Page Heading CREATING THE LEADER EASI COMMO EXPAN Our markets We currently operate in nine countries, spanning nearly 600 million households. Our research shows that spending on home improvement is a key priority for householders, making this an attractive sector for retailers. It is also attractive because of the relatively small number of well-known manufacturer brands. This means a specialist home improvement retailer provides a vital role for the consumer by offering a wide product choice and expert advice. We can offer a high proportion of own brand product, achieve economies of scale and have a more defensible position against online or generalist operators when compared with other retail segments. Read more about our business model on pages 6 to 7. Our strategy Our unique contribution as a business to our customers is that we can harness our home improvement experience, our heritage as a leader in sustainability and our international scale and sourcing capability to bring new, more sustainable and more affordable products to market. This means our customers can have better homes, the planet s resources can be protected and we generate value for our people, communities and shareholders. By also providing our customers with project advice and new shopping channels to complement our stores, we will make it easier for them to adapt their homes to their evolving needs. Our shorthand for describing this purpose is Better Homes, Better Lives. The next phase of our development towards this vision Creating the Leader builds on the success of the previous phase known as Delivering Value, which has repositioned Kingfisher as a stronger business in the attractive home improvement market. 8 Annual Report and Accounts 20
Governance Accounts ER N D ONE TEAM Helping people have better homes Creating the Leader: Self-help initiatives Four Themes Eight Steps Key Performance Indicators (KPIs) EASIER 1. Making it easier for customers to improve their home 2. Giving our customers more ways to shop For more information see pages 10 to 11. Like-for-like sales growth (LFL) Unique web users COMMON EXPAND ONE TEAM 3. Building innovative common brands 4. Driving efficiency and effectiveness everywhere For more information see pages 12 to 13. 5. Growing our presence in existing markets 6. Expanding in new and developing markets For more information see pages 14 to 15. 7. Developing leaders and connecting people 8. Sustainability: becoming Net Positive For more information see pages 16 to 17. % of Group sales direct sourced % of Group sales that are common Retail profit margin Kingfisher Economic Profit (KEP)* * A measure of profit after a charge for the capital used by the business. (See page 24.) Group employee engagement scores Net Positive sustainability dashboard Financial benefits Predicting the potential retail profit benefits from this programme today, when we don t know the economic conditions or competitive landscape we will face in the future, is very difficult. However, whatever the conditions, we believe our efforts will drive higher LFL sales, higher gross margin and more cost efficiencies than would have been delivered without this programme. In total we estimate that this would create an additional 300 million of annualised retail profit in the fifth year (2016/17), net of price reinvestment and based on the size of the business and market conditions in 2011/12. www.kingfisher.com 9
Creating the Leader leader RANGE INSPIRATION LOGY EASIER ER ADVICE AVAIL AIL CONFIDEN AFFORDABLE TECHNOLOGY ELPFUL EDUCATION C AIL C Our key steps 1. Making it easier for customers to improve their home 2. Giving our customers more ways to shop What we did in 20 Emphasised our affordability credentials: Launched handy prices marketing campaign in B&Q Invested in pricing in Castorama France and Poland Rolled out Brico Dépôt back to basics marketing campaign Extended Brico Dépôt France and Spain programme of arrivages (one-off special buys) to Turkey and Poland Launched UK Enterprise Finance Guarantee scheme for tradesmen Extended our omnichannel offer: Upgraded B&Q online offer (www.diy.com), including 20,000 extra products for home delivery (using Screwfix omnichannel infrastructure) Preparatory work to extend TradePoint (B&Q s trade-only offer) website to main shop floor categories e.g. kitchens continues Launched upgraded websites in Turkey, China, Brico Dépôt France and Spain. Work to upgrade Poland s website continues Trialled click & collect in Castorama France and in Turkey 10 Annual Report and Accounts 20
Governance Accounts HOICER ER RESEARCH ABILITY OMNICHANNEL CE ACCESSIBLE CONVENIENT Key Performance Indicators (KPIs) Like-for-like sales +0.7% Like-for-like sales +0.7% -2.9% 11/12 +1.3% -2.9% 11/12 Unique web users (m) Monthly Moving Annual Average +1.3% Unique web users (m) 24 Monthly Moving Annual Average 19 11/12 15 19 11/12 15 Key future priorities Going forward from 2014/15, we are replacing the longer list of detailed milestones in favour of a summarised version that better highlights the key wider Group priorities within the Creating the Leader framework. Our key priority in 2014/15 is to: Extend omnichannel capabilities across the Group 24 TradePoint s updated website is now transactional on 14,000 products. Further updates will include main shop floor categories B&Q s improved online offer includes 20,000 extra products for home delivery www.kingfisher.com 11
Creating the Leader leader WORLD S BEST PRODUCTS N EF INNOVATION NOVATION XCLUSIVE BRANDS COMMON SCAL NIQUE LOCAL MARKETS INT EFFICIENCY FICIENCY CHOIC CUSTOMER Our key steps 3. Building innovative common brands 4. Driving efficiency and effectiveness everywhere What we did in 20 Product: Launched energy-efficient iqe Group brand Extended common paint ranges Rolled out Colours Group own-brand paint into Russia and Spain Commenced roll out of new Colours own-brand emulsion paint range across B&Q UK & Ireland (in 120 stores) and Castorama France (all 105 stores completed) Launched exclusive Valspar mixing desk paint into B&Q UK & Ireland (now in 120 stores) and China Launch of Site workwear into Brico Dépôt France now planned during 2014/15 following arrivages (one-off special buys) trial during 20 Held inaugural European product show, attended by 6,000 store and buying colleagues from the UK and France Achieved 9% common (up from 8% in 20) and 20% direct sourcing (up from 19% in 20) reflecting a re-emphasis of quality over quantity Extended French common supplier contracts to the wider Castorama and Brico Dépôt brands division Efficiency: Upweighted distribution centre and cross-docking capability in Poland, Spain and Turkey SG&A (1) optimisation from media buying programmes across the UK and France. Achieved c. 40m total savings from Group SG&A initiatives since the start of Creating the Leader Extended Brico Dépôt shelf-ready packaging from 20% to 32% Rolled out France and Spain all-staff bonus programmes to Poland (linked to individual store sales and profit growth) Undertook IT process mapping analysis at Castorama France in readiness for Group-wide IT programme (1) Selling, general & administrative expenses. 12 Annual Report and Accounts 20
Governance Accounts LE L ERNATIONALEXCLUSIVE E STRONGER TOGETHER PRODUCTIVITY E LOCAL TASTE DIRECT SOURCING DIVERSE Key Performance Indicators (KPIs) Products direct sourced % of total sales 11/12 Common product sales % of total sales 11/12 2 15 8 9 20 19 Key future priorities Going forward from 2014/15, we are replacing the longer list of detailed milestones in favour of a summarised version that better highlights the key wider Group priorities within the Creating the Leader framework. Our key priorities in 2014/15 are to: Extend sourcing programmes (e.g. new cross-group MacAllister power and hand tools and Blooma BBQs) Start four-year Group-wide IT programme, consistent with our ongoing capital expenditure plans Kingfisher s inaugural European product show was held in October 2013 involving 6,000 colleagues from the UK and France Retail profit margin % 11/12 7.2* 7.4 8.1 Blooma BBQs, one of our Group own brands, feature dishwasher safe and reversible grills * The reduction in retail profit margin reflects difficult economic conditions in Europe and our decision to improve prices for customers in our major markets. Group own-brand MacAllister has developed a new drill with a light for easy use in confined spaces www.kingfisher.com 13
Creating the Leader leader TRADE AMBI EXPAND GROWTH CONSUMER REACH LOC XIBILITY HIGHER RE BIG BOX INTERNATIO INFILL LEXIBILITY Our key steps 5. Growing our presence in existing markets 6. Expanding in new and developing markets What we did in 20 Existing markets: Opened 84 net new stores ahead of original target of 68 stores including UK 62 (principally Screwfix outlets), France 7, Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4 Koçtaş Fix outlets), representing 3% space growth Revamped and extended four Castorama France stores B&Q UK store rightsizing update First freehold store deal completed with a grocer last year Store reduced in size by 50%; sales density improvement of 75% Non-operational space sold to grocer in February 2014 at a good return for 32 million An additional store has received planning permission and seeking planning permission for another 16 New and developing markets: Bought 15 stores in Romania, which contributed an additional 2% space growth. In total, Group space growth was 5% Evaluated Screwfix international opportunities announcing a four-store pilot in Germany in summer 2014 and the launch of a country-wide website with next-day delivery 14 Annual Report and Accounts 20
Governance Accounts TION KINGFISHER ECONOMIC PROFIT TURNS NEW TERRITORIES AL EXPERTISE OMNICHANNEL SMALL BOX NAL CAPABILITY Key Performance Indicators (KPIs) Kingfisher Economic Profit (KEP)*( m) 74 44 11/12 131 * See page 24. Key future priorities Going forward from 2014/15, we are replacing the longer list of detailed milestones in favour of a summarised version that better highlights the key wider Group priorities within the Creating the Leader framework. Our key priorities in 2014/15 are: Organic growth of 2% (71 net new stores, of which 54 are Screwfix outlets) including entering two new markets To actively manage the portfolio including completing the disposal of Hornbach and looking for a strategic partner for B&Q China (see the Group CEO s statement on page 5) To continue to capitalise on consolidation opportunities (as we did in Romania) Kingfisher acquired Bricostores 15 stores in Romania in 20. They will be rebranded under the Brico Dépôt banner Castorama France revamped two of its stores, including this one in Dunkerque Screwfix opened 60 new stores in the year, taking the total to 335 www.kingfisher.com 15
Creating the Leader leader ACADE DEVELOPING LEAD OLLABORATION LABORATION ONE YEYE TEAMFORCE RECRUITMENT YH AM HARNESS Y ENT F FOR GOOD DIVERSITY Y ET POSITIVE AMBITION ENGA Our key steps 7. Developing leaders and connecting people 8. Sustainability: becoming Net Positive What we did in 20 People: Continued to extend the Kingfisher One Academy Net Positive: Published first Net Positive report and appointed Richard Gillies from Marks and Spencer Group plc as Group Sustainability Director, to lead the Net Positive agenda (see www.kingfisher.com/netpositive) Over 1,400 Kingfisher employees shared an estimated gain of 10 million following the maturity of the ShareSave scheme in December 2013 16 Annual Report and Accounts 20
Governance Accounts MY ERS GEMENT CONNECTING PEOPLE SM MOBILITY ALENTS RETENTION SKILLS POSITIVE IMPACT Key Performance Indicators (KPIs) Engagement scores Gallup Q12 survey (out of 5)* 3.95 3.91 11/12 3.96 Sales of products with eco-credentials % of total sales** 21 20 11/12 20 2.3bn (eco-product sales) 2.1bn (eco-product sales) 11/12 2.2bn (eco-product sales) * Based on a wider sample of employees with over 70,000 staff invited to participate in 20. The 20 figure of 4.11 for the leadership group rose to 4.25 in 20. ** For full information go to www.kingfisher.com/netpositive/reporting Key future priorities Going forward from 2014/15, we are replacing the longer list of detailed milestones in favour of a summarised version that better highlights the key wider Group priorities within the Creating the Leader framework. Our key priorities in 2014/15 are to: People: Increase focus on talent management Continue to develop Kingfisher One Academy with new programmes Net Positive: Establish processes to accelerate Net Positive innovation and to apply what we learn across the Group Further integrate Net Positive into our Operating Company business plans The Kingfisher One Academy ran 10 programmes for the Group s top 200 leaders in 20 The first report covering our performance against our Net Positive targets was published in June 2013 Kingfisher achieved Business in the Community s Corporate Responsibility Index Platinum Big Tick in the 2013 survey. We are also included in two socially responsible indices, the FTSE4Good and Dow Jones Sustainability Index. www.kingfisher.com 17