Kingfisher Plc · LSE:KGF
Kingfisher — Investor Day (November 2003)
93 slides from Kingfisher's investor day presentation, November 2003
Slide 1: Investor Event November 2003
Investor Event November 2003 1
Slide 2: Group Commercial
Group Commercial George Adams 2
Slide 3: Agenda
Agenda • Scale of the opportunity • Intelligence • Strategic Supplier Management - SSM • Direct sourcing • Key categories • Own brands 3
Slide 4: Scale - a major opportunity for the Group
Scale - a major opportunity for the Group Cost reduction Value Added • strategic supplier • best sellers management • key categories • direct sourcing • key brands • exclusive own brands Supply Chain, Process, Systems, People 4
Slide 5: Scale - cumulative cash benefits total more than £1 billion over 5 years
Scale - the cumulative cash benefits total more than £1 billion over the 5 years £m 400 300 200 100 2003/04 2004/05 2005/06 2006/07 2007/08 Annual increment Rolled up benefit 5
Slide 6: Scale - cumulative cash benefits over 5 years
Scale - the cumulative cash benefits total more than £1 billion over 5 years •Benefits are tracked monthly •Up to 75% of cash will be re-invested •price •in store service •store modernisation •new infrastructure •new stores •Allocation between levers is complex 6
Slide 7: Scale - we have achieved a number of quick wins already
Scale - we have achieved a number of quick wins already Key Strategic Supplier Management Best Sellers Categories - CPR gained in Castorama France. Paint: own brand Power tools tender 8-13% saving - Teams set up in Castorama France, Brico Depot, Italy, Poland and Asia. Sealants: own brand - E-auctio
Slide 8: Scale - leveraging the supply side
Scale - leveraging the supply side % of purchases - NOW % of purchases - FUTURE Top 200 = 60% Top 200 = 70% Common Common 100 100 = 30% 8,800 = 40% = 40% 4,800 = 30% Direct Direct = 5% = 10% Total number of suppliers Total number of suppliers 9,000 5,000 8
Slide 9: Intelligence - we now know much more about our supply chain
Intelligence - we now know much more about our supply chain • We have been able to analyse the supply chain and mine data for the first time • Findings are very interesting, e.g. • 70% variability on identical product cost prices • Major variability on terms • 7% variation in availability 9
Slide 10: Intelligence - identifying common suppliers
Intelligence – identifying common suppliers • 100 of the suppliers are common to at least two Operating Companies (“OpCos”) • These suppliers represent EUR 2.6 bn purchases - over a third of total Group spend 10
Slide 11: Intelligence - identifying product commonality
Intelligence - identifying product commonality By knowing: ►”Same Product, Same Barcode” ►”Same Product, Different Barcode” ►”Like-for-like product” (e.g. AAA Batteries) …we can arrive at core common range models and resultant economies of scale benefits. 11
Slide 12: Intelligence - Same Product, Same Barcode
Intelligence - “Same Product, Same Barcode” • Over 9,000 products common to at least 2 Kingfisher Operating Companies • Spend on these 9,000 products is over EUR 350 m 12
Slide 13: Intelligence - aligning net cost prices across the Group
Intelligence - aligning net cost prices across the Group • Of the 9,000 products, 5,000 investigated to date • Aligning these 5,000 products across the Group to lowest existing net cost price is: – EUR 11 m, on a purchase value of Eur 230m (CPR = 4.7%) • Further work is taking this total higher stil
Slide 14: Intelligence - Same Product, Different Barcode
Intelligence - “Same Product, Different Barcode” But… • ..many identical products from same supplier with differing barcodes ..so • by cross-linking these products we are able to identify further opportunity 14
Slide 15: Intelligence - Example: Same Product, Different Barcode
Intelligence - Example: “Same Product, Different Barcode” BOSCH PEX 400AE Multi-Sander Casto-France EAN: B&Q EAN: Brico Depot EAN: 3165140248242 3165140237390 3165140248242 15
Slide 16: SSM - builds on the success of CPR at B&Q
SSM - builds on the success of CPR at B&Q £m’s cumulative c175 savings at B&Q 114 57 9 2000 2001 2002 2003e 16
Slide 17: Strategic Supplier Management
Strategic Supplier Management Set the Objectives Manage Suppliers Innovation Advantage / Parity / Availability Disadvantage Cost Business plans Strategic alignment Measure Benchmark Measure benefits Range reviews Keep benefits separate Tender request Performance dashboard Value chain analysi
Slide 18: SSM - a dedicated team now in place
SSM - a dedicated team now in place… Headcount Relevant experience and skills B&Q 15 Retailers Kingfisher, Body Shop, Sainsbury, Programme co-ordinators 5 OBI Castorama France 13 Brico Depot 9 Manufacturers Castorama Poland 4 Cable & Wireless, Alsthom, Newell - Castorama Italy 2 Rubbermaid, Dana Pro
Slide 19: CPR Polska Tools
CPR Polska Tools 19
Slide 20: SSM - Developing tools to support buyers
SSM – Developing tools to support buyers 20
Slide 21: SSM - Developing tools to support buyers
SSM – Developing tools to support buyers 21
Slide 22: Direct sourcing - rapid growth
Direct sourcing - rapid growth +800 Kingfisher Direct DIY shipments £m 256 150 110 16 27 38 4 11 1995 1996 1997 1998 1999 2000 2001 2002 2007 22
Slide 23: Direct sourcing - a global network
Direct sourcing - a global network • Warsaw 2004 • Milan Prague • Istanbul 2005 • Shanghai • Jaipur • Hong Kong • Kuala Lumpur 2005 • South America 2005 • Durban 23
Slide 24: Direct sourcing - Project Widget
Direct sourcing – Project Widget What is a “Widget”? Small items, typically many sku’s, usually packed singularly or as multiples in bags. e.g. Nuts/bolts/screws, Fixings, Home Hardware How do we source today? We source entire ranges from UK Distributors who source these products in Asia, manage com
Slide 25: Project Widget at B&Q
Project Widget at B&Q Eastern China European sources sources: 60Million 4Million bags bags 500 skus 4000 skus India sources: 10Million bags 1000 skus 25
Slide 26: Key categories - piloting 5 covering nearly 40% of margin
Key categories – piloting 5 which cover nearly 40% of margin and 30% of sales The 5 categories – paint, adhesives, hard flooring, power tools, lighting 14 Margin participation % 12 10 8 * 6 4 2 Part 0 * based on B&Q 2003 participation 26
Slide 27: Key categories - Paint
Key categories - Paint • The European Paint Buying Team meets every quarter (Started in April 2001) • The main role of this forum is to – Discuss and agree common European paint strategy – Coordinate range review alignments – Agree and implement advantaged supplier strategy – Negotiate group terms a
Slide 28: Key categories - Paint objectives
Key categories – Paint objectives ¾ Common European Own Label Strategy ¾ Common European Branded Paint Strategy ¾ Develop And Implement European Universal Paint Tinting System ¾ Group Supplier Management And Development 28
Slide 29: Key categories - Paint results
Key categories – Paint results Year Action Result 2001 Group Rebates €5m Entry Price Tender €2m 2002 Group Rebates €5m Ongoing/New Tenders €3m 2003est Group Rebates €6m Ongoing Tenders €3m 2004est Group Rebates €6m Ongoing/Euro Tender €7m Total €37m 29
Slide 30: Key categories - Paint Own Brand 2003 Tender
Key categories - Paint Own Brand 2003 Tender • Combined volume in excess of 140 million litres • B&Q, Castorama France and Brico Depot • Among categories in the tender: - Entry price level - Coloured emulsion - Masonry - Gloss • Combined purchase value in excess of €250 million 30
Slide 31: Key categories - Paint Own Brand 2003 Tender Results
Key categories – Paint Own Brand 2003 Tender Results • We achieved a total saving of around 7.4% of costs of goods sold over 3 years • It allowed us to consolidate our volume from our current 8 suppliers to 4 suppliers • Finally, it enabled us to benchmark our prices to the best in class paint suppl
Slide 32: Key categories - Learnings
Key categories - Learnings • Time consuming • Very complex with many variables • Big savings achievable • Group work allows economies of scale • European purchasing integration can be achieved 32
Slide 33: Own brands - Power tools
Own brands - Power tools 33
Slide 34: Own brands - Power Tools now sourced together
Own brands - Power Tools now sourced together Top 10 Products B&Q Casto F Casto Italy Hornbach 1500 w table saw 9 9 9 Pro 6pc kit 9 Pro 4pc kit 9 9 Router table with Router 9 9 14.4 sp Megapro drill 9 PP pro mitre saw 9 9 9 1250w Router, TCT Bits 9 9 9 9 PP 8” Table saw 9 750w Scroller jigsaw 9 9 9
Slide 35: Bosch Video
Bosch Video
Slide 36: Conclusion - a major opportunity worth the effort
Conclusion.- a major opportunity worth the effort… • Over £1 billion cash savings between 2003/4 and 2007/8 • We have 6 levers to achieve it • We are building on successes with CPR, paint and power tools and Asian sourcing • We are learning, developing our people, systems and resources • Using clear
Slide 37: Investor Event November 2003
Investor Event November 2003 37
Slide 38: B&Q Presentation
B&Q Presentation Bill Whiting Chief Executive Rob Cissell Managing Director, Commercial Duncan Tatton-Brown Finance Director 38
Slide 39: Agenda
Agenda • Introduction Bill Whiting Chief Executive • Customer Offer Rob Cissell Managing Director, Commercial • Space & Infrastructure Duncan Tatton-Brown Finance Director 39
Slide 40: B&Q is bigger
B&Q is bigger 2002 SALES * (£bn inc. VAT) 3.97 3.45 B&Q Focus/Wickes & Homebase … yet with only 14.4% of RMI market in 2003 H1 *Source: GfK – 12 month to Jan 03 (includes VAT, excludes offshore stores) 40
Slide 41: And better
And better “PRICE” “RANGE” “INSPIRATION” 100 100 100 90 90 90 80 80 80 70 70 70 60 60 60 50 50 50 40 40 40 30 30 30 20 20 20 10 10 10 0 0 0 1999 2000 2001 2002 2003 HY 1999 2000 2001 2002 2003 HY 1999 2000 2001 2002 2003 HY B&Q HOMEBASE FOCUS WICKES Source: Milward Brown Tracking Survey 41
Slide 42: B&Q is the store of choice
B&Q is the store of choice Visit most often 59% 16% 11% 9% Visited last month 81% 52% 41% 32% Visited last 6 months 93% 70% 61% 59% Source: Millward Brown (6th August) 42
Slide 43: B&Q has....
B&Q has…. • more AB and female customers than Homebase • more skilled workers than Wickes • twice the building material sales of an average builders merchant • a bigger home delivery business than Next Directory 43
Slide 44: Agenda
Agenda • Introduction Bill Whiting Chief Executive • Customer Offer Rob Cissell Managing Director, Commercial • Space & Infrastructure Duncan Tatton-Brown Finance Director 44
Slide 45: Consumers are definitely changing
Consumers are definitely changing • Cash rich / time poor • Changing family types • Needs to Wants • Price still key 45
Slide 46: Our competitors are changing
Our competitors are changing • Homebase going softer • Focus Group investing in Wickes • Specialists growing stronger • Retail boundaries blurring 46
Slide 47: B&Q described as owning the harder end of the market
B&Q described as "owning" the harder end of the market Hard Soft Interior New garden path Services Design 6 5 4 3 2 1 B&Q heartland Projects that involve design Projects involving choices and add bulk materials, the finishing skill and touches to a knowledge home 47
Slide 48: B&Q is seen as down to earth and honest
B&Q is seen as down to earth and honest Hard Soft Interior New garden path Services Design 6 5 4 3 2 1 Functional Helping people make their homes better Recognised leader Authority Known for quality, design and style Basic Standardised Innovation Low prices As good for women as men Trade-y Honesty D
Slide 49: A solid foundation for growth
… a solid foundation for growth Hard Soft Interior New garden path Services Design 6 5 4 3 2 1 Functional Helping people make their homes better Recognised leader Authority Known for quality, design and style Basic Standardised Innovation Low prices As good for women as men Trade-y Honesty Down-to-E
Slide 50: B&Q proposition evolution
B&Q proposition evolution Retain core values • Low prices Becomes • Honest & trustworthy Affordable and • Innovative Accessible DIY Helping people make their homes better 50
Slide 51: B&Q = Better homes
B&Q = Better homes • Greater choice • More services • Low prices 51
Slide 52: Customer Offer Levers
5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR 52
Slide 53: Stretching Core Markets e.g. Shower Enclosures
Stretching Core Markets e.g. Shower Enclosures Shower Enclosure Market (% Volumes by Price Point) 10% 20% 51% Over £1,000 £200 - £999 70% 29% Under £200 20% B&Q Total Market Source: GFK 53
Slide 54: Stretching Core Markets e.g. Shower Enclosures
Stretching Core Markets e.g. Shower Enclosures GOOD BETTER BEST PREMIUM 2003 £129 £299 £499 2004 £129 £349 £799 £999 £1199 £2399 STOCKED SPECIAL ORDER 54
Slide 55: Improved product and proposition will drive ATV and project sales
Improved product and proposition will drive ATV and project sales Today’s volume product 2004 volume product Total Project Cost Total Project Cost £942 £1,441 Average Sale +53% Average Profit +94% 55
Slide 56: Customer Offer Levers
5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR 56
Slide 57: Entering New Markets e.g. Bedroom Furniture
Entering New Markets e.g. Bedroom Furniture GOOD BETTER BEST PREMIUM 2002 £69 2004 £69 £99 £149 £295 STOCKED SPECIAL ORDER 57
Slide 58: Bedroom Furniture Trial
Bedroom Furniture Trial 58
Slide 59: Bedroom Furniture Trial
Bedroom Furniture Trial 59
Slide 60: Customer Offer Levers
5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR 60
Slide 61: Create Mass Markets - examples
Create Mass Markets - examples STEAM CABINET AIR CONDITIOING 61
Slide 62: Customer Offer Levers
5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR 62
Slide 63: Component Sourcing Project Widget
Component Sourcing Project Widget • B&Q initiative which can be rolled out to other group companies • Taking control of supply chain, branding and quality • Minimum 20% cost saving 63
Slide 64: Customer Offer Levers
5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR 64
Slide 65: How do we deliver all of this?
How do we deliver all of this? • Growth of Services – Special Order – Financial Services – Installation Services 65
Slide 66: Rapid growth of Special Order
Rapid growth of Special Order Customer benefits from: • Dramatic increase in choice • Access to quality products • Convenience 66
Slide 67: Continued expansion of other services
Continued expansion of other services Multi Channel Financial Services 67
Slide 68: Sustainable improvement of installation services
Sustainable improvement of installation services • Customers want installation – lack time – do not trust tradesmen – lower DIY skills – risk with higher value items • Installation difficult to perfect 68
Slide 69: Customer Offer Summary
Customer Offer Summary • Clear commercial strategy – Offering greater choice – Offering more services – Maintaining low prices 69
Slide 70: Affordable Style Ads
AFFORDABLE STYLE ADS 70
Slide 71: Agenda
Agenda • Introduction Bill Whiting Chief Executive • Customer Offer Rob Cissell Managing Director, Commercial • Space & Infrastructure Duncan Tatton-Brown Finance Director 71
Slide 72: B&Q Strategy
B&Q Strategy • World class supply base • LFL growth • Reach - channels - stores • Infrastructure and capability • Efficiency 72
Slide 73: Alignment of our formats
Alignment of our formats TODAY HARD PROPOSITION SOFT HIGH PRICE SUPERCENTRE WAREHOUSE LOW 73
Slide 74: Alignment of our formats
Alignment of our formats TODAY THE FUTURE HARD PROPOSITION SOFT HARD PROPOSITION SOFT HIGH PRICE SUPERCENTRE WAREHOUSE WAREHOUSE LOW 74
Slide 75: Alignment of our formats
Alignment of our formats TODAY THE FUTURE HARD PROPOSITION SOFT HARD PROPOSITION SOFT HIGH PRICE SUPERCENTRE MINI WAREHOUSE WAREHOUSE LOW WAREHOUSE 75
Slide 76: Mini-Warehouse Proposition
Mini-Warehouse Proposition FROM TO 76
Slide 77: Mini-Warehouse Proposition
Mini-Warehouse Proposition FROM TO 77
Slide 78: Mini-Warehouse Proposition
Mini-Warehouse Proposition FROM TO 78
Slide 79: Mini Warehouse Video - Customers Talking
MINI WAREHOUSE VIDEO? CUSTOMERS TALKING 79
Slide 80: Mini Warehouse revamp programme
Mini Warehouse revamp programme • Capital investment - up to £1m / store revamp • Double digit sales uplift • 19 by end 2003/4 • 25 to 35 commencing 2004/5 80
Slide 81: Warehouse is our flagship
Warehouse is our flagship Store Visited Most Often 49 Supercentre 20 17 9 Catchments 70 Warehouse Catchments 12 9 4 Source: Millward Brown 81
Slide 82: Space optimisation in current Warehouses
Space optimisation in current Warehouses Service Desk 3 4 RETURNS 82
Slide 83: East Central Scotland - Current B&Q Stores
East Central Scotland - Current B&Q Stores Edinburgh Livingston Key Warehouse Mini Warehouse Supercentre 0 3 6 miles 83
Slide 84: East Central Scotland - Potential
East Central Scotland - Potential Edinburgh Livingston Key Warehouse Mini Warehouse Supercentre 0 3 6 New Store miles 84
Slide 85: New selling space growth
New selling space growth… Current Store New Stores Potential Stores Warehouse 100 175 +75 Mini 8 50 +42 Warehouse Total Increase +117 85
Slide 86: Pipeline remains strong despite tougher planning environment
Pipeline remains strong despite tougher planning environment Net Space Growth 000’s Square Metres Last 5 years Next 3 years 177 = Average store 153 157 openings p.a. Warehouse 9 Mini Warehouse 6 1 9 9 8 -2 0 0 2 2 002 2 0 0 3 -2 0 0 5 Average Average Average (exc. 2001/02) 86
Slide 87: Infrastructure investments will support new opportunities
Infrastructure investments will support new opportunities • Existing delivery business £500m • National scale enables efficiency • Ability to define service level 87
Slide 88: Building our capability & efficiency
Building our capability & efficiency CUSTOMER IN TASK OUT = More Time for Customers (shop floor hours) 120 111 100 Current Next Year Future (Indexed) 88
Slide 89: Building our capability & efficiency
Building our capability & efficiency • Cost reduction • Systems Total Shrinkage • Shrinkage 2002 2003 • Working capital management 89
Slide 90: B&Q Strategy
B&Q Strategy Operating Asset Margin Turn • World class supply base 9 • LFL growth 9 • Reach - channels 9 - stores • Infrastructure and capability 9 • Efficiency 9 9 90
Slide 91: B&Q Strategy
B&Q Strategy Operating Asset Margin Turn • World class supply base 9 • LFL growth 9 = Sustainable Growth • Reach - channels 9 - stores • Infrastructure and capability 9 • Efficiency 9 9 = Improved ROIC 91
Slide 92: B&Q Presentation
B&Q Presentation Bill Whiting Chief Executive Rob Cissell Managing Director, Commercial Duncan Tatton-Brown Finance Director 92
Slide 93: B&Q Presentation
B&Q Presentation Bill Whiting Chief Executive Rob Cissell Managing Director, Commercial Duncan Tatton-Brown Finance Director 93