presentation to retail investors - kingfisher plc
TRANSCRIPT
Agenda
2
Kingfisher at a Glance
Strategic History
Our Markets and Brands
‘Creating the Leader’ Strategy
2013/14 YTD(1) Summary and Outlook
Questions
Up to 2013/14 Q3 ended 2 November 2013
Kingfisher at a Glance
3
No 1 in Europe, No 3 worldwide● 1,090 stores in 9 countries
● 350 ‘Big Box’ stores, 740 medium and smaller outlets
● Retail & light trade offering
Sales c£11bn, EBITDA c£1bn(1)
● EBITDA split: France 50%, UK 30%, Developing markets 20%
Positive KEP (Kingfisher Economic Profit) & strong cash flow generation
Strong balance sheet
● BBB credit rating
● £3.6bn freehold property(2)
(1)FY 2012/13(2)As at 2 February 2013
Strategic History
4
Dem
erg
ing
‘Delivering Value’ ‘Creating the Leader’Easier, Common Expand, One Team
Conglomerate • Home improvement
• General Retail
• Electricals
1980 2000 20122008 2017
Home Improvement is an attractive sector of Retail
Scale advantage
● Customer tastes converging across markets
● Few known manufacturer brands
Defensible ● Huge range breadth, need for interaction, difficult home delivery economics means
– Difficult category for grocers
– Low online sales penetration
Positive retail space/consumer demand balance
● Many of our markets still developing (space immature)
● UK competitor space is reducing
5
Strategic History
6
Dem
erg
ing
‘Delivering Value’ ‘Creating the Leader’Easier, Common Expand, One Team
Conglomerate • Home improvement
• General Retail
• Electricals
1980 2000 20122008 2017
2008 – Ian Cheshire becomes
Kingfisher CEO
Delivering Value, 2008-2012 – a success
More profitable● Adjusted pre-tax profit more than doubled
(from £357m to £807m)
● Retail profit margin up 290bps to 8.1%
● Adjusted basic EPS up 137% to 25.1p,
ahead of target
Higher returns
● ROC* up c490bps to 10.7% (WACC
8.1%)
● Economic Profit (KEP) of £131m
(2007/08 Economic Loss of £109m**)
For the four years ended 28 Jan 2012
* Group Return on Capital Jan 2009-Jan 2012
** In constant currencies
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Growing responsibly, more
sustainable operations● Selling more ‘eco’ products to help
customers be sustainable
● Reduced store waste and CO2 emissions
Stronger foundations● Financial net debt down £1.5 billion,
BBB- (+ve outlook)
● Significant growth investment
● High quality sourcing operations
● Highly engaged colleagues
Off to a good start on Common(1) and Direct sourcing
8
Common product definition:
1. Same product or;
2. Same supplier where common product not possible due to market / legal reasons
(e.g. Electrical extension cable same supplier but different sockets)
As a % of Group SalesJan
2008
Jan
2012
Direct sourced 9% 15%
Common <1% 2%
Established 11 Group-wide
common own brands ● Replacing the 150+ local own brands
● Enabling investment in innovation
and prices
From conglomerate to integrated Group
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‘Federation’ ‘Integrated’ ‘Conglomerate’Past Today Future
150+ own brands
OpCos working
separately
10+ Group Brands50% Common Product
‘One Team’
Kingfisher today
Strategic History
10
Dem
erg
ing
‘Delivering Value’ ‘Creating the Leader’Easier, Common Expand, One Team
Conglomerate • Home improvement
• General Retail
• Electricals
1980 2000 20122008 2017
£100bn+ in 9 countries
Mature
● France
● UK
Emerging
● Poland 1997
● China 1999
● Turkey 2001
● Ireland 2002
● Spain 2003
● Russia 2006
● Romania 2013
Our Markets
11
China
China
Romania
France
ROIUK
Russia
TurkeySpain
Poland#1
#1
#1
#1
#1
France
27 million households
DIY is number one pastime in France helped by
● High level of home ownership and growing
● 35h working week
● High savings ratio
Compete on Product and Service more than price
● Two largest Home Improvement retailers make up 50% of the market
● Planning restrictions; difficult to open space
12
France - Our Brands
Market leader
Castorama
● 35,000 SKUs
● Inspiration
● ‘Smart store’: “see, understand, take”
Brico Dépôt
● 10,000 SKUs
● Heavy DIY/Trade oriented
● Project quantities
● Everyday low price
212 stores (105 Castorama, 107 Brico Dépôt)
● 65% Freehold
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UK & Ireland
26 million households
High level of home ownership
Nation of gardeners
Government initiatives supporting housing market
Fragmented market, lots of smaller players
662 stores (359 B&Q, 303 Screwfix)
● 95% leasehold
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UK & Ireland – Our Brands
B&Q
● 40,000+ SKUs
● One stop shop for projects, modern stores
● ‘Trade-point’ trade offer
● Upgrading Omni channel offer
● Market leader
Screwfix
● 20,000 SKUs
● Services small tradesmen ‘White Van Man’
● ‘Trade-counter’ model
● Best in class Omni channel offer
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Poland
14 million households
Skilled population, big project DIY
Increasing aspiration, tastes changing
Lots of Soviet era housing and high occupancy ratio
Lots of small local players but underserved by big
retailers
Store revamp program
72 stores
● 80% freehold
16
Our Markets – Other International
17
Stores Sales
FY2012/13
(£m)
Retail profit
FY 2012/13
(£m)
Russia 19 426 16
Spain 24 234 1
Turkey (1) 39 n/a(1) 9
China 39 374 (9)
Romania 15 n/a(3) n/a(3)
Hornbach (2) n/a n/a 26
(1) Joint Venture sales are not consolidated(2) Associate sales are neither consolidated nor controlled therefore not applicable(3) Romania acquired during 2013/14
‘Creating the Leader’
1.Making it easier for customers to improve their home
2.Giving our customers more ways to shop
3. Building innovative common brands
4. Driving efficiency and effectiveness everywhere
5. Growing our presence in existing markets
6. Expanding in new and developing markets
7. Developing leaders and connecting people
8. Sustainability: becoming ‘Net Positive’
Easier
Common
Expand
One
Team
19
Sales
Cost
efficiencies
Gross
margin
‘Creating the Leader’ in action
1.Product innovation
2.Omni channel/click & collect
3. 10+ group brands replacing OpCo own brands
4. One Team Product Show
5. Adding c.3% space per year excl. Romania(1)
6. Screwfix Germany trial, 4 stores summer 2014
Easier
Common
Expand
20(1) Romania acquisition completed in H1 2013/14 added 3% space.
Off to a good start…and there is more to come
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Common product definition:
1. Same product or;
2. Same supplier where common product not possible due to market / legal reasons
(e.g. Electrical extension cable same supplier but different sockets)
As a % of Group
SalesJan 2008 Jan 2012 Jan 2013 Target
Direct sourced 9% 15% 19% 35%
Common <1% 2% 8% 50%
Expansion where returns attractive,
Rightsizing in UK
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24%
28%
43%
5%
Existing stores
Omnichannel
IT, Supply Chain & Other
New stores & relocations
FY 2013/14
c.£400m (including Romania)Rightsizing program in UK
● 1 store completed with positive
results
18 store package underway
● 5% less space
Looking at the potential for more
% Space
growth
2013/14
UK & Ireland +1.0%
France +3%(2)
Poland +3%
China (1)%
Romania n/a
Russia +5%
Spain +21%
Turkey +12%
6%
Expand
Annualised benefits targeted for year 5
2% LFL outperformance*
1% higher Gross Margin percentage (after some reinvestment in affordability)
1% reduction in the cost to sales ratio
£300m
additional
Retail Profit
in year 5
* Adding profit at the gross margin rate
Note: Based on the size of the business today and excludes the benefits from new store space
Outperformance is defined as better than we would have achieved without this programme23
2013/14 YTD Summary and OutlookH1 challenging and volatile, Q3 overall growth in both sales and profits
Markets remain challenging, particularly France
£145m provision release from resolution of French tax case
Balance sheet remains strong, not in capital ‘surplus’
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Housing
transactions
vs. 5 year
average(1)
Consumer
confidence
vs neutral(2)
2008 2013 20132008
2008 2013 20132008
(1) UK source is Bank of England, France source is Oxford Economics
(2) UK source is DG ECFIN, France source is DG ECFIN
Contacts
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Further copies of this presentation will be available for download from www.kingfisher.com
or viewed on the Kingfisher IR iPad App available for free at the Apple App store.
We can be followed on twitter @kingfisherplc.
Ian Harding, Group Communications Director +44 (0)20 7644 1029
Sarah Levy, Director of Investor Relations +44 (0)20 7644 1032
Matt Duffy, Investor Relations Manager +44 (0)20 7644 1082