Hi. Good morning, everyone. Welcome to all of you this morning. Today is an important moment in our transformation. We are halfway through it. Today, I am going to talk about four things. The first one is why our transformation is vital, probably even more than when we started this journey. The second one is why our transformation is going to deliver the expected benefits. The third one is why our transformation is tough, and what are the issues we are currently facing, because we are facing issues. The fourth one is what are the decisions that we are taking to deliver this plan and to create long-term value. The first idea I would like to share with you this morning is that our transformation is the survival of this organization. To be fair, it's the same thing for every single retailer.
It's not an evolution, it is a revolution that we are living in. Just a few numbers. I'm sure you know those numbers, but I think it's fine to remind them all together. In the U.K., over the last three years, 100,000 people lost their jobs in retail. Since the beginning of this year, 2,000 stores have closed. This is the reality we are living in. It is starting in France, and it's far from over. You need to look outside, not to complain about anything, but just to understand how deep the change needs to be, how profound the revolution is. The change needs to be profound. We need to engage the right level of transformation.
Does anyone in this room, or outside this room, to be fair, is thinking that in five years, six years, seven years, eight years from now, I don't know, customers will still be pushing big trolley in stores? I personally don't believe so. The number of SKUs, the number of promotions, the number of stores are no longer retail's fundamentals. This is a huge cultural change for all of us. This is a total paradigm shift. If I go deeper in the home improvement sector, the customer experience hasn't changed over the last 20 years. You go to a shop right now and you've been to a shop 15 years ago, has it changed really from a customer point of view? No, it hasn't. The biggest change we have in our sector is the growth of Amazon and few other pure players.
Of course, some companies are adapting, but very little are mobilizing their entire supply chain. What does that mean? Is that the first movers will win, and they will win big. You will be with me that since we started the journey, the external environment has changed as I've just described. We didn't know what we know right now. The outlook is tough as well, and I hate to refer to it as you know, but it's there. We are living in it. That's the first idea. The second idea I wanted to share with you today is that our transformation is going to deliver huge benefits. Why? Because we are creating a long-term competitive advantage for the company through four different elements. The first one being scale and purchasing power. The second one being a differentiated offer. The third one is strong digital capabilities.
The fourth one is affordable prices. You will see more of that in that presentation. I am convinced we've got the right strategy, and that in fact, the benefit that we can expect are bigger than what is in this current plan, even if we are doing it in a very challenging environment, as we all know. Why do I believe in it? The first thing, which is not the smallest one, is that we are doing what we said we would. I remember when we started that journey, the investor asked me, "It's not going to flow through your numbers in the first period of that transformation. So what can you give us to make sure that we can, not control, but look at the fact that you are doing what you said we would?" This is why we set up those strategic milestones.
I'm not sorry to say that for the third year in a row, we are going to deliver them. We deliver against our plan. I'm not going to take all those milestones. You know them, they are written on this slide, but we've already achieved 42% COGS. Being really honest, who was believing two years and a half ago that we would do this? There were a lot of skepticism in the room. We've almost rolled out our unified IT platform in less than three years across nine geographies. I don't know many companies that have done that without any big car crash. Someone told me SAP equal a profit warning. I want to pick that one because it's really important. We have a much higher engagement than the retail sector.
We are doing everything on the pulse on how our organization is feeling, the last results were in June, so no months ago, in the middle of this transformation, and we were 10 points higher than the average of retail. These are facts. The second reason why I believe in it is that our strategic pillar are now proven. Why I say now, because it was not the case a year ago. I couldn't have said that a year ago. We didn't have the scale to be so sure about it. Let me take them. Operational efficiency. Our GNFR program is working. We are delivering. Tick. Proven. The second one, digital. We are starting to deliver our plan. We are implementing that IT platform that is the base. We are creating new websites.
We've been launching the new Kingfisher app, we are doing it in France as we go along. Our digital sales are growing. Tick. The third one, the offer. It's of course, the most important pillar of our plan, GBP 350 million out of the GBP 500 million. Let me deep dive a little bit in this one, as I'm sure it's important to you. What are you seeing on the screen? The first thing is, as I said already, we've unified over 42% of our sales. It's done. We are delivering positive sales growth now. It hasn't been the case in the first instance, what you see on that chart, which is the most important thing, is the trend. We are improving as we grow. The sales growth is getting momentum.
By the end of this year, we will have unified more than half of our sales. It's an important slide, and I'm going to take a bit of time to take you through it. What does it tell us? First of all, it is the final piece of evidence, if any needed, that we can sell the same stuff, as I'm used to say, across different geographies. Please don't ask me at the end of this session, "Can you sell the same stuff everywhere?" Yes, we can. Yes, it works. Our unique and unified offer is growing. In fact, it is growing much more, as you can see, than our old ranges. Again. The other thing that you can see on this slide is the 7 categories. I've been accused a little bit to do some cherry-picking in the numbers. This is not cherry-picking, guys.
Those 7 categories are representing the whole business, the business as a whole. We are getting strong positive growth in most categories, as you can see. The other element that is on this slide is that in 5 categories out of 7, even if we are not generating growth, we are getting profit increase, profit growth. This profit growth is a combination of sales growth and CPR. You might notice that in 1 category, you don't get any sales growth and we get profit uplift, which means that the CPR is there. What it tells you as well, being very honest, is we haven't got it right everywhere. Sure, 3 categories are not growing. We know how to do this, and we are going to get this right everywhere. I hope I just convinced you that our 3 pillars are now proven.
Let me now look at our transformation from a different angle. People often ask me why I am so confident into our plan. From the beginning, we've been very confident in the size of the potential of this transformation and the fact that the benefit will be back with us. Let me explain why, in reality, it is going to be the case. Bear with me for a moment. This slide is an illustration of the profit contribution by the end of this year for the 3 first years of our transformation. What you can see on this slide is that the benefit of One Kingfisher, benefits we generated with the One Kingfisher plan, is substantial. Let me give more color with it. You know the GNFR and operational efficiency, it will be GBP 90 million by the end of this year.
What I can tell you is that the benefit from digital and from the new offer is considerably greater on top of those operational efficiencies, to give you some indication about this bar. There are 3 main reasons why this increased profit is not dropping through the bottom line as we speak. The first one being clearance. As you know, by the end of the plan, we would have changed 90% of our offer. This means that we are managing an unprecedented amount of clearance. Let's be honest, we've been incredibly diligent in this exercise, really. We've managed speed of clearance, customer impact, and P&L impact. You have to juggle a little bit with all those things, but still it has a cost. Once the transformation is finished, this profit will normalize. The second being price investment. Pricing is a core element of our strategy.
We want to make home improvement accessible for everyone. This is key. In fact, we've applied little new investment into price. What we've done, we've achieved our price position improvement because we have improved massively by reducing promotion. We are going to talk a little bit about that when we are going to talk about France later on. Unless markets worsen, we have no plan for price investment to increase significantly. We won't need to. The second profit drag are costs. The costs in IT in digital are bigger than they need to be at this stage because we build capability for much higher volume. Part of this is intentional. When you build a motorway, you don't build one lane, even though at the beginning you don't have much traffic. As we deliver profit uplift, these costs will be more proportional to our benefit.
Equally, it will be both. We will look at efficiency as we always look, and we will scale those costs to our volumes. What does that mean? That means that the overall result is that we've generated significant financial benefits, but the observable profit of the transformation is small, just as we had planned from the start. If now we roll forward to the end of the transformation, what is going to happen? We will have further financial benefits, driving by moving from 42% of the new offer to 90%, and the development of Unique that is going to be more growth, and the digital sales growth. This is the plan. Against these benefits, clearance will reduce massively. We will have limited price investments, even if we will have price investments, and we will size digital and IT organization costs according to the level of activity.
The impact on the bottom line will be huge. Obviously, the picture we see in the results is more complex than this, as you know. There are other impacts outside the transformation, both negative and positive, to be fair. From ordinary cost management, which is positive, and we are used to it, to challenge in trading of the ranges , as you have seen in this slide, -1.8%. This is life. It brings me to the third idea I want to share with you, is that this transformation is stuck. It is stuck because of the scale of it. It's stuck because of the pace of it. We are delivering the milestones. We are halfway through it. I just started today with this. We are half in the new world as in the old world. I promise you, it's really difficult to manage.
Even if we are delivering our milestones, we are facing some issues, and there are areas we need to improve. Let me cover those areas. Margin, I've touched a little bit on it. Karen will cover in more detail how this is going to work. Working capital, that was a big issue last time we spoke together. Karen will be covering it in her session. What I want to do right now is to do a focus on France. Let me talk about France. To be fair, those issues were the same six months ago. It's not changing. In France, I told you last year, there is no quick fix. I was right. The message I want to give you is we really understand the poor performance, which is, besides the most important thing.
If you want to solve something, you have to understand what is going on. We are lagging behind in all aspects of customer perception in France. The gap is even bigger when you look at who the big spenders. What are the big spenders? They are the 25% of people that are generating 80% of the spend. This is where we are. Price, this is not new. I'm going to update you on the progress, but price. You will see that the first points are related. Of course, price is one element of the customer perception. Digital proposition, we've already said that we were lagging behind in that space. The one that is probably new is the level of transformation that. Likewise, B&Q, Castorama in France has been the operating company this year that has been most affected by the transformation.
Change the IT system, they launched a new digital website, we've moved into the financial services with some people impact, all of it. Of course, like any other opco, they have to change a lot of ranges. The second thing I would like to remind about France is we have the right plan. As we say, the ONE Kingfisher plan is addressing the French issue. Let me update you on where we are in terms of progress today. First of all, the unified offer is starting to generate growth. To date, more in Brico than in Casto, but it's progressing more in Casto than the ranges as well. Price. That has been, for a very long time, one of the biggest problems for Castorama in France. We are getting there. We started with a price index of 108. We are, as we speak, at 101.
We're back in the market, we're back in competition. We've launched our new website. We had some issue as well, like when you launch something new. We are progressing, we are solving this issue, and we did a research in France with customer, and they can see that our website is faster than the rest of the competition, it has a better ergonomy. That will come through, and customer will notice it. I think the third idea I would like you to remember about France is that we need to start to say what we've done to the customer. We haven't yet. Because to do this, you need to be pretty prepared. We are right now, so we are going to start to communicate and to give more visibility to our action, and meaning that it will improve in H2.
Karen is going to take you through what are the detail of the action plan for H2 in France. The fourth idea I would like to share with you today is that we are taking any decision required to deliver this plan and deliver a long-term sustainable growth for this business. It's not or, it's and. It has to be and. This is our commitment as an executive team with the support of the board. We are making this business more efficient as we go and as the environment changes. Let me go through few decisions that we've been taking or we are going to take in the next coming months. As you may notice, I did some operational changes. I did some change in the management in the operations field. I think I'm not going to comment on that, but you've seen them.
We published that beginning of September. This morning, I want to pause a little bit about this, you've seen the announcement that was saying that Aya would be leaving Kingfisher, and that she would be replaced by Henri Soler. Guys, this is a positive move. This is just a manifestation that we are taking the right decision as we move. Aya came in to build OSC. She has done it. OSC is a machine that is working. She came to deliver those COGS numbers that I've been talking all along in this morning, 42%. It is done. Now we are moving on the second phase, and it's unified is almost finished. It's all about unique development. What do I mean? Let me remind you what I mean by this. It's really creating a differentiated offer based on customer needs.
It's about designing product and solution for the customer at affordable price and having from end to end. We decided with Aya that Henri was unique placed to do that. He has done it on our bathroom category, which is the most successful one. We get double-digit like-for-like growth and big margin improvement. We are going to do that. He's going to lead that in every category. We are moving on, guys. We are moving on. As we go along, as we evolve in our transformation, we are taking the right decision. The second thing we are going to look at is we have losses in this business. This is not new news to you. We are going to look at them. Again, what does that mean? I'm not going to update you. Please don't ask question about what it is, I'm not going to answer.
We are going to look at it. What we are going to look at, well, is to try to bring more efficiency. We are delivering against our efficiency plan. We are going to look at with the teams about, can we do more? Why? Because we are committed to deliver this plan, because we are going to look at everything we can do to deliver it. My message is we adapt as we go. We are not staying still. We are taking the right decision. We could have increased prices, guys. It will have make the margin looking better, I promise you. We're not, because this is not what we do. It deliver the plan and making this business sustainable for the long term. That wouldn't be making this business sustainable for the long term. We are making the right judgment, clearance, again.
You stop clearance, margin is going up. You clear more, stock are going down. Could it be the right decision? No. We are managing those things almost every week. We want to deliver this plan, we are committed to it, but we want this business to be sustainable. In summary, we always knew it was going to be bloody difficult. It is. No question about this. You will be with me that the backdrop doesn't help us, but it is what it is. Let's be honest, we scored own goals as well. We haven't get it all right at the first time. We've always said we would make mistakes. We do a big thing, and we don't have a lot of benchmarks, but we are learning as we go. Our transformation is the right thing to do even more than when we started.
We are delivering it at pace. To power this transformation, the image I get is we've been in the case building the engine first. Not all the moves have been visible, but they were the right ones, and they are making the difference. We are creating scale and momentum. If there is one message I would like you to leave this room with, is our pillars are solid, which was not the case even six months ago. Unique vision work for the customer. We have sales growth. CPR is real. We can be competitive and making home improvement accessible and generate more margin. Digital is even more than when we started, the new way to shop, and we are building the engine to be a reference for the customer. Our business become more efficient. We are delivering on that front, and there is more efficiency to come.
I'm going to hand over to Karen for the financials. Thank you.
Thank you, Vero. Not really sure how I follow that. Let me try with the numbers here. First of all, good morning everyone, and thank you for joining us today. I'm going to take you through the financial performance for the half year, and I'll pull out the key headlines in each of our major geographies, and we'll then spend a bit more time on France on both performance and actions. I'll then update you on our gross margin performance, and finally, on our working capital position. Let's start with an overview of the income statement. On a constant currency basis, total group sales were slightly up at GBP 6.1 billion, with like-for-like sales down 1.1%.
At the group level, gross margins were down 40 basis points as the benefits from unified and unique product were offset by a weaker performance in France and by higher logistics costs in the group. I will cover this in more detail shortly. Retail profit of GBP 404 million was down 14.3% on a constant currency basis. This reflects a solid performance in the U.K. and Poland, offset by significantly weaker profits in France. To put this into context, excluding France, the profits were down 4.2%, with the profits from our two other major geographies, the U.K. and Ireland, and Poland, actually up 1.4%. Underlying profit before tax was GBP 375 million, down 14.8%, which was broadly in line with reported retail profit and included GBP 4 million of favorable currency impact. By way of reminder, all underlying metrics are before transformation costs. Our effective tax rate was stable at 27%.
Underlying earnings per share of GBP 0.128, down 11.7%, driven by the decline in France profits and including the positive impact from the share buyback. Adjusted profit before tax of GBP 323 million was down 18% in the half year and we incurred GBP 52 million of transformation costs. Statutory profit before tax is after both transformation costs and exceptional items and was down 30.1% to GBP 281 million. We had a GBP 42 million exceptional charge this half year compared with an GBP 8 million exceptional credit last year. The charge was driven by planned restructuring activity in France and the U.K., including the costs of the move of finance transactional processing from a shared service center in Poland to take benefits from our unified IT rollout. I'll now cover the key results in our major geographies, starting with the U.K., Poland and other international, and then I'll focus on France.
In the U.K. and Ireland, like-for-like sales were slightly down by 0.5%, with a 2.5% like-for-like sales decline at B&Q, mostly offset by a 4.5% growth at Screwfix. In the context of a weak U.K. consumer backdrop, softer housing market, and generally uncertain environment, we think this is a credible sales result. B&Q's -2.5% like-for-like performance reflects the story of two very different quarters. Quarter one saw a like-for-like decline of 9%, driven by exceptionally harsh weather. This was followed by a decent recovery in quarter two, when like-for-like sales grew 3.6%, helped by much better weather. Screwfix continues to take market share using its convenience model with growth driven by its specialist trade desks and strong digital capability. We opened another 21 new outlets during the period, taking the total to 598. Although today we're actually already above the 600 mark at 601.
The U.K. and Ireland growth margin was down 30 basis points, mainly reflecting operating company mix and the opening of Screwfix's fourth distribution center in Lichfield, which isn't yet operating at optimal capacity. This was largely offset by good cost control. Retail profit was up by 1.2%. I should also highlight that in the second half of the year, the discontinuation of B&Q's showroom installation services is expected to negatively impact H2 like-for-like sales by about 1 to 2 percentage points, but with a broadly neutral impact on retail profit. Our Polish and other international businesses reflect some very different operating realities. We had a good performance in Poland. Like-for-like sales were up 1.5%, despite the introduction of the Sunday trading ban.
Although it's difficult to accurately estimate the impact of the removal of two Sundays of trading a month, we believe that it's about 1.5 percentage points on sales. We're now rolling out our unified IT platform in Poland, and this will give us the infrastructure to improve our digital capability and allow customers to shop at their convenience. Gross margin performance was strong, up 120 basis points, reflecting improved product mix, including a good performance from new unified ranges. This was partly offset by higher staff costs, resulting in a retail profit uplift of 1.9%. In the rest of other international, like-for-like sales declined by 1.2% and delivered a loss of GBP 24 million. That reflected modest profits in Iberia and Turkey, but losses in Russia, Romania, and Screwfix Germany. In Russia, sales declined 1.6% on a like-for-like basis, and the business delivered a GBP 9 million loss.
Like-for-like sales in quarter two were up 2.1%. We do expect a better overall performance in the second half of the year. It should be noted that the operating environment was challenging. This was nevertheless a disappointing result. In Romania, the business as a whole made a half year loss of GBP 9 million, driven by the Praktiker stores. Like-for-like sales were up 3.5%, with the existing Brico Dépôt Romania continuing to trade well with the new ranges. Sales performance of Praktiker Romania was weak, reflecting low footfall, as the stores have not yet been integrated with the Brico Dépôt business. In Praktiker, old stock is being cleared through. Stores are now receiving unified product. We expect an improved performance in H2. Sales of unified offer across both businesses are growing very well, with a number of categories showing double-digit growth.
In Screwfix Germany, like-for-like growth was nearly 20%. The business made an GBP 8 million retail loss, which was in line with expectations and was a slight improvement over the prior year. For those smaller businesses, excluding Poland, we expect a better performance in the second half of the year. As Vero said, we will update at the full year with our plans to stop the losses in our portfolio. Looking at France. Vero also commented on the root causes of our weak performance in Castorama France. I'll focus on the financial impact of this and the actions that we have in place to improve performance. In France, like-for-like sales were down 2.4%, with Castorama down 5.8% as Brico Dépôt was up 1.7%. This compares to the French market that was flat overall in H1, but volatile from month to month.
From a sales perspective, we've actually narrowed the gap to market versus last year. Brico Dépôt's sales result particularly reflected the good performance of the new unified ranges, supported by the phasing of investment in marketing, Brico's 25th anniversary. Castorama sales performance was disappointing, with continued weak footfall and some execution issues around transformational activity, which affected the offer and digital initiatives. Overall, France retail profits decreased by 31%, reflecting the weak sales performance at Castorama France, a reduction in total France gross margin of 60 basis points, largely reflecting logistics inefficiencies and higher costs, notably relating to the phasing of marketing activity at Brico Dépôt. I'll explain the logistics inefficiencies when I speak about gross margin. As Vero said, we remain convinced that the ONE Kingfisher plan is tackling the root causes of our underperformance in France.
In the shorter term, we've put some actions in place to support the second half of the year performance. As Vero said, these are actions that absolutely fit with our strategy. We're accelerating the move towards everyday low pricing, accompanied by more effective customer communication. As well as this, we have improvements to make on the price architecture of new ranges. This work is already underway. We've also already started to deal with some of the additional logistics costs, which have been incurred as a result of taking on expensive short-term space to deal with the increased stock in the system as a consequence of stock actions in H2 last year and the slow sales in the first half of this year.
Where we can, we're consolidating high-cost temporary space into better-suited space, which lowers the cost per cubic meter and makes more efficient use of that space and reduces transport costs. Over and above our continued GNFR initiative, we're tackling variable costs, for example, by flexing hours more efficiently. We did this effectively at B&Q last year, and we're taking the learnings from there. Now let's look at the margins. Our reported net margin rate at the group level was down 40 basis points, and that's not where we wanted it to be. We have plans in place to improve on this in the second half of the year. However, I wanted to use this waterfall chart to show what actually happened in the first half of the year when progress on our unified offer was offset by higher logistics costs, particularly in France.
You'll see from this chart that margin progression on our unique and unified ranges continued and generated 30 basis points of improvement after absorbing cost inflation and after we invested in price investment. We have experienced input cost inflation, partly price increases, and some continued foreign exchange headwinds. Our unified approach has been critical to managing the impact of this input cost inflation, helping us to continue to improve our price positioning whilst growing the unified product margin. We continued to improve our price index and are now at just below 100 across the group. Further progress being made in France on Castorama prices, down from 108 when we started to 104 at the end of last year and now at 101. With our EDLP work and communications already launched in B&Q and planned for France.
Like others, we're operating against a challenging backdrop, but we have remained true to our pricing strategy. The margin on our non-unified offer was slightly down after absorbing similar headwinds to unified, but without the benefit of our unified approach. As expected, clearance levels are similar to last year, so they are not impacting the H1 reported margin. You'll see later in the presentation that we're doing what we said we would do to reduce the mitigation stocks that we brought into our network last year when we wanted to reduce the impact of transformation-related disruption on customers. We're not calling out availability issues as a significant factor in H1 performance because it has improved.
However, elevated levels of stock and a slow start to the year in terms of sales have resulted in a 40 basis points margin drag coming from additional logistics costs and some stock inefficiencies, particularly in France, where this relatively expensive temporary space was secured to keep inventory moving in the network. We also opened the new warehouse facility in Screwfix, and as it's not yet operating at optimal levels, it's creating some cost absorption impact on the margin. It's also worth pointing out that as the relatively lower margin Screwfix and Poland businesses have grown in H1, this has had a negative impact on group operating mix in the margin. We do have plans in place to improve the second half of the year in order to deliver a positive reported uplift in margin rate post-clearance for the full year.
We don't expect the macro backdrop to improve, so we continue to assume similar input cost pressures to those we experienced in H1. In France, we have some changes to the makeup of our price architecture to make, so we do not expect an H2 drag from price investment. We will also benefit from seasonal mix, as the second half of the year is less weighted to lower margin outdoor categories. With more range implementations planned for the second half of the year, we expect cost price reduction benefits to increase, and this is what happened last year. Our categories have very different margins, and so if we go strongly in a high margin category, it positively skews the group margin. Just to illustrate this point, the highest margin category has a margin that's 25 percentage points above the category with the lowest margin.
We've already started to address the logistics inefficiencies by reducing and optimizing warehouse requirements by continuing to work on the mitigation stock levels that were increased last year. Moving on now to update on operational efficiency. As you know, we're targeting GBP 100 million of operational efficiency benefits by 2021, largely driven by our good-not-for-resale initiatives. To date, we have delivered GBP 72 million of benefits, of which GBP 14 million was achieved in the first half of the year. GBP 8 million came from GNFR benefits, with savings achieved in areas such as professional services and even billboards. As we said we would, we're starting to work on other areas. In H1, the remaining GBP 6 million came from savings that related from restructuring in B&Q. Our finance shared service center in Poland was established in February 2018, and now has around 150 employees, mainly supporting B&Q.
Activities will transfer in the second half of the year from France. We remain on track to deliver GBP 30 million of benefits in the full year. To date, our focus has been largely on improving operational efficiency and driving down operating costs, but now we're also working on driving efficiencies in capital expenditures. So this could increase the addressable opportunity and should, over time, provide scope to make our CapEx consumption more effective. Now on to cash and returns. We generated GBP 285 million of free cash flow, and our half-year net cash position was GBP 99 million. This was after planned transformation costs of GBP 52 million and GBP 250 million of returns to shareholders. This represents a modest increase on our year-end net cash position of GBP 68 million.
The board is declaring a flat interim dividend of GBP 0.0333, which is consistent with our full-year target range of 2 to 2.5 times dividend cover. In addition to ordinary dividends of GBP 160 million, we returned GBP 90 million to shareholders via share buybacks. Of the GBP 600 million that we committed to return over the first three years of our five-year plan, GBP 550 million of shares have now been repurchased. So now let's look at the uses of cash. In the half year, we generated GBP 460 million of EBITDA, and there was a GBP 77 million inflow of working capital. We paid tax and interest of GBP 81 million out of this, and we invested GBP 165 million back into the business. We returned GBP 250 million to shareholders via ordinary dividends and share buybacks.
Our lease adjusted net debt to EBITDA ratio increased slightly to 2.5 times from 2.4 times at year-end. The group continues to have financial flexibility while retaining an efficient cost of capital. Let's look at that working capital, as this has been a key area of focus for the business. As Vero explained earlier, as you would know well, our stock position at the year end increased significantly, partly as a result of changes to our operating model, but also as we carried more stock to protect the customer experience during a time of disruption. We showed the equivalent of this chart at year end, I'll break down the GBP 77 million working capital inflow in the first half of the year into the same moving parts. We saw a GBP 27 million impact from growth.
This is a normal aspect of our business, with more stock in the business relating to new stores in Screwfix, Poland, and our recently acquired business in Romania. The second element highlighted relates to the move to unified product ranges. In order to sustainably leverage the scale of our group, we're changing our operating model and controlling more of the supply chain than we used to. Costs, which used to be in the cost of products that we bought from distributors, are now in our supply chain. As expected, as we unified more ranges, this element increased by GBP 35 million. New unified ranges increased stock by a further GBP 25 million. This reflects ongoing first-time purchases of new ranges as we need to fill the displays and support visual sales for our customers.
We've been working hard on reducing what we call mitigation stock, which is that extra non-unified stock and fast-selling lines that we brought into inventory last year. At last year end, this had increased our stock balance by GBP 180 million. I'm pleased to say that the stock reduction plans that we put in place are working effectively, we've already reduced the stock by GBP 90 million so far. Finally, the net of the change in payables and receivables was a positive GBP 74 million, largely expected to be phasing, leading to a GBP 77 million overall working capital inflow. If we now turn to H1 CapEx and our guidance on our full capital expenditure for this year. The left-hand circle represents the GBP 165 million that we invested in the first half of the year.
This shows that we invested about a third of our CapEx on refreshing and maintaining existing stores, we invested about the same amount on IT projects. We continue to roll out our unified IT platform in Castorama France. We're starting to implement in Brico France, we've completed the store rollout in Poland. We invested another 13% of the total on transformation. This included store CapEx for our new ranges and digital spend. The right-hand block represents our new reduced guidance of up to GBP 350 million for the full year, that's down from up to GBP 425 million previously. The GBP 75 million reduction includes lower spend on new stores, with IT spend preserved and transformation only slightly reduced. Let's look at how we're tracking versus our total transformation costs in the five-year plan.
During the half, we spent GBP 119 million of transformation costs in addition to the GBP 271 million we'd spent in the first two years of the plan. Our full-year guidance for this year is GBP 240 million, slightly higher than previously guided, reflecting small changes to P&L costs and exceptional costs. We continue to expect that the total transformation cost of our plan will be around GBP 800 million. This leaves close to GBP 300 million for years four and five of the plan. Although we don't expect a change to the total, we are likely to see some further rebalancing between transformation P&L costs and exceptional costs, and we'll update more fully on this at the year-end. To summarize, in the first half of the year, unified and unique sales and margin continued to grow. However, these margin benefits were outweighed by a weak performance in France and higher logistics costs.
We have actions underway to improve our H2 performance in France and also to deliver a better H2 margin performance at group level. As we execute on these plans, we expect to grow the group gross margin after clearance in the full year. Our transformation costs are broadly as expected, and our stock reduction plans to deal with increased levels of non-unified stocks are progressing well. Our balance sheet remains strong, and we continued to return surplus cash to shareholders. We are operating in challenging markets, which make a tough plan tougher, but we are doing the things that we said we would do, and we are on track to achieve our strategic milestones for the third year. Thank you for listening to us both, and I will take questions.
I don't want to.
Hi. It's Geoff Lowery from Morgan Stanley. Can you talk us through, please, you've got a gross margin benefit of 40 basis points on the unified ranges so far.
Yeah.
The target is, essentially, it's a 500 basis points improvement in the COGS, when the unified ranges are fully implemented. That seems a big jump from where you are at the moment. Can you talk about how that's going to be delivered, please?
Sure. Actually, I think when we talked about equivalents, we said that the equivalent, in terms of gross margin uplift to actually get to this GBP 350 million, was more like 300 basis points. I think the first thing that I should really point out, because you may or may not have this in your mind, is thinking about what we said at the end of last year, when on a smaller base of unified COGS, we said that we had grown the margin by 180 basis points, and now we're looking at something that's 40. The two figures aren't actually comparable. We will be able to give you a more comparable and cumulative figure at the year-end.
The reason for not being comparable is that you're talking about different bases, a half year versus a full year, and about 20% of COGS and about 40% of COGS. That's just the maths of why you can't just add the two things up. Why are we confident? It's worth just stepping back and thinking about what is important in terms of the things that need to happen in order to grow the margin. What we're looking at is a question of maturity, a question of mix, a question of clearance, and a question of price. Until you get all of these things cleaned, you don't get to the full opportunity that you've got, that we believe in. I start thinking about maturity.
One of the things that gives us confidence is the way that we have seen our Wave One implementations from the early part of the plan actually mature through the plan. What happens is when you start off, you don't actually get a lot of benefit because the benefit that you're getting from the cost price reduction gets offset by clearance costs and any price reset that you might want to do. Once you've positioned your price correctly and you've got through the clearance, that leaves you with a cleaner number. Just to give you an illustration of that, our Wave One implementations are already achieving more than 300 basis points of margin. I'm saying globally, we need to get to a 300 basis point uplift. The early ranges that we've already unified are already showing us an uplift of that magnitude.
Those ranges actually have a small weight in the first half of the year. The first half of the year actually includes a small weighting of the mature, if you like, implementations and some less mature implementations, which we will see the benefits of in the second half of the year and into next year. The second element that's important, again, when you're looking particularly at the first half of this year, is what happens with mix. The first half of this year has a very heavy mix of outdoor products in it. Across our 7 categories, there's actually 25 full percentage points of margin difference between the highest margin category and the lowest margin. Again, simple arithmetic will tell you that if you're heavily weighted towards the lower margin, then that is going to suppress what you see in the margin.
By the time we get to the end of this year, you will see a more normalized spread of categories, and that in itself will improve the margin that we're getting. The third thing that I think is worth remembering is that I started talking about what we call the procurement maturity curve, and we are very low down still on the procurement maturity curve because we've only unified 40% of our COGS. What does that mean, being low down on the procurement maturity curve? That means that all we are giving our suppliers at the moment are consolidated volumes.
For sure, we're getting cost price reduction, and the cost price reductions that we are getting, and we've given you some examples over the last year and a half, are very much in line with what we need to achieve to get to our 300 basis points. At the moment, we haven't moved on to, if you like, very far up step 2 of the procurement maturity curve. Step 2 being actually, I'm going to give you more reliable sales forecasts. The more reliable I can make my sales forecast, again the better cost price reduction you get, the better stock management possibilities you get.
Just to complete the picture of the procurement maturity curve, the higher end of that is when you really have an established relationship with suppliers, an established history, and you start deconstructing your bill of materials and you know even better what things should cost. That was a pretty long answer from me, but I was expecting the question, and I think what I'm hoping you're hearing is that we are already seeing, through our very complicated spreadsheets and reporting systems, that the margin uplift is coming through, but it just needs the time to mature to come through. We are only halfway through.
That was very comprehensive. Just to follow up. Would your spreadsheets change at all if there's a hard Brexit? Obviously, then you move to WTO terms, and then you can end up with an import tariff, I would imagine, on products coming to the U.K. as opposed to coming to France. Does that change anything?
Well, our spreadsheets could change because of a lot of reasons. We've already said that we're operating in quite a tough market, a tough operating environment. Also, I did refer to cost price inflation. We tend to get a lag effect when we're negotiating with suppliers on commodity price increases. Over the last few years, commodity price increases have gone up a lot. It's not just Brexit that could change our spreadsheets. It could be what's happening in commodity prices. It could be what's happening from the foreign exchange perspective. Brexit itself, when we've had a look at worst-case scenarios, actually even if you went to WTO tariff on the basket of products that we are actually selling customers, they're at the lower end of the tariff range in general.
Would joint sourcing still make sense in that situation?
Absolutely. Absolutely, yeah.
Morning. Richard Chamberlain, RBC. Couple of questions, please. Véronique, you talk about the plans to improve the performance of Castorama going forward. I think one of the things you mentioned is changing the customer communication approach from the third quarter. Can you give a bit more color on that? Is that about getting customers to sort of notice the new ranges more? Is that been a problem for customers?
I'm going to give you as much answer that I can to protect us from competition because as you know, we have quite a strong competitor in France. I already give away quite a lot in this presentation because I thought it was important to give you the confidence that we are doing. I think to be fair, even more than anywhere else, but actually we started in B&Q is, as I said, we've been in the case changing a lot of things. At a point in time when you think we are ready enough, we are not ready 100%, that's for sure. We just need to start to show to the customer what you've done and that things are improving. A part of that is of course, showing more the new ranges, to be fair, in communication and in store.
We haven't talked since then, but we've appointed John Colley as a trading director. It's his role in the organization. He's sitting on the executive, so he's dedicated to that. How we magnify for the customer what we've been doing, how we have a training plan that is really making the emphasis on what is new. This is true in store, this is true in communication, this is true on our digital. To do that in France, we needed to have all those things, put it in a line. What is to push newness on a website that is not working? Now we are getting there, so we will. We are going to be able to communicate on prices as well, because you need to be in the competition before you say, "Hello, I'm back." We're back right now.
I think, again, I think we are moving into that EDLP strategy, which has been what we want to do from the start. Remember, 2 years and a half ago when we started, we said, people are not buying a bag because there is a promotion on the bag. They are buying a shower because they need a shower. How we are going to offer to every customer the shower at the right price all day long. This is what we do right now, but we can start to talk about it. It was impossible to talk about it even 6 months ago. This is what we are going to do.
Thank you. The other one is on the other international side, I guess in broad brush terms, can you talk about what needs to be done to get the losses down, particularly in Russia?
I said I wouldn't answer this question. I'm sorry.
Maybe just in broad brush terms, what the issues are.
I think there are different realities, as Karen said.
What are they, do you think?
To give you a straightforward example then, perhaps around Romania, we actually haven't integrated the Praktiker business into Brico Dépôt. We know that Brico Dépôt is continuing to do well. We're just starting to get the same offer into the Praktiker stores. We have to clear out the old stock and get the new ranges in place and that is a plan for Romania.
Again, I think we haven't been precise that it was about other internationals. I think what we said, we would do as we did. We closed some stores in the U.K. We've closed few stores this year in France, is that we are tracking losses everywhere in the business. This is just to show our commitment as an executive team to deliver this plan.
I just wondered in Russia, for example, are there any sort of quick fixes or any of these self-help that you can bring in the second half?
I will tell you in six months from now. Good try, Richard. Good try.
It's Nick Hawkins at Bank of America. I just want to follow up on Richard's question on pricing, which you say is one of the three main drivers of underperformance in France. You've managed to get the index down to 101 and still lost a chunk of market share. I wonder to what extent you need to push your pricing down further to reengage with customers, or you think you can do it by better communication in store and the website and stuff. Do you have a backlog of negative pricing sentiment amongst the key customers that you need to address more aggressively?
I think we will do what needs to be done. I think what is very important to us is, in fact, this is not only true with France. I think our starting point in France was, in Castorama, actually not in France, was worse than what it was when we started the journey, this journey anywhere else. I think our commitment to the customer is to make home improvement accessible for everyone. We have a very clear pricing policy that I'm going to tell publicly, which is different if you talk about commodity products, if you talk about international brand products, and if you talk about own brand. I think the percentage of own brand, we started this journey, we were around 20, we are now over 35. It gives you the opportunity to create price difference and price preference without reducing all prices.
We are on a journey, we are not where we need to be, but we are progressing. To be fair, it takes time for the customer, and you need to tell the customer that you've been improving. It's not like food. You are not buying coffee or you are not buying a shower every week like you are buying coffee. The price perception of customer in our improvement sector is built in a very different way than it is in clothing or food retail. It takes time.
Yeah. Hi, this is Prashant from Goldman Sachs. On Castorama, how many Castorama stores are now loss-making for you? On a group level, Castorama level, when do you see the trading sort of stabilizing on a like-for-like? Is it next year or is it in the second half you'll start to see things really shaping up for Castorama?
I think on the trading stabilizing, I don't think we can put a date on that. I think Bernard said it's not a quick fix. Certainly, the action plan that we've got, that we've described, is to improve the performance in the second half of the year.
Yeah.
On the stores, we don't have a lot of loss-making stores.
Just Arja's departure, does it change the shape of unification of products in terms of execution? Executed is still 90%, does it change anything?
No.
Just one question on digital. The digital growth was only 8% in B&Q. Is that in line with your expectations, the digital sales growth that's happening in the business, or you think you can accelerate the online channel a little bit more?
Prashant?
Sorry. On that B&Q it is, yeah.
Yeah.
Sorry. No, actually, we're slightly behind what we think we can do, to be fair. In every country there's a different story, to be fair. If you take B&Q, basically we're pushing support on new generation platforming, which is effectively step changing. It's already in for mobile app, it's in for tablet. We're about halfway through desktop as I speak. And to be honest, we should have finished it by the end of the week. That actually will be a step change in B&Q, but we're slightly behind where we thought. We believe we can push B&Q much harder. Sorry, B&Q's still only a 4% penetration. If you look at France and Poland, it's circa one. We've still got a long way to go on digital, and we're pushing very hard.
We've now got the one-hour click and collect everywhere in B&Q, and the click and collect sales went up 55%.
Thank you.
Easy question. I just wonder, bearing in mind your comments about not pushing big trolleys around stores in five years' time, and you've got lots of big stores and lots of trolleys.
Yeah, we do.
I just wondered if you are currently doing any sort of property reviews. I think, clearly, one might think about that in France, but also maybe the U.K. Maybe you comment on the Screwfix model. (Oscar), talk about that.
Yeah. This is a fair comment. I think we are doing property review as always, I would say. I think it's real-time, and we will continue to do that. I think what we are doing as well is proper work on format, which we are not ready to talk now as we speak, but we've been, and I've been talking about that even six months ago. We've launched work internally, and as I said, looking outside as well, what is happening outside, onto what is going to be the right format for the customer in the future. I think, again, without talking too much about this, I'm not saying that that store are going to disappear. Actually, it's really interesting to see that in the U.S., the kind of normal, old retailer are seeing the sales through store going up again after that very difficult period.
I think the future is combination of store and digital. I think we are very well-placed in that format work with Screwfix in our portfolio as well, because I think we know what a convenient format is. We know how it works, and we know what it does to the customer when it works well. To be fair as well, we know how to do a good big store. I think with that probably unique combination in the home improvement sector, I think we can think of something that will be relevant to the customer in the coming years.
Just to follow up on that, when will you tell us what the results of your deliberations are? Secondly, bearing in mind you've got 1% of your sales in France online, 4% in the U.K. Do you feel that you're properly positioned for the new digital age? Should you maybe put a bit more grunt behind your digital presence? Sorry, more emphasis.
We will update you after year end next year, normally. That's the plan on what I was thinking about that. Maybe April. Yeah, let's see, but not that long. We are not going to wait for ages before updating. I think on the digital side, Steve can I think we're starting from nearly nothing, except Screwfix. I think we are using our knowledge, our digital knowledge that is moving in Screwfix with the rest of the group. We are pushing as hard as we can. We are where we are. To be fair, if you look at Europe, we are not dissimilar from the rest of the competition, and we are pushing really hard. That's why the CapEx, the investment in digital are not reducing. If we are having a look at that, Steve Morris, did you want to say something?
Yeah, sure. I think to be fair, there's an enormous amount of grunt already from digital, I think is the point. I think one of the problems with digital that people don't recognize is actually the hard stuff isn't the presentation stuff. It's actually all the plumbing behind the scenes. You've got the content and whatever. Taking Vero's point from earlier, what we're trying to do is make sure that actually we've got all the right infrastructure and the right processes behind the scenes that says when you actually get a market-leading proposition, then it's sustainable and it will be market leading. If you go and look at the mobile app that I was talking about in B&Q or mobile web in B&Q, that is market leading in terms of navigation, speed, and I won't say it's better than Amazon, but it could be.
As you know, Tony, this is a cultural change internally as well.
I think the point is, Tony, you're absolutely right, is we're at the start of a journey. Have we gone far enough with digital? No.
We are pushing.
Anne Critchlow from SocGen. I've got a question on the unique ranges. Where is the price of those settling compared to the closest branded competitors now? Looking at the three categories that weren't seeing sales growth, what sort of actions do you need to take? Is it easily fixable to turn those around? What have you learned so far?
I was saying I'm not going to disclose our pricing strategy, but as you have understood, I think in the unique offer, we are really be true to our promise to the customer, which is really making home improvement accessible. There is a gap between what would be the standard proposition in the market and our proposition from a price point of view, but not only. From a quality perspective, from a design perspective, and from a functionality point of view. This is what unique is about. I think that was the story we took about this bathroom furniture. They are, I would say cheap, because they are cheap. They are functional, they are high quality, and they are really bringing something to the customer that didn't exist in the market, and that's why they are buying.
There is a substantial price differentiation in the unique offer, and this is a strategy. It has always been the strategy. What can we do? If your question is can we fix those three categories, definitely we can. I think those three categories haven't a lot of uniqueness, to be fair. As we said, the unique story is just at the beginning. Why is that? Because it takes more time at unified. Unified, you reduce your number of suppliers, you reduce the number of SKUs, you take the ones that are working and you build the volume. It was not easy to do, but it takes less time. When you do unique, you have to start from the customer need, really understand what the customer. You need to understand the market. You need to design to cost. You need to source differently.
We are, as we say, and with all the implications, we are really going from the very beginning to the end journey. It takes time. We are going to do more in this category like everywhere else. Definitely we can fix them.
Shall I go from over here in the corner?
Yeah. Andy Hughes from UBS. Another one on unified, if I may. Karen, just going back to your answer, the guest question at the start, I mean it sounded pretty positive. I just wanted to check a couple of things there. Those phase one ranges where you are getting the 300 basis points, are they representative? There's no particular reason why-
No.
They're not representative.
No. They are representative. Yes.
All right. Okay. That's good. On the second thing on that, in terms of whether you need to get sales gains to get to that GBP 350 million. I mean, you were sort of implying that you might need to get some sales gain to get there. Whereas I think at the start of the program, GBP 350 was like a steady state improvement. Is there any sort of slight movement in the goalposts there?
No. Again, I think we need to come back to the origin of this journey. I still remember very well my first meeting with investors when I started. If I would have said that we were getting sales growth on that new offer, that, let me remind you, no one was believing that we can sell the same stuff across geographies. That was the common starting point. If I would have started this journey saying, "I'm going to get to the GBP 350 million with sales growth," people would have laughed. What we said is, "If you want an equivalent, is it GBP 7 billion of changing power multiplied by 5% CPR?" That was the easiest way to give people the confidence that we can deliver it because it's cost price reduction. We are seeing this cost price reduction coming through.
We've explained, hopefully clearly, why this was not coming through as we speak. We've always said that this plan would be back and loaded. To be fair, to see sales growth coming in, and that's why we talk about it's not because we need it to deliver the GBP 350 million. It's because first it's there, why we wouldn't talk about it? It's making the proof that we can sell the same stuff across. This is the only reason why we are talking about it. To be fair, if people thought, "Oh, the old ranges were better, the old local ranges were better," they were not. They are declining. The new stuff is growing.
It's fair to say the GBP 350, we should get hung up about 300 basis points of gross margin because we might get premium sales growth in those ranges. Is that?
You know what? With everything happening outside, I'm not going to bet to more than GBP 350 million delivery in this plan. I'm sorry, you know what I mean.
Yeah.
You do what you want, I'm going to stick to this plan and really work hard to deliver it.
Just very simplistically, though, our plans say that we can get there with cost price reduction. Lots of things are changing. I have said there's quite a lot of cost price increase that we'll need to manage through. Plans say we'll get there with cost price reduction, what you're also seeing is that there's some sales stuff coming through as well.
While I got the mic, just one other. I can't remember which results meeting it was, you alluded to the fact that you might not need two separate chains in France when they're selling unified ranges. Given what's happened at Casto, if you were thinking of pushing the button on removing one of the brands, are you closer to pushing the button?
As I said, that was my first point in this presentation, we will do what needs to be done when it needs to be done. I think to date, we have an issue in France. We are addressing it. We want to show you the progress. We know that the One Kingfisher plan is addressing the problem that we have in France. As we go, as I show, as I did of anything, I've just demonstrated it since we started this journey.
It's Adam Cochrane, Citi. On the unique, which really generates a good opportunity for you. Given the long lead times, can you give us a sort of guideline as to how much unique product you'd expect to be coming in through the ranges in the next couple of years? In terms of unique, can you just remind us how sales uplift versus the unified product? I think previously they were seeing-
I can't give you numbers about how much unique and when unique is going to hit the floor for the customer. I think what we've seen, what we've done, and I think this is the biggest thing in this presentation at this moment in stage of this transformation, is we have enough evidence and enough scale. Which means this is not cherry picking about what works. Avoid the mistake and what doesn't work. We've been very as taking sales growth from unification. From unification, you expect CPR. Where we were expecting sales growth, without telling it, was around unique. What I can tell you is in the unique program that we've been launching, we get that growth. Actually, I spent some time on the categories because you've seen one of those categories is double-digit growth.
Honestly, guys, in this environment, with everything happening in retail and all, to get double-digit growth in one full category, this is meaningful. As I said, the seventh category is the whole business. Then if you were looking at, you had few other, which were high single digit growth. I think it's good stuff. As I said, some of them are not good enough, and we are going to fix it, but we know how to deliver it. I think we will get unique as we go because some of the unique developments have been hitting the floor, especially in bathroom, but not only. I think we were in Templemars last week with all the leadership team to the event. You've been invited a year ago, but we are doing that every year internally.
We saw all the new developments that are going to hit the floor next year. There is some unique product, not going to tell, but there are some amazing in categories that you would be surprised. You will discover that as we go along.
Thank you.
It's not going to finish. I was reading an article in the press, I think this week, I can't remember which, I'm not going to say which newspaper saying that we are not IKEA, our products are not unique enough to generate growth. A, that's not true. B, the scale of it is not big enough. To be fair to those people who wrote that article, from a customer point of view, is it really visible? No, it's not. Next year is the year. With this trading plan, with John Colley coming in and taking that in charge with the trading commercial, the trading director within the operating, we are going to shout about it.
You mentioned that double digit on that category chart. I wasn't quite sure if some of those categories were benefiting from external market conditions, sort of that plus 11% was because of the-
If you see some positive market condition, I am happy to hear them.
Okay. I thought the warm weather might have helped seasonal, for example, and that may have been the category 1.
Honestly, seasonal has been helped by the market condition because if you take, of course, we had a very good Q2 and still some good sales in the end of the season for seasonal. The two are current and have been a driver.
Those category 1.
All in all, I don't think seasonal has been helped.
When you look down those category numbers, the positive ones would probably reflect market share gains you'd expect?
Yes, of course.
Okay.
Yes, of course.
Thank you.
Over here, it's James.
I had one very quick one and a second one, perhaps requiring a lengthier answer. Can you perhaps disaggregate that half one into Q1 and Q2? You said Q2 was better, what did the gross margin do in Q2 rather than Q1?
What happened to the gross margin in Q2 rather than Q1?
Yeah.
What I said was, we're not assuming that the backstop of cost pressure will go away. We'll have a bit of a headwind there, we will deal with that. What we will see is We've got to do some work on the price hierarchies in France, which means that we didn't get all our pricing right. That means that whereas we took a net cost price, a cost investment hit in the first half of the year-
All other things being equal, I'm not expecting that in the second half of the year. The phasing of the implementations is actually more heavily weighted to the second half of the year. The cost base reductions will come through more in the second half of the year than the first, that's what we saw last year. The mix will be a richer margin mix in the second half of the year. Then we're working on those logistics and efficiencies.
My question was actually what the H1 of minus 40 basis, how you split that into Q1 and Q2. You indicated that Q2 was better.
Q2-
I'm trying to understand how much of an impact it was there.
Q2 was better. I'm just not saying any more than that. Since we started this, we've seen Q1, Q2 progression.
Okay. Just going back to Castorama France, 108 to 101 is such a big improvement in pricing that I'm still puzzled as to how market share get worse for the fascia when pricing gets so much better. I'm just wondering if you can exclude whether there were execution issues that the customer would have had to suffer in the stores, maybe linked to the first attempt to take costs out of stores. Just give me that reassurance, because I don't think I've seen a parallel where I've seen pricing improve so much and actually customer behavior switching off even more.
When I'm talking about price, I'm talking about price index. Price perception hasn't moved yet accordingly, because to be fair, we haven't communicated properly about this. As I said, in this sector, it takes long for customers to realize that we are back in terms of competition. To be fair as well, we couldn't shout before because we were not at that point. This 101 is just the most recent research analysis that we've been doing. Honestly, from an execution in store, and I'm on the ground, as you know, quite often, there was nothing that I would say is worse in Casto than it has been in any of the other operating companies. I think to be fair, we are looking at customer perception in store. Let me be very clear.
Customers that are going into store, they're happy with the service, they're happy with everything. We don't have enough. The problem we've got is attracting. This is why I started my presentation by the brand perception. This is because people are not considering us as the first choice. They go somewhere else. This is what we need to achieve. We need to bring them back. The ones that are there, they think the service is better than it was. The pricing are better, the quality of the product is better. Again, there is no problem as I read in some of the press as well about the fact that the new offer is not working in [inaudible]. That's the point. We don't sell enough. The problem we've got is the traffic.
The traffic is, I say, was on the web because it is improving on the web, but was digitally and in store. That's what we need to improve.
Thank you.
Simon.
Hi, Simon Owen. Just to follow up on France. Can you give us a bit of help around phasing in France in the second half of the year, given the costs through the first half? Obviously, Casto seems to be in a slightly unique position of kind of getting harmed by weather in the first half, but not seeing any benefit from weather in the second half because of rain. How much of the footfall declines do you think are kind of market or environment related? How much do you think are format related?
(Joanne), for the first one on the cost phasing. Maybe two points to make that. We did say that the increase in costs in the first half of the year, a large part of that was attributed to the advertising phasing to support the Brico Dépôt anniversary. That doesn't mean that we are not going to do any advertising in the second half of the year, but that was phased into the first half. The other positive that will be phased into the second half comes from the France action plan. That's around the point that I made about flexing the store hours better. Taking people out of stores to better reflect what's being sold. That's already started. Those are the two things.
Generally, do you think France, that perhaps is simply a kind of an element at least towards it being a victim of circumstance in the first half of the year, or do you actually think it kind of runs deeper?
As I said previously, I try not to say that underperformance is because I think the overall environment in France is not as positive as it was. I think I was very hopeful as you may see the customer confidence and all the rest of I think it's just the end of the situation that has been going on for quite a while. I think, as I said, this customer perception thing is people are not going to us, especially those big spenders, as a first choice. That's what we need to change. To be able to change this, you need to have facts for the customer. I don't think it was worse in the first half than it has been at any time, but it's just that more you go, the less you are relevant, and I think we are where we are.
Karen, can I just ask about the cost reduction program?
Yeah.
You've done a chunk going into Poland. With France to come, what do the next couple of years look like? Do we have more departments and more functions going into Poland or a Poland-like equivalent? Is there a big another next chunk to go?
You are talking about the finance.
Yeah
shared service piece. At the moment, what has gone in is mostly B&Q and a bit of Kingfisher Corporate Center. France goes in shortly, then Poland would follow because what we want to do is take advantage of the more consistent processes that you get from the unified IT system. The financial transactional work will go in on the back of the IT rollout. We are always looking for new things to do. In fact, it is a very small number of people, but we have put in some people because actually we thought that as we looked at the GNFR program, there was some opportunity to be had from looking at the long tail of spend. Actually, you work on that long tail of spend through compliance. It is not very sexy. You get people to fill in their purchase orders properly, et cetera.
We created a business case for that and thought it was worth putting some more people into Poland. The things are going well there just now, and we will be looking for opportunities, but we are not making any commitments right now.
Okay.
Sorry. To follow up. Again, for you please, Karen. On the Kingfisher website with showing consensus figures, there is a very big increase in adjusted profit for tax next year by about GBP 200 million. The largest increase mainly coming from transformation costs coming right down, I think from GBP 135 million you guide this year to about GBP 20 million next year. Can I take it from your comments earlier about having to sort of reallocate some of that GBP 800 million, that those numbers need to change quite significantly?
Well, we're not making any comment on that at the moment. We've still got GBP 300 million of cash transformation costs left, two years of the transformation to go. We think that's enough. Exactly how they will be phased and split, we'll update on more at the year-end.
Yeah. It's Charles Allen of Bloomberg Intelligence. I think at the beginning of the program, you said that you wanted to take about 200,000 SKUs out of the business, out of the 400,000 you had at the time. Can you say how many of those have now been completely cleared?
I think on what has been unified, we've decreased by 80% the number of SKUs. On the 42% that has been unified, we reduced by 80%.
That would still be less than 100,000 that have been taken out of the business.
It will be what it will be. I think we are doing it on the base of the spend and the customer needs. It's huge reduction.
I don't think we actually gave a number.
No.
We pointed out just how many SKUs we had. Not an objective.
There was a pie chart in one of the things that said that, I think it was 197,000 to be exact, that said that you were going to take out.
I don't remember that. What I remember me saying is.
Delisted.
It was the cut of the tail.
It was delisted.
Yeah. It was all delisted.
It was the Cut the Tail Program.
Of the SKUs that we had in the system, we actually had this tail of old and delisted stuff. Our first sharp initiatives was to get that out of the system. We finished that about 18 months ago and actually changed the processes in the business to make sure that that didn't come back again. That's quite important because even though at the moment we've got high levels of inventory, it's good inventory. It doesn't have that kind of layer of delisted in it. Thank you, Steve.
Any more? Good. Thank you very much for your time this morning.