Kingfisher Plc · LSE:KGF
Kingfisher — Investor Presentation (October 2006)
61 slides from Kingfisher's investor presentation, Oct 6, 2006
Slide 1: International Review
International Review Gerry Murphy Group Chief Executive
Slide 2: Today's agenda
Today’s agenda • Formal presentation • General Q&A • Buffet lunch • Networking with International business heads
Slide 3: International business heads
International business heads Gerry Murphy George Adams Philippe Tible Patrick Langlade Steve Gilman European Castorama France Brico Depot France B&Q Asia Development Didier Cantreau Mariusz Gliwinski Claude Acquart Brico Depot Spain B&Q China Castorama Poland Yi Liu Peter Partma B&Q Taiwan Castorama
Slide 4: Kingfisher at a glance
Kingfisher at a glance • World’s third largest home improvement retailer • Retail sales: £8bn, 50% non UK • Over 680 stores in 11 countries in Europe and Asia
Slide 5: Kingfisher – Europe's no 1 home improvement retailer
Kingfisher – Europe’s no 1 home improvement retailer Sales €m 12 11.1 10 8 6 5.2 5 4 3 2.2 2.2 1.9 1.7 2 1.3 1.3 0 I s r e s us er h B e lin he ke cu as ac ch O tik ha er is ic eb Fo nb ar ak M gf au W om om or Pr in y B ro H K ric H Le B Source: Verdict - 2005
Slide 6: Consistent strategy…
Consistent strategy… • Build on strong leadership positions – UK, France • Expand proven growth businesses – Screwfix, Poland, Italy, China and Taiwan • Invest in new opportunities – UK Trade, Spain, Russia, Korea, Turkey • Capitalise on buying scale and international diversity
Slide 7: 18 years of experience outside main domestic markets
18 years of experience outside main domestic markets • In Europe since 1988 – Italy,1988 – Poland,1997 – Turkey, 2001 – Ireland, 2002 – Spain, 2003 – Russia, 2006 • In Asia since 1996 – Taiwan,1996 – China,1999 – South Korea, 2005
Slide 8: Successful, sustainable international development takes...
Successful, sustainable international development takes... • Time and money • Vision and long-term support • Champions/evangelists • Strong local management • Realism • And the ability to adapt, adapt and adapt…
Slide 9: International – a huge opportunity
International – a huge opportunity • GROWTH – Big markets developing fast – £100 billion in International markets • RETURNS – Ahead of the cost of capital – Supported by Group supply scale • ACCELERATED INNOVATION – Global consumer trends – Sharing of products, ideas and talent
Slide 10: International Review – Group Finance Director
International Review Duncan Tatton-Brown Group Finance Director
Slide 11: Our international markets are four times the size of the UK…
Our international markets are four times the size of the UK… Markets size in £bn £bn 25 46 128 31 26 UK France Proven New Total
Slide 12: …with faster forecast growth
…with faster forecast growth Forecast DIY Annual Market Growth 2006- 2006-2009 16% 14.0% 14% 12% 10.0%* 10% 8% 7.2% 7.1% 6.9% Weighted 6% 5.5% 5.1% 4.9% Average 4.2% 4% 2% 0% K ly n nd nd na ia an ce ai U I ta s hi an la la iw Sp us C Po I re Ta Fr R * Based on historical growth Source: Euromonitor
Slide 13: International – a balanced approach
International – a balanced approach Invested Sales 1 Capex 3 Capital 2 B&Q UK 47% 69% 33% France 34% 16% 29% Developed 81% 85% 62% Proven 17% 14% 28% New 2% 1% 10% 1. 6 months to 29 July 2006 2. As at 28 January 2006 3. 2006/07e
Slide 14: Attractive returns
Attractive returns Russia Returns Turkey Above Spain France China exc. OBI Korea Group Ireland average Taiwan Poland Italy Below 2005/06 ROIC – size of bubble reflects invested capital weighting
Slide 15: Spain - the Market
Spain - the Market • Spain Population 44.1 million • Larger cities population: Madrid 2.9m Barcelona 1.5m Valencia 0.7m Seville 0.7m Zaragoza 0.6m c. 20 towns 0.2m-0.5m Sources: CIA World factbook Mongabay.com
Slide 16: Spain - profitable stores provide roll out confidence
Spain - profitable stores provide roll out confidence 2005/06 £m Overall retail loss (5.5) Central head office costs (4.3) Pre- Pre-opening costs (2.1) Underlying store contribution 0.9
Slide 17: Spain - overall profits expected soon
Spain - overall profits expected soon €m 20 15 10 5 0 20 20 20 20 20 20 20 20 20 20 -5 02 03 04 05 06 07 08 09 10 11 e e e e e -10 Store rollout
Slide 18: International - strong control mechanisms
International - strong control mechanisms • Extensive country research prior to entry • Board approval for new country entry • Low cost entry model • All store commitments agreed by CEO/CFO • 5 year development plan – updated annually • Annual budget sign off • 3 monthly review with CEO/CFO • Monthl
Slide 19: International - funding and property strategy
International - funding and property strategy • Local borrowing is a natural hedge • Freehold preferable – Helps exit – e.g. Brazil – Helps reconfigure – e.g. China – Potential for additional value – Poland property cost £208m – Market value £269m* * As at 28 January 2006
Slide 20: Freehold property - a key asset
Freehold property - a key asset Market Values* Yields UK £1.2bn 5% France £0.9bn 8% Rest of Europe £0.7bn 7-10% Asia £0.2bn 9% £3.0bn * As at 28 January 2006
Slide 21: Access to new products and suppliers
Access to new products and suppliers Poland China
Slide 22: Buying power - a local advantage
Buying power - a local advantage Turkey 2002- 2002-2006 growth Group product ranges +12% Buying margin +500bps EBIT +204%
Slide 23: International Review – Group Chief Executive
International Review Gerry Murphy Group Chief Executive
Slide 24: International - key principles
International - key principles • Retail rules! • Vive la difference! • Work together where it matters • Work independently where it doesn’t • Expand at the right rate • Be prepared to exit
Slide 25: International - use local teams
International - use local teams • Casto Poland – 6,000 FTE Polish – 1 French • China – 10,000 FTE Chinese – 5 Europeans
Slide 26: International expansion - choosing the right markets
International expansion - choosing the right markets • Potential RMI market big enough • No1 or 2 position achievable • Economics potentially attractive • Availability of products/employees • Short time to economic scale
Slide 27: International - using the right format
International - using the right format • Castorama, Brico Dépôt or B&Q? • Big box versus small box? • Consumer offer versus trade? Brand?....usually not critical Planning regime? Property costs?
Slide 28: Russia - a good example
Russia - a good example • Population 144 m • 11 cities > 1 m • 70% of wealth west of the Urals • 20 cities > 0.5 m • 2 cities > 4 m
Slide 29: Russia - growing economy
Russia - growing economy GDP Per Head at PPP £ 8000 5.2 % 6000 R CAG Actual 4000 Forecast 2000 0 1995 1997 1999 2001 2003 2005 Consumer Spend 10 ,0 0 0 £m 9 ,0 0 0 % 8 ,0 0 0 5. 9 GR 7 ,0 0 0 CA 6 ,0 0 0 Actual 5 ,0 0 0 Forecast 4 ,0 0 0 3 ,0 0 0 2 ,0 0 0 1,0 0 0 0 1995 1997 1999 2001 2003 2005 Sour
Slide 30: Russia - attractive home improvement market
Russia - attractive home improvement market £m Russian DIY Market Size Market Fragmentation 6 ,0 0 0 3% Organised Stores 5 ,0 0 0 1 0 .9 % Wholesalers GR: 27% CA 4 ,0 0 0 3 ,0 0 0 2 ,0 0 0 1,0 0 0 70% Open markets 0 19 9 9 2000 2 001 20 02 20 03 20 04 Total market size 2004 £3.8bn Sources: Euromonit
Slide 31: The market is large and growing
The market is large and growing Free transfer from State 85% of flats need total “remont” Mortgage market developing, 80m sq.m new housing p.a property prices rising Apartments delivered bare 45% own a “dacha” Est £5bn in Moscow alone!
Slide 32: Castorama Russia
Castorama Russia
Slide 33: Castorama Russia - store format
Castorama Russia - store format • Format based on Castorama Poland • Harder offer • Focused on building/maintenance • EDLP
Slide 34: B&Q China - adapting
B&Q China - adapting • 300m+ households • Growing middle class • Home conscious • HI market £27bn • Western brands popular • Limited DIY knowledge
Slide 35: B&Q China - adapting
B&Q China - adapting Offer heavily adapted by local management: • Different store format • Authenticity promise • Different ranges • Different service/services model
Slide 36: B&Q China - store environment
B&Q China - store environment
Slide 37: B&Q China - authenticity promise
B&Q China - authenticity promise
Slide 38: B&Q China - adapted product ranges
B&Q China - adapted product ranges
Slide 39: B&Q China - adapted service model
B&Q China - adapted service model • More service – More staff per store – 350 vs 180 in UK – Inc 200 vendor reps • Full decoration service – New apartment fit- fit-out
Slide 40: B&Q China - full decoration service
B&Q China - full decoration service 15,000 apartment fit-outs in 2005
Slide 41: B&Q China - clubs and DIY training
B&Q China - clubs and DIY training Children’s clubs and DIY training
Slide 42: B&Q China Comparison with B&Q UK (Warehouse stores)
B&Q China Comparison with B&Q UK (Warehouse stores) B&Q China B&Q UK Store Size 8-20,000 sq.m 10- 10-15,000 sq.m Two floor/one floor with Format Warehouse – 1 floor mezzanine Number of SKUs 50,000 32,000 Staff/store 350 180 Sales/sq. metre £980* £1,700 Rent/sq. metre £40** £155 * £1900 on purchasing
Slide 43: B&Q China Comparison with B&Q UK (Warehouse stores)
B&Q China Comparison with B&Q UK (Warehouse stores) B&Q China B&Q UK Sales Mix: Installed Product 30% 2% Trade 20% 11% Gardening 1% 18%
Slide 44: Sharing format ideas
Sharing format ideas Spain France Poland
Slide 45: Sharing merchandising ideas
Sharing merchandising ideas B&Q, Wednesbury Castorama, Englos
Slide 46: Sharing new product ideas
Sharing new product ideas Disney in China Disney in Turkey
Slide 47: Sharing international retail talent
Sharing international retail talent Claude Acquart – Castorama France 16 years – Castorama Poland CEO 9 years Mariusz Gliwinski – Nomi Poland 7 years – B&Q Taiwan CEO 3 years – B&Q China CEO from November 06 Steve Gilman – B&Q UK 18 years – B&Q Asia CEO 10 years
Slide 48: Working together on global trends
Working together on global trends Feminisation Busy lives
Slide 49: Global trends - Feminisation, busy lives
Global trends - Feminisation, busy lives “Dressed” rooms Installation Tradesman
Slide 50: International – a huge opportunity
International – a huge opportunity • GROWTH – Big markets developing fast – £90 billion International markets • RETURNS – Ahead of the cost of capital – Buying power • ACCELERATED INNOVATION – Global consumer trends – Sharing of products, ideas and talent
Slide 51: International Review: Questions
International Review Questions
Slide 52: Appendix
Appendix Country level information….sources • Population and GDP data – EIU 2004 • RMI market sizes and own brand penetration – Kingfisher estimates • Sales, EBIT, KPI data – as reported
Slide 53: France
France Population 61m GDP growth: average last 5 years 1.1% GDP growth: forecast 2006 1.6% Estimated market size £31bn Estimated market share 9% (24% UNIBAL DIY & gardening) Sales 2005/06 £2.7bn EBIT 2005/06 £230m Store numbers H1 2006/07 181 FTE employee numbers H1 2006/07 18,667 Own brand penetrat
Slide 54: China
China Population 1.3bn GDP growth: average last 5 years 8.1% GDP growth: forecast 2006 9.6% Estimated market size £27bn Estimated market share 1% Sales 2005/06 £312.8m EBIT 2005/06 £0.2m Store numbers H1 2006/07 51 FTE employee numbers H1 2006/07 9,868 Own brand penetration 4.2% Orient Home, Homemar
Slide 55: Poland
Poland Population 38m GDP growth: average last 5 years 2.9% GDP growth: forecast 2006 5.2% Estimated market size £4bn Estimated market share 10% Sales 2005/06 £417.0m EBIT 2005/06 £52.5m Store numbers H1 2006/07 34 FTE employee numbers H1 2006/07 5,915 Own brand penetration 3.7% Leroy Merlin, OBI, P
Slide 56: Italy
Italy Population 58m GDP growth: average last 5 years 1.0% GDP growth: forecast 2006 1.8% Estimated market size £13bn Estimated market share 2% Sales 2005/06 £266.9m EBIT 2005/06 £28.7m Store numbers H1 2006/07 27 FTE employee numbers H1 2006/07 2,156 Own brand penetration 5.4% Competitors Leroy Mer
Slide 57: Taiwan
Taiwan Population 23m GDP growth: average last 5 years 3.1% GDP growth: forecast 2006 4.3% Estimated market size £2bn Estimated market share 10% Sales 2005/06 Not consolidated EBIT 2005/06 £7.4m Store numbers H1 2006/07 21 FTE employee numbers H1 2006/07 1,857 Own brand penetration 8.1% Hypermarkets
Slide 58: Spain
Spain Population 44.1m GDP growth: average last 5 years 3.5% GDP growth: forecast 2006 2.8% Estimated market size £5bn Estimated market share 1% Sales 2005/06 £49.3m EBIT 2005/06 £(5.5)m Store numbers H1 2006/07 7 FTE employee numbers H1 2006/07 473 Own brand penetration n/a Leroy Merlin, Bricoman,
Slide 59: Turkey
Turkey Population 74m GDP growth: average last 5 years 4.7% GDP growth: forecast 2006 6.0% Estimated market size £4bn Estimated market share 3% Sales 2005/06 Not consolidated EBIT 2005/06 £2.0m Store numbers H1 2006/07 9 FTE employee numbers H1 2006/07 1,039 Own brand penetration 17% Competitors Pra
Slide 60: Russia
Russia Population 142.8m GDP growth: average last 5 years 6.0% GDP growth: forecast 2006 6.4% Estimated market size £10bn Estimated market share n/a Sales 2005/06 n/a EBIT 2005/06 £(5.4)m Store numbers H1 2006/07 2 FTE employee numbers H1 2006/07 565 Own brand penetration n/a OBI, Leroy Merlin, K-ra
Slide 61: South Korea
South Korea Population 49m GDP growth: average last 5 years 3.6% GDP growth: forecast 2006 4.5% Estimated market size £6bn Estimated market share n/a Sales 2005/06 £5.2m EBIT 2005/06 £(6.3)m Store numbers H1 2006/07 1 FTE employee numbers H1 2006/07 161 Own brand penetration n/a Competitors Hanssem,