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Group Chief Executive
Ian Cheshire
Agenda
Introduction Ian Cheshire Group CEO
Delivering Value Ian Cheshire Group CEO
Financial review
Kevin O’Byrne Group CFO
Creating the Leader Ian Cheshire Group CEO
Questions
4
2011/12 Summary
Strong results in difficult times for retailers ● Sales +3.3%*, adjusted PBT +20.4%
Self-help initiatives driving our performance in all geographies ● Particularly strong sales growth in France
● Group gross margin +40bps
● Costs (SG&A) ratio to sales flat
‘Delivering Value’ has achieved all objectives
‘Creating the Leader’ now underway
5 * In constant currencies
Delivering Value – 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 since Jan 2009
** In constant currencies 6
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
146p per
share
303p per
share
Jan 2008 Mar 2012
“Our aim is to deliver a step change in shareholder value” … Ian Cheshire, March 2008
Delivering Value – a success
Market cap TSR vs FTSE 100
7
Feb-08 Oct-08 Jun-09 Feb-10 Nov-10 Jul-11 Mar-12
Kingfisher FTSE 100
126.4%
16.2%
£7.2bn
£3.4bn
A reinvigorated B&Q
B&Q retail profit up 83% despite market decline
Retail profit margin up 300bps to 6.2%, on track to achieve a sustainable
7% margin, supported by: ● Distribution efficiencies
● Shrinkage reduction
● More direct sourcing
● Cost efficiency programme
Store estate updated
Stringent store standards operating successfully
Almost 60% of colleagues achieved retail NVQs or City & Guilds qualifications
8
A strong and scalable UK trade offer
Combined trade sales of over £1bn
New trade offer (‘TradePoint’) added to all B&Q stores ● 800,000 trade professionals registered
Developed and expanded Screwfix ● Opened 122 new Screwfix outlets (taking the total to 215)
● Added specialist trade counters exclusive to plumbers and electricians
● Group ‘centre of excellence’ for multi-channel developments
● Launched a 15 minute ‘click, collect & go’ offer
9
A stronger position in France
Sales up 10%*, profits up 42%*
Retail profit margin up 210bps to 9.5% supported by: ● Buying optimisation benefits
● Shrinkage reduction
● More direct sourcing
Added 12% net new space
Castorama modernisation accelerated ● 66% of stores now in modern format, up from 42% in 2007/08
● Innovative ‘Do-it-Smart’ programme launched
* In constant currencies 10
A bigger business in Eastern Europe
Sales up 71%* to £1.7bn**, profits up 62%*
Opened 59 new stores, +85% net new space ● 25 in Poland, 21 in Turkey and 13 in Russia
Opened new distribution facilities in Poland and Turkey to
unlock future direct sourcing and distribution benefits
* In constant currencies
** Including 100% of the sales of Turkey JV 11
A more stable business in China
Losses significantly reduced ● 2008/09: loss of £63m*
● 2011/12: loss of £3m
Cash neutral
Store portfolio rationalised from 63 to 40 stores, 16 downsized
New, smaller format in development
12 * In constant currencies
A stronger sourcing capability
Direct sourcing shipments up 77%
Established 11 Group-wide
common own brands ● Replacing the 150+ local own brands
● Enabling investment in innovation
and prices
Invested in sourcing, innovation
and brand management
13
A more profitable business model
Adjusted pre-tax profit*
* Adjusted measures are before exceptional items, financing fair value remeasurements and amortisation of acquisition intangibles 14
£357m
£807m
2007/08 More profit fromhigher sales
Higher grossmargin upc.300bps
Cost to sales ratio held
flat
Lower interest 2011/12
£52m £315m
£83m
2007/08 2011/12
Other International
France
UK
Goodwill and Centraladjustments
Now a higher returning business model
KEP = Lease adjusted profit after tax less a charge made for Invested
Capital based on lease adjusted weighted average cost of capital
£(109)m*
£131m
Kingfisher Economic Profit (KEP)
15 * In constant currencies
Made good use of our positive cash flow
Free cash flowbefore capex
Other* Net capex Dividend Debt repayment
16
£3.0bn
£0.5bn £1.2bn
£0.6bn
* Other includes proceeds from sale of Italy (£0.5bn), French tax receipt (£148m) and
share purchase for employee incentive schemes (£117m)
£1.4bn
Success has been built on people engagement
Gallup survey of 1,100 senior management. Answers to 12 questions
posed every 6 months, 1=no engagement, 5= total engagement
3.8
4.0
4.2 4.2 4.3
2007/08 2008/09 2009/10 2010/11 2011/12
Worldwide best
in class score
17
Made our own operations more sustainable
Reduced carbon emissions by 25% since 2007/08
Awarded Business in the Community’s (BITC) prestigious ‘Platinum Plus’
standard for leading on sustainability for the last two years
18
Helped customers live more sustainably
Sales of eco-products broadly doubled, now 13% of Group sales ● 2008/09: £0.7bn
● 2011/12: £1.4bn
More timber comes from sustainable sources ● B&Q UK now 100%
● Castorama and Brico Dépôt France rated best in class by WWF
19
Group Finance Director
Kevin O’Byrne
2011/12 Financial results
Adjusted pre-tax profit £807m, up 20.4%
Free cash flow of £367m while investing for growth
Reported financial net debt £88m
Return on Capital 10.7%, KEP of £131m
Dividends up 25.0%
21
Group sales up 3.3% in constant currencies
2010/11 France UK & Ireland OtherInternational
2011/12
+4.8% +0.1%
+7.3%
Reported
Rate 3.6%
+3.3%
£10,450m £10,831m
22
Reported
Rate
Group retail profit up 15.8% in constant currencies
2010/11 France UK & Ireland OtherInternational
2011/12
£762m
£882m
Reported
Rate 15.7%
+11.6%
+20.0%
+13.2% +15.8%
23
Reported
Rate
2011/12 - Financial highlights
2011/12 2010/11 % Reported
Change
Adjusted basic EPS* 25.1p 20.5p +22.4%
Effective tax rate** 28% 29% n/a
Post tax exceptional items £(5)m £(3)m n/a
Profit after tax £639m £491m +30.1%
* Before exceptional items, IAS39, amortisation of acquisition intangibles, related tax items and tax on prior year items
** Before exceptional items and tax on prior year items 24
Free cash flow
£m 2011/12 2010/11
Operating profit (before exceptionals) 819 704
Other non-cash items* 274 276
Change in working capital (187) (141)
Pensions and provisions (before exceptionals) (54) (57)
Operating cash flow 852 782
Interest (8) (19)
Tax (148) (133)
Gross capex (before strategic investments) (338) (285)
Disposal of assets 9 87
Net capex (329) (198)
Free cash flow 367 432
* Includes depreciation and amortisation, impairment losses, share based compensation charge, pension service cost, share of
post-tax results of JVs and associates and profit/loss on retail disposals 25
Use of free cashflow
(1) Investments of a one-off nature, such as bolt on acquisitions and buy outs of freeholds in existing leased stores
(2) Includes dividends received from JVs and associates, business acquisitions, issue of shares and exceptional items
(excluding property disposals)
£m 2011/12 2010/11
Free cash flow 367 432
Dividends (178) (129)
Share purchase for employee incentive schemes (117) -
Strategic capex investments(1)
Freehold interests (73) (25)
Ex-Focus DIY stores (39) -
Other(2) (17) (9)
Cash flow movement (57) 269
Opening net cash/(financial net debt) 14 (250)
Other movement including foreign exchange (45) (5)
Closing (financial net debt)/net cash (88) 14
26
Higher growth investment
2007/08 2010/11 2011/12
£513m
£450m
Ongoing capex
Strategic investment* £310m
2010/11: £25m; 2011/12: £112m
27 *Investments of a one-off nature, such as bolt on acquisitions and buy outs of freeholds in existing leased stores
Space growth
% Growth
since
2007/08
Stores at
Jan 2012
M2
Store space
at Jan 2012
New stores
target
2012/13
% Space
growth
2012/13
Long-term
store target
+7% 572 2,593 50 +0.4% 750(1)
+12% 205 1,625 2 +2% 240(2)
+47% 67 492 6 +9% 125
+145% 36 191 4 +10% 100
+266% 18 161 2 +11% 60
-43% 40 333 0 0 tbd
+67% 17 100 3 +11% 100
955 5,495 67 2-3% 1,375
(1) B&Q UK & Ireland 360; Screwfix 390
(2) Castorama 110; Brico Dépôt 130
tbd = to be decided
Russia
Turkey
Poland
France
China
UK & Ireland
Spain
28
‘Delivering Value’ has driven recovery in key metrics
Rated BBB- in 2008/09
Metrics now broadly consistent with BBB flat
10%
15%
20%
25%
30%
35%
2008/09 2009/10 2010/11 2011/12
BBB
Kingfisher
BBB-
Improving credit rating metrics
29
* Measure used by Standard & Poors. 2011/12 Kingfisher estimate calculated as Funds from Operations (adjusted for
lease depreciation) divided by Adjusted Net Debt (adjusted for capitalised operating leases and pensions)
FFO/Adjusted Net Debt %*
Full year dividend up 25.0%
2011/12 Pence YOY %
Interim dividend* 2.47 +28.3%
Final dividend 6.37 +23.8%
Total full year dividend 8.84 +25.0%
*Interim dividend policy - automatically calculated as 35% of the prior year total dividend
Dividend cover 2.8 times down from 2.9 times last year
30
2011/12 Summary
Profit growth in all divisions
Adjusted basic EPS up 22.4%
Strong ROC and KEP growth
Continued investment to support development and growth
Dividend growth ahead of earnings
31
Group Chief Executive
Ian Cheshire
We operate in an attractive sector of retail
Scale advantage ● Customer tastes converging across markets
● Few known manufacturer brands
Defensible ● Customers demand choice and advice
● Multi-channel specialist preferable to generalist or digital pure play
● Forecast to have low online sales penetration
Positive retail space/consumer demand balance ● Many of our markets still developing (space immature)
● UK is mature, but space is reducing
Operating as a real international leader will unlock the industry’s
sales, cash margin and returns potential
33
‘Creating the Leader’
“Become the world’s expert at making home improvement
easier for customers”
“Use our scale to accelerate innovation and make home
improvement more affordable”
“Accelerate and improve our expansion in existing and
new territories”
“Create a unique networked organisation, stronger than the
sum of its parts, whilst harnessing our diversity and
closeness to the local customer”
Easier
Common
Expand
One
Team
34
‘Creating the Leader’ – the right organisational structure
80/20 local flex 20/80 local flex
‘Federation’ ‘Integrated’ ‘Conglomerate’
Total local flex
Past Today Future
Direct & common sourcing
expertise
Direct & common sourcing
expertise
Brand managers
Innovators
35
Group CEO
Group CFO
Divisional CEO
Group COO
Divisional CEO
36
‘Creating the Leader’ – the right organisational structure
Group CFO
37
‘Creating the Leader’ – the right organisational structure
CEO
network
38
‘Creating the Leader’ – strong team of CEOs
Alain Souillard, Brico Dépôt, France
John Declerck, Russia
Alp Özpamukçu, Turkey
Janusz Lella, Poland Pascal Gil, Spain
Steve Willett, Trade UK
Loic Dubois, China
Martyn Phillips, B&Q UK & Ireland
Guy Colleau, Castorama, France
VERSION
ONLY
‘Creating the Leader’ – a clear sense of purpose
39
‘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’
40
Easier
Common
Expand
One
Team
1. Making it easier for our customers to
improve their home
41
How Measure
● Keeping prices low and
competitive ● Easier products to use ● Easier stores to shop ● DIY education & advice ● On-line research,
design and forums ● De-mystify ‘eco’ for the home
AIM: Grow the market and our share of it
● LFL Sales growth
Easier
2. Giving our customers more ways to shop
42
How Measure
● Group multi-channel platform ● Smartphone & tablets ● Click, pay & collect in store
AIM: Customers can shop anytime, anywhere, anyhow
● Unique web users
Easier
3. Building innovative, common brands
43
How Measure
● Direct sourcing ● Common ranges ● New product innovation ● Coordinated range change
AIM: A core common range of quality, exclusive products
● % of group sales direct sourced
● % of group sales that are
common
EASIER
Common
The benefits to come from
a best in class common range
Best ranges
Exclusive brands
Innovation
Working capital
Central warehousing
Marketing & packaging
Leveraging scale
More direct sourcing
Like-for-like sales
Cash margin
Efficiency
44
Common
…recent 2011/12 real examples
B&Q UK & Castorama France BBQs
Phase1 commonality, March 2011
Total category sales +8%
Common range sales +35%
45
Brico Dépôt & Screwfix hand power tools
New design range launched 2010
Common range sales +40%
Common
Off to a good start…and there is more to come
46
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)
Common
As a % of Group Sales Jan 2008 Jan 2012 Target
Direct sourced 9% 15% 35%
Common <1% 2% 50%
4. Driving efficiency and effectiveness everywhere
47
How Measure
● Supply chain efficiency ● Streamlining in store process ● Harmonisation of IT ● Goods not for resale (GNFR)
AIM: Better cost productivity
● Retail profit margin
Common
5. Growing our presence in existing markets
48
How Measure
● Opening new stores ● Developing store formats
AIM: Grow sales, profits and returns
● Kingfisher Economic Profit
(KEP)
Expand
6. Expanding in new and developing markets
49
● Research new territory entry ● Test a ‘Do it For Me’ (DFM)
store format
AIM: Grow sales, profits and returns
● Kingfisher Economic Profit
(KEP)
How Measure
Expand
7. Developing leaders and connecting people
50
How Measure
● Kingfisher Academy ● Cross group networks
AIM: Harness our talent
● Engagement scores
One
Team
8. Sustainability: becoming ‘Net Positive’
51
● Timber ● Energy ● Communities ● Innovation
AIM: Long-term business success
● ‘Net Positive’ scorecard
How Measure
One
Team
‘Creating the Leader’ – measures
• LFL sales growth
• Unique web users
• % of group sales direct sourced
• % of group sales that are common
• Retail profit margin
• Kingfisher Economic Profit (KEP)
• Engagement scores
• ‘Net Positive’ scorecard
52
Easier
Common
Expand
One
Team
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 programme 53
‘Creating the Leader’– the right targets
Operational measures
Earnings per share
(EPS)
Economic Profit (KEP)
EPS growth
drives dividends
and valuation
KEP recognises the
cost of capital
ensuring efficient use
of shareholder’s
capital
Ensures focus on the key
activities that will drive
benefits of industry
leadership
54
Existing published incentive targets
EPS
20.5p
Max EPS
target 31.2p
2010/11 2013/14
55
KEP
+£68m
Year 2010/11 3 years to 2013/14
Max cumulative
KEP target
+£386m
UK France Other International
Goodwill & Central adjustments
‘Creating the Leader’,
clear 2012/13 milestones
• Complete UK roll out of DIY training classes
• Launch B&Q YouTube channel
• Test new formats in the UK, France, Turkey, Russia & China
• Prepare for the UK’s ‘Green Deal’
• Launch Screwfix mobile ‘click, pay & collect’ offer
• Develop a Group multi-channel platform and implement first in ‘TradePoint’
• Upgrade B&Q’s on-line offer
• Trial ‘click & collect’ in Castorama France
56
Easier
‘Creating the Leader’,
clear 2012/13 milestones
• 18% of sales to be direct sourced
• 7% of sales to be common
• Double direct sourcing in our developing markets
(Poland, Russia, Turkey & China)
• Extend ‘Trade’ common own brands in Screwfix and Brico Dépôt
• Develop a Group-wide stock forecasting and replenishment IT solution,
implement first in B&Q UK
• GNFR savings from European-wide supply negotiations including marketing
catalogue printing and store fixture and fittings costs
57
Common
‘Creating the Leader’,
clear 2012/13 milestones
• Open 67 new stores
(UK 50, France 2, Poland 6, Russia 2, Turkey 4 & Spain 3)
• Revamp and extend 5 Castorama France stores
• Test a ‘DFM’ store format in China
• Launch the Kingfisher Academy
• Launch ‘Net Positive’ and associated scorecard
58
Expand One
Team
Summary & Outlook
‘Delivering Value’ was a success
Kingfisher is in great shape
● Self-help is now the ‘day job’
We have a clear plan to achieve real industry leadership
● ‘Creating the Leader’
● 8 steps, clear measures and 2012/13 milestones
Outlook likely to remain tough
● Confident we can continue to outperform
59
Cautionary note
regarding forward-looking statements
THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS AND IS THEREFORE SUBJECT TO RISKS,
ASSUMPTIONS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED BECAUSE THEY RELATE TO FUTURE EVENTS. THESE FORWARD LOOKING STATEMENTS
INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS RELATING TO THE COMPANY’S EXPECTATIONS AROUND THE
COMPANY’S NEXT PHASE OF DEVELOPMENT KNOWN AS ‘CREATING THE LEADER’ AND ITS ASSOCIATED EIGHT STEPS.
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF RELEVANT TERMINOLOGY INCLUDING THE
WORDS: “BELIEVES”, “ESTIMATES”, “ANTICIPATES”, “EXPECTS”, “INTENDS”, “PLANS”, “GOAL”, “TARGET”, “AIM”, “MAY”,
“WILL”, “WOULD”, “COULD” OR “SHOULD” OR, IN EACH CASE, THEIR NEGATIVE OR OTHER VARIATIONS OR COMPARABLE
TERMINOLOGY AND INCLUDE ALL MATTERS THAT ARE NOT HISTORICAL FACTS. OTHER FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ESTIMATED BY THE FORWARD-LOOKING STATEMENTS INCLUDE,
BUT ARE NOT LIMITED TO, GLOBAL ECONOMIC BUSINESS CONDITIONS, MONETARY AND INTEREST RATE POLICIES,
FOREIGN CURRENCY EXCHANGE RATES, EQUITY AND PROPERTY PRICES, THE IMPACT OF COMPETITION, INFLATION
AND DEFLATION, CHANGES TO REGULATIONS, TAXES AND LEGISLATION, CHANGES TO CONSUMER SAVING AND
SPENDING HABITS AND OUR SUCCESS IN MANAGING THESE FACTORS.
CONSEQUENTLY, OUR ACTUAL FUTURE FINANCIAL CONDITION, PERFORMANCE AND RESULTS COULD DIFFER
MATERIALLY FROM THE PLANS, GOALS AND EXPECTATIONS SET OUT IN OUR FORWARD-LOOKING STATEMENTS AND
RELIANCE SHOULD NOT BE PLACED ON ANY FORWARD LOOKING STATEMENT. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY UPDATE ANY FORWARD LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE. NOTHING IN THIS PRESENTATION SHOULD BE CONSTRUED AS A PROFIT FORECAST.
60
Appendices
Reporting timetable 2012/13
Period Reporting date Detail Communication
Q1 13 weeks to
28 April 2012 31 May 2012
Sales and retail
profit
Conference call at
1200hrs GMT
H1
pre-close
23 weeks to
7 July 2012 19 July 2012
Pre-close
guidance Press release
Interims 26 weeks to
28 July 2012 12 Sept 2012 Full interim results
Presentation/
webcast
Q3 13 weeks to
27 Oct 2012 29 Nov 2012
Sales and retail
profit
Conference call at
1200hrs GMT
Q4 14 weeks to
2 Feb 2013 Feb 2013 Sales Press release
Prelims 53 week year
ended 2 Feb 2013 March 2013 Full year results
Presentation/
webcast
63
£1.4 billion gross debt repaid
Bonds and facilities Repaid Outstanding
MTNs £150m MTN 2010 £150m -
€500m MTN 2010 £419m -
€550m MTN 2012 £294m £167m
£250m MTN 2014 £177m £73m
USPP $207m 2013 £99m £33m
$81m 2016 £9m £43m
$179m 2018 - £114m
China local debt £58m £81m
Bank loans and finance leases £186m £62m
Total gross debt £1,392m £573m
Constant currencies. In addition, the £500m revolving credit facility was refinanced during the year
The new facility of £200m, expiring August 2016 remains undrawn 64
Freehold property –
£3.5 billion(1) as at 28 January 2012
Market Value Yields 2011/12
UK £0.9bn 7.3%
France £1.5bn 7.6%
Poland £0.5bn 8.4%
China £0.4bn 7.9%
Other £0.2bn -
Total £3.5bn
Capitalised leases (2) £4.9bn
(1) Book value of properties £2.8bn. Balance sheet values were frozen at 1 February 2004 on transition to IFRS
(2) Using a rent/yield calculation
Statutory financial reconciliation
2011/12
£m
2010/11
£m
Adjusted pre-tax profit 807 670
Exceptionals (12) (6)
Financing fair value remeasurements 2 7
Profit before tax 797 671
Income tax (158) (180)
Profit for the year 639 491
Return on Capital (ROC)
2011/12 2010/11
Group post-tax profit (1) £606m £521m
Average Capital Employed (2) £5,663m £5,417m
ROC % 10.7% 9.6%
(1) Post tax Retail Profit less central costs and excluding exceptional items, other than realised property profit
(2) Net Assets excluding Net Debt and Pension related items including related Deferred Tax
Lease adjusted ROC
2010/11 2010/11
Group post-tax profit (1) £904m £820m
Average Capital Employed (2) £11,370m £11,178m
ROC % 8.0% 7.3%
(1) Post tax Retail Profit less central costs and excluding exceptional items, other than realised property profit,
adjusted for the post tax impact of leases
(2) Net Assets excluding Net Debt and Pension related items including related Deferred Tax, including leases
capitalised at the long term property yield
Sponsored ADR programme
Kingfisher ADRs trade in the US over-the-counter market on
the ‘OTCQX’ platform under the following information:
Symbol KGFHY
CUSIP 495724403
Ratio 1 ADR : 2 ORD
Country United Kingdom
Effective Date Jan 01, 1986
Underlying SEDOL 3319521
Underlying ISIN GB0033195214
Depositary BNY Mello
Benefits of ADRs to US investors:
● Clear and settle according to normal US standards
● Offer the convenience of stock quotes and dividend
payments in US dollars
● Can be purchased/sold in the same way as other US
stock s via a US broker
● Provide a cost-effective means of international portfolio
diversification
Hong Kong
Joe Oakenfold
email: [email protected]
Tel: +852 2840 9717
New York
Ravi Davis
email: [email protected]
Tel: +1 212 815 4245
London
Mark Lewis
email: [email protected]
Tel: +44 (0)20 7964 6089
69
For questions about creating Kingfisher ADRs, please contact BNY Mellon:
