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18/01/2008 1 Kingfisher Sourcing Organisation Global Sourcing Overview UBS 23 rd January 2008

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18/01/2008 1

Kingfisher Sourcing OrganisationGlobal Sourcing Overview

UBS

23rd January 2008

18/01/20082

Global Sourcing – Strategic importance

KSO sourced products generated €1.3 billion of sales for Kingfisherin 2006/7

€12.8bn total sales

KSO product sales€1.3bn

18/01/20083

What is Kingfisher Sourcing Organisation

An integrated network of worldwide sourcing offices in 9 locations

Principal offices• Hong Kong• Shanghai• New Delhi• Warsaw• Sao Paulo (late 2007)

Satellite offices• Shenzhen• Bangkok• Surabaya• Istanbul

18/01/20084

What is direct sourcing ?

Domestic Purchase

Europe Overseas

Importer Trader

Manufacturer

Manufacturer

+10% to 70%

•Importers can mark-up manufactured cost by between 10% to 70%

•Some importers add value (consolidation, stock holding, design etc)

Direct Sourced Purchase

Opcos KSO

Manufacturer

Manufacturer

•Cost savings range 10% to 70%

•Average cost savings 20% to 25% including logistics on-costs & DC charges

Europe Overseas

OpCo

KSO exists to purchase directly from manufacturers in low cost countries (LCC)to deliver innovative products at advantaged cost prices.

18/01/20085

KSO Senior Management Team

Anthony SutcliffeDirector of Global Sourcing

Linda ShanFinanceManager

Gavin Keane

GM - SH

Christel CostagliHead of Supply

Chain

Mark Atkinson Head of Business

Support

Luc MiroslawHead of Quality

Valery CussenotHead of

Commercial

Jean-Pierre Turlotte

GM - KSEE

Brian NewtonGM – New Markets

Louisa BenchHead of HR

Don CheungHead of Systems

John Prendergast Business Efficiency

Manager

Manoj GuptaGM - Aricia

18/01/20086

KSO Purchases by Opco – 2007/08

Int’l

Brico Depot

Casto Int'lOthers

B&Q

Screwfix

Casto France

18/01/20087

KSO Purchases by Product Category – 2007/08

ElectricalHandtools & Hardware

Heating & Cooling

Lighting

Decorative (incl. Flooring)

ShowroomLeisure

(incl. Building)

Events

Garden Power

Power Tools

18/01/20088

Products supplied – KSO Hong Kong

Electrical LightingAir Treatment

Showroom Decorative Leisure & events

18/01/20089

Products supplied – KSO Hong Kong

Ceramic tiles Building materials Showroom

18/01/200810

Products supplied – KSO Shanghai

HardwarePowertools Garden Powertools

18/01/200811

Products supplied – KSO India

HardwareTextiles

18/01/200812

Products supplied – KSO Eastern Europe

Flooring & timber products

18/01/200813

Why direct source?

4 Key benefits

1 Economic

2 Innovation

3 Operations

4 Vendor relationships

18/01/200814

1 Economic benefits of Direct sourcing

“ You can’t buy cheaper than buying directly from the factory “

Eliminate agents, middle-men, distributors and their profits

But Direct sourcing is no longer just about lower cost price & CPR

18/01/200815

Innovation benefits of Direct Sourcing

Exclusive access to supplier-developed designs

Combine our own designs with low cost manufacturers

Allows us to develop our own exclusive brands (OEBs)Control IP rightsControl economic modelControl supply chain

2

18/01/200816

Innovation benefits of Direct Sourcing2

18/01/200817

3 Operational benefits of Direct sourcing

Robust ‘in-the-field’ controls

Factory working & environmental standards

Quality levels

On-time deliveries

18/01/200818

Did you know…..?

In 2006/7, incoming qualityacceptance rates were 99.4% for

direct sourced products delivered to B&Q,versus 98.4% for domestic purchases

18/01/200819

4 Vendor relationship benefits of Direct sourcing

Manufacturers prefer direct relationships with retailers

Exclusive supply agreements

Direct & exclusive access to supplier designs, technologies &innovation

Better trading terms

Deny competitors the benefits of our volumes

Market making innovation – Directly sourced

18/01/200820

Direct sourcing – how does it work ?

Operating model – 3 core functions

Sourcing

QualitySupplyChain

CPR CSR

Packaging

PeopleStructureProcessSystems

18/01/200821

How does it work? - Sourcing

Key interface with OpCo commercial teams

Create the range sourcing brief

Find the products & suppliers

Build the product range – response to brief

Negotiate the commercial terms

Manage the product development timelines

18/01/200822

Did you know….?

KSO supplies more than 15,000

product lines. That’s more products than

an average Brico Depot store !

18/01/200823

How does it work? – Quality Assurance & Control

Create the technical specification

Validate & assess the suppliers and factoriesQuality systemsEthical & Environmental standards

Test & approve products & packaging

Monitor mass production

Quality control inspections & shipment release

18/01/200824

Did you know….?

KSO conducts over 14,000 quality inspections a year.1st time pass rates are 95%

KSO uses around 800 factories worldwide. 100% of these factories have been assessed to the

Kingfisher Code of Conduct standard

18/01/200825

How does it work? – Supply Chain

Create the supply chain briefs

Confirm quantities & orders

Plan & monitor production

Implement supply chain solutions to reduce inventory & costpalletisationconsolidationstore-ready packaging

18/01/200826

Supply Chain solutions

£1 & €1 Pallet

Palletization

18/01/200827

Did you know….?

KSO has shipped 50,000 containersin the past 12 months.

Laid end-to-end, the line of containers wouldstretch for 200 miles.

That’s the distance from London to Manchester !

18/01/200828

Strategy - Kingfisher growth in Direct sourcing purchases

150

225

290335

487

569

702

800

0

100

200

300

400

500

600

700

800

2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

FOB US$m

+

18/01/200829

But…..Opportunities not yet optimised

KSO Sourced COGS

B&Q Casto Brico SFX Total

11.8% 10.4% 4.1% 12.9% 9.2%

Group

We believe that 15%-20% of COGS can be sourced direct generating an estimated annual margin gain of €100m

18/01/200830

Global Sourcing – 3 clear priorities

Combine innovation andlow cost manufacturing

Own design developmentsExpand sourcing coverage1

2Drive volume through commonpurchasing

Product cataloguesPurpose built showrooms

3 Drive efficiency Improve execution & reduce costsVISION Global Sourcing system

18/01/200831

Combine innovation and low cost manufacturing1

OEB powertools

Design model

Kingfisher designsKingfisher specsKSO R&D engineersDirect to manufacturers Current PP range Concept design Engineering 3D design

OEB mobile air-conditioning

Design model

KSO & Kingfisher DesignsManufacturer’s R&D technical capability

Concept Design Engineering 3D Design

18/01/200832

Showroom & decorative

Design model

KSO designsSupplier designsVolcan ‘Style & Trends’ guidelinesPermanent & Global sourcing

B&Q LightingKSO share 25% (vs 17% 06/7)

B&Q Window DécorKSO share 36% (vs 24% 06/7)Sales uplift 51% LFL

Castorama bathroomKSO share 12%

Combine innovation and low cost manufacturing1

18/01/200833

Combine innovation and low cost manufacturing1

Sourcing Coverage extended to Latin America

Agent appointed

Based in Southern Brasil

Operational November 2007- decking tiles- leisure furniture- flooring- ceramic tiles- building materials

18/01/200834

Drive volumes through common purchasing2

We are making our Global developments more visible and accessible acrossthe Group, driving common purchasing

Showroom - Hong Kong

Showroom-Shanghai

KSO Product Catalogues

18/01/200835

Drive efficiency3

VISION system is providing greater visibility and control of developments

18/01/200836

Summary

KSO is a strategic ‘weapon’

Major source of innovation, profit & differentiation

Opportunities not yet maximised

Clear strategic intent