Kingfisher plc Sarah Levy Director of Investor Relations
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
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 Profit) & strong cash flow generation Strong balance sheet BBB credit rating 3.5bn freehold property (2) (1) FY 2013/14 (2) As at 1 February 2014 3
Demerging Strategic History Conglomerate Home improvement General Retail Electricals Delivering Value Creating the Leader Easier, Common Expand, One Team 1980 2000 2008 2012 2017 4
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 penetration Positive retail space/consumer demand balance Many of our markets still developing (space immature) UK competitor space is reducing 5
Demerging Strategic History Conglomerate Home improvement General Retail Electricals Delivering Value Creating the Leader Easier, Common Expand, One Team 6 1980 2000 2008 2012 2017 2008 Ian Cheshire becomes Kingfisher CEO
Delivering Value, 2008-2012 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 Growing responsibly, more sustainable operations Selling more eco products to help customers be sustainable Reduced store waste and CO 2 emissions Higher returns ROC * up c490bps to 10.7% (WACC 8.1%) Economic Profit (KEP) of 131m (2007/08 Economic Loss of 109m ** ) Stronger foundations Financial net debt down 1.5 billion, BBB- (+ve outlook) Significant growth investment High quality sourcing operations Highly engaged colleagues 7 For the four years ended 28 Jan 2012 * Group Return on Capital Jan 2009-Jan 2012 ** In constant currencies
Off to a good start on Common (1) and Direct sourcing As a % of Group Sales Jan 2008 Jan 2012 Direct sourced 9% 15% Established 11 Group-wide common own brands Replacing the 150+ local own brands Enabling investment in innovation and prices Common <1% 2% 8 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)
From conglomerate to integrated Group Past Today Future Conglomerate Federation Integrated 150+ own brands OpCos working separately 10+ Group Brands Kingfisher today 50% Common Product One Team 9
Demerging Strategic History Conglomerate Home improvement General Retail Electricals Delivering Value Creating the Leader Easier, Common Expand, One Team 1980 2000 2008 2012 2017 10
Our Markets 11 100bn+ in 10 countries Mature France UK #1 Emerging #1 Poland #1 1997 China #1 1999 Turkey #1 2001 Ireland 2002 Spain 2003 Russia 2006 Romania 2013 Portugal 2014 China
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; difficult to open space 12
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
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
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 15 Screwfix 20,000 SKUs Services small tradesmen White Van Man Trade-counter model Best in class Omni channel offer Germany trial 4 stores summer 2014
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
Our Markets Other International Stores Sales FY2013/14 ( m) Retail profit FY 2013/14 ( 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) First store opened May 2014 17
Creating the Leader Easier Common Expand One Team 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 Sales Gross margin Cost efficiencies 18
Creating the Leader in action Easier Common Expand 1. Product innovation 2.Omni channel/click & collect 3. 10+ group brands replacing OpCo own brands 4. One Team Product Show 5. Adding c.2% space per year 6. Screwfix Germany trial, 4 stores summer 2014 19
Off to a good start and there is more to come As a % of Group Sales Jan 2008 Jan 2012 Jan 2014 Target Direct sourced 9% 15% 20% 35% Common <1% 2% 9% 50% 20 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)
21 Expansion where returns attractive, Rightsizing in UK FY 2014/15 c. 350-400m 30% 40% 30% New stores & relocations Existing stores IT, Supply Chain, Omnichannel & Other % Space growth 2013/14 Net new stores 2014/15 UK & Ireland - 50 (1) France +2% (2) 4 Spain +19% 4 Turkey +11% 7 (3) Portugal n/a 2 Screwfix Germany n/a 4 2% New country entry net charge of c. 10m in FY 2014/15 (1) Screwfix outlets. (2) French space growth includes 3 Castorama revamps. (3) Including 4 Koçtaş Fix outlets Expand Rightsizing program in UK 1 store completed with positive results 18 store package underway 5% less space Looking at the potential for more
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 22
Creating the Leader in action - self-help offsetting external impacts Retail Profit m External impacts = ( 55)m 24 20 44 9 10 28 Self-help = + 58m 57 37 778 805 Net = + 3m FY 2012/13 FX One offs & Other Markets Net French wage credits Volume drivers Margin drivers Cost management Cost inflation FY 2013/14 23
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 Hornbach disposal, Brico Dépôt Portugal & Screwfix Germany entry and China partnership review Continue to capitalise on consolidation opportunities (as we did in Romania) Accelerate B&Q UK & Ireland s evolution Commence multi-year programme of additional capital returns to shareholders 24
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 paying a healthy dividend Capitalising on value enhancing consolidation opportunities (as we did in Romania) 25
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 continued with our Creating the Leader programme of self-help initiatives Commenced capital returns, c. 35m worth of shares repurchased up to 28 May 2014 c. 100m to be returned via special dividend in July 2014 Received proceeds of 236 million following the disposal of the Group s 21% stake in Hornbach in March 2014 First Brico Dépôt store in Portugal now open Continued exclusive negotiations to acquire Mr Bricolage in France 26
Entered into Mr. Bricolage exclusive negotiations Expand 27 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 strong brand alongside Kingfisher s existing two successful brands in France Established and successful international franchising operation Low risk exposure to new markets Acquisition would be conditional upon anti-trust clearance and the approval of the franchisees Process likely to take until the end of FY 2014/15
Appendix
Capital structure remains strong Financial flexibility YE 2013/14 YE 2012/13 Maintaining a strong balance sheet Adjusted net debt/ebitdar (1) Target the metrics for BBB flat Invest in the business & pay a healthy dividend (moving towards 2.5x cover over the medium-term) Conditions for capital returns Better than BBB flat metrics Stable or growing economic environment Expected 2014/15 2.3x P P 2.4x P P YE 2013/14 YE 2012/13 29 Resolution of French tax case (1) See Net debt/ebitdar reconciliation in Appendix for definitions
Right Size Right Place update Expand 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 supermarket groups progressing as expected One planning consent now received; One denied Rest remain subject to planning permission (c.12 months) Looking at the potential for more deals 30
The journey so far since 2008 Common More than doubled direct sourcing to c.20% of Group sales Established Group-wide common own brands Replacing 150+ local own brands Common (1) products at 9% (2) of Group sales up from less than 1% Enabling investment in innovation and prices and a lot more common product Invested in our global sourcing capability and brand management Brazil Warsaw Istanbul Shanghai Israel Shenzhen India Hong Kong Vietnam Indonesia Sourcing Hub Satellite Sourcing Office 31 (1) 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) (2) As at 1 February 2014
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