Good morning, everyone, and thank you for joining us today. I'm Thierry Garnier, CEO of Kingfisher, and I'm here with our CFO, Bernard Bot. We are still unable to meet in person today and are conducting this presentation virtually from our offices in Paddington. We are happy to be with all of you this morning and are looking forward to updating you on our progress in 2020. Our agenda for today will start with an update on our operations and strategy.
First, how we are managing the ongoing impact of COVID, then a progress report on our fixed and focused in 2020 priorities. Finally, a recap of the Powered by Kingfisher plan, which we laid out in June, and some headlines on progress we have made in the first half of the year.
Bernard will then present our financial performance and position before we open the meeting up for Q&A. On slide five, I would like to take a moment to reflect on the past few months. Starting with our industry, there can be no doubt that the very specific nature of this crisis has driven up demand within the home improvement market. We believe there are five reasons for this.
Firstly, customers are spending more time at home. They have had fewer leisure options available to them and have traveled less, and many have rediscovered the pleasure of DIY as a hobby. Consumers have made more discretionary spend available for home improvement. More people are working from home, meaning finding new ways to improve or use space, and therefore new needs for home improvements.
Finally, the impact of lockdown measures temporarily depressed demand for do it for me and favored do it yourself. The crisis has also clearly accelerated the trend of people shopping online. Kingfisher's e-commerce sales surged up to 4x in April, continues to see strong growth of above 2x compared to pre-COVID rates, despite the restart of in-store purchasing.
Finally, as people emerge from confinement into an economic downturn, we see a search for value for money. We already offer a price index of 100 or less versus closest competitors in all key banners, we will use the power of our Own Exclusive Brands or OEB and our discounter banners to do more. Our top line growth has been supported by this strong market demand.
However, in parallel, through our new strategic direction, our retail banners have found new ways to meet this demand and serve their community. They have played to their diverse strengths. Whether you are a DIY-er, a trade person, someone who wants choice, value, service, or convenience, we have found a way to serve you. In doing so, we believe that we have strengthened our market position. Given all the challenges we have faced, we are pleased that our H1 performance was resilient with a strong sales recovery in Q2.
Our profit and cash performance does also include benefits which will reverse or not recur, and we'll be very transparent about this later in the deck. While it is still too soon to call a normalized pattern of demand, an economic uncertainty must make us cautious. The past four to five months give us confidence.
The fundamentals of our market are strong, and we have demonstrated our ability as a group to adapt and trade through challenging times. We are convinced that the crisis reinforces our strategic direction. In fact, it pushes us to be bolder in areas such as e-commerce with stores at the center, the importance of a discounter banner, and value for money through our OEB, and being simpler and leaner.
There is still much work to do, but as a team, we feel encouraged by these results and are confident in the opportunities ahead of us. Turning to slide six, and how we continue to manage the impact of COVID on our business and our stakeholders. Given much of this has been disclosed already, let me just remind you of the key points.
From the outset of the pandemic, our priority was to act responsibly towards our colleagues, our customers, to our communities as a retailer of essential goods, and making difficult decisions to protect our business for the long- term. All stores in our largest markets had essential status from day one, but we decided to keep them shut at the start of confinement and reopen only when it was safe to do so. We have also been donating PPE to healthcare workers and charities, and in recognition of their hard work, we have paid additional bonuses to frontline colleagues.
In addition to successfully implementing strict social distancing and safety measures, our teams were able to adapt our operating model quickly, rapidly accelerating IT, supply chain, logistics, and process changes to meet unprecedented levels of online demand.
This all took place against a backdrop of stringent cost control and cash mitigation actions, with a particular focus on the management of our orders and inventory. As a result, we have been able to limit the financial impact of COVID to date, and our business continues to be on a sound footing. We have access to over GBP 3.7 billion of cash resources, providing us with significant financial flexibility and liquidity headroom. Before I move on, I would like to say a huge thank you to all our colleagues who have continued to go above and beyond throughout such a challenging period.
Their drive and determination has been humbling to witness. When I joined Kingfisher in late September last year, my immediate priorities were to develop a long-term strategic plan while also taking early decisions to focus and fix the business, which are summarized here on slide seven.
These actions have had a positive impact on our business, setting the path for the implementation of our new plan, while also helping us to respond to the challenges of the crisis. As we reported at full year results, we have a strong and experienced group executive team in place. We have continued to strengthen the bench too, with a new COO at Castorama France, as well as key hires within our group data and digital teams. Next, one of the key enablers of our new strategy is rebalancing local and group responsibilities.
Earlier this month, we launched the fundamental reorganization of our commercial operating model, about which I will say more later. We have also started work on the new operating models for IT and digital teams.
Before the onset of the coronavirus, we paused or stopped several group-wide initiatives to focus on doing fewer things rapidly and better. This involved cutting back on non-critical range reviews and pausing big and time-consuming projects. In France, we stopped all non-critical IT projects and paused our global SAP rollout at Brico Dépôt France, which allowed us to prioritize Castorama and focus on improving our SAP was working in that banner.
This has contributed to an improved operational performance at Castorama France in H1 and allowed us to accelerate implementation of the group next generation digital technology stack. This is a key enabler for our broader e-commerce strategy and was rolled out in H1 without disruption to the business. We are making good progress with our exit process for Russia, and as previously reported, we reversed the previous decision to exit Iberia.
We believe we can build a profitable and sustainable business under the Brico Dépôt discounter banner. Moving on to France, I've already described the operational benefits of addressing our challenges with SAP. The performance of our supply chain in France has also stepped up with over 25 new recruits to that local team. Before the crisis, we were seeing solid underlying improvement in stock availability and inventory management. During H1, we reintroduced more local ranges in France, and we successfully conducted many promotion-based trading events.
At Brico Dépôt, we have been increasing special promotions or arrivage as we seek to reignite this business' strong discounter credentials. These factors all contributed towards the clear improvement in performance of like-for-like sales in France versus the market.
While there is still much work to do and the crisis has had a significant impact on the French profit performance, I am encouraged by our commercial performance so far. During H1, we rapidly modified our operations and processes across the group to focus on orders picked in stores and fulfilled through either click and collect or home delivery. This is integral to our wider e-commerce strategy, which I will talk to shortly. In Q4 last year, we began implementing a new trading approach to address diverse customer budgets and needs and offering excellent value for money.
During the first half, we made further progress, we're introducing more local ranges across the group, running more trading events, making further investments in price at Screwfix, and testing new service propositions. Finally, we know that there are significant cost reduction opportunities across Kingfisher over the longer term.
The crisis has provided us with many additional learnings in this area. Turning to slide eight, the chart on the left shows the evolution of group like-for-like and e-commerce growth over H1. As we reported previously, prior to any COVID-related store closures, trading in the first quarter was already reacting positively to the changes we were making. From late March to early April, you can see the significant impact of lockdown measures and our decision to close in-store shopping for several weeks.
In Q2, group like-for-like trends improved significantly due to the phased reopening of stores in the U.K. and France. Sales growth, both in store and online, was consistent throughout May, June, and July as lockdown restrictions eased and customers spent more time on home improvement projects.
In terms of the third quarter, trading has remained positive, with Q3 group like-for-like up 16.6% to date. All banners are growing like-for-like sales, and there is a broad-based demand across all categories. Our showroom sales and order book are also strong, which I will discuss more shortly. Screwfix has seen its growth accelerate in recent weeks too. Turning to slide nine, and let me take you through a brief recap of Powering Kingfisher.
The first key principle of the strategy is that Kingfisher banners are not the same, and this is a strength. They each address diverse customer needs, operate different business models, and each is developing a clear positioning and plan. Our second key principle is that we will power these banners as a group.
We believe that the role of Kingfisher Group is to enable our banners to serve their customers better, harnessing the scale of the group where it makes sense. We have a clear vision to build the customer propositions of the future, as you can see with our seven priorities on the left-hand side of this slide. Through e-commerce, more compact stores, OEB-led differentiation, a mobile-first experience, and a compelling services offer. This will be enabled by a balanced local group operating model and an agile culture.
We have already taken the first fundamental step here with our new commercial operating model and our mindset of done is better than perfect and test and learn has served us well during the crisis. We want to be simpler and leaner. This means doing less, landing it faster, and reducing our cost and inventory.
At last, we want to build a responsible business culture at Kingfisher. We have established four new responsible business priorities focused around inclusivity, climate change, helping to make greener homes, and fixing bad housing. As part of our commitment to colleague engagement and inclusivity, we are very happy to announce the launch today of an all-colleague share plan.
This gives each and every one of our 77,000 colleagues around the world at Kingfisher the opportunity to become shareholders, with one free share awarded for every share bought. We strongly believe in this program to allow our colleagues to share and to contribute to the success of our new plan as shareholders too. At our full year results in June, we set out clear priorities for each of our banners.
Although it is still early days, on slide 10, I wanted to update you on some of the progress being made. There has been a lot happening, I'm conscious of time, I will just focus on B&Q, Screwfix, and Castorama France. For B&Q, we have already discussed previously the steps taken to accelerate e-commerce, implement new trading approaches, and focus on the customer. The business is in the process of strengthening its range, offering more choice to customers, and meeting demand for products previously not available.
For example, B&Q has brought back Sandtex and Leyland paints, these have been big hits with customers. We have seen the successful launch of our new kitchen range, which along with popular ranges like Norma bathrooms, is proving our private label opportunity. Developing B&Q service proposition is also a key priority.
We have tested kitchen installation services to support the new range, and I can confirm that we'll be relaunching this service across the U.K. by January 2021. We also have trials taking place for tool hire and self-checkout counters. In addition, we are trialing some smaller store formats to understand how we can extend the distribution of our brands. For example, Merton in Southwest London, which is performing well, and we have several other trials coming soon.
We have also recently agreed to test four B&Q store-in-store concepts inside Asda stores over the next few months, which we track with interest. The Screwfix business has been strengthening its range and continues to improve its price positioning versus peers during the period. I'm also excited about upcoming enhancements to its mobile experience to support its market-leading position.
In terms of store expansion, while there was a pause during the first half, the business is on track to open around 30 stores this financial year in the U.K. In the Republic of Ireland, our first five stores have been performing very well, and we are on track to open 10 stores this year. We are also confident that this model can work outside the U.K., and we are now developing plans for asset-light expansion to start with.
In France, the actions that we have taken over the last 12 months continue to have a positive impact on sales. Performance versus the market has improved, gaining market share in June, July, and August. The major SAP issues highlighted one year ago have been addressed.
Its underlying supply chain is stronger. It has benefited from a new leadership team and the flexibility to implement new trading approaches, including running training events and strengthening their ranges. Overall, while there is still much work to do across banners, we are encouraged by the progress being made and by the commitment and energy of our teams. Turning now to slide 11. We have already started to see the benefits, both before the crisis and our response to it, in rebalancing group and local responsibilities.
Earlier this month, we announced the fundamental reorganization of our commercial operating model. The changes are aimed at leveraging the different positioning of our banners, enabling much greater speed, agility, and local knowledge, while at the same time ensuring that we use the scale and knowledge of the group intelligently. On this slide, you can see the before and after position.
Before, the group had responsibility for all range plans for our banners, whether OEB or brands, as well as all supplier relations. The banners had limited decision rights. Under the new model, the group will retain the design, ranging, sourcing, and supplier relations for all OEB and continue to manage supplier relations for the group's top 20-30 major international brands. We'll therefore continue to leverage the group scale to achieve buying benefits where this really matter.
I believe that the group's strong sourcing, design, and engineering capabilities built up over the last four to five years is driving real product differentiation. This is a key driver for delivering sustainable and profitable sales growth. Our retail banners will gain new responsibilities reflecting the fact that they are closest to our customers. They will define category strategies, overall product range, non-OEB buying, pricing, promotions, marketing, and merchandising.
As a result of this proposed new model, some roles within our group teams are expected to change, and we are currently in consultation with those who are impacted. It is a fundamental reorganization of how Kingfisher operates, and we are excited by the potential here. To slide 12. Over the next two slides, I want to go into a little bit more detail on two of the key medium-term drivers of our strategy, growing e-commerce sales and growing our OEB sales. The crisis turbocharged the long-term trend toward e-commerce.
With very limited incremental CapEx, we accelerated plans that were already in place to create new solutions, sometimes overnight, to meet the spike in demand. Between April and July, we were averaging 1.5 million e-commerce orders a week, which is significant even when compared to some of the U.K. food retailers.
In H1, overall e-commerce sales grew by 164% and by 173% when excluding Screwfix. Group e-commerce penetration increased by 12 percentage points to 19%. Excluding Screwfix, penetration increased five percentage points to 8%. These numbers are clearly supported by the specific nature of trading during the crisis. The more important takeaways for me are the potential for e-commerce in our industry. Our ability to handle the demand and to manage the financial and operational consequences of e-commerce growth.
The long-term growth trends are clear, and we have made significant shifts in our strategy to leverage this opportunity. We have shifted to store-based picking and fulfillment as a priority, and are redesigning the store operating model to support efficient delivery and click and collect, with only certain categories delivered from fulfillment center.
For the seven months to August 31st, 88% of all e-commerce orders, excluding Screwfix, were picked in stores, up 28 percentage points versus one year ago. 80% of e-commerce orders, excluding Screwfix, were made through click and collect. B&Q is committed to delivering click and collect within one hour, and for Screwfix in as little as one minute. We have also started to develop our last mile home delivery capabilities from stores, enabling faster fulfillment. At B&Q, for instance, our partnership with DPD has enabled next day delivery with 98% of the U.K. population.
In addition, we are testing same-day delivery with Stuart, a DPD affiliate company. You have heard me talk about the group's next generation digital technology stack, which we are rolling out as a priority. It is already in place at B&Q. An initial implementation was completed at Castorama France during H1.
This means that we are migrating Kingfisher front-end IT architecture to cloud-based API components, which is a critical driver for more efficient and more dynamic digital capabilities, including scalable mobile apps, smarter search capability. The cost of this accelerated rollout sits within our existing IT budget envelope, and it leverages the work already completed over the last few years with the global SAP rollout. We will support this work with a more balanced local group operating model for IT and digital, the planning of which has already begun.
Lastly, we are continuing to explore the potential for an e-commerce marketplace, but it is very early days. To slide 13. We believe that our own exclusive brands, or OEB, with differentiation and value for money are a key driver for Kingfisher's future sales and retail profit growth.
We are seeing good progress recently with our new kitchen range selling well at B&Q. Outside the period, when our showroom offer was closed, orders increased 23% year-on-year on a like-for-like basis, with takeaway sales up by nearly 8%. Our new lighting range is also landing well at Castorama France.
To achieve our longer term goal of higher OEB penetration, we have shifted the priority from the unification of ranges towards OEB, and we will ensure that the OEB products and brands are aligned with the different banners' proposition by tailoring them for DIY, for trade, and for discounters. With my update now concluded, let me hand over to Bernard.
Thank you, Thierry, and good morning, everyone. To slide 15 and an overview of the half. While Q1 sales were heavily impacted by COVID, we saw strong recovery of sales in Q2, aided by strong demand and actions to serve our customers safely. The start of Q3 is also encouraging with Q3 group like-for-like sales are up 16.6% to the September 19th, with growth across all banners and categories. Overall, the group's financial performance for the half was resilient. Total sales in H1 were down 1.1%, and like-for-like sales were down 1.6%, all in constant currency.
Retail profit was up 17.7% in constant currency as a result of, in large part, temporary cost savings and a strong performance in the second quarter, in particular by B&Q. Free cash flow was significantly higher year-on-year at over GBP 1 billion, the largest then driven by favorable working capital movements.
We have and continue to actively manage the impact of COVID. As a result, we ended the half with net financial cash of over GBP 1.1 billion. We entered the second half against a favorable trading backdrop, and our focus is on enabling sales in a safe environment. However, the continued uncertainty and concerns over COVID and the wider economic environment limit our visibility. Given this uncertainty, the board has decided not to declare an interim dividend.
We recognize the importance of dividends to shareholders and will continue to evaluate the quantum and timing of any future dividend payments. Slide 16 is a dashboard of the key financials for the half. Let me touch on the profit measures here.
Starting with gross profit, this was GBP 2.2 billion, down 1.5%. Gross margin for the half was down 10 basis points to 36.9%, with a decline in Q1 mostly offset by an increase in Q2. As mentioned, group retail profit increased by 17.7%, and our retail profit margin increased by 140 basis points to 9%. Adjusted pre-tax profit was up 23.1% to GBP 450 million, and statutory pre-tax profit was GBP 398 million after GBP 17 million of net exceptional charges. Statutory profit after tax was GBP 317 million.
Moving to slide 17 and the movement in group retail profit. This was up GBP 79 million to GBP 533 million, with a decline in gross profit of GBP 35 million, more than compensated by a reduction in cost of GBP 114 million. Let me unpick the gross profit decline.
This was driven by a GBP 23 million adverse impact from a 1.6% decline in like-for-like and a GBP 20 million increase in supply and logistics costs, which was mostly COVID related. Lower clearance activities, partly offset by more trading initiatives and price investments, increased gross profit by GBP 8 million. The contribution from net store growth offset the negative contribution from Russia. As mentioned earlier, while Q1 saw gross margin decline, Q2 saw an increase that mostly offset this decline.
Moving through the bridge, operating costs were higher by GBP 28 million from higher store numbers and inflation, and by GBP 22 million because of the shift in our French frontline employees' profit share into H1. The latter partly reflects the structure of the French store staff bonus scheme, which is based on quarterly sales performance. Given the very strong sales growth in Q2, more had to be accrued in this quarter.
There will be, however, the offsetting benefit in H2. In the half, we incurred direct COVID-related cost increases of GBP 28 million for PPE, additional store security costs, and special bonus payments made to frontline store staff. While we incurred further costs for safe in-store customer journeys, including additional marshaling, we were able to offset these with higher productivity and a reallocation of staff. The combination of business rates relief in the U.K. and furlough schemes in the U.K., France, and Spain provided a total benefit of GBP 100 million.
Finally, we achieved a further GBP 92 million of cost savings. For example, we significantly reduced spending on advertising and marketing, Goods Not For Resale, head office cost, and travel during the crisis. In a large part, these reductions are specific to the period. Let me now take you through the net exceptional charges for the half of GBP 17 million.
Asset impairments and exit costs of GBP 27 million were recognized during the period relating to Russia, reflecting the performance of the business in H1 and the anticipated net proceeds from the planned sale of Russian activities. The GBP 14 million liability that was held in relation to warranties as part of the B&Q China disposal in 2014 was released in the period following the expiry of the claims period. Of this amount, GBP 10 million has been recognized within exceptional admin expenses, and GBP 4 million has been recognized within exceptional tax items.
After these exceptional items, our statutory profit before tax was GBP 398 million. To slide 19 and the performance of our major geographies. There are slides in the appendices detailing the performance of each of our retail banners, but let me pull out some key points here.
Starting with the U.K., like-for-like sales were up 2.4%, driven by a strong sales recovery in Q2. Like-for-like sales at B&Q grew by 28% in Q2 and by 4.1% in H1. Like-for-like sales at Screwfix were down 1.1% in the half. Sales also recovered in Q2, it did at a much lower pace of 2.4%, reflecting a slower pickup in demand from professional tradespeople than from DIYers. As tradespeople restarted their work in customers' home and we gradually re-established in-store purchasing, sales trends have strengthened with Screwfix quarter three to date like-for-like up 9.9%.
The business has also continued to improve its price position relative to its nearest peers. U.K. retail profit increased by 47.1% to GBP 411 million. This was driven by sales growth at B&Q, an increase in U.K. gross margin of 100 basis points, and an 8.8% reduction in operating costs.
The gross margin increase reflected higher full price sales and lower clearance in B&Q, partly offset by higher supply and logistics costs in Screwfix. Operating costs benefited from the cost reduction measures I mentioned previously, business rates relief, and up to the July 1st, the U.K. furlough scheme. These savings were partly offset by cost inflation, Screwfix space increase year-on-year, and COVID-related cost increases. In France, like-for-like sales were down 5.9%, reflecting the significant impact from COVID-related store closures in Q1.
France experienced a longer period of lockdown relative to the U.K. Q1 like-for-like in France was -41.5%, compared to -16% in the U.K. This was partly offset by strong recovery in demand in Q2 with like-for-like at + 27%, ahead of the U.K., but not enough to return to growth for the half. Retail profit declined by 44.1% to GBP 63 million.
This was mostly driven by the sales decline at both retail banners. Results were also impacted by a decrease in gross margin of 130 basis points, reflecting higher supply and logistics costs as a result of COVID and external disruptions at the start of the year. Next to the decision to up-weight special promotions or arrivage deals in Brico Dépôt and also more trading events. Operating costs were 4.9% lower.
Benefits from temporary cost-reduction measures and the French furlough scheme were partly offset by COVID-related costs and additional payments to frontline staff, and a GBP 22 million shift in employee profit share into H1 referred to earlier. Poland, which kept its doors open throughout the period, also saw stronger demand in Q2 with like-for-like up 15% in Q2 and 3.5% in H1.
Total sales growth was 6.8%, reflecting the annualization of four store openings last year and one store opening in H1. Gross margin in Poland decreased 120 basis points, largely reflecting mix, better price positioning, and more trading events. Retail profit in Poland declined by 7% in constant currency, with profit growth more than offset by a 7.6% increase in operating costs. This is linked to wage inflation, the increase in space year on year, incremental COVID-related costs, and additional frontline staff bonuses.
Iberia sales with like-for-like sales down 22.3% in H1 were severely impacted by COVID restrictions during the half. Since reopening stores in Spain from mid-May onwards, we have seen strong demand with June like-for-like up 25.5% and July up 19%. Despite these weaker sales, the business made a retail profit of GBP 1 million in the half.
Romania reduced its retail loss slightly to GBP 11 million for the half and Russia to GBP 5 million. Slide 20 provides an overview of cash flow and highlights a period of very strong cash generation for the group. We generated an EBITDA of GBP 769 million in the period. Working capital showed a largely timing-related inflow of GBP 656 million, driven by a GBP 208 million decrease in stock and a net GBP 448 million increase in payables. The stock reduction reflects lower purchases during lockdown and strong Q2 sales.
We are working to structurally reduce our inventory levels. I anticipate some rebuilding of inventory in the second half as we improve our product availability. The increase in payables was driven by the deferrals of stock purchases and higher payroll and VAT creditors, again, reflecting strong trading in Q2.
After rental payments, tax and interest and gross CapEx, free cash flow for the period was a little over GBP 1 billion, up by over GBP 800 million year-on-year. The net cash movement, including excluding financing, was also a little over GBP 1 billion. As a result, net debt at the end of H1 reduced by over GBP 1.1 billion to GBP 1.4 billion. Given that working capital will, to a large extent, normalize in the second half, I would expect our net leverage ratio to increase in the second half.
Moving to slide 21 and our current liquidity and financial position. As at September 18, we had over GBP 3.7 billion of total liquidity available, including GBP 2.1 billion of cash, which includes around GBP 540 million from a term facility guaranteed by the French state.
To remind you, under the terms of this facility, the full amount was drawn down on the May 18th. Subject to circumstances and to certain conditions being met, we will consider repaying this facility in H2. We remain eligible for the Bank of England CCFF program and have additional undrawn RCFs available for GBP 1 billion. As mentioned, our working capital position was very favorable in the first half, and while cash is a key focus area, working capital will to a large extent normalize as we rebuild inventories and settle our accounts payable.
That said, we are on a very sound financial footing given our strong cash generation and access to significant liquidity. Moving to slide 22, our outlook and technical guidance for the full year. There's a lot on here, let me pick out some of the key items. Starting with the sales outlook.
While Q3 trends to date have been encouraging, with sales up 16.6% to the September 19th, visibility is limited by ongoing concerns over COVID and the wider economic environment. We expect incremental COVID-related costs to total around GBP 40 million in this year. This is slightly higher than previously anticipated, largely due to bonuses to frontline store staff. We expect central costs to be slightly lower than prior year at around GBP 58 million to GBP 60 million. In the U.K., business rates relief is expected to remain in place until the end of March 2021.
Of Kingfisher's annual business rates bill of around GBP 140 million, around GBP 130 million is eligible for relief. With regards to furloughing, since the July 1st, we have not claimed under the furlough programs in the U.K. and France, and will not claim the U.K. government job retention bonus.
Furthermore, we intend to repay the furlough benefit received in the U.K. of around GBP 23 million in the second half of the year, unless there are any material changes in the trading environment. Turning to cash flow. From a financing perspective, we have already paid back GBP 600 million drawn in June under the CCFF.
As I mentioned earlier, given our solid liquidity position, we're also considering repaying the GBP 540 million French term facility in H2, subject to the environment and certain conditions being met. To repeat, we expect a very favorable working capital position at the end of H1, to a large extent, to normalize as we rebuild inventory and settle outstanding creditors.
With regards to capital expenditure, we continue to review expenditure plans on a case-by-case basis and expect total CapEx of up to GBP 300 million, with a further GBP 50 million earmarked development expenditure that is deferred into the next financial year.
With regards to the previously announced 11 store closures in France. Seven stores have been closed, of which four were in the first half. We expect to close two more Castorama stores in H2, have decided to convert two Castoramas earmarked for closure into Brico Dépôt stores. Cash costs of exits have been fully provided for in previous periods. With that, let me now hand back to Thierry.
Thanks, Bernard, let me now briefly summarize before we open for Q&A. First, we have delivered a resilient financial performance in the first half, with a strong recovery of sales in Q2, following the significant impact of lockdown measures in Q1. The sales recovery has extended into H2 with good growth so far. The crisis has driven stronger demand for home improvement across our markets, prompting more people to re-engage with DIY, become more comfortable with ordering goods online, and seek value for money against a challenging economic backdrop.
In parallel, we have benefited from our new strategic direction with our retail banners finding new ways to meet these demands and serve their community. Our experiences through the crisis have reinforced this direction and have made us bolder in our priorities.
While there is still a great deal to do, we have made good progress with the strategic plan that we announced in June. There has been a fundamental reorganization of our commercial operating model. We are continuing to improve our operational performance in France. We have accelerated our plans around e-commerce and many encouraging new initiatives are being developed across our banners. Looking forward, there remains considerable uncertainty around the coronavirus crisis and the wider economic outlook.
Managing the risk here remains a key priority for us. While the near-term outlook is uncertain, as a team, we believe the longer term opportunity for Kingfisher is significant and we are committed to returning Kingfisher to growth. Thank you for your time. I would like now to invite any questions. Over to you, operator.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question over the phone today, please signal by pressing star one on your telephone keypad. Please note if you're using a speakerphone to make sure your mute function is turned off to allow your signal to reach our equipment. Once again, ladies and gentlemen, that is star one to ask a question. We'll pause for just a brief moment to give everyone an opportunity to signal for questions. Our first question over the phone comes from a Richard Chamberlain from RBC. Please go ahead. Your line is now open.
Yeah, thanks very much. Two questions from me, please, to start things off. The first one's on the U.K., obviously very strong performance in the first half, Thierry. You talk about reintroducing kitchen installations going forward, and I wonder what changes we should expect compared to last time, because I guess it used to be quite helpful for sales, but not so good for profits. That's my first question.
Thank you, Richard. First part of this answer is we have been testing four different ways early Q4 last year, different ways, partly, let's say, fully managed by B&Q and some of the tests, let's say, really managed in a different way. We have had very good results overall. We have chosen one of the four way. Now we are rolling out these installation services across the store and will be ready by end of January.
We consider we should have a small number of trade people by stores that are actively managed, but with a way through which we can guarantee to the customer that the quality of the job is indeed there. That overall, the cost of the installation could be paid to B&Q and, let's say, could be part of other services offered by B&Q. That we are very clear now after those tests, rolling out in all our stores. I think we'll do it in a different way versus what was done previously, where it was, for a large part, B&Q employees.
Okay, got it. Yeah. Okay, thank you. On the second one on Poland, I wondered how much the performance has been held back by the new ranges coming in a little bit later. I think you mentioned the kitchens are still to come in or are coming in right now.
Yeah.
Also in Poland, do you see some of that price investment that you've made to become more competitive, it's starting to ease off in the second half? Thanks.
Thank you. I think on Poland, we are pretty happy with the sales trend, to be honest. The range reviews are on time. We, from the beginning, planned to have these kitchen range reviews in the coming months. It's coming as planned with early good results. No, I would not say we have disruptions linked to that. I think last year probably our price positioning was okay, but we consider we should do a bit better this year. I don't expect any material additional investment in the coming months. We thought we had to do this small price repositioning in the past months.
Overall, very happy with the trade in Poland. The country that kept all its stores open across the crisis, very often taking initiatives, a lot of good practices around safety measures, and a lot of agility on e-commerce. Relatively happy with Poland, indeed. Thank you, Richard.
Okay, great.
Just to add, Richard, Bernard here. If you look at the like-for-likes, Q2 for Poland, + 15% trading in this quarter, also very strong at 10.3%. I think that reinforces the approach and the strategy that we have in Poland.
Our next question comes from Anne Critchlow from Societe Generale. Please go ahead. Your line is now open.
Thanks. Two questions from me, please. The first on product availability. Could you comment on how your availability rates have been improving, or otherwise, particularly in France, where I think there were some problems previously? The second question is about rental costs. What sort of rent reductions are you getting on rent renegotiations, where are these taking place, and how does it differ between countries? What's the outlook there?
Thank you, Anne. Let me first comment on the French supply chain. Again, we did many actions very early last year, starting with the team, we had to strengthen the team, we recruited 25 additional people in the team. Through our IT progress, through the SAP implementation at Casto, we indeed supported our supply chain operations.
We did a lot of work last year, therefore, I would say end of 2019, we went back to 97.5%-98% of availability, which was probably up by four to five points versus the year before. Really underlying improvement. If I look at the French supply chain in France in the past weeks, we have a low level of inventory. One of our key criteria is the occupation ratio of our DC. They are at a good level.
I must say that you probably remember that we had a strike in the French harbors for many months up to February. We started the crisis with a lot of containers in the French harbors, and we clean all that. We solve all those issues. Therefore, today, already the French supply chain is operationally in a good shape. Maybe one comment on the COVID. We overall consider we have a supply chain well under control, but with some issues in some specific categories. We have a very polarized demand today.
When you speak about outdoor paint brushes, sometimes we have such strong demand that our suppliers have issues to deliver products. We have well under control, with a few challenges for some specific categories. Maybe I leave it to Bernard on the lease topic.
Sure. Hi, Anne. Obviously, our property cost is a key area of focus and to some extent, the crisis has enhanced our reputation as a high-quality tenant. Obviously, with that, we engage with our landlord. The last year, we did about 35 re-gears. This year, we're also pretty active. We've got about seven approved, with a reduction of about 20% in the rent. It is a little bit skewed towards the U.K. because that's where we've got the biggest part of our rentals. Obviously, we're also looking at other markets and engaging with the landlords there.
Great. Thank you.
Our next question comes from Geoff Ruddell from Morgan Stanley. Please go ahead. Your line is open.
Yeah, good morning. Could I ask two questions, please? The first of which relates to the change in the commercial organization that you announced this morning, with the banners getting control of their non-OEB ranges. I was just wondering how that's going to work in practice. Are we going to get another round of range reviews, which were obviously very disruptive to the business last time around, or is the range changes going to be very slow and gradual?
Then the second question, completely different topic. I think the very final bullet point of the summary slide talks about Kingfisher being committed to returning to growth. I just wondered what sort of growth that means. Is that top-line growth? If it is top-line growth, is that going to be driven by space growth? If so, in what markets and in what banners you would expect to grow space? Thank you.
Thank you, Geoff. I think first of all, when we speak about reorganization, I think first it's how we reallocate responsibilities. I think for me, the structural point is the group was in charge of the ranges, the range strategy, and really the detail ranging by banners. We discover it was not efficient because, even if you are extremely smart, it's very difficult in one person to manage all the different ranges of B&Q, Screwfix, Brico Dépôt, Castorama in France and Poland, et cetera.
That's why we consider to be closer to customer and to use a banner to decide on the range strategy is critical. I do not expect material range reviews. I think over time, gradually, maybe we'll need us over two years. We'll adjust the ranges. If you take a B&Q or Castorama in France, we consider the choice is not large enough.
Especially what we call in the upper categories, the Q3 and Q4 upper premium choices, we don't have enough ranges. When you look at Brico Dépôt, we should probably come back to a more discounter DNA in the range strategy. It will come over time. I don't expect material range reviews. To come back to your second question, when we said bringing Kingfisher back to growth, I think first our strong belief is that as a retailer, everything starts from the top line. I would say like-for-like top line, to answer clearly your questions.
We have opportunities, especially with Screwfix, with Poland, and maybe over time, other opportunities that we want to improve our like-for-like operations. We are as well committed to grow the absolute retail profit. You remember we were very clear in June, but all this story, all this new strategy should start from the top line, and for us it's like-for-like sales.
That's clear. Thank you.
Our next question comes from Geoff Lowery from Redburn. Please go ahead. Your line is open.
Yeah. Good morning, team. Two questions as well. You've obviously thought very hard about the structure of the commercial and sourcing organizations. Given that and your mix of businesses, what do you think is a realistic aspiration for your inventory, GBP million inventory turn relative to sales? However you think about it, what's realistic there? Secondly, given the step change in multi-channel that's going on in your business, if your sales split, say, ended up 35% digital, 65% stores, what would your gross margin, OpEx to sales and the EBIT margin look like in that scenario?
Maybe let's start with the second question and Bernard and I will comment on the first one. I think there is obviously always this question around the potential impact of the digital sales on our profit. You already see that we announced a critical change. We moved from seven to 19 points of digital sales, and you can still see the profit of the company. I think, and coming from food retail and looking at the situation of Kingfisher as well with those fresh highs, we are in a high margin environment. We have high margin in DIY.
As soon as you give the priority to store picking, you are already operating with marginal additional CapEx, marginal additional fixed costs. You just add additional cost, but you have limited fixed costs. I think it's really a very powerful model.
We have been able to prepare 88% of the number of the group orders through store picking, and then it's click and collect, 80% of our orders through click and collect. Click and collect is the most profitable channel. We have many additional ideas that I will not develop today because it's a bit too early to improve our online P&L looking forward.
On inventory, and I will leave the floor to Bernard, we believe, and we said it clearly in June, that we believe we have significant opportunities to reduce inventory. We started the job end of 2019. We have structural programs in place. Obviously, the crisis is helping us, and as said Bernard, we will rebuild part of it. Indeed, we have program in place, and we believe the opportunities are strong.
Yes. Just let me just add a little bit of color there and as the obviously, GBP 200+ million contribution to cash flow in the half from the inventory reduction. I'm looking to hold on to part of that. Obviously, we also need to rebuild stock and ensure that we've got availability across the banners. I think more structurally, as Thierry highlighted, if you look over the past five years or four years, we increased stock by GBP 500 million, where in 2018, 2019 we took off about GBP 130 million.
Last year we took about GBP 90 million, but there's more to go, and we think there's a meaningful further reduction to be had. I think as we highlighted in June, there are probably three main areas. It's around better planning and forecasting.
It's looking at what we do in stores in terms of display levels, but also things as ranging and deployment, where I think we can be a little bit smarter with some of the very slow-moving or nearly not selling items. That's the plan, which is, that's one of the powers of the group where we're working in terms of the supply chain expertise and working very closely with the banners to follow up on that.
Okay, thanks.
Our next question comes from Warwick Okines from Exane BNP Paribas.
Yeah, good morning. I've got two questions. Firstly, could you give a little bit more color on your thoughts about Screwfix outside the U.K. and Ireland? You mentioned it in your prepared remarks. Just roughly what timeframe are you also thinking about it? Secondly, you talked a fair bit about Brico Dépôt and its discounting proposition. Could you give us a sense of what proportion of sales you made in the first half on arrivage? I think I'm right in saying that it got to as low as only about 5% of sales a year or two ago. Has that rebuilt to the sort of 15% that more historically has been the right level?
Yeah. Let me start with the second one to go fast on this one. We indeed really strongly believe that Brico Dépôt is a unique model, really our discounter. I remind you that before discuss arrivage, in this model, you should have very low everyday low price. We have a very good price index, and that's critical in this model. When we organize promotions, what we call arrivage is really a one-time promotion, and when this promotion is over, you don't keep really the SKU at your assortment.
I would say in the past, in 2019, arrivage went at a very low level, probably slightly above 5%. We are currently, let's say, in a range 8%-10% when we look at the Q2. Well, that's to describe the current trading strategy for Brico. For Screwfix, you remember we started in Ireland.
We had trial of Screwfix in Germany. One was successful in Ireland, the other one not in Germany, which we spent some time to understand what we can learn from those two experiences. That's why when I say we want to start in asset light ways, we really believe the way we started in Ireland two, three years ago is the right one. With a pure online start, building the brand, building an online proposition, gradually advertising the brand.
After a few years, when we consider we were ready to open the few first stores, we are very happy today with the first Irish store of Screwfix. I think the other direction would be to look at countries where you already are Kingfisher.
When you are in a country for years, you have your team, you know the supplier, you have the relationship with suppliers, you have a supply chain, you have stores, you have professional teams. That for me are the two directions, looking at Kingfisher countries and looking at the Irish success to build plan for Screwfix. I don't want to comment on timing. I prefer to tell you when it's done rather than to give you promise. We are working on plans with Screwfix to start international expansion outside the U.K. and Ireland.
Thank you.
Our next question comes from Georgina Johanan from JPMorgan. Please go ahead. Your line is open.
Hi, guys. Thanks for taking my questions. I've got two, please. The first one is just on the gross margin. Apologies if I've missed it somewhere, but I think you often provide some guidance for the full year outlook. If you could just give a sense there, that would be helpful, please.
My second question was just around the French market and availability in the French market in general. How has that been in recent months? I guess I'm just trying to get a sense if your share gains have been supported in part by a lack of availability of products at some of the smaller players, et cetera, in terms of sort of difficulty managing it over the COVID crisis. Thank you.
Let me start with the second one. On French availability, as I just answered, we had structural actions to fix our supply chain. I don't come back to that. I think it's part of our improved like-for-like sales in Q4 and up to March, is linked to this availability improvement. Obviously, as I mentioned, COVID crisis impacted availability all across the group, and I guess as everyone. Indeed, we are gaining market share in France in June, July, and August. I think we respect very much our competitors in France. You know that Adeo is a strong and organized company.
I do not believe that Adeo's situation is worse than us on availability. I think it's probably more linked to a better brand positioning of Castorama and Brico, of our e-commerce strategy, where we have been probably agile. The ranges improvement, et cetera, or what we described this morning, rather than only availability in my view, for the French market. Now I come back to the margin with Bernard.
Hi, Georgina. Yes, look no further. We didn't give guidance on the gross margin. Let me say a couple of things. As I just said, gross margin in the half was slightly down 10 basis points, and that's really the higher supply and logistics costs and the trading initiatives. There was an offset from lower clearance and fewer range changes and the dynamic was that the Q1 was down, but Q2 margin actually was up year-over-year.
For the full year, I think, the many moving pieces, and to some extent, we don't have visibility with some of the uncertainties. A couple of things we do know is we're going to continue with some of our trading initiatives. That's one. The other, there will be slightly less range changes this year compared to the prior.
Thank you very much.
Our next question comes from Simon Bowler from Numis. Please go ahead. Your line is open.
Thank you. Good morning. A couple questions from myself. You kind of quite helpfully spoke to the idea that you don't see any need for sequential further investments into promo or pricing in Poland. I was just wondering whether the same would be said in France as well. Secondly, just coming back to the new commercial operating model.
Again, thinking about how this works in practice, are local teams effectively using kind of the own brands as if they were a third-party supplier? Is there any incentive for the local teams to kind of buy the own branded products over and above what pricing they're offered by group?
Yeah. Thank you. I come back to those two questions. I think for the French pricing, to be very direct, we are today happy with the Castorama price index. We are below or slightly below 100 or matching our competitor, and I think it's a goo
d positioning. We are clearly below 100 for Brico Dépôt. As I really want that Brico Dépôt come back to a strong discounter DNA, our plan in the medium run is to constantly improve our price index, by cost saving, by action, so that constantly we try to be the leader in our price positioning, which we are, and to continue to improve our price index by reinvesting our cost saving into prices, and that's how works a discounter model.
It will be done over time, I would say, a bit all the time, as soon as we have a better sales density or improvement on cost. I think on purchasing, that's our work, the group. We have a common framework. We want, as a group, to continue to increase the proportion of OEB. We are today around 39%, and we believe this proportion should continue to grow. We have a good team. We have engineers, we have designers, we have quality team, we have sourcing team.
We have strong capabilities and all the banner that we are all together committed to grow this OEB penetration, in the medium- term. We believe it will bring sales, it will bring differentiation, it will bring margin. As a group, we are committed to continue to increase the penetration of OEB.
As a quick kind of follow-up, I don't know if kind of just try and get a sense of how important to your mind the OEB piece of things is. Is that on a medium, long-term view, it should be 50% of the business? Have you got a sense around where those targets for that part sit?
We don't want to set a target at that time. We consider there are significant opportunity to continue to grow OEB. OEB has a better margin than the categories. As we have, we speak about three, four years horizon. Indeed, we have ambitious target during this time horizon.
And maybe just to [crosstalk]--
I think... [crosstalk]
--Just to add a couple of things on your point on the incentives for the banners on OEB. Obviously, it is a source of differentiation for them, and we see it, for example, in the kitchen ranges. There is the margin benefit and significantly, and I think Thierry mentioned it in. The current environment where people are looking for value for money, obviously the OEB brand is a fantastic proposition that we can offer to our customers. All the incentives to build the OEB share in the banners.
Okay. Thank you.
Our next question comes from Simon Irwin from Credit Suisse. Please go ahead. Your line is open.
Good morning, gentlemen. Can you just talk a little bit more about stores and formats in terms of where your thinking is on stores? I noticed, obviously, what you mentioned in the statement, and that you have effectively pulled two Castorama closures back from closure. How much do you think you're reasonably close to knowing what you want your large stores to look like in particular? Do you have a plan in place to start reinvesting in those stores, which probably haven't seen too much investment in recent years?
Yeah. Thank you for the question, Simon. Several topic I would like to mention. First, as I said, we believe in smaller formats, and we believe in the longer trend of smaller formats because of the demography, because it's true for every market in the world, and we have to learn how to operate smaller formats.
That's why we have already three small B&Qs. We are so far encouraged by the first results, so we'll open a few more B&Q tests in the coming months. We'll have some tests in France as well for smaller formats. As we just announced, we will test for a small B&Q inside Asda store that's shop in shop. I do not believe in the large closure plan. I believe that we need a lot of stores, that probably we need less square meter than today.
We need a lot of stores to bring convenience, as well to operate our e-commerce with store picking. Now, for some of our big boxes, here is mainly some of the B&Q and some of the Castorama in France, probably we could have some too large big boxes for some catchment areas.
Again, it's not everywhere. You have some very successful large B&Q or large Castorama, some catchment area, the store are too large, and we should gradually work on resizing. That's as well for me, test and learn. You need to test to understand the implication on sales, what is the CapEx level, how much you can get on margin, on the cost. We will gradually test and learn resizing, right-sizing. When we are ready, we'll come with a plan on this topic.
I think this is a topic that is on the table for every retailer in the world, and the size of big boxes. You're right that on CapEx, when you look at the past year, and we said that in June, we thought we have spent probably too much CapEx on product and not enough on retail. Looking forward, we want to rebalance a bit the CapEx spend on retail stores.
Again, we'll do that gradually with measures and with plans, but it is correct that we should probably looking forward at a bit more CapEx to renovate our store networks. At last, you're right to say that we will transfer two Castorama France that was supposed to be closed, into Brico Dépôt. A few years ago, some transfer from Castorama to Brico Dépôt were very successful, so we are very interested to look at the results now. I think it's interesting topic to follow up in the coming months when we'll have the results of those transfers. Thank you, Simon.
Thank you very much.
We'll take our next question from Kate Calvert from Investec. Please go ahead. Your line is open.
Good morning, everyone. A couple of questions from me. First of all, could I ask Geoff's question in a different way on the new commercial operating model? When will I be able to go into a B&Q and Castorama and see a range that you are happy with? Is this within two years? In terms of my second question, on future growth, how many stores do you envisage in Poland, Spain or Romania as the ideal number? Finally, where are you with the disposal of Russia?
Thank you. I think, for a retailer, range is a never-ending story. As we say, we are never happy with the range and we should continue to constantly improve our range. As I said, we want to continue to increase the proportion of OEB, and to increase your OEB, you need to develop new ranges to find suppliers, et cetera. That's what we are doing, for example, for kitchen. When you look at the time horizon of kitchen, you need several years to roll out the kitchen all across the group.
It takes some time probably to be back to a range with more local ranges, more adjusted ranges to the customer needs, especially when you look at Castorama and Brico, we are on different banner proposition.
I think if we are reasonable, I think two years is probably a right horizon to be happy with. But OEB will continue to grow over time. As I said, for me, you are never fully happy with the range. You should never be happy, means otherwise you are not agile and moving, and you have new needs. I give you an example, we are developing a new proposition to create easily interior walls.
If you want to work from home, we have now a new proposition that you will see across our stores to set up, very easily, additional clusters in your home and additional interior walls. So I think it's a never-ending work on the range. Russia, I said we are making good progress. I hope to come back to you soon, but I can't comment more for the moment.
I think for Poland, Spain, and Romania, it is highly dependent, in my view, on the business model. Poland is extremely profitable business model. The country is not saturated. We still have spaces to open new big boxes in new cities or in smaller cities. We just opened a new store last week. It seems going well.
For Spain and Romania, I would say in the short- term, the first topic for me is to bring back Romania to breakeven, which is not the case. We are, let's say, it's very strong action plan to improve the business model in Romania, and to bring back the country to breakeven. I think Spain has been on sale for a while. Again, we are profitable. You see that it is very encouraging to see the profit of Iberia despite being on sale and despite the crisis. We have first to work on the business model to make sure we have even a stronger proposition before we could consider to open a large number of new stores.
Yeah, and just to ... [crosstalk]
Can I just confirm on Romania? Oh, sorry.
Yeah, go ahead, please. Yeah.
No, just on Romania, do you think you could break even next year?
I would say that this year we will improve. As I think Bernard commented in H1, we did a small improvement. We believe that for the full year of 2020, we will improve the profit versus last year. Definitely, we are really committed to bring back the country to breakeven as soon as possible, but I would wait to commit for 2021.
Thank you.
We'll now take our next question from Adam Cochrane from Citi.
Good morning. Thanks for taking the question. Two questions from me. First of all, in terms of the sales performance, how much would you attribute to the market compared to the bits that you're doing yourself? If a large proportion is the market, are you able to give us a flavor on how consumer trends are changing? Do you view this as a cyclical or a structural trend?
You mentioned that the pickup in online penetration, we've seen that across a number of different companies. I was just wondering, we don't really know, in all honesty, how much of that is going to stick. I'd just be interested in your view as to how much of this performance is down to the market and how much is down to your outperformance of the market. On the consumer trend, how permanent do you think these changes are, or should we expect a normalization in DIY versus do it for me, for example?
Yeah.
The second question is, would you be able to give a base profit number for the first half for us to work off the next year? I found that there's quite a lot of moving parts with regards furlough schemes, business rates reduction. What would be the best number do you think to use as being a like-for-like comparison base for first half profitability for next year? Thanks.
Yeah. Thank you. That's all very good question, obviously. Thank you. First, I think to try to be relatively short. First, when we do customer survey, we start to understand there are five factors that support this demand in DIY and home improvement. I briefly described that in my speech a few minutes ago. I think people, they have more time at home. They have more money available, discretionary spending. They rediscover gardening and DIY as a hobby because finally you have less available leisure options, and that's very clear in the survey we are setting up.
People are working from home, therefore they need to reorganize their spaces. At last, I think it's more temporary, people are a bit scared to have trade people at home for a few weeks, even though it's getting better, and therefore, DIY is favored versus do it for me.
I think, again, it's temporary. I fully acknowledge that I think a large part of our sales is the market. I think we need to be very modest on that. On the other side, we are gaining market share. We look at France, June, July, August, we are beating the market. I think it did not happen since many years. I think B&Q, clearly we have had some of B&Q's competitor. You can check as well. I think B&Q is doing a good job and the same for Poland. I think we are gaining market share, and this is due to our new, I think, strategic direction around different banners.
Banner on powering, agility, the new spirit we have around agility, and I think the decision we have made around e-commerce from stores. I believe indeed that the online sales, we'll not come back to the previous world. During the COVID time, online sales were up by 3x . We are slightly above 2x . I think it's pretty resilient. I think we'll stay at a very high level of online sales, looking forward. For profits, I will let Bernard give you some.
Yes. Hi, Adam. I think we left some clues in page 17 in the group retail profit bridge. I think if you look at the gross margin, we talked a little bit about what we think it's going to do in the second half, but clearly there were some one-off components in there, especially in regards to supply and logistics and the net of the clearance and other things, and the trading initiatives was slightly positive. That gives you some indication of where we think the gross margin rate could go. I think the more important part is on cost.
Obviously, we will proceed to go to new stores and expand. That's going to add up a little bit of cost. Inflation will still in some sort of fashion be there. That was the GBP 28 million in the first half, and that's set to continue.
The three other blocks, basically the French employee profit share shift into H1 is a temporary one. The COVID, obviously we're going to lose the benefits from the rates and the furlough, the GBP 100 million, although the business rate is going to continue until March 2021. Incremental COVID costs, I think we're learning to manage as best we can. Obviously it will depend a little bit on the trading environment.
We had the GBP 92 million where we said that is in a large part temporary. Let me say a little bit more about that. Included in here are things like lower advertising and marketing cost, some things we were able to do on discretionary spend, GNFR, store maintenance, et cetera. Some of that will come back.
That is not to say that we are working structurally to reduce our costs, be it in distribution, fulfillment, things on the head office, IT, the regears I have talked about. Yes, there will be a part that we are working on, that we are looking to flow through, but a large part is more related to the environment and will be temporary. Hopefully that gives you a little bit of an indication of the moving parts.
While I have you. Obviously, you're a group and report as one. Why repaying the U.K. furlough benefit but not the French one? I could sort of understand if you repaid both, so you could maybe free up an opportunity to pay a dividend if possible, but repaying one country but not the other, sort of doesn't really open up many doors. What's the rationale there, please?
Yeah, let me comment on that. I think, first of all, you saw the situation by country is very different, and we have sales growth in the U.K., a profit increase by 47%, and we consider it just the right thing to do, to pay back the furlough in the U.K. In France, we are today in a very different situation with profit down, and sales are still down on the H1.
We have decided in France to pay back the [Foreign language] of the PGE in the course of the second half unless material changes. It's just the situation of the countries are very different, and we consider looking at the profit situation in the U.K. and France, it's just the right thing to do.
Well, congratulations for repaying the U.K. I think that's very much the right thing to do.
Thank you.
It appears there are no further questions queued at this time. Mr. Garnier, I would like to turn the conference back over to yourself for any additional closing remarks, sir.
Thank you. Thank you very much. Thank you again for your time. Obviously, the near-term outlook ahead of us is still very uncertain. As a team, let me tell you again that we strongly believe that the long-term opportunity for Kingfisher is significant. We very much look forward to updating you again in November with our Q3 trading, and then again next March. Until then, please stay all safe and keep well. Thank you for this morning. Talk to you very soon. Bye-bye.