Kingfisher Plc · LSE:KGF
Kingfisher — Investor Presentation (June 2003)
62 slides from Kingfisher's investor presentation, June 2003
Slide 1: Gerry Murphy, Chief Executive Officer
Gerry Murphy Chief Executive Officer
Slide 2: Kingfisher today
Kingfisher today • Strong Q1 performance – Retail sales £2615.8 million up 8.5%, LFL up 3.9% – Retail profit £153.5 million, up 36.5% • KESA demerger on track for Q2 – New name : KESA Electricals plc – David Newlands, Chairman – Jean-Noël Labroue, Chief Executive – Martin Reavley, Finance Director
Slide 3: Kingfisher Home Improvement
Kingfisher Home Improvement Uniquely positioned in attractive markets • Scale – 3rd largest Home Improvement retailer • International - European No. 1 and leadership in Asia • Market leading retail brands, built on value for money • Experienced and focused management • Strong financials, renewed foc
Slide 4: Strength of brands drives strong sales growth
Strength of brands drives strong sales growth CAGR 11.8% £bn 6.3 5.4 4.7 4.0 4.2 3.6 1998 1999 2000 2001 2002 2003 Figures without Reno Depot, Casto Germany, Casto Belgium, Casto Brazil, Nomi
Slide 5: .. and double digit growth in operating profit
.. and double digit growth in operating profit CAGR 12.9% £bn 524 438 401 357 327 286 1998 1999 2000 2001 2002 2003 Figures without Reno Depot, Casto Germany, Casto Belgium, Casto Brazil, Nomi
Slide 6: Kingfisher Home improvement operating companies
Kingfisher Home improvement operating companies Wholly owned Operating Number of Sales growth companies stores (CAGR 2000-2003) B&Q (incl. B&Q Direct) 321 16.5% Castorama France 105 3.5% Brico Dépôt 58 35.2% Castorama Poland 17 36.2% Castorama Italy 15 23.2% B&Q China 9 129.2%
Slide 7: Our objective – driving growth and efficiency
Our objective – driving growth and efficiency • Driving business growth – Leveraging existing space – Aggressive roll-out of new space • Driving operating efficiency – Supply chain superior – Sharing skills returns
Slide 8: Our markets
Our markets
Slide 9: Growing and attractive home improvement market
Growing and attractive home improvement market • Large, global market • Strong growth over last five years • Growth forecast to continue • Common products • Fragmented supplier base
Slide 10: Europe & Asia represent 40% of the world Home Improvement market
Europe & Asia represent 40% of the world Home Improvement market €40bn €130bn €230bn Europe North America Asia Rest of World
Slide 11: DIY market growth expected to outperform retail sector..
DIY market growth expected to outperform retail sector.. Sales growth % UK France CAGR = 4.5% CAGR = 4.1% 4.9% 4.5% 4.2% 3.8% 3.8% 3.4% 3.2% 2.8% 2002 2006 2002 2006 DIY All retail Source: Mintel
Slide 12: Market growth driven by a combination of ..
Market growth driven by a combination of .. • Personal wealth • Cyclical factors – Housing transactions • Socio-economic factors – Rising number of households – Increased female participation – Increased interest in style • Affordability
Slide 13: Clear link between DIY spend and disposable income
Clear link between DIY spend and disposable income 25 Denmark Disposable Income per Capita (€) UK 20 Italy Spain Germany France 15 10 Greece 5 0 0 100 200 300 400 500 DIY Expenditure per Capita (€k) Source: Verdict 2002
Slide 14: UK DIY market only marginally affected by housing transactions
UK DIY market only marginally affected by housing transactions YOY Change 20 15 10 5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 -5 -10 -15 Property transaction (volume) DIY spend Source ONS, Verdict
Slide 15: French DIY market only marginally affected by housing transactions
French DIY market only marginally affected by housing transactions YOY Change 25 20 15 10 5 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 -5 -10 Property transaction (volume) DIY spend Source Unibal, INSEE
Slide 16: Number of households increasing ahead of population growth
Number of households increasing ahead of population growth UK population (m) UK households (m) + 3.44% + 7.38% 59.01 60.14 61.04 24.72 25.44 23.69 1997 2002 2007e 1997 2002 2007e Source : EIU
Slide 17: Number of households increasing ahead of population growth
Number of households increasing ahead of population growth French population (m) French households (m) + 4.51% + 10.39% 59.9 61.13 25.7 58.49 24.45 23.28 1997 2002 2007e 1997 2002 2007e Source : EIU
Slide 18: Women are now the 'decision makers' for major purchases in the UK
Women are now the ‘decision makers’ for major purchases in the UK 60 50 40 30 % 20 10 0 Conservatory Wooden Floors Fitted Kitchen Bathroom Suite Men Women Source TGI : Had major or equal say in purchase of …
Slide 19: … and are the 'catalyst' for home improvement projects
… and are the ‘catalyst’ for home improvement projects Agreement with attitudinal statements Men Women I’m always looking for ideas to 36 43 improve my home Magazines give me ideas for how to 29 40 improve my home I change decoration at home as often 11 17 as I can afford to Source : TGI annual surv
Slide 20: UK Media coverage encourages the DIY 'amateur enthusiast'
UK Media coverage encourages the DIY ‘amateur enthusiast’ .. Then – those with specialist Now – the amateur knowledge enthusiast Gardeners’ World Changing Rooms Gardeners’ Question time Home Front Charlie’s Garden Army Ground Force
Slide 21: Kingfisher driving business growth
Kingfisher driving business growth
Slide 22: Kingfisher well positioned in key markets
Kingfisher well positioned in key markets Market Market size Market Relative market (€ bn) position share versus next competitor UK 17 1 2.1 France 17 1 1.2 Italy 11 2 0.8 Poland 3 1 1.3 Taiwan 1 1 na China 12 1 1.5
Slide 23: ..but strategy is to drive business growth
..but strategy is to drive business growth • Driving business growth – Leveraging existing space • Product innovation • Services • Pricing – Aggressive roll-out of new space
Slide 24: Scope for significant sales density improvements
Scope for significant sales density improvements Sales per square metre index (B&Q = 100) 160 140 Index (B&Q = 100) 120 100 80 60 40 Brico Home Leroy B&Q UK Castorama Homebase Depot Depot Merlin France
Slide 25: Driving growth – product innovation
Driving growth – product innovation B&Q decking sales (£m) +400% 1999 2002e Market share in 2002 - 32%
Slide 26: Driving growth – product innovation
Driving growth – product innovation B&Q laminate flooring sales (£m) +300% 1999 2002e Market share in 1999 – 15% 2002 – 34%
Slide 27: Driving growth – own brands
Driving growth – own brands • Performance Power – own label range of power tools – market leader in the UK with 38% market share • Colours – Own label range of decorative paint – 19% market share
Slide 28: Driving growth – new services
Driving growth – new services Installation Products Sales 2000-02 DIY market CAGR CAGR 2000-02 Kitchens 21.8% Bathrooms 13.5% 5.5% Fireplaces 24.4% Windows/doors 11.1%
Slide 29: Driving growth – new services
Driving growth – new services Financial services • ‘You Can Do It’ – more than 100,000 cards since Nov 02 • ‘Homeplan’ – more than 20,000 cards since Nov 02 • ‘L’Atout’ – ¾ million cards since 1997
Slide 30: Bringing down the price of DIY for our customers ..
Bringing down the price of DIY for our customers .. Warehouse price reduction profile (index) 102 100 98 96 94 92 90 88 98/99 99/00 00/01 '01/02 '02/03
Slide 31: … has driven total sales growth
… has driven total sales growth B&Q – sales growth vs. pricing index 102 4000 100 3500 3000 98 Price index 2500 Sales £m 96 2000 94 1500 92 1000 90 500 88 0 98/99 99/00 00/01 '01/02 '02/03
Slide 32: … without impacting operating margins
… without impacting operating margins B&Q – operating margin vs. price index 102 12.0% 100 10.0% Operating margin % 98 8.0% Price index 96 6.0% 94 4.0% 92 90 2.0% 88 0.0% 98/99 99/00 00/01 '01/02 '02/03
Slide 33: Driving business growth - New Castorama Management
Driving business growth-New Castorama Management • Philippe Tible, Castorama Chief Executive since February 2003 – Entire career in the French retail industry – 10 years at Leroy Merlin • Patrick Chorein, new Commercial Director since last week – Commercial director at Conforama (PPR Group) for 10 y
Slide 34: Driving business growth – revitalising Castorama France
Driving business growth – revitalising Castorama France • Short term initiatives – Standardised in-store display • End caps, cash ends, clip strips and power aisles – Pricing of top 500+ products – Improved in-store availability • Best sellers in all stores • Own label offer – In-store navigation
Slide 35: Driving business growth – revitalising Castorama France
Driving business growth – revitalising Castorama France • Store revitalisation – “Project Wheel” type rejuvenation – Development of test store (Lille- Hellemmes) • Range, merchandising, in-store layout and navigation, prices – Develop during 2003/4 • Longer term store blue-print
Slide 36: Longer term new store format
Longer term new store format • 3 test stores to re-open in 2003 (La Hénin, Toulon-La Seyne, Chalon s/Saône) • Range reviews • Changes in surface allocation • Change price perceptions • Standardisation of merchandising (Planogram)
Slide 37: Driving business growth - Logistics improvements at Castorama
Driving business growth- Logistics improvements at Castorama Type Before 2000 2001-2002 2005 Direct 82% 62% 35% Distribution 18% 18% 30% centres Cross- 20% 35% Dockings
Slide 38: Driving business growth
Driving business growth • Driving business growth – Leveraging existing space • Product innovation • Services • Pricing – Aggressive roll-out of new space
Slide 39: Driving growth - new selling space
Driving growth - new selling space Home Improvement 000m2 Space growth - CAGR 15% 3,765 3,383 3,021 2,477 1999 2000 2001 2002
Slide 40: Kingfisher store formats – the 'big box' warehouse
Kingfisher store formats – the ‘big box’ warehouse Stores B&Q UK Warehouse 96 Castorama France 105 Castorama Poland 17 Castorama Italy 15 B&Q China 9 • 10,000 sqm internal • 5,000 sqm garden centre Another snap • 40-50,000 SKU’s
Slide 41: Kingfisher store formats – the 'medium box' warehouse
Kingfisher store formats – the ‘medium box’ warehouse Stores B&Q UK‘mini- 8 Warehouse’ B&Q UK Supercentre 225 B&Q Taiwan 14 • 4,000-5,000 sqm • 25,000 SKU’s Another snap
Slide 42: Store formats
Store formats Castorama France • 6,300 sqm internal • 2,700 sqm garden centre • 45,000 SKU’s • Catchment area = 144,000 households
Slide 43: Store formats
Store formats Brico Dépôt • 3,700 sqm internal • 1,300 sqm garden centre • 15,000 SKU’s • Catchment area = 150,000 households
Slide 44: Our markets are relatively underdeveloped
Our markets are relatively underdeveloped Specialist selling space per capita (square feet) US 3.0 * Germany 1.6 France 1.1 UK 1.0 Italy 0.9 Spain 0.6 Source : Verdict *Estimate
Slide 45: Kingfisher improving operating efficiency
Kingfisher improving operating efficiency
Slide 46: Improving operating efficiency
Improving operating efficiency • Driving superior business growth – Leveraging existing space – Aggressive roll-out of new space • Improving operating efficiency – Supply chain – Asset leverage superior – Store operations returns
Slide 47: Improving operating efficiency - exploiting scale
Improving operating efficiency - exploiting scale • Cost Price Reduction programme • Established far Eastern buying operation • Product range – Common product sourcing – Own label development • Sharing skills and innovation – Product development – format development – In store practices
Slide 48: CPR is mutually beneficial, driving volume through lowering price
CPR is mutually beneficial, driving volume through lowering price Higher volumes Higher volumes for key enable lower suppliers costs Lower Lower costs selling prices enable lower drive selling prices volume
Slide 49: Driving volume through lowering price
Driving volume through lowering price Product X (B&Q) Cost Price / Unit £ Quantity ‘000 10.77 14.8 7.02 7.02 2000 2002 2000 2002 Retail Price £ Net Margin £k 14.98 316.5 9.98 45.2 2000 2002 2000 2002
Slide 50: .. and generating sustainable savings
.. and generating sustainable savings Cumulative net CPR £m 200+ 100+ 65 15 2000 2001 2002 2003
Slide 51: The opportunity for CPR in France is significant
The opportunity for CPR in France is significant SKU’s in SKU’s Suppliers store referenced B&Q 40,000 80,000 700 Castorama 50,000 >150,000 1,200
Slide 52: Improving operating efficiency - exploiting the benefits of scale
Improving operating efficiency - exploiting the benefits of scale • Cost Price Reduction programme • Established far Eastern buying operation • Product range – Common product sourcing – Own label development • Sharing skills and innovation – Product development – format development – In store practi
Slide 53: Buying offices located near key suppliers
Buying offices located near key suppliers Shanghai Hong Kong Shenzhen Jaipur
Slide 54: Rapid increase in volumes sourced directly from the Far East
Rapid increase in volumes sourced directly from the Far East Kingfisher DIY shipments £m 256 150 110 27 38 11 16 4 95/96 96/97 97/98 98/99 99/00 00/01 '01/02 '02/03
Slide 55: .. but still further potential
.. but still further potential Group Potential 2002/3 2006 B&Q 10% 15% Castorama 4% Estimated savings from direct sourcing 30%
Slide 56: Improving operating efficiency - exploiting the benefits of scale
Improving operating efficiency - exploiting the benefits of scale • Cost Price Reduction programme • Established far Eastern buying operation • Product range – Common product sourcing – Own label development • Sharing skills and innovation – Product development – format development – In store practi
Slide 57: Common product sourcing
Common product sourcing Current • B&Q UK 700 suppliers • Castorama France 1,200 suppliers • B&Q China 1,800 suppliers Future • Core 1000 key suppliers accounting for 80% of purchases • 50 – 100 global • 100 – 150 supply > one company
Slide 58: Improving operating efficiency - exploiting the benefits of scale
Improving operating efficiency - exploiting the benefits of scale • Cost Price Reduction programme • Established far Eastern buying operation • Product range – Common product sourcing – Own label development • Sharing skills and innovation – Product development – format development – In store practi
Slide 59: Own label development
Own label development 2003 Xmas decorations UK, Ireland, France, Italy, Germany, Turkey, China, Taiwan
Slide 60: Improving operating efficiency - exploiting the benefits of scale
Improving operating efficiency - exploiting the benefits of scale • Cost Price Reduction programme • Established far Eastern buying operation • Product range – Common product sourcing – Own label development • Sharing skills and innovation – Product development – format development – In store practi
Slide 61: Driving value – Kingfisher
Driving value – Kingfisher • World’s most international home improvement business: – leading brands in attractive markets – multiple formats and channels – great people • Leveraging scale and diversity • Substantial organic growth potential • Focused on value and returns
Slide 62: Gerry Murphy, Chief Executive Officer
Gerry Murphy Chief Executive Officer