Investor Event November 2003

Transcription

1 Investor Event November 2003

2 Group Commercial George Adams

3 Agenda Scale of the opportunity Intelligence Strategic Supplier Management - SSM Direct sourcing Key categories Own brands

4 Scale - a major opportunity for the Group Cost reduction strategic supplier management direct sourcing Value Added best sellers key categories key brands exclusive own brands Supply Chain, Process, Systems, People

5 Scale - the cumulative cash benefits total more than 1 billion over the 5 years m / / / / /08 Annual increment Rolled up benefit

6 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

7 Scale - we have achieved a number of quick wins already Best Sellers Power tools Exclusive Own Brands Performance Power and MacAllister Key Categories Paint: own brand tender 8-13% saving Sealants: own brand tender 22-44% saving Power tools: joint sourcing Key Manufacturer Brands Paint and power tools brand tender Strategic Supplier Management - CPR gained in Castorama France. - Teams set up in Castorama France, Brico Depot, Italy, Poland and Asia. - E-auctions 50m Direct Sourcing - Xmas decs. Joint sourcing - Power tools. Joint sourcing - Category alignment Add Value Reduce Cost c25% of total benefit c75% of total benefit

8 Scale - leveraging the supply side % of purchases - NOW Top 200 = 60% % of purchases - FUTURE Top 200 = 70% Common Common = 30% 8,800 = 40% = 40% 4,800 = 30% Direct = 5% Direct = 10% Total number of suppliers 9,000 Total number of suppliers 5,000

9 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

10 Intelligence identifying common suppliers 100 of the suppliers are common to at least two Operating Companies ( OpCos OpCos ) These suppliers represent EUR 2.6 bn purchases - over a third of total Group spend

11 Intelligence - identifying product commonality By knowing: Same Product, Same Barcode Same Product, Different Barcode Like-for for-like product (e.g. AAA Batteries) we can arrive at core common range models and resultant economies of scale benefits.

12 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

13 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 still

14 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

15 Intelligence - Example: Same Product, Different Barcode BOSCH PEX 400AE Multi-Sander Casto-France EAN: B&Q EAN: Brico Depot EAN:

16 SSM - builds on the success of CPR at B&Q m s cumulative savings at B&Q c e

17 Strategic Supplier Management Set the Objectives Innovation Availability Cost Strategic alignment Manage Suppliers Advantage / Parity / Disadvantage Business plans Measure Measure benefits Keep benefits separate Benchmark Range reviews Tender request Performance dashboard Value chain analysis

18 SSM - a dedicated team now in place Headcount B&Q 15 Programme co-ordinators ordinators 5 Castorama France 13 Brico Depot 9 Castorama Poland 4 Castorama Italy 2 Asia 9 Relevant experience and skills Retailers Kingfisher, Body Shop, Sainsbury, OBI Manufacturers Cable & Wireless, Alsthom,, Newell - Rubbermaid, Dana Procter & Gamble, Unilever GSK Languages English, French, German, Polish, Italian, Russian, Chinese.

19 CPR Polska Tools

20 SSM Developing tools to support buyers

21 SSM Developing tools to support buyers

22 Direct sourcing - rapid growth Kingfisher Direct DIY shipments m

23 Direct sourcing - a global network Warsaw 2004 Milan Prague Istanbul 2005 Jaipur Shanghai Hong Kong Kuala Lumpur 2005 South America 2005 Durban

24 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 component supply and packaging. Range 1 Range 2 Manufacture in Asia Widget Ranges - Current Supply Chain Cons ol idate Shipping UK Distributor B&Q DC for shipping Supplier 1 Supplier 2 DC Issues: Many layers Not buying from source factories Poor service level Range 3 Supplier 3

25 Project Widget at B&Q Eastern European sources: 4Million bags 500 skus China sources 60Million bags 4000 skus India sources: 10Million bags 1000 skus

26 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 % * Part * based on B&Q 2003 participation

27 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 and implement group rebates Share information on local prices, rebates and terms

28 Key categories Paint objectives Common European Own Label Strategy Common European Branded Paint Strategy Develop And Implement European Universal Paint Tinting System Group Supplier Management And Development

29 Key categories Paint results Year Action Result 2001 Group Rebates 5m Entry Price Tender 2m 2002 Group Rebates 5m Ongoing/New Tenders 3m 2003est 2004est Group Rebates 6m Ongoing Tenders 3m Group Rebates 6m Ongoing/Euro Tender 7m Total 37m

30 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

31 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 suppliers market prices in Europe

32 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

33 Own brands - Power tools

34 Own brands - Power Tools now sourced together Top 10 Products B&Q Casto F Casto Italy Hornbach 1500 w table saw Pro 6pc kit Pro 4pc kit Router table with Router 14.4 sp Megapro drill PP pro mitre saw 1250w Router, TCT Bits PP 8 Table saw 750w Scroller jigsaw 171 pc power tool kit

35 Bosch Video

36 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 processes and skilled resource Just starting, the best is yet to come

37 Investor Event November 2003

38 B&Q Presentation Bill Whiting Rob Cissell Duncan Tatton-Brown Chief Executive Managing Director, Commercial Finance Director

39 Agenda Introduction Bill Whiting Chief Executive Customer Offer Rob Cissell Managing Director, Commercial Space & Infrastructure Duncan Tatton-Brown Finance Director

40 B&Q is bigger 2002 SALES * ( bn inc. VAT) B&Q Focus/Wickes & Homebase yet with only 14.4% of RMI market in 2003 H1

41 And better PRICE RANGE INSPIRATION HY HY HY B&Q HOMEBASE FOCUS WICKES

42 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%

43 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

44 Agenda Introduction Bill Whiting Chief Executive Customer Offer Rob Cissell Managing Director, Commercial Space & Infrastructure Duncan Tatton-Brown Finance Director

45 Consumers are definitely changing Cash rich / time poor Changing family types Needs to Wants Price still key

46 Our competitors are changing Homebase going softer Focus Group investing in Wickes Specialists growing stronger Retail boundaries blurring

47 B&Q described as "owning" the harder end of the market Hard Soft New garden path Services Interior Design B&Q heartland Projects involving bulk materials, skill and knowledge Projects that involve design choices and add the finishing touches to a home

48 B&Q is seen as down to earth and honest Hard Soft New garden path Services Interior Design Functional Helping people make their homes better Recognised leader Basic Authority Known for quality, design and style Low prices Standardised Innovation As good for women as men Trade-y Honesty Down-to-Earth Inspiration

49 a solid foundation for growth Hard Soft New garden path Services Interior Design Functional Helping people make their homes better Recognised leader Basic Authority Known for quality, design and style Low prices Standardised Innovation As good for women as men Trade-y Honesty Down-to-Earth Inspiration

50 B&Q proposition evolution Retain core values Low prices Becomes Honest & trustworthy Affordable and Accessible DIY Innovative Helping people make their homes better

51 B&Q = Better homes Greater choice More services Low prices

52 5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR

53 Stretching Core Markets e.g. Shower Enclosures Shower Enclosure Market (% Volumes by Price Point) 10% 20% 51% Over 1, % 29% Under % B&Q Total Market

54 Stretching Core Markets e.g. Shower Enclosures GOOD BETTER BEST PREMIUM STOCKED SPECIAL ORDER

55 Improved product and proposition will drive ATV and project sales Today s volume product 2004 volume product Total Project Cost 942 Average Sale +53% Average Profit +94% Total Project Cost 1,441

56 5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR

57 Entering New Markets e.g. Bedroom Furniture GOOD BETTER BEST PREMIUM STOCKED SPECIAL ORDER

58 Bedroom Furniture Trial

59 Bedroom Furniture Trial

60 5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR

61 Create Mass Markets - examples STEAM CABINET AIR CONDITIOING

62 5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR

63 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

64 5 Customer Offer Levers 1. Stretch Core Markets 2. Enter New Markets 3. Create Mass Markets 4. Component Sourcing 5. CPR

65 How do we deliver all of this? Growth of Services Special Order Financial Services Installation Services

66 Rapid growth of Special Order Customer benefits from: Dramatic increase in choice Access to quality products Convenience

67 Continued expansion of other services Multi Channel Financial Services

68 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

69 Customer Offer Summary Clear commercial strategy Offering greater choice Offering more services Maintaining low prices

70 AFFORDABLE STYLE ADS

71 Agenda Introduction Bill Whiting Chief Executive Customer Offer Rob Cissell Managing Director, Commercial Space & Infrastructure Duncan Tatton-Brown Finance Director

72 B&Q Strategy World class supply base LFL growth Reach - channels -stores Infrastructure and capability Efficiency

73 Alignment of our formats TODAY HARD PROPOSITION SOFT IGH RICE SUPERCENTRE OW WAREHOUSE

74 Alignment of our formats TODAY THE FUTURE HARD PROPOSITION SOFT HARD PROPOSITION SOF IGH RICE SUPERCENTRE WAREHOUSE WAREHOUSE OW

75 Alignment of our formats TODAY THE FUTURE HARD PROPOSITION SOFT HARD PROPOSITION SOF IGH RICE SUPERCENTRE MINI WAREHOUSE OW WAREHOUSE WAREHOUSE

76 Mini-Warehouse Proposition FROM TO

77 Mini-Warehouse Proposition FROM TO

78 Mini-Warehouse Proposition FROM TO

79 MINI WAREHOUSE VIDEO? CUSTOMERS TALKING

80 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

81 Warehouse is our flagship Store Visited Most Often Supercentre Catchments Warehouse Catchments

82 Space optimisation in current Warehouses Service Desk 3 4 RETURNS

83 East Central Scotland - Current B&Q Stores Edinburgh Livingston Key Warehouse Mini Warehouse Supercentre miles

84 East Central Scotland - Potential Edinburgh Livingston Key Warehouse Mini Warehouse Supercentre New Store miles

85 New selling space growth Current Stores Store Potential New Stores Warehouse Mini Warehouse Total Increase

86 Pipeline remains strong despite tougher planning environment 177 Last 5 years Net Space Growth 000 s Square Metres Next 3 years = Average store openings p.a. Warehouse 9 Mini Warehouse 6 Average Average (exc. 2001/02) Average

87 Infrastructure investments will support new opportunities Existing delivery business 500m National scale enables efficiency Ability to define service level

88 Building our capability & efficiency TASK OUT = More Time for Customers (shop floor hours) CUSTOMER IN Current Next Year Future (Indexed)

89 Building our capability & efficiency Cost reduction Systems Shrinkage Total Shrinkage Working capital management

90 B&Q Strategy Operating Margin World class supply base LFL growth Reach - channels -stores Infrastructure and capability Efficiency Asset Turn

91 B&Q Strategy Operating Margin World class supply base LFL growth Reach - channels -stores Infrastructure and capability Efficiency Asset Turn = Sustainable Growth = Improved ROIC

92 B&Q Presentation Bill Whiting Rob Cissell Duncan Tatton-Brown Chief Executive Managing Director, Commercial Finance Director

93 B&Q Presentation Bill Whiting Rob Cissell Duncan Tatton-Brown Chief Executive Managing Director, Commercial Finance Director