London, and it's great to review the progress of our Screwfix City format with the team. So thank you for joining us for Kingfisher's half year results presentation. Bhavesh and I will take you through our H1 results, our outlook for the year and provide an update on our key strategic initiatives. Following this presentation will be our usual Q&A. I want to start with an overview of Kingfisher's attractive investment story, which drives our medium-term financial priorities and outlook. We have the #1 or #2 leading positions in our markets, and those markets worth GBP 160 billion, 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 maintain 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. 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 banners. Our trade strategy is now very much proven and delivering results. Our online, 1P and marketplace platforms significantly increase product choice for our customers and offer fast fulfillment times. We also see exciting potential in Retail Media with an ambition to grow Retail Media income to up to 3% of Group e-commerce sales. And finally, we continue to expand our store footprint, primarily through the expansion of Screwfix and growth opportunities we see in Poland. Bringing all these elements together, we are committed to our financial priorities, which are to grow sales ahead of our markets, grow adjusted profit before tax ahead of sales and to generate strong free cash flows. We have a disciplined capital allocation framework, prioritizing investment in organic growth, maintaining a strong balance sheet and returning surplus cash to our shareholders. So moving to our results. You will have seen from our RNS published this morning that we have had a strong first half. And there are 3 key messages I want to highlight: First, our strategic growth initiatives are driving market share gains, a key leading indicator of our progress beyond macroeconomic trends. While several factors have contributed to our performance in the half, I'm 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. In addition, we continue to strengthen our retail fundamentals. This includes successful innovation across our big-ticket categories, competitive pricing and ensuring high product availability in store during period of peak demand. Second, we are seeing some healthy growth indicators across our business. Growth in the half was of high quality, driven by increased volumes and transactions rather than inflation. In our core categories, we have seen consistent quarter-on-quarter growth, including a tenth consecutive quarter of underlying growth in the U.K. Q2 marked our third consecutive quarter of underlying growth in big-ticket sales, and we have a strong order book at the end of the half. Our banners in France and Poland are also showing improving sequential trends despite operating in more subdued markets. And third, we are raising our profit and free cash flow guidance for the full year. Our expectations for markets for the year remain consistent with what we outlined in March, whilst mindful of mixed consumer sentiment and political uncertainty. We are also accelerating our share buyback program due to the combination of our strong free cash flow generation and some one-off positive cash inflows. Back in March, I said that Kingfisher was in its best operational shape in years, and I stand by that today. While there is much more to do, our H1 results and our improved guidance demonstrate the momentum in the business and our confidence in the future. I will now hand over to Bhavesh to talk you through our H1 financials and full year outlook. Bhavesh Mistry: Thank you, Thierry, and good morning, everyone. Let me start with an overview of our performance in the half, starting with the top line. I'm pleased with the relative outperformance of our banners in the half and our sales growing ahead of our markets. Total sales for the group were GBP 6.8 billion, with like-for-like sales up 1.9%, excluding a negative calendar impact of minus 0.6%. We delivered an adjusted profit before tax of GBP 368 million, up 10.2% in the half and adjusted EPS of 15.3p, up 16.5%, driven by gross margin accretion of 100 basis points and retail operating margin accretion of 40 basis points, alongside a 4% uplift from our share buyback program. Free cash flow generation in the half was GBP 478 million, an increase of 13.5%, and net leverage stood at 1.3x at the end of the half. Turning now to our sales growth, starting with a view by category. All of our categories delivered growth in H1. Core Products represent around 2/3 of our portfolio, and we were pleased to see improving sequential growth trends with underlying like-for-like flat in Q1, rising to 1.2% in Q2. Key Subcategories which performed well in the half include tools and hardware and indoor paint. Big Ticket delivered a third consecutive quarter of underlying growth. That growth has been driven largely by group-led innovation in our kitchen ranges and some improvement in the kitchen and bathroom market. Our order book also ended the half in a positive position. Seasonal sales benefited from record warm weather in the U.K. over the spring months. Clearly, there was some pull forward from Q2 into Q1 as we called out in our Q1 trading update. It's worth noting that we'll be lapping the strong seasonal performance in Q1 next year. Turning now to our sales by geography. In the U.K., B&Q delivered an excellent first half, significantly outperforming the market and driving growth across multiple fronts. These include TradePoint growth of 6.9%, fueled by our enhanced loyalty program and an increased investment in trade sales partners to help us better serve trade customers. E-commerce growth of 23.8%. Our 1P and 3P operations work together to enhance conversion, increase customer traffic and drive mutual growth. Benefits from the closure of Homebase and transference of customers to B&Q as well as the opening of the 8 stores we acquired, which our team rapidly opened in order to be ready for peak trading. And of course, seasonal product sales, which benefited from good weather in Q1. Screwfix delivered a strong performance across both quarters. Our Screwfix teams have executed at a high level, enhancing the customer proposition through targeted marketing and promotional campaigns, competitive pricing, robust inventory availability and deeper engagement with trade customers via app-driven reward initiatives. In France, against a subdued consumer backdrop, we were encouraged to see improving sequential trends in our like-for-like performance. Castorama like-for-like sales declined by 1.4% in the half and were flat in Q2. Amidst the soft market backdrop, Castorama saw an improving trend in core sales across the first 2 quarters and strong seasonal performance. As you'll hear from Thierry, following testing last year of our trade customer proposition, CastoPro, we've now rolled it out across our entire estate. Brico Depot's performance was in line with the market with an improving like-for-like trend across the half. We saw an elevated level of promotional activity during Q2, which impacted Brico Depot's everyday low-price model. Brico also has a greater weighting to building and joinery products and a lower exposure to seasonal categories, both of which are less supported by weather experienced by France in H1. We feel good about the Brico model with its clear customer offering of discounted prices and high product availability. Turning now to our business in Poland, where we remain very excited about the medium-term growth opportunities. Castorama Poland is a market-leading banner with opportunity to increase space, whilst building in both trade and e-commerce. We had a slow start to the year with poor weather, high interest rates and political uncertainty weighing on the economic backdrop. However, conditions improved in Q2 and have now stabilized on an underlying basis. We continue to make progress on our strategic initiatives. Trade penetration has reached 25%, and we've further grown our e-commerce penetration following the launch of our marketplace offering in January. We have a slide in the appendix to this presentation covering our other international markets. But to summarize very briefly: Screwfix France had a strong like-for-like growth of 52% at the store level, in line with our expectations. We completed the sale of Romania 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. As I said in March, we'll 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 half. Let me give you a few examples. At a gross margin level, we've seen benefits from group buying and sourcing efficiencies, which contributed meaningfully to 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're on track to reduce headcount 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. Let me now turn to our profit performance in the half. Adjusted profit before tax rose by 10% or 19% when excluding the GBP 24 million of one-off business rates refund received by B&Q in the first half of last year. One of the main drivers of our first half profit growth is 100 basis points of gross margin expansion, which is driven by positive top line growth and our margin initiatives, some of which I outlined earlier. In March, we said that we faced around GBP 145 million of cost headwinds from higher wages, inflation and taxes. These headwinds are playing out as expected, including the increase in U.K. national insurance costs in April. I'm pleased to say that in H1, our teams have done an excellent job mitigating these headwinds. The gross margin drivers, combined with our structural cost reduction program, enabled us to deliver 40 basis points of retail operating margin expansion to 6.6% and adjusted profit before tax of GBP 368 million. All of our banners delivered margin expansion in the half. In the U.K., margins were up 10 basis points or 80 basis points when adjusting for the B&Q business rates refund from last year. France delivered a 20 basis point margin improvement and Poland saw margin growth of 10 basis points. As is typical for our business, profit delivery remains weighted towards the first half. That seasonal pattern has been amplified by the strong Q1 trading I mentioned earlier. We also have a more H2-weighted marketing and technology investment this year compared to last. This is to support our strategic priorities. In the second half, we also see the full impact of the U.K. national insurance contributions increase following its implementation in April. EPS growth in the half was up 16.5%. Our profit delivery has driven around 2/3 of our EPS growth, while share buybacks contributed 1/3. In March, we announced our fourth share buyback program of GBP 300 million, and we've already repurchased GBP 100 million of our shares under this program. Given our strong trading performance and some material one-off cash inflows, we plan to accelerate purchases in the second half with the aim of completing the program by March 2026. Turning now to our group cash flow, starting on the left of this chart. We generated EBITDA of GBP 744 million. The change in working capital 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 days by 6.5. 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 spend totaled GBP 145 million. Together, these drove free cash flow of GBP 478 million in the half, 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. This reflects not only our profit delivery in H1, but also the timing of marketing, technology and CapEx investments, which are more second half weighted versus the prior year. These investments are supporting our strategic priorities and will ensure that we enter 2026 with strong momentum. As mentioned earlier, we also benefited from 2 exceptional nonrecurring cash inflows in the half, which sit outside of our free cash flow. First, net proceeds of GBP 33 million from the sale of our Romanian business in May. Second, proceeds of GBP 64 million from the successful resolution of an historic tax issue in relation to EU State aid. Net cash flow in the half was GBP 277 million, an increase of 120%, 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, an increase of 8% year-on-year. Turning to our market outlook and guidance for the year. As Thierry mentioned earlier, the market outlook scenarios that we set out in March remain unchanged. In the U.K. & Ireland, we've seen a resilient consumer in H1, but remain mindful of potential softness in the market given both uncertainty around the upcoming autumn budget and rising inflation. To date, the market has delivered low single-digit growth, and we continue to expect market growth to be in the range of flat to low single digit. In France, the market has remained subdued in H1. Although we saw lower interest rates, higher mortgage lending and increased housing starts in the half, French consumer sentiment remains subdued amidst an uncertain political environment. We continue to expect a market of low to mid-single-digit decline to flat for the year, an improvement on the 7% market decline we experienced last year. In Poland, political factors and high interest rate and mortgage rates weighed on consumer confidence in the first half, impacting discretionary spending. However, we're now seeing some early signs of recovery, supported by 3 interest rate cuts this year and continued real wage growth. We reiterate our market outlook of low single-digit decline to low single-digit growth. And as you can see on the right-hand side of this slide, on the whole, our banners are tracking ahead of our markets for the first 6 months of this year. Now let me turn to our updated guidance for the year. Our full year market scenarios remain unchanged from the guidance that we set out in March. Given this and our strong start to the year, we're raising our full year profit and cash outlook today. We now expect to deliver the upper end of our adjusted profit before tax range of GBP 480 million to GBP 540 million. On free cash flow, we've already delivered the upper end of our full year range of GBP 420 million to GBP 480 million in H1. This reflects the phasing of our profit delivery and the H2 weighting of CapEx investment. Given the strong performance, we are raising our full year free cash flow guidance to GBP 480 million to GBP 520 million. And finally, our stronger cash position and nonrepeating cash inflows enables us to accelerate our current GBP 300 million share buyback program. We now expect to complete this within 12 months, which is by the end of March 2026. I'll now hand back to Thierry. Thierry Dominique Garnier: Thank you, Bhavesh. 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. We continue to progress at pace with all our strategic pillars, which we outlined in our RNS. For today, I would go deeper with trade and our digital ecosystem, a group strategy that we applied in the U.K. first and serves as a successful blueprint that we have 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. Through TradePoint, CastoPro and other dedicated trade formats, we are leveraging our existing store footprint to serve this valuable customer base. Our trade strategy enables us to grow our market share and to increase store sales densities with little to no additional CapEx. As a result, our trade business is both revenue and margin accretive at the 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. Retail Media also represents a compelling opportunity. Our ambition is for Retail Media income to reach up to 3% of the group's e-commerce sales with minimal capital employed, it is highly margin accretive. Trade now represents 28% of group sales, reflecting the continued development of our trade proposition across banners. We are expanding dedicated trade space within our stores and improving our product range, including high-quality trade-specific OEB and leading branded products. 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 have also improved our service offering, including enhancements to our Pro app, our direct-to-site delivery options, our 2 rental services and we have launched new trade financing solutions. And none of this is possible without having the right people. We have 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, our trade sales grew by plus 11.9%. Looking at our banners, TradePoint at B&Q now represents 22.4% of total B&Q sales with 6.9% growth in H1, and this is supported by a strong increase in sign-ups for our loyalty program and our successful trade-up accounts for around 25% of its online sales. We now have 77 trade sales partners in store, a 75% increase versus this time last year. And we continue to invest in this area and are recruiting an additional up to 40 trade sales partners in H2. We continue to leverage the learnings from the U.K., in France, in Iberia and Poland. As you can see, we now have dedicated loyalty schemes in every banner. In Castorama France, we have, in just a few months, rolled out our trade offering across the entire state. At Brico Depot, our trade penetration is now over 12%, an increase of 260 basis points in the half. We have created a trade desk in every Brico Depot stores with 131 dedicated trade colleagues. And in Poland, our trade penetration is over 25%, a circa 10 percentage points increase in H1. And we have large CastoPro zones already in 14 stores. And turning now to the broader digital ecosystem we are building, and it starts with a strong first-party e-commerce proposition with our stores at the center. We have 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. And in parallel, click & collect generates more traffic to our stores. We have developed a digital hub store model, which ensures excellent availability of product to e-commerce orders, and we keep investing in agile technology to improve our online conversion. All this in turn drives increased traffic, which supports our third-party marketplace offering. So on marketplace, we are offering a large choice with several millions of SKU. We can confirm that this large choice in turn generates more traffic to our website, all of which fuels additional 1P sales. Our stores play an important role for marketplace to 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 engagements. 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 support 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. Moving to Slide 21, which sets out some statistics around our digital ecosystem. We leverage our stores for speed and convenience with 93% of 1P orders picked in stores and 88% delivered through click & collect. This enables click & collect in as little as 15 minutes at B&Q, 1 minute at Screwfix and 20 minutes site delivery with Screwfix print. Our Group marketplace GMV is up 62%, and B&Q marketplace makes a retail operating profit of around GBP 7 million in the half. 50% of marketplace customers are new to our website with around 15% subsequently buying a 1P product. So we continue to grow this platform and have started onboarding cross-border vendors across the group to provide even more choice for our customers. We have signed up 11% more loyalty members since July last year and are seeing a significant increase in app-driven revenue and sales from AI and data-driven recommendations. We are rapidly scaling our Retail Media. We have also created a vendor platform, Core IQ, to monetize our data. So as you can see, we are really excited about the potential we have here as it uses our assets and will generate long-term growth and value creation. So moving to Screwfix France, where we see strong like-for-like growth in stores. We are happy with the progress with 52% store like-for-like growth in H1 and 74,000 unique customers, a 30% increase year-on-year. We believe the key to its long-term success is leveraging all the things that make Screwfix great in the U.K.; the best prices, unrivaled fulfillment and a wide selection of products. We are seeing good momentum across all KPIs with stronger customer retention, growing national brand awareness and over 17,000 sign-ups to the trade loyalty. We can see evidence of this continuous concept improvement with our second cohort of stores growing at a faster pace in year 1 than the first cohort. All this is in line with our expectations and makes us confident about the future of Screwfix in France. 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 OEB products enables us to make higher gross margins than the branded equivalent. This affordable innovation has driven a large part of big-ticket categories growth and the good order book Bhavesh and I mentioned earlier. Slide 25 provides an illustration of these new ranges. 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 are 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 improving the performance and profitability of Castorama. And we have made excellent progress in our plans 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 have focused our energy on delivering against our plans, gaining market share and managing effectively our gross margin and cost. In H1, specifically, we grew our market share in France and improved our retail operating profit margin by 20 basis points to 3.5%. 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 of the pace of the market recovery. Despite current headwinds, we remain optimistic on the outlook for the market in the medium term. Our new management teams at both banners are working at a high level and with fast pace to make us more competitive and more efficient. I'm very proud of what is delivered by the teams. As you can see, we are growing sales densities across both banners. We are seeing an improved customer NPS, and this is supported by our trade and e-commerce initiatives. Looking forward, we are focused on strategic range reviews at Castorama and the launch of a new e-commerce platform at Brico Depot. We also continue to deliver strong productivity and operating efficiencies. At Castorama, we are on track to remove 12% of head office roles. Across France, work is ongoing to reduce a further 14% in logistics space by year-end. The restructuring and modernization of approximately 1/3 of Castorama store network is well underway. We addressed 13 stores last year, which have delivered encouraging results with rightsized formats and comprehensive refits, all delivering sales densities ahead of the Castorama average. We also successfully transferred 1 store to Brico Depot and converted 2 stores to franchise model for the first time in June. By year-end, a total of 24 stores will have been addressed, including the 11 currently in progress, and we'll provide a further update on this at year-end. So to summarize, we operate in large and attractive markets with our leading banners. We have had a strong first half, and we are delivering on our financial priorities. We have grown sales ahead or in line of our markets. Our performance is underpinned by our strategic growth initiatives. We are driving profitable growth and high free cash flow generation. And we are confident to raise our full year targets 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 cost and driving shareholder returns. We look to H2 and beyond with confidence in our plans. Over to you, Richard, and thank you, everyone. Operator: We will now begin the Q&A session. [Operator Instructions] I would like to remind all participants that this call is being recorded. We'll take our first question from Kate Calvert from Investec. Kate Calvert: First question is on your gross margin performance in the first half, which was a very good performance. It's not often, I think, we see 100 basis points improvement. You did talk about sort of 3 main buckets driving this. I was wondering if you could give us a feel for how that 100 basis points improvement is split between the buckets of sort of sourcing mix and better sort of markdown. And then I think basically, should we expect these gross margin drivers to continue into FY '27? I suppose I'm sort of trying to understand, is this a sustainable step change? And is there more to go after in some of those buckets? And then my second question is on costs that you highlighted the headwinds of marketing and tech in the second half. Should we expect these to continue into FY '27 as well? And where are your marketing costs at the moment as a percentage of sales versus the historic sort of norm? Thierry Dominique Garnier: Thank you for your question, Thierry speaking. So I will let Bhavesh answer your first question on gross margin and cost. Bhavesh Mistry: Okay. Thanks for your question. So yes, pleased with our gross margin performance in the half. A range of different drivers of that. Majority is our buying, so better buying and negotiation, both on our OEB and our branded that accounted for about 60 basis points. Marketplace is margin accretive. You heard Thierry talk about what we're doing with marketplace, most advanced in B&Q, but early days with our other markets. Banner mix helps. So B&Q's outperformance and the fact that Romania we disposed off. So that's a contributor. And some headwinds against that, we had packaging tax in the U.K. So it gives you a flavor for some of the drivers behind the margin. I guess stock losses, right, because we had better stock turn, better trading and therefore, lower stock losses. So that gives you a bit of color on gross margin. In terms of costs, in terms of -- we continue with some of our structural actions. I talked about that in the prepared remarks, 3 gears. Indirect procurement, store and head office efficiencies, all continuing to contribute to managing our cost base, very important given the GBP 145 million of headwinds that we signaled with inflation, national insurance, packaging tax, et cetera. And in terms of second half weighting of marketing and tech, that really is, again, linked to some of what we talked about today. It's in tech. It's further investment in our marketplace, early days, and we just launched in Poland in January, early days in France as well. So we continue to invest in marketplace, scaling our data tools. We now offer cross-border vendors, ability to trade on marketplace. The personalization -- Hello B&Q is now launched. We have Hello Casto, so that's sort of an AI-generated chatbox. But we also have higher national [indiscernible]. We have 6 months in the second half. We had 3 months in the first half. [indiscernible] typically go out around April. So you get full 6 months' time in the second half. So that gives you hopefully a bit of color in terms of some of the drivers of our cost running in the second half and investment in the second half. Kate Calvert: Yes, I suppose I was specifically asking more about marketing because obviously, that's one of the things that often gets cut when the market gets tougher. So I guess, when the market recovers, should we expect marketing as a percentage of sales to go up? And then I suppose the other thing is you have called out tech specifically. It's a general thing in the industry overall that tech costs are going up as a percentage of sales in retail. So is that something that we should expect to continue into next financial year? Or is that sort of a one-step change in tech? Thierry Dominique Garnier: Yes. I'd maybe get to -- Thierry speaking. I'll start with marketing. I think the H1, H2 dynamic is probably more tactical. I don't think you can go [indiscernible] from there. We had relatively calmer H1 because of weather and therefore, for some categories, we don't have to advertise more. On the other side, Screwfix peak in H2 with Big Black Friday, so we are usually investing a bit more in H2 in those categories. Maybe you have seen we have had a very good price cut campaign at B&Q just a few days ago. So there is no -- on marketing, not really much to draw from H1, H2 dynamics. I think on tech, I think for every, I would say, retailer, tech is becoming a very important component of the CapEx first dynamic and P&L. We plan for a long time, a bit more H2-weighted investment in tech. Is it business related? I can give you a few examples on marketplace. We are accelerating our cross-border vendors that require a specific tax engine to manage that properly. We are improving our buy box, happy to comment further if you want. As well on data and AI, we have more plans to roll out our markdown softwares to more banners. And as well on our core IT, seems like we are relying still a lot on Oracle ATG. We are decomposing Oracle ATG to move to a more agile IT. And in our plan was a bit more H2 weighted. Bhavesh Mistry: Just on your marketing question, Kate. Historically, our marketing costs have been about 2% of sales. It's a touch higher this year, but just to give you a sense of scale. Operator: Our next question comes from Richard Chamberlain with RBC. Richard Chamberlain: So a couple of questions from me, please. I think in the statement, you talked about improved returns on promo activity through the use of AI solutions. I wonder if you can give a bit more color on what you're doing there? And then second, on the group-wide trade penetration, I think you say it's 28%. So where is it now for the U.K.? And is there still upside in the U.K., do you think in terms of trade penetration going forward? Thierry Dominique Garnier: Thank you, Richard. On your first question, the fact that the base algorithm is all around elasticity versus price and volume. And that the same algorithm that somehow rent for markdown and promo and we are extending that to prices in the coming months at B&Q. So this is basically calculating at the SKU level and store level elasticity pattern. And therefore, this algorithm will give you daily recommendation for price per store and at the same time, is able to simulate a lot around what if I do [indiscernible] or minus 15 on [indiscernible]. And they give you immediately is a component of what does it mean for sales, what are the halo effect on other products. So that's a very powerful tool. We have rolled out this tool in B&Q and this year at Casto and the plan is to roll out that across the group. On [indiscernible] sales, Bhavesh will give you the precise figures, but I think we still have a lot to do on TradePoint. I think obviously, Screwfix, we have relatively stable trade penetration. And Screwfix is basically in first place a trade business. At TradePoint, we have the plan to reach GBP 1 billion. We are improving the trade penetration, and there is more to go, but I hand over to Bhavesh. Bhavesh Mistry: Yes. So [indiscernible] B&Q's trade penetration is 22.4%. So that was up a little bit from last year. And as Thierry said, Screwfix is a very much trade-focused business. Their trade penetration is 74%. Operator: Our next question comes from Grace Gilberg with Jefferies. Grace Gilberg: I just have 2 from me. In reference to the very strong H1 profit beat, can we talk a little bit more about the mechanics of what went into that specifically around how much of this was potentially more big-ticket driven? That's my first question. The second, and it kind of goes off from the first is that the new implied or the new guidance for the full year implies that second half would probably be a bit worse than previously expected. Is there anything that you're seeing now that should make H2 look a little bit worse? Or just any other color around that would be very helpful. Thierry Dominique Garnier: Thank you, Grace. Maybe I'll start by the profit bridge -- the profit beat and Bhavesh will give additional comments. I think first of all, in retail, it always starts from sales. So we are very pleased with the H1 sales dynamic because it's not coming from price. The price is broadly flat in H1. In fact, it's minus 0.1%. So all the growth is coming from volume sold and a little bit of mix because we have sold more big ticket as well as small positive mix impact. We have gained market share. We are seeing healthy dynamic on Core and Big Ticket. And another example is the positive order book at the end of July with a double-digit order book. And that's driven by our strategic initiative, our range reviews on, for example, on kitchen and bathroom. You have seen the trade and e-commerce sales progression. So I think healthy H1 on sales. Then I hand over to Bhavesh on margin and cost for H1. Bhavesh Mistry: So yes, look, just to reiterate what Thierry said, very pleased with what we've delivered in the first half. Beyond seasonal, you look at underline Core, Big Ticket, trade, e-commerce, all moving in the right direction. I remind you, we're an H1 weighted business. Our peak is in the first 6 months. And that was more amplified this year by the strong seasonal performance that we had that we talked about in Q1. And when we look at the second half, we've got 6 months of national insurance. We didn't have that in Q1. We've got 6 months of pay rise. We didn't have that in H1. And then the H2 weighted marketing and tech, some of the examples I gave earlier to Kate's question. So that sort of explains the H1/H2 dynamic. And then we're really just taking a balanced view when we set the full year guidance. We saw a resilient consumer in H1 in the U.K., a bit more subdued in France and Poland. And as you saw in our market outlook, we're just staying mindful of the consumer across our markets in H2. Grace Gilberg: No, I appreciate that. And actually, if I could just ask one more. This is kind of going off of question around gross margin improvement. And if I heard it correctly, you're saying that 60 bps of that 100 bps improvement is around better buying on own brand and also branded items. Is that expected to continue going into the full year? I would imagine that that's something that's more structural than particularly a one-off. Thierry Dominique Garnier: I think, yes, on what -- starting from raw material prices, we continue to see good price decrease in raw material prices in H2 and probably the early part of '26. We have positive FX component is a tailwind, and that's largely hedged so that should remain with us. And the key strategic initiative, marketplace, we mentioned, we have the positive contribution, for example, on clearance and losses from our new software and markdown promo software I mentioned. On the other side, growing trade is a negative because on gross margin specifically, trade gross margin has a lower gross margin, while the retail profit is very good. Operator: My next question comes from Ami Galla from Citi. Ami Galla: A couple of questions from me. The first one was on the competitive intensity across your markets. Can you give us some color as to how has that shaped up in the first half, particularly in France? The second one was just on Screwfix France and the growth that you've seen across that banner. Is there a revision to your network expansion plan, i.e., are we going to see an acceleration in the sort of new store openings in that banner? And the last one is on the franchise option in France. How is that route exploring more franchisees down the line? How is that kind of coming through to an extent? Thierry Dominique Garnier: Thank you, Ami, for your question. First, competitive intensity. The first thing I would say across the board is we have seen rational behavior from competitors on prices. Price index should always be top of our mind. I'm very happy with price index. An example is Brico Depot in France. We have improved our price position in the past 6 months. I'm very, very pleased with that. And we are constantly adjusting. We are -- if you look at the media, we are communicating on price cut at B&Q on specific categories a few days ago. Then on promo, I think U.K. relatively standard promo plan in H1, even probably because of the season was very strong. So we were relatively at a lower level on clearance. France, a very, very dynamic promo market in H1. And we were, I think, following that very, very carefully in our banners. And Poland as well, we have seen a relatively dynamic promo environment in H1. So very, very rational on price, but more competitive on promo in France and Poland. Screwfix France, yes, 52% store like-for-like. We are very happy with that. That's in line with our expectation. So at the same time, we should stay calm. It's good, but we need to deliver this kind of like-for-like because that's the plan. All the KPIs are good. But really, I stay with what I said in March '24 and March '25. We need a bit of time to have a certain number of stores reaching year 3 and year 4 to make sure the sales density of the store are in the right place. And therefore, all the plan, the breakeven and the profit per store is in line with our expectations. So I would say all in line with expectation, happy with what's going on, but I don't want to accelerate too much expansion before I'm pretty sure we have enough stores reaching what they need to do in profit and sales in year 4. Franchise, we are as well very excited with franchise. I think it's a very strategic move for France for the first time with our first 2 franchise store for Casto. Don't underestimate the amount of job we need to do to start one store. It's from legal contract, how we share the margin, how do you deliver product with your logistics, how you create IT link. And all this is a massive job done by the team. So more to come on franchise for Casto. And I can tell you as well that we are planning to open our first Brico Depot France store in 2026 through a franchise model. That would be a conversion from [indiscernible] store that will become a Brico Depot store in '26. Bhavesh Mistry: Just on Screwfix France, I'd say each of these cohorts are in sort of different stages of life. Some very recently opened, others around 2 years open. And so on a brand that's new to the market. So for us, we look at some of those underlying durable metrics like repeat customers, like brand awareness, like trade penetration. That's what we're looking at measuring to ensure that the foundations are really strong to then move forward on further Screwfix expansion in France. Operator: Our next question comes from Yashraj Rajani from UBS. Yashraj Rajani: So 3 questions from me, please. The first one is on click & collect in B&Q. Given that's a newer initiative, can you give us some color on how the unit economics are looking in that business, how that's affecting frequency? And do we expect that to be a bigger margin driver in the second half than it was potentially in the first half? So that's the first question. The second question is on business rates. So can you give us any indication of what we need to keep in mind there for the second half and potentially next year as well? And the third question is on shareholder returns. So I appreciate we have some one-offs in free cash flow this year, but maybe beyond that, should we expect that the GBP 300 million buyback is something that we should expect every 12 months? Or do you think there's other opportunities like potentially exploring some freehold as well? Thierry Dominique Garnier: Thank you, Yash, for your question. Maybe I start with the first one and Bhavesh will answer the second and the third. I think first of all, using stores for our 1P operation is since 2020, really our core strategy. And you have seen the statistics, we are largely -- over 90% of our orders are prepared in stores and 88% delivered through click & collect. So one, it's a very profitable way to manage e-commerce. That's why our 1P operation is profitable. And secondly, it's great traffic to the store. So when the customer comes for click & collect order, we know that there is a good proportion of those customers that will enter the store and buy additional products. We have always tried to link our marketplace operation to the stores. So from the beginning of B&Q marketplace, returns were allowed in every store. You can order online a marketplace product and you can return the product in B&Q stores. And recently, we have started click & collect option for our marketplace vendors. I think we are the first one to do that in the U.K. And that's driving profitable business and additional footfall to the stores. So a bit too early to give you detailed data because it's just a few weeks, but the early data show a good traffic inflow -- footfall to the store from the people that come in to collect their marketplace product. So I think on business rate, I'll hand over to Bhavesh and as well on retail. Bhavesh Mistry: Yes. I mean, on your question, we had some rebates last year in B&Q. That's not repeating, and we're very clear in sort of calling that out. Going forward, we don't see any material sort of rebates or anything coming through. The broader challenge as you heard from other retailers is just the impact of business rates on brick-and-mortar retailers relative to what you see with some of the pure-play online, and that's something that we continue to lobby that challenge alongside our retail peers for a bit more of a level playing field. On shareholder returns, we have a good track record of delivering share buybacks after we invest in our business after we pay our dividend. This year, specifically, the reason we've accelerated is back to the 2 one-offs that I talked about in my prepared remarks. Our historical track record of buying back is around 18 months. So I wouldn't read anything into this year's acceleration simply as we had 2 one-offs, and we've invested at the right level in our business. We felt this is excess cash, and it made sense to accelerate the buyback only this year. Operator: We'll take our next question from Adam Cochrane from Deutsche Bank. Adam Cochrane: A couple of questions from me. Firstly, on the free cash flow guidance being increased, but the sort of top end of the profit before tax number not being increased. Can you just highlight what the incremental sort of GBP 40 million or so that you're generating on free cash flow above and beyond the increase in profit and where that comes from? And secondly, on the second half PBT decline, I understand the points you're making about on the cost side. But would you say that you're feeling more or less confident about the outlook in the second half versus the first half from where you were before. When you see the -- I think on some of the slide decks, you've got some sort of macro indicators. Are you feeling slightly cautious about what we see in France or what we might see in the U.K.? Just a little bit of how you're feeling about the wider consumer given some of the surveys and things that you guys do. And then the third question is on the big ticket, I think if I'm right, it sounds like your lower price point ranges have proven to be really successful. So from a volume perspective, would you say that your big ticket growth looks even more impressive than the value numbers that you presented? Thierry Dominique Garnier: Thank you, Adam. Let me start maybe with exactly reverse order, so 3, 2 and 1. So I think in big ticket, in short, the answer is yes, we are selling more lower price, let's say, lower tier kitchen across the group. So therefore, when you look at volume, yes, it's better than the sales you are looking at. Maybe let's spend 1 or 2 minutes on our view of the customer by region, and we'll do that methodically by country. So I think U.K., it's fair to say H1, we have seen a resilient consumer. And you see that through multiple quality indicators, transaction, volume were up, positive order book for big ticket, core and [indiscernible] categories. And when you look at the consumer sentiment, we are seeing a slightly improved consumer sentiment, slowly rising in H1 to now according to GfK. Now we are, like you, mindful of signs of softness in the labor market, the uncertainty of the budget ahead of us and we are seeing as well food inflation relatively high. So it's something we are looking. We are watching that H1, the consumer in the U.K. has been resilient. So therefore, we believe the middle of the scenario as a target for the full year is very relevant for the U.K. France, different story. We have seen H1, a subdued consumer, mainly driven by political uncertainty and the constant discussion around reforms, what should be the right reforms. And the consequence of that is a super high savings rates in France. We are about 400 or 500 basis points above historical average. So it's not as if the macro was a catastrophe or people have no money. In fact, people have money, but they save, they are not optimistic about the future. Consumer sentiment in France stay very low and is decreasing. So moving in sales is a good indicator, so moving from 92% in January to 88% in July, so not great. While we are seeing better macro indicator, interest rates is low, the mortgage year-on-year is up. The housing transaction are slightly up. So it's not around macro. It's all around political uncertainty. And we so far are relatively cautious about France in H2. We believe the consumer sentiment will remain subdued. The political environment is not improving. So we are cautious about France in H2. And therefore, scenario, we believe will be between the middle part of our range and the lowest end of the range for France. Poland H1 was a difficult H1, probably slightly worse than expected due to geopolitical factor in Q1 with the discussion around the war in Ukraine, political election at the end of Q1, relatively high inflation, relatively high interest rates and somehow consumer sentiment was low. But contrary to France, we are seeing some sign of, I would say, slow recovery, inflation now down to 3.1% in July. The real wage growth is really supportive. We have seen 3 interest cuts from the Central Bank of Poland and overall an improvement in the consumer sentiment. The macro are really supportive. So I would rather go for a slow improvement of the consumer sentiment in Poland in the coming months. And therefore, we are comfortable with the middle of our scenario. So a bit longer, but I think it's important everyone hear that. And then on the... Bhavesh Mistry: Your first question, Adam, on the free cash shape. So as I alluded to earlier, our peak is in H1. So our profit is H1 weighted. Our free cash is even more H1 weighted, and that's just the dynamic of working capital. We're selling through our stock in the first half. We tend to buy it in the second half. We also have a little bit more CapEx weighted in H2. That's our Screwfix store openings, both city and regular Screwfix. We've got more tech and maintenance CapEx. And then just some technicalities around the timing of Chinese New Year and Easter next year means there's more stock being ordered in the second half of this year. And again, that's just making sure we have it in and ready for peak trading when we hit the first half of the next financial year. Adam Cochrane: So if we think about a walk-through from where your free cash flow guidance was at the upper end at the beginning of the year and where it is now, obviously, your profit expectations haven't changed at the upper end, but your cash flow has. I understand the timing between 1H and 2H, but the absolute quantum of the GBP 40 million year-over-year, the timing of Chinese New Year as an example, I'm assuming you would have known that at the beginning of the year. So what's changed in terms of the upper end of the free cash flow? Is it that you've got lower inventory? Is it that -- what's the exact driver of higher free cash flow for the full year? Bhavesh Mistry: Well, profits. We had a tax refund [indiscernible] historical sort of true-ups of prepayments and tax. I'd say those are the 2. And we also took inventory days down, right. We took another 6 days down. So better management of our stock. Operator: Next question comes from Mia Strauss with BNP Paribas Exane. Mia Strauss: Maybe just 2 questions. On Castorama France, you've talked about the progress you've made on some of the store restructurings and the reduction in DC space. But maybe if you can give a bit more color on what that actually translates to in terms of pounds? And then secondly, on big ticket, as you said, we've seen 3 quarters of sequential growth. Is this kind of considered the new normal? Or are we going to start lapsing in tougher comps as we go into next year? Thierry Dominique Garnier: So I think maybe on Casto France, you have in the presentation really an update of the plan and we are really happy with the progress being on sales and really productivity and on the restructuring of the store network. Some of those actions will deliver results relatively in short term. And when you speak about costs, you have short-term impact, including logistics, head office, continuous work we are doing on efficiency. So that delivers relatively fast P&L impact. Store network, you need a bit more time when you do rightsizing, you need to do the job in the store, you need to bring the partner in the back-end space and you need the maturation of the stores. So I think clearly, the network, we need much more time to crystallize the profit than on short-term cost actions. Another example, when you speak about e-commerce and Pro as well, it's a long-term several years program, and we are very optimistic on it. On big ticket, I think in short, probably 2/3 of the growth is our self-help, 1/3 is the market. So when I look at H2 and '26, I think the momentum -- we should see the momentum from self-help for a few more months. It's a combination of range, but as well the churn by the team. I give you interesting data that installations were up 36% in H1, kitchen and restroom installations. So it's a good job done by the team around training, incentives, focus on selling more kitchen and bathroom installations. So we have really a strong plan on kitchen, bathroom. So 2/3 our action, 1/3 the market. Operator: Our next question comes from Georgina Johanan from JPMorgan. Georgina Johanan: [Audio Gap] the second one, thanks for all the color on gross margin. I just wondered to help us with modeling as we go into next year. Obviously, seasonal was so strong in the U.K. in Q1. If you could just give a sense in basis points of how much that supported the H1 gross margin in the U.K. in particular, please? And then finally, just on Poland, I think some of us are sort of more removed from that market, if you like, than U.K. and France. And I just wondered if there was anything happening that would be useful to be aware of in terms of the sort of competitive or structural environment there. So not necessarily related to sort of promo around the cyclical, but just whether there is any new competitors developing or competitors falling away as the case may be, I know action is rolling out strongly there, for example. So just anything you could share would be really helpful. Thierry Dominique Garnier: For sure. Thank you for the question. I'll start with the first one. I think about half of B&Qs are in a way impacted by Homebase closures. And we have tactical marketing action locally. So we did a piece of job to make sure we can reach the customer around the Homebase stores and attract them to B&Q. And we make sure we have enough stock in the store to make sure as well the sales transference was optimized in H1. So it's part of the sales of B&Q in H1, obviously, but there are many other levers, and we discussed big project, marketplace growth, the Pro, et cetera, and Homebase is part of that along with the good weather in H1. We have bought 8 stores from Homebase, 5 in the U.K., 3 in Poland. Again, very happy with the pace of the team because we converted them in a record few weeks. So we were -- the store already ready between April and early May, just before peak. I'm very happy with the sales of those 8 stores so far, really good start. Maybe on Poland, I will let Bhavesh speak around gross margin and seasonal. Competitive dynamic, we are clear #1. But there is a fight with [indiscernible] as well competing in this market. We see, as I mentioned, rational behavior on prices, relatively dynamic promo. And I think both us and [indiscernible], we keep opening stores. If you look at the past 3 years, we opened 11 stores between '23, '24 and H1 '25. So significantly more stores than [indiscernible] keep up new store on this side. I think big market -- big player in Poland is Allegro. I think if you tell me the past 5 years who is the #1 competitor is probably Allegro. So we are really working hard on our e-commerce proposition, our marketplace in Poland since early this year. A lot going on, on loyalty program, data apps in Poland to compete with Allegro. And like in other countries, yes, Allegro is a fantastic marketplace. But for DIY, and we see that in the U.K., we could become the reference marketplace in DIY in Poland. And then new discounters, you mentioned [indiscernible]. I think it's -- we are internally working very hard on how we react with discounters for the past few years through our lowest price, through dedicated OEB. As well Lidl, Lidl is doing good job on some categories. So that's something we are addressing very, very carefully. And I think we have a very good plan to compete with Lidl and [indiscernible] in Poland and across the globe. Now on seasonal and gross margin... Bhavesh Mistry: So our seasonal like-for-likes in the half were plus 5.1%. These are rough, rough numbers, but if you assume seasonal and more normal seasonal would be sort of 1% to 2% like-for-likes. When you take our gross margin of around 35%, it's a little bit lower in seasonal than other categories. Thierry talked about big ticket being sort of margin accretive relative to the other categories, then I'd roughly say around GBP 15 million of our profit uplift was a function of the seasonal outperformance or margin uplift. Operator: [Operator Instructions] There are no further questions on the webinar. I'll now hand over to Thierry for closing remarks. Thierry Dominique Garnier: Thank you, everyone, for joining, and thank you for all your questions and comments. And obviously, myself with the team, we are at your disposal if you want to discuss further or ask more questions and happy to meet you and talk to you very soon. Thank you, everyone.

33天前Insight Analytics约5分钟阅读

KGFHY 2026 Q2 财报电话会议

Operator: Good day, ladies and gentlemen, and welcome to Kingfisher plc's Half Year 2025 to 2026 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. Thierry Dominique Garnier: Hello, everyone. Today, I am at our Camden Screwfix store in London, and it's great to review the progress of our Screwfix City format with the team. So thank you for joining us for Kingfisher's half year results presentation. Bhavesh and I will take you through our H1 results, our outlook for the year and provide an update on our key strategic initiatives. Following this presentation will be our usual Q&A. I want to start with an overview of Kingfisher's attractive investment story, which drives our medium-term financial priorities and outlook. We have the #1 or #2 leading positions in our markets, and those markets worth GBP 160 billion, 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 maintain 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. 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 banners. Our trade strategy is now very much proven and delivering results. Our online, 1P and marketplace platforms significantly increase product choice for our customers and offer fast fulfillment times. We also see exciting potential in Retail Media with an ambition to grow Retail Media income to up to 3% of Group e-commerce sales. And finally, we continue to expand our store footprint, primarily through the expansion of Screwfix and growth opportunities we see in Poland. Bringing all these elements together, we are committed to our financial priorities, which are to grow sales ahead of our markets, grow adjusted profit before tax ahead of sales and to generate strong free cash flows. We have a disciplined capital allocation framework, prioritizing investment in organic growth, maintaining a strong balance sheet and returning surplus cash to our shareholders. So moving to our results. You will have seen from our RNS published this morning that we have had a strong first half. And there are 3 key messages I want to highlight: First, our strategic growth initiatives are driving market share gains, a key leading indicator of our progress beyond macroeconomic trends. While several factors have contributed to our performance in the half, I'm 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. In addition, we continue to strengthen our retail fundamentals. This includes successful innovation across our big-ticket categories, competitive pricing and ensuring high product availability in store during period of peak demand. Second, we are seeing some healthy growth indicators across our business. Growth in the half was of high quality, driven by increased volumes and transactions rather than inflation. In our core categories, we have seen consistent quarter-on-quarter growth, including a tenth consecutive quarter of underlying growth in the U.K. Q2 marked our third consecutive quarter of underlying growth in big-ticket sales, and we have a strong order book at the end of the half. Our banners in France and Poland are also showing improving sequential trends despite operating in more subdued markets. And third, we are raising our profit and free cash flow guidance for the full year. Our expectations for markets for the year remain consistent with what we outlined in March, whilst mindful of mixed consumer sentiment and political uncertainty. We are also accelerating our share buyback program due to the combination of our strong free cash flow generation and some one-off positive cash inflows. Back in March, I said that Kingfisher was in its best operational shape in years, and I stand by that today. While there is much more to do, our H1 results and our improved guidance demonstrate the momentum in the business and our confidence in the future. I will now hand over to Bhavesh to talk you through our H1 financials and full year outlook. Bhavesh Mistry: Thank you, Thierry, and good morning, everyone. Let me start with an overview of our performance in the half, starting with the top line. I'm pleased with the relative outperformance of our banners in the half and our sales growing ahead of our markets. Total sales for the group were GBP 6.8 billion, with like-for-like sales up 1.9%, excluding a negative calendar impact of minus 0.6%. We delivered an adjusted profit before tax of GBP 368 million, up 10.2% in the half and adjusted EPS of 15.3p, up 16.5%, driven by gross margin accretion of 100 basis points and retail operating margin accretion of 40 basis points, alongside a 4% uplift from our share buyback program. Free cash flow generation in the half was GBP 478 million, an increase of 13.5%, and net leverage stood at 1.3x at the end of the half. Turning now to our sales growth, starting with a view by category. All of our categories delivered growth in H1. Core Products represent around 2/3 of our portfolio, and we were pleased to see improving sequential growth trends with underlying like-for-like flat in Q1, rising to 1.2% in Q2. Key Subcategories which performed well in the half include tools and hardware and indoor paint. Big Ticket delivered a third consecutive quarter of underlying growth. That growth has been driven largely by group-led innovation in our kitchen ranges and some improvement in the kitchen and bathroom market. Our order book also ended the half in a positive position. Seasonal sales benefited from record warm weather in the U.K. over the spring months. Clearly, there was some pull forward from Q2 into Q1 as we called out in our Q1 trading update. It's worth noting that we'll be lapping the strong seasonal performance in Q1 next year. Turning now to our sales by geography. In the U.K., B&Q delivered an excellent first half, significantly outperforming the market and driving growth across multiple fronts. These include TradePoint growth of 6.9%, fueled by our enhanced loyalty program and an increased investment in trade sales partners to help us better serve trade customers. E-commerce growth of 23.8%. Our 1P and 3P operations work together to enhance conversion, increase customer traffic and drive mutual growth. Benefits from the closure of Homebase and transference of customers to B&Q as well as the opening of the 8 stores we acquired, which our team rapidly opened in order to be ready for peak trading. And of course, seasonal product sales, which benefited from good weather in Q1. Screwfix delivered a strong performance across both quarters. Our Screwfix teams have executed at a high level, enhancing the customer proposition through targeted marketing and promotional campaigns, competitive pricing, robust inventory availability and deeper engagement with trade customers via app-driven reward initiatives. In France, against a subdued consumer backdrop, we were encouraged to see improving sequential trends in our like-for-like performance. Castorama like-for-like sales declined by 1.4% in the half and were flat in Q2. Amidst the soft market backdrop, Castorama saw an improving trend in core sales across the first 2 quarters and strong seasonal performance. As you'll hear from Thierry, following testing last year of our trade customer proposition, CastoPro, we've now rolled it out across our entire estate. Brico Depot's performance was in line with the market with an improving like-for-like trend across the half. We saw an elevated level of promotional activity during Q2, which impacted Brico Depot's everyday low-price model. Brico also has a greater weighting to building and joinery products and a lower exposure to seasonal categories, both of which are less supported by weather experienced by France in H1. We feel good about the Brico model with its clear customer offering of discounted prices and high product availability. Turning now to our business in Poland, where we remain very excited about the medium-term growth opportunities. Castorama Poland is a market-leading banner with opportunity to increase space, whilst building in both trade and e-commerce. We had a slow start to the year with poor weather, high interest rates and political uncertainty weighing on the economic backdrop. However, conditions improved in Q2 and have now stabilized on an underlying basis. We continue to make progress on our strategic initiatives. Trade penetration has reached 25%, and we've further grown our e-commerce penetration following the launch of our marketplace offering in January. We have a slide in the appendix to this presentation covering our other international markets. But to summarize very briefly: Screwfix France had a strong like-for-like growth of 52% at the store level, in line with our expectations. We completed the sale of Romania 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. As I said in March, we'll 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 half. Let me give you a few examples. At a gross margin level, we've seen benefits from group buying and sourcing efficiencies, which contributed meaningfully to 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're on track to reduce headcount 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. Let me now turn to our profit performance in the half. Adjusted profit before tax rose by 10% or 19% when excluding the GBP 24 million of one-off business rates refund received by B&Q in the first half of last year. One of the main drivers of our first half profit growth is 100 basis points of gross margin expansion, which is driven by positive top line growth and our margin initiatives, some of which I outlined earlier. In March, we said that we faced around GBP 145 million of cost headwinds from higher wages, inflation and taxes. These headwinds are playing out as expected, including the increase in U.K. national insurance costs in April. I'm pleased to say that in H1, our teams have done an excellent job mitigating these headwinds. The gross margin drivers, combined with our structural cost reduction program, enabled us to deliver 40 basis points of retail operating margin expansion to 6.6% and adjusted profit before tax of GBP 368 million. All of our banners delivered margin expansion in the half. In the U.K., margins were up 10 basis points or 80 basis points when adjusting for the B&Q business rates refund from last year. France delivered a 20 basis point margin improvement and Poland saw margin growth of 10 basis points. As is typical for our business, profit delivery remains weighted towards the first half. That seasonal pattern has been amplified by the strong Q1 trading I mentioned earlier. We also have a more H2-weighted marketing and technology investment this year compared to last. This is to support our strategic priorities. In the second half, we also see the full impact of the U.K. national insurance contributions increase following its implementation in April. EPS growth in the half was up 16.5%. Our profit delivery has driven around 2/3 of our EPS growth, while share buybacks contributed 1/3. In March, we announced our fourth share buyback program of GBP 300 million, and we've already repurchased GBP 100 million of our shares under this program. Given our strong trading performance and some material one-off cash inflows, we plan to accelerate purchases in the second half with the aim of completing the program by March 2026. Turning now to our group cash flow, starting on the left of this chart. We generated EBITDA of GBP 744 million. The change in working capital 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 days by 6.5. 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 spend totaled GBP 145 million. Together, these drove free cash flow of GBP 478 million in the half, 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. This reflects not only our profit delivery in H1, but also the timing of marketing, technology and CapEx investments, which are more second half weighted versus the prior year. These investments are supporting our strategic priorities and will ensure that we enter 2026 with strong momentum. As mentioned earlier, we also benefited from 2 exceptional nonrecurring cash inflows in the half, which sit outside of our free cash flow. First, net proceeds of GBP 33 million from the sale of our Romanian business in May. Second, proceeds of GBP 64 million from the successful resolution of an historic tax issue in relation to EU State aid. Net cash flow in the half was GBP 277 million, an increase of 120%, 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, an increase of 8% year-on-year. Turning to our market outlook and guidance for the year. As Thierry mentioned earlier, the market outlook scenarios that we set out in March remain unchanged. In the U.K. & Ireland, we've seen a resilient consumer in H1, but remain mindful of potential softness in the market given both uncertainty around the upcoming autumn budget and rising inflation. To date, the market has delivered low single-digit growth, and we continue to expect market growth to be in the range of flat to low single digit. In France, the market has remained subdued in H1. Although we saw lower interest rates, higher mortgage lending and increased housing starts in the half, French consumer sentiment remains subdued amidst an uncertain political environment. We continue to expect a market of low to mid-single-digit decline to flat for the year, an improvement on the 7% market decline we experienced last year. In Poland, political factors and high interest rate and mortgage rates weighed on consumer confidence in the first half, impacting discretionary spending. However, we're now seeing some early signs of recovery, supported by 3 interest rate cuts this year and continued real wage growth. We reiterate our market outlook of low single-digit decline to low single-digit growth. And as you can see on the right-hand side of this slide, on the whole, our banners are tracking ahead of our markets for the first 6 months of this year. Now let me turn to our updated guidance for the year. Our full year market scenarios remain unchanged from the guidance that we set out in March. Given this and our strong start to the year, we're raising our full year profit and cash outlook today. We now expect to deliver the upper end of our adjusted profit before tax range of GBP 480 million to GBP 540 million. On free cash flow, we've already delivered the upper end of our full year range of GBP 420 million to GBP 480 million in H1. This reflects the phasing of our profit delivery and the H2 weighting of CapEx investment. Given the strong performance, we are raising our full year free cash flow guidance to GBP 480 million to GBP 520 million. And finally, our stronger cash position and nonrepeating cash inflows enables us to accelerate our current GBP 300 million share buyback program. We now expect to complete this within 12 months, which is by the end of March 2026. I'll now hand back to Thierry. Thierry Dominique Garnier: Thank you, Bhavesh. 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. We continue to progress at pace with all our strategic pillars, which we outlined in our RNS. For today, I would go deeper with trade and our digital ecosystem, a group strategy that we applied in the U.K. first and serves as a successful blueprint that we have 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. Through TradePoint, CastoPro and other dedicated trade formats, we are leveraging our existing store footprint to serve this valuable customer base. Our trade strategy enables us to grow our market share and to increase store sales densities with little to no additional CapEx. As a result, our trade business is both revenue and margin accretive at the 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. Retail Media also represents a compelling opportunity. Our ambition is for Retail Media income to reach up to 3% of the group's e-commerce sales with minimal capital employed, it is highly margin accretive. Trade now represents 28% of group sales, reflecting the continued development of our trade proposition across banners. We are expanding dedicated trade space within our stores and improving our product range, including high-quality trade-specific OEB and leading branded products. 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 have also improved our service offering, including enhancements to our Pro app, our direct-to-site delivery options, our 2 rental services and we have launched new trade financing solutions. And none of this is possible without having the right people. We have 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, our trade sales grew by plus 11.9%. Looking at our banners, TradePoint at B&Q now represents 22.4% of total B&Q sales with 6.9% growth in H1, and this is supported by a strong increase in sign-ups for our loyalty program and our successful trade-up accounts for around 25% of its online sales. We now have 77 trade sales partners in store, a 75% increase versus this time last year. And we continue to invest in this area and are recruiting an additional up to 40 trade sales partners in H2. We continue to leverage the learnings from the U.K., in France, in Iberia and Poland. As you can see, we now have dedicated loyalty schemes in every banner. In Castorama France, we have, in just a few months, rolled out our trade offering across the entire state. At Brico Depot, our trade penetration is now over 12%, an increase of 260 basis points in the half. We have created a trade desk in every Brico Depot stores with 131 dedicated trade colleagues. And in Poland, our trade penetration is over 25%, a circa 10 percentage points increase in H1. And we have large CastoPro zones already in 14 stores. And turning now to the broader digital ecosystem we are building, and it starts with a strong first-party e-commerce proposition with our stores at the center. We have 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. And in parallel, click & collect generates more traffic to our stores. We have developed a digital hub store model, which ensures excellent availability of product to e-commerce orders, and we keep investing in agile technology to improve our online conversion. All this in turn drives increased traffic, which supports our third-party marketplace offering. So on marketplace, we are offering a large choice with several millions of SKU. We can confirm that this large choice in turn generates more traffic to our website, all of which fuels additional 1P sales. Our stores play an important role for marketplace to 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 engagements. 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 support 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. Moving to Slide 21, which sets out some statistics around our digital ecosystem. We leverage our stores for speed and convenience with 93% of 1P orders picked in stores and 88% delivered through click & collect. This enables click & collect in as little as 15 minutes at B&Q, 1 minute at Screwfix and 20 minutes site delivery with Screwfix print. Our Group marketplace GMV is up 62%, and B&Q marketplace makes a retail operating profit of around GBP 7 million in the half. 50% of marketplace customers are new to our website with around 15% subsequently buying a 1P product. So we continue to grow this platform and have started onboarding cross-border vendors across the group to provide even more choice for our customers. We have signed up 11% more loyalty members since July last year and are seeing a significant increase in app-driven revenue and sales from AI and data-driven recommendations. We are rapidly scaling our Retail Media. We have also created a vendor platform, Core IQ, to monetize our data. So as you can see, we are really excited about the potential we have here as it uses our assets and will generate long-term growth and value creation. So moving to Screwfix France, where we see strong like-for-like growth in stores. We are happy with the progress with 52% store like-for-like growth in H1 and 74,000 unique customers, a 30% increase year-on-year. We believe the key to its long-term success is leveraging all the things that make Screwfix great in the U.K.; the best prices, unrivaled fulfillment and a wide selection of products. We are seeing good momentum across all KPIs with stronger customer retention, growing national brand awareness and over 17,000 sign-ups to the trade loyalty. We can see evidence of this continuous concept improvement with our second cohort of stores growing at a faster pace in year 1 than the first cohort. All this is in line with our expectations and makes us confident about the future of Screwfix in France. 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 OEB products enables us to make higher gross margins than the branded equivalent. This affordable innovation has driven a large part of big-ticket categories growth and the good order book Bhavesh and I mentioned earlier. Slide 25 provides an illustration of these new ranges. 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 are 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 improving the performance and profitability of Castorama. And we have made excellent progress in our plans 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 have focused our energy on delivering against our plans, gaining market share and managing effectively our gross margin and cost. In H1, specifically, we grew our market share in France and improved our retail operating profit margin by 20 basis points to 3.5%. 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 of the pace of the market recovery. Despite current headwinds, we remain optimistic on the outlook for the market in the medium term. Our new management teams at both banners are working at a high level and with fast pace to make us more competitive and more efficient. I'm very proud of what is delivered by the teams. As you can see, we are growing sales densities across both banners. We are seeing an improved customer NPS, and this is supported by our trade and e-commerce initiatives. Looking forward, we are focused on strategic range reviews at Castorama and the launch of a new e-commerce platform at Brico Depot. We also continue to deliver strong productivity and operating efficiencies. At Castorama, we are on track to remove 12% of head office roles. Across France, work is ongoing to reduce a further 14% in logistics space by year-end. The restructuring and modernization of approximately 1/3 of Castorama store network is well underway. We addressed 13 stores last year, which have delivered encouraging results with rightsized formats and comprehensive refits, all delivering sales densities ahead of the Castorama average. We also successfully transferred 1 store to Brico Depot and converted 2 stores to franchise model for the first time in June. By year-end, a total of 24 stores will have been addressed, including the 11 currently in progress, and we'll provide a further update on this at year-end. So to summarize, we operate in large and attractive markets with our leading banners. We have had a strong first half, and we are delivering on our financial priorities. We have grown sales ahead or in line of our markets. Our performance is underpinned by our strategic growth initiatives. We are driving profitable growth and high free cash flow generation. And we are confident to raise our full year targets 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 cost and driving shareholder returns. We look to H2 and beyond with confidence in our plans. Over to you, Richard, and thank you, everyone. Operator: We will now begin the Q&A session. [Operator Instructions] I would like to remind all participants that this call is being recorded. We'll take our first question from Kate Calvert from Investec. Kate Calvert: First question is on your gross margin performance in the first half, which was a very good performance. It's not often, I think, we see 100 basis points improvement. You did talk about sort of 3 main buckets driving this. I was wondering if you could give us a feel for how that 100 basis points improvement is split between the buckets of sort of sourcing mix and better sort of markdown. And then I think basically, should we expect these gross margin drivers to continue into FY '27? I suppose I'm sort of trying to understand, is this a sustainable step change? And is there more to go after in some of those buckets? And then my second question is on costs that you highlighted the headwinds of marketing and tech in the second half. Should we expect these to continue into FY '27 as well? And where are your marketing costs at the moment as a percentage of sales versus the historic sort of norm? Thierry Dominique Garnier: Thank you for your question, Thierry speaking. So I will let Bhavesh answer your first question on gross margin and cost. Bhavesh Mistry: Okay. Thanks for your question. So yes, pleased with our gross margin performance in the half. A range of different drivers of that. Majority is our buying, so better buying and negotiation, both on our OEB and our branded that accounted for about 60 basis points. Marketplace is margin accretive. You heard Thierry talk about what we're doing with marketplace, most advanced in B&Q, but early days with our other markets. Banner mix helps. So B&Q's outperformance and the fact that Romania we disposed off. So that's a contributor. And some headwinds against that, we had packaging tax in the U.K. So it gives you a flavor for some of the drivers behind the margin. I guess stock losses, right, because we had better stock turn, better trading and therefore, lower stock losses. So that gives you a bit of color on gross margin. In terms of costs, in terms of -- we continue with some of our structural actions. I talked about that in the prepared remarks, 3 gears. Indirect procurement, store and head office efficiencies, all continuing to contribute to managing our cost base, very important given the GBP 145 million of headwinds that we signaled with inflation, national insurance, packaging tax, et cetera. And in terms of second half weighting of marketing and tech, that really is, again, linked to some of what we talked about today. It's in tech. It's further investment in our marketplace, early days, and we just launched in Poland in January, early days in France as well. So we continue to invest in marketplace, scaling our data tools. We now offer cross-border vendors, ability to trade on marketplace. The personalization -- Hello B&Q is now launched. We have Hello Casto, so that's sort of an AI-generated chatbox. But we also have higher national [indiscernible]. We have 6 months in the second half. We had 3 months in the first half. [indiscernible] typically go out around April. So you get full 6 months' time in the second half. So that gives you hopefully a bit of color in terms of some of the drivers of our cost running in the second half and investment in the second half. Kate Calvert: Yes, I suppose I was specifically asking more about marketing because obviously, that's one of the things that often gets cut when the market gets tougher. So I guess, when the market recovers, should we expect marketing as a percentage of sales to go up? And then I suppose the other thing is you have called out tech specifically. It's a general thing in the industry overall that tech costs are going up as a percentage of sales in retail. So is that something that we should expect to continue into next financial year? Or is that sort of a one-step change in tech? Thierry Dominique Garnier: Yes. I'd maybe get to -- Thierry speaking. I'll start with marketing. I think the H1, H2 dynamic is probably more tactical. I don't think you can go [indiscernible] from there. We had relatively calmer H1 because of weather and therefore, for some categories, we don't have to advertise more. On the other side, Screwfix peak in H2 with Big Black Friday, so we are usually investing a bit more in H2 in those categories. Maybe you have seen we have had a very good price cut campaign at B&Q just a few days ago. So there is no -- on marketing, not really much to draw from H1, H2 dynamics. I think on tech, I think for every, I would say, retailer, tech is becoming a very important component of the CapEx first dynamic and P&L. We plan for a long time, a bit more H2-weighted investment in tech. Is it business related? I can give you a few examples on marketplace. We are accelerating our cross-border vendors that require a specific tax engine to manage that properly. We are improving our buy box, happy to comment further if you want. As well on data and AI, we have more plans to roll out our markdown softwares to more banners. And as well on our core IT, seems like we are relying still a lot on Oracle ATG. We are decomposing Oracle ATG to move to a more agile IT. And in our plan was a bit more H2 weighted. Bhavesh Mistry: Just on your marketing question, Kate. Historically, our marketing costs have been about 2% of sales. It's a touch higher this year, but just to give you a sense of scale. Operator: Our next question comes from Richard Chamberlain with RBC. Richard Chamberlain: So a couple of questions from me, please. I think in the statement, you talked about improved returns on promo activity through the use of AI solutions. I wonder if you can give a bit more color on what you're doing there? And then second, on the group-wide trade penetration, I think you say it's 28%. So where is it now for the U.K.? And is there still upside in the U.K., do you think in terms of trade penetration going forward? Thierry Dominique Garnier: Thank you, Richard. On your first question, the fact that the base algorithm is all around elasticity versus price and volume. And that the same algorithm that somehow rent for markdown and promo and we are extending that to prices in the coming months at B&Q. So this is basically calculating at the SKU level and store level elasticity pattern. And therefore, this algorithm will give you daily recommendation for price per store and at the same time, is able to simulate a lot around what if I do [indiscernible] or minus 15 on [indiscernible]. And they give you immediately is a component of what does it mean for sales, what are the halo effect on other products. So that's a very powerful tool. We have rolled out this tool in B&Q and this year at Casto and the plan is to roll out that across the group. On [indiscernible] sales, Bhavesh will give you the precise figures, but I think we still have a lot to do on TradePoint. I think obviously, Screwfix, we have relatively stable trade penetration. And Screwfix is basically in first place a trade business. At TradePoint, we have the plan to reach GBP 1 billion. We are improving the trade penetration, and there is more to go, but I hand over to Bhavesh. Bhavesh Mistry: Yes. So [indiscernible] B&Q's trade penetration is 22.4%. So that was up a little bit from last year. And as Thierry said, Screwfix is a very much trade-focused business. Their trade penetration is 74%. Operator: Our next question comes from Grace Gilberg with Jefferies. Grace Gilberg: I just have 2 from me. In reference to the very strong H1 profit beat, can we talk a little bit more about the mechanics of what went into that specifically around how much of this was potentially more big-ticket driven? That's my first question. The second, and it kind of goes off from the first is that the new implied or the new guidance for the full year implies that second half would probably be a bit worse than previously expected. Is there anything that you're seeing now that should make H2 look a little bit worse? Or just any other color around that would be very helpful. Thierry Dominique Garnier: Thank you, Grace. Maybe I'll start by the profit bridge -- the profit beat and Bhavesh will give additional comments. I think first of all, in retail, it always starts from sales. So we are very pleased with the H1 sales dynamic because it's not coming from price. The price is broadly flat in H1. In fact, it's minus 0.1%. So all the growth is coming from volume sold and a little bit of mix because we have sold more big ticket as well as small positive mix impact. We have gained market share. We are seeing healthy dynamic on Core and Big Ticket. And another example is the positive order book at the end of July with a double-digit order book. And that's driven by our strategic initiative, our range reviews on, for example, on kitchen and bathroom. You have seen the trade and e-commerce sales progression. So I think healthy H1 on sales. Then I hand over to Bhavesh on margin and cost for H1. Bhavesh Mistry: So yes, look, just to reiterate what Thierry said, very pleased with what we've delivered in the first half. Beyond seasonal, you look at underline Core, Big Ticket, trade, e-commerce, all moving in the right direction. I remind you, we're an H1 weighted business. Our peak is in the first 6 months. And that was more amplified this year by the strong seasonal performance that we had that we talked about in Q1. And when we look at the second half, we've got 6 months of national insurance. We didn't have that in Q1. We've got 6 months of pay rise. We didn't have that in H1. And then the H2 weighted marketing and tech, some of the examples I gave earlier to Kate's question. So that sort of explains the H1/H2 dynamic. And then we're really just taking a balanced view when we set the full year guidance. We saw a resilient consumer in H1 in the U.K., a bit more subdued in France and Poland. And as you saw in our market outlook, we're just staying mindful of the consumer across our markets in H2. Grace Gilberg: No, I appreciate that. And actually, if I could just ask one more. This is kind of going off of question around gross margin improvement. And if I heard it correctly, you're saying that 60 bps of that 100 bps improvement is around better buying on own brand and also branded items. Is that expected to continue going into the full year? I would imagine that that's something that's more structural than particularly a one-off. Thierry Dominique Garnier: I think, yes, on what -- starting from raw material prices, we continue to see good price decrease in raw material prices in H2 and probably the early part of '26. We have positive FX component is a tailwind, and that's largely hedged so that should remain with us. And the key strategic initiative, marketplace, we mentioned, we have the positive contribution, for example, on clearance and losses from our new software and markdown promo software I mentioned. On the other side, growing trade is a negative because on gross margin specifically, trade gross margin has a lower gross margin, while the retail profit is very good. Operator: My next question comes from Ami Galla from Citi. Ami Galla: A couple of questions from me. The first one was on the competitive intensity across your markets. Can you give us some color as to how has that shaped up in the first half, particularly in France? The second one was just on Screwfix France and the growth that you've seen across that banner. Is there a revision to your network expansion plan, i.e., are we going to see an acceleration in the sort of new store openings in that banner? And the last one is on the franchise option in France. How is that route exploring more franchisees down the line? How is that kind of coming through to an extent? Thierry Dominique Garnier: Thank you, Ami, for your question. First, competitive intensity. The first thing I would say across the board is we have seen rational behavior from competitors on prices. Price index should always be top of our mind. I'm very happy with price index. An example is Brico Depot in France. We have improved our price position in the past 6 months. I'm very, very pleased with that. And we are constantly adjusting. We are -- if you look at the media, we are communicating on price cut at B&Q on specific categories a few days ago. Then on promo, I think U.K. relatively standard promo plan in H1, even probably because of the season was very strong. So we were relatively at a lower level on clearance. France, a very, very dynamic promo market in H1. And we were, I think, following that very, very carefully in our banners. And Poland as well, we have seen a relatively dynamic promo environment in H1. So very, very rational on price, but more competitive on promo in France and Poland. Screwfix France, yes, 52% store like-for-like. We are very happy with that. That's in line with our expectation. So at the same time, we should stay calm. It's good, but we need to deliver this kind of like-for-like because that's the plan. All the KPIs are good. But really, I stay with what I said in March '24 and March '25. We need a bit of time to have a certain number of stores reaching year 3 and year 4 to make sure the sales density of the store are in the right place. And therefore, all the plan, the breakeven and the profit per store is in line with our expectations. So I would say all in line with expectation, happy with what's going on, but I don't want to accelerate too much expansion before I'm pretty sure we have enough stores reaching what they need to do in profit and sales in year 4. Franchise, we are as well very excited with franchise. I think it's a very strategic move for France for the first time with our first 2 franchise store for Casto. Don't underestimate the amount of job we need to do to start one store. It's from legal contract, how we share the margin, how do you deliver product with your logistics, how you create IT link. And all this is a massive job done by the team. So more to come on franchise for Casto. And I can tell you as well that we are planning to open our first Brico Depot France store in 2026 through a franchise model. That would be a conversion from [indiscernible] store that will become a Brico Depot store in '26. Bhavesh Mistry: Just on Screwfix France, I'd say each of these cohorts are in sort of different stages of life. Some very recently opened, others around 2 years open. And so on a brand that's new to the market. So for us, we look at some of those underlying durable metrics like repeat customers, like brand awareness, like trade penetration. That's what we're looking at measuring to ensure that the foundations are really strong to then move forward on further Screwfix expansion in France. Operator: Our next question comes from Yashraj Rajani from UBS. Yashraj Rajani: So 3 questions from me, please. The first one is on click & collect in B&Q. Given that's a newer initiative, can you give us some color on how the unit economics are looking in that business, how that's affecting frequency? And do we expect that to be a bigger margin driver in the second half than it was potentially in the first half? So that's the first question. The second question is on business rates. So can you give us any indication of what we need to keep in mind there for the second half and potentially next year as well? And the third question is on shareholder returns. So I appreciate we have some one-offs in free cash flow this year, but maybe beyond that, should we expect that the GBP 300 million buyback is something that we should expect every 12 months? Or do you think there's other opportunities like potentially exploring some freehold as well? Thierry Dominique Garnier: Thank you, Yash, for your question. Maybe I start with the first one and Bhavesh will answer the second and the third. I think first of all, using stores for our 1P operation is since 2020, really our core strategy. And you have seen the statistics, we are largely -- over 90% of our orders are prepared in stores and 88% delivered through click & collect. So one, it's a very profitable way to manage e-commerce. That's why our 1P operation is profitable. And secondly, it's great traffic to the store. So when the customer comes for click & collect order, we know that there is a good proportion of those customers that will enter the store and buy additional products. We have always tried to link our marketplace operation to the stores. So from the beginning of B&Q marketplace, returns were allowed in every store. You can order online a marketplace product and you can return the product in B&Q stores. And recently, we have started click & collect option for our marketplace vendors. I think we are the first one to do that in the U.K. And that's driving profitable business and additional footfall to the stores. So a bit too early to give you detailed data because it's just a few weeks, but the early data show a good traffic inflow -- footfall to the store from the people that come in to collect their marketplace product. So I think on business rate, I'll hand over to Bhavesh and as well on retail. Bhavesh Mistry: Yes. I mean, on your question, we had some rebates last year in B&Q. That's not repeating, and we're very clear in sort of calling that out. Going forward, we don't see any material sort of rebates or anything coming through. The broader challenge as you heard from other retailers is just the impact of business rates on brick-and-mortar retailers relative to what you see with some of the pure-play online, and that's something that we continue to lobby that challenge alongside our retail peers for a bit more of a level playing field. On shareholder returns, we have a good track record of delivering share buybacks after we invest in our business after we pay our dividend. This year, specifically, the reason we've accelerated is back to the 2 one-offs that I talked about in my prepared remarks. Our historical track record of buying back is around 18 months. So I wouldn't read anything into this year's acceleration simply as we had 2 one-offs, and we've invested at the right level in our business. We felt this is excess cash, and it made sense to accelerate the buyback only this year. Operator: We'll take our next question from Adam Cochrane from Deutsche Bank. Adam Cochrane: A couple of questions from me. Firstly, on the free cash flow guidance being increased, but the sort of top end of the profit before tax number not being increased. Can you just highlight what the incremental sort of GBP 40 million or so that you're generating on free cash flow above and beyond the increase in profit and where that comes from? And secondly, on the second half PBT decline, I understand the points you're making about on the cost side. But would you say that you're feeling more or less confident about the outlook in the second half versus the first half from where you were before. When you see the -- I think on some of the slide decks, you've got some sort of macro indicators. Are you feeling slightly cautious about what we see in France or what we might see in the U.K.? Just a little bit of how you're feeling about the wider consumer given some of the surveys and things that you guys do. And then the third question is on the big ticket, I think if I'm right, it sounds like your lower price point ranges have proven to be really successful. So from a volume perspective, would you say that your big ticket growth looks even more impressive than the value numbers that you presented? Thierry Dominique Garnier: Thank you, Adam. Let me start maybe with exactly reverse order, so 3, 2 and 1. So I think in big ticket, in short, the answer is yes, we are selling more lower price, let's say, lower tier kitchen across the group. So therefore, when you look at volume, yes, it's better than the sales you are looking at. Maybe let's spend 1 or 2 minutes on our view of the customer by region, and we'll do that methodically by country. So I think U.K., it's fair to say H1, we have seen a resilient consumer. And you see that through multiple quality indicators, transaction, volume were up, positive order book for big ticket, core and [indiscernible] categories. And when you look at the consumer sentiment, we are seeing a slightly improved consumer sentiment, slowly rising in H1 to now according to GfK. Now we are, like you, mindful of signs of softness in the labor market, the uncertainty of the budget ahead of us and we are seeing as well food inflation relatively high. So it's something we are looking. We are watching that H1, the consumer in the U.K. has been resilient. So therefore, we believe the middle of the scenario as a target for the full year is very relevant for the U.K. France, different story. We have seen H1, a subdued consumer, mainly driven by political uncertainty and the constant discussion around reforms, what should be the right reforms. And the consequence of that is a super high savings rates in France. We are about 400 or 500 basis points above historical average. So it's not as if the macro was a catastrophe or people have no money. In fact, people have money, but they save, they are not optimistic about the future. Consumer sentiment in France stay very low and is decreasing. So moving in sales is a good indicator, so moving from 92% in January to 88% in July, so not great. While we are seeing better macro indicator, interest rates is low, the mortgage year-on-year is up. The housing transaction are slightly up. So it's not around macro. It's all around political uncertainty. And we so far are relatively cautious about France in H2. We believe the consumer sentiment will remain subdued. The political environment is not improving. So we are cautious about France in H2. And therefore, scenario, we believe will be between the middle part of our range and the lowest end of the range for France. Poland H1 was a difficult H1, probably slightly worse than expected due to geopolitical factor in Q1 with the discussion around the war in Ukraine, political election at the end of Q1, relatively high inflation, relatively high interest rates and somehow consumer sentiment was low. But contrary to France, we are seeing some sign of, I would say, slow recovery, inflation now down to 3.1% in July. The real wage growth is really supportive. We have seen 3 interest cuts from the Central Bank of Poland and overall an improvement in the consumer sentiment. The macro are really supportive. So I would rather go for a slow improvement of the consumer sentiment in Poland in the coming months. And therefore, we are comfortable with the middle of our scenario. So a bit longer, but I think it's important everyone hear that. And then on the... Bhavesh Mistry: Your first question, Adam, on the free cash shape. So as I alluded to earlier, our peak is in H1. So our profit is H1 weighted. Our free cash is even more H1 weighted, and that's just the dynamic of working capital. We're selling through our stock in the first half. We tend to buy it in the second half. We also have a little bit more CapEx weighted in H2. That's our Screwfix store openings, both city and regular Screwfix. We've got more tech and maintenance CapEx. And then just some technicalities around the timing of Chinese New Year and Easter next year means there's more stock being ordered in the second half of this year. And again, that's just making sure we have it in and ready for peak trading when we hit the first half of the next financial year. Adam Cochrane: So if we think about a walk-through from where your free cash flow guidance was at the upper end at the beginning of the year and where it is now, obviously, your profit expectations haven't changed at the upper end, but your cash flow has. I understand the timing between 1H and 2H, but the absolute quantum of the GBP 40 million year-over-year, the timing of Chinese New Year as an example, I'm assuming you would have known that at the beginning of the year. So what's changed in terms of the upper end of the free cash flow? Is it that you've got lower inventory? Is it that -- what's the exact driver of higher free cash flow for the full year? Bhavesh Mistry: Well, profits. We had a tax refund [indiscernible] historical sort of true-ups of prepayments and tax. I'd say those are the 2. And we also took inventory days down, right. We took another 6 days down. So better management of our stock. Operator: Next question comes from Mia Strauss with BNP Paribas Exane. Mia Strauss: Maybe just 2 questions. On Castorama France, you've talked about the progress you've made on some of the store restructurings and the reduction in DC space. But maybe if you can give a bit more color on what that actually translates to in terms of pounds? And then secondly, on big ticket, as you said, we've seen 3 quarters of sequential growth. Is this kind of considered the new normal? Or are we going to start lapsing in tougher comps as we go into next year? Thierry Dominique Garnier: So I think maybe on Casto France, you have in the presentation really an update of the plan and we are really happy with the progress being on sales and really productivity and on the restructuring of the store network. Some of those actions will deliver results relatively in short term. And when you speak about costs, you have short-term impact, including logistics, head office, continuous work we are doing on efficiency. So that delivers relatively fast P&L impact. Store network, you need a bit more time when you do rightsizing, you need to do the job in the store, you need to bring the partner in the back-end space and you need the maturation of the stores. So I think clearly, the network, we need much more time to crystallize the profit than on short-term cost actions. Another example, when you speak about e-commerce and Pro as well, it's a long-term several years program, and we are very optimistic on it. On big ticket, I think in short, probably 2/3 of the growth is our self-help, 1/3 is the market. So when I look at H2 and '26, I think the momentum -- we should see the momentum from self-help for a few more months. It's a combination of range, but as well the churn by the team. I give you interesting data that installations were up 36% in H1, kitchen and restroom installations. So it's a good job done by the team around training, incentives, focus on selling more kitchen and bathroom installations. So we have really a strong plan on kitchen, bathroom. So 2/3 our action, 1/3 the market. Operator: Our next question comes from Georgina Johanan from JPMorgan. Georgina Johanan: [Audio Gap] the second one, thanks for all the color on gross margin. I just wondered to help us with modeling as we go into next year. Obviously, seasonal was so strong in the U.K. in Q1. If you could just give a sense in basis points of how much that supported the H1 gross margin in the U.K. in particular, please? And then finally, just on Poland, I think some of us are sort of more removed from that market, if you like, than U.K. and France. And I just wondered if there was anything happening that would be useful to be aware of in terms of the sort of competitive or structural environment there. So not necessarily related to sort of promo around the cyclical, but just whether there is any new competitors developing or competitors falling away as the case may be, I know action is rolling out strongly there, for example. So just anything you could share would be really helpful. Thierry Dominique Garnier: For sure. Thank you for the question. I'll start with the first one. I think about half of B&Qs are in a way impacted by Homebase closures. And we have tactical marketing action locally. So we did a piece of job to make sure we can reach the customer around the Homebase stores and attract them to B&Q. And we make sure we have enough stock in the store to make sure as well the sales transference was optimized in H1. So it's part of the sales of B&Q in H1, obviously, but there are many other levers, and we discussed big project, marketplace growth, the Pro, et cetera, and Homebase is part of that along with the good weather in H1. We have bought 8 stores from Homebase, 5 in the U.K., 3 in Poland. Again, very happy with the pace of the team because we converted them in a record few weeks. So we were -- the store already ready between April and early May, just before peak. I'm very happy with the sales of those 8 stores so far, really good start. Maybe on Poland, I will let Bhavesh speak around gross margin and seasonal. Competitive dynamic, we are clear #1. But there is a fight with [indiscernible] as well competing in this market. We see, as I mentioned, rational behavior on prices, relatively dynamic promo. And I think both us and [indiscernible], we keep opening stores. If you look at the past 3 years, we opened 11 stores between '23, '24 and H1 '25. So significantly more stores than [indiscernible] keep up new store on this side. I think big market -- big player in Poland is Allegro. I think if you tell me the past 5 years who is the #1 competitor is probably Allegro. So we are really working hard on our e-commerce proposition, our marketplace in Poland since early this year. A lot going on, on loyalty program, data apps in Poland to compete with Allegro. And like in other countries, yes, Allegro is a fantastic marketplace. But for DIY, and we see that in the U.K., we could become the reference marketplace in DIY in Poland. And then new discounters, you mentioned [indiscernible]. I think it's -- we are internally working very hard on how we react with discounters for the past few years through our lowest price, through dedicated OEB. As well Lidl, Lidl is doing good job on some categories. So that's something we are addressing very, very carefully. And I think we have a very good plan to compete with Lidl and [indiscernible] in Poland and across the globe. Now on seasonal and gross margin... Bhavesh Mistry: So our seasonal like-for-likes in the half were plus 5.1%. These are rough, rough numbers, but if you assume seasonal and more normal seasonal would be sort of 1% to 2% like-for-likes. When you take our gross margin of around 35%, it's a little bit lower in seasonal than other categories. Thierry talked about big ticket being sort of margin accretive relative to the other categories, then I'd roughly say around GBP 15 million of our profit uplift was a function of the seasonal outperformance or margin uplift. Operator: [Operator Instructions] There are no further questions on the webinar. I'll now hand over to Thierry for closing remarks. Thierry Dominique Garnier: Thank you, everyone, for joining, and thank you for all your questions and comments. And obviously, myself with the team, we are at your disposal if you want to discuss further or ask more questions and happy to meet you and talk to you very soon. Thank you, everyone.

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