Kingfisher Plc · LSE:KGF
Kingfisher — Investor Presentation (June 2014)
32 slides from Kingfisher's investor presentation, June 2014
Slide 1: Kingfisher plc
Kingfisher plc Sarah Levy Director of Investor Relations
Slide 2: Agenda
Agenda Kingfisher at a Glance Strategic History Our Markets and Brands ‘Creating the Leader’ Strategy Q1 2014/15 Summary Priorities for 2014/15 Appendix 2
Slide 3: Kingfisher at a Glance
Kingfisher at a Glance No 1 in Europe, No 3 worldwide ● 1,134 stores in 9 countries ● Around 350 ‘Big Box’ stores, 780 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
Slide 4: Strategic History
Strategic History Demerging Conglomerate • Home improvement ‘Delivering Value’ ‘Creating the Leader’ Easier, Common Expand, One Team • General Retail • Electricals 1980 2000 2008 2012 2017 4
Slide 5: Home Improvement is an attractive sector of Retail
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 penetratio
Slide 6: Strategic History
Strategic History Demerging Conglomerate • Home improvement ‘Delivering Value’ ‘Creating the Leader’ Easier, Common Expand, One Team • General Retail • Electricals 1980 2000 2008 2012 2017 2008 – Ian Cheshire becomes 6 Kingfisher CEO
Slide 7: Delivering Value, 2008-2012 – a success
Delivering Value, 2008-2012 – a success More profitable Higher returns ● Adjusted pre-tax profit more than doubled ● ROC* up c490bps to 10.7% (WACC (from £357m to £807m) 8.1%) ● Retail profit margin up 290bps to 8.1% ● Economic Profit (KEP) of £131m ● Adjusted basic EPS up 137% to 25.1p, (2007/08 Ec
Slide 8: Off to a good start on Common and Direct sourcing
Off to a good start on Common and Direct sourcing (1) Jan Jan As a % of Group Sales Established 11 Group-wide 2008 2012 common own brands ● Replacing the 150+ local own brands Direct sourced 9% 15% ● Enabling investment in innovation and prices Common <1% 2% Common product definition: 1. Same produc
Slide 9: From conglomerate to integrated Group
From conglomerate to integrated Group Past Today Future ‘Conglomerate’ ‘Federation’ ‘Integrated’ 150+ own brands 50% Common Product OpCos working 10+ Group Brands ‘One Team’ separately Kingfisher today 9
Slide 10: Strategic History
Strategic History Demerging Conglomerate • Home improvement ‘Delivering Value’ ‘Creating the Leader’ Easier, Common Expand, One Team • General Retail • Electricals 1980 2000 2008 2012 2017 10
Slide 11: Our Markets
Our Markets £100bn+ in 10 countries Mature ● France #1 ● UK #1 Emerging ● Poland #1 1997 ● China #1 1999 ● Turkey #1 2001 ● Ireland 2002 ● Spain 2003 ● Russia 2006 ● Romania 2013 ● Portugal 2014 11 China
Slide 12: France
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; dif
Slide 13: France - Our Brands
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 (103 Castorama, 109 Brico Dépôt) ● 65% Freehold 13
Slide 14: UK & Ireland
UK & Ireland 28 million households High level of home ownership Nation of gardeners Government initiatives supporting housing market Fragmented market, lots of smaller players 703 stores (359 B&Q, 344 Screwfix) ● 95% leasehold 14
Slide 15: UK & Ireland – Our Brands
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 ● Germany t
Slide 16: Poland
Poland 15 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
Slide 17: Our Markets – Other International
Our Markets – Other International Stores Sales Retail profit FY2013/14 FY 2013/14 (£m) (£m) Russia 20 453 15 Spain 27 284 1 Turkey 46 n/a(1) 11 China 39 421 (6) Romania 15 n/a(2) n/a(2) Portugal 1 n/a(3) n/a(3) (1) Joint Venture sales are not consolidated (2) Romania acquired during 2013/14 (3) Firs
Slide 18: ‘Creating the Leader’
‘Creating the Leader’ 1. Making it easier for customers to improve their home Easier 2. Giving our customers more ways to shop Sales 3. Building innovative common brands Common 4. Driving efficiency and effectiveness everywhere Gross margin 5. Growing our presence in existing markets Expand 6. Expan
Slide 19: ‘Creating the Leader’ in action
‘Creating the Leader’ in action 1. Product innovation Easier 2. Omni channel/click & collect 3. 10+ group brands replacing OpCo own brands Common 4. One Team Product Show 5. Adding c.2% space per year Expand 6. Screwfix Germany trial, 4 stores summer 2014 19
Slide 20: Off to a good start…and there is more to come
Off to a good start…and there is more to come As a % of Group Jan 2008 Jan 2012 Jan 2014 Target Sales Direct sourced 9% 15% 20% 35% Common <1% 2% 9% 50% Common product definition: 1. Same product or; 2. Same supplier where common product not possible due to market / legal reasons 20 (e.g. Electrical
Slide 21: Expansion where returns attractive, Rightsizing in UK
Expansion where returns attractive, Expand Rightsizing in UK FY 2014/15 % Space Net new c.£350-400m growth stores 2013/14 2014/15 Rightsizing program in UK UK & Ireland - 50(1) ● 1 store completed with 30% France +2%(2) 4 positive results 30% Spain +19% 4 18 store package underway Turkey +11% 7(3) ●
Slide 22: Annualised benefits targeted for year 5
Annualised benefits targeted for year 5 2% LFL outperformance* £300m 1% higher Gross Margin percentage additional (after some reinvestment in affordability) Retail Profit 1% reduction in the cost to sales ratio in year 5 * Adding profit at the gross margin rate Note: Based on the size of the busines
Slide 23: Creating the Leader in action - self-help offsetting external impacts
Creating the Leader in action - self-help offsetting external impacts Retail External impacts = (£55)m Self-help = +£58m Profit £m 37 57 24 20 28 44 10 9 805 778 Net = +£3m FY FX One offs & Markets Net French Volume drivers Margin drivers Cost Cost inflation FY 2012/13 Other wage credits management
Slide 24: Priorities for 2014/15
Priorities for 2014/15 ● Driving the ‘Creating the Leader’ programme ● Easier – Extend omnichannel capabilities across the Group ● Common – Extend sourcing programmes – Start four year Group-wide IT programme ● Expand – Organic growth: 2% space growth – Actively managing the portfolio, including Hor
Slide 25: Started a multi-year capital returns programme
Started a multi-year capital returns programme Incremental to annual dividend ● 2013/14 annual dividend, 9.9p (up 5%), totalling £234 million Capital return of around £200 million during the financial year 2014/15 At this level we retain flexibility to continue: ● Reinvesting in the business and pay
Slide 26: Q1 2014/15 Summary
Q1 2014/15 Summary Total sales up 6.1% (+6.1% LFL) and retail profit up 20.3% to £142 million Sales and profit growth driven by ● Favourable weather patterns compared to Q1 last year ● Encouraging underlying signs in the UK & Poland offset by ongoing weak consumer confidence in France Progress conti
Slide 27: Entered into Mr. Bricolage exclusive negotiations
Expand Entered into Mr. Bricolage exclusive negotiations Entered into exclusive negotiations with the principal shareholders of Scarlett to acquire their majority shareholding Overall purchase price (including debt) expected to be around €275 million ● Transaction provides: ● Third, complementary st
Slide 28: Appendix
Appendix
Slide 29: Capital structure remains strong
Capital structure remains strong Financial flexibility YE 2013/14 YE 2012/13 Maintaining a strong balance sheet • Adjusted net debt/EBITDAR(1) 2.3x 2.4x • Target the metrics for BBB flat P P Invest in the business & pay a healthy dividend (moving towards 2.5x cover over the P P medium-term) Expected
Slide 30: Right Size Right Place update
Expand Right Size Right Place update Rightsizing is progressing • On first store (freehold site) – Space reduced by 50%; sales density up 75% supported by higher grocer footfall – Enabled sale of ASDA half at a good return for £32 million in February 2014 • Further 17 store agreements with supermark
Slide 31: The journey so far since 2008
Common The journey so far since 2008 More than doubled direct sourcing to c.20% of Group sales Warsaw Established Group-wide common Istanbul Shanghai own brands Israel Shenzhen India Hong Kong ● Replacing 150+ local own brands Vietnam ● Common(1) products at 9%(2) of Group sales up from less than 1%
Slide 32: Contacts
Contacts 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 32