Kingfisher Plc · LSE:KGF
Kingfisher — Debt Investor Presentation (September 2003)
40 slides from Kingfisher's debt investor presentation, September 2003
Slide 1: Presentation to Eurobond Investors
Presentation to Eurobond Investors September/October 2003 www.kingfisher.com
Slide 2: Group Overview
Group Overview • Focused D.I.Y (Home Improvement) retailer • No.1 in Europe; 3rd largest in the world • Operates 549 stores in 7 countries in Europe and Asia including UK, France, Poland, China & Taiwan • Market leading positions in key markets • Strategic alliance with Hornbach - Germany’s leading
Slide 3: Group Overview
Group Overview • FTSE 50 with market capitalisation c.£6.5bn • Strong sales and profit track record Kingfisher’s DIY Business: Sales (£m) Kingfisher’s DIY Business: Retail Profit (£m)* 6,757 534 5,834 431 5,094 399 4,528 366 CAGR = 14% CAGR = 13% 2000 2001 2002 2003 2000 2001 2002 2003 • c.62,000 em
Slide 4: Group Overview - Strong financial results H1 2003-4
Group Overview Strong financial results - H1 2003-4 Continuing % Change Operations Retail Sales £3.9bn +15% Group Operating £308m +23% Profit PBT £309m +24% Earnings £211m +111% EPS 9.3p +37% Before goodwill amortisation and exceptional items 3
Slide 5: Recent Corporate History
Recent Corporate History Now a focused DIY retailer • 1980’s Development of B&Q (DIY), Comet (Electricals) and Superdrug (health,beauty and pharmacy) and Woolworths (general merchandise) • Early 1990’s International development (Darty) • 1998 Acquisition of majority stake in Castorama (DIY) through
Slide 6: The World's Most International DIY Retailer
The World’s Most International DIY Retailer UK Poland China 215 Supercentres 17 stores 11 stores 99 Warehouses 10 Mini-Warehouses Germany Alliance with Hornbach Taiwan 15 stores France Turkey 105 Castorama 5 stores 57 Brico Depot Italy 15 stores 5
Slide 7: Well Positioned In The Key Markets
Well Positioned In The Key Markets Market Size (€ bn) Kingfisher Market share/ nearest Position competitor UK 17 1 2.1 France 17 1 1.2 Italy 11 2 0.8 Poland 3 1 1.3 Taiwan 1 1 n/a China 12 1 1.5 6
Slide 8: Strong Management Team
Strong Management Team Gerry Murphy Chief Executive Officer Helen Weir Ian Cheshire Bill Whiting Philippe Tible Patrick Langlade Group Finance Chief Executive, Chief Executive, Chief Executive, Chief Executive, Director International and B&Q Castorama France Brico Dépôt Development 7
Slide 9: Home Improvement Market
Home Improvement Market Section 1 8
Slide 10: Home Improvement Market
Home Improvement Market Attractive and growing market • €400 bn (estimated) global home improvement market of which €170 bn is in Europe and Asia • Strong growth over the last five years and forecast to continue Worldwide Home • Diverse national markets Improvement Market • Common products RoW • Fra
Slide 11: DIY market growth expected to outperform retail
Home Improvement Market DIY market growth expected to continue to outperform the retail sector Sales growth % UK France CAGR = 4.5% CAGR = 4.1% 4.9% 4.5% 4.2% 3.8% 3.8% 3.4% 3.2% 2.8% 2002 2006 2002 2006 DIY All retail Source: Mintel 10
Slide 12: Growth is driven by a combination of factors
Home Improvement Market Growth is driven by a combination of factors • Greater disposable income • Cyclical factors • Housing transactions • Socio-economic factors • Rising number of households • Increased female participation • Increased interest in style • Greater affordability • Lower prices 11
Slide 13: DIY market only marginally affected by housing transactions
Home Improvement Market DIY market only marginally affected by housing transactions United Kingdom France YOY Change 25 YOY Change 20 20 15 15 10 10 5 5 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 -5 -5 -10 -10 -15 Property transaction (volume)
Slide 14: Retail space in the European context
Home Improvement Market Retail space in the European context UK and France have significant room for growth compared to other European markets 1.85 Euro 400 Sqft 1.65 1.55 1.45 1.30 1.30 280 250 250 1.10 1.051.05 1.00 200 207 0.90 185 190 0.9 170 170 0.67 0.60 120 0.55 105 50 50 55 Sales per capita
Slide 15: The Key Businesses
The Key Businesses Section 2 14
Slide 16: UK - B&Q
UK - B&Q • The only UK DIY retailer with ‘large format’ warehouse stores • More than twice the size of the nearest competitor • ‘Everyday Low Price’ proposition B&Q Store Portfolio - H1 ‘04 No. of Size SKUs Store Type FY ‘03 CAGR* Stores (Sqm) Sqm) • Sales (£m) 3,748 17% Warehouse 99 14,000 35,000 •
Slide 17: Castorama France
Castorama France • Strong brand recognition • Disappointing recent development FY ‘03 CAGR* Castorama France Stores - H1 ‘04 • Sales (£m) 1,654 1.8% Number 105 • Operating Profits (£m) 106 -7% • No. of Stores** 105 -2% Size 8-10,000 Sqm • Selling space (‘000 sq m) 951 0.3% SKUs 50,000 * since FY ’00
Slide 18: Brico Dépôt
Brico Dépôt • Successful flexible format able to grow space despite planning restrictions • Heavy end of DIY market • ‘No frills’ proposition Brico Dépôt Stores - H1 ‘04 FY ‘03 CAGR* Number 57 • Sales (£m) 569 35% Size 5,000 Sqm • Operating Profits (£m) 39 31% • No. of Stores** 56 29% SKUs 15,000 •
Slide 19: Business Strategy
Business Strategy Section 3 18
Slide 20: Focus on returns, improving ROIC
Business Strategy Focus on returns…improving ROIC…more from less Return on Invested Capital Asset Turn x Operating Margin • LFL, sales per square metre • product costs • fixed capital efficiency • operating costs • working capital efficiency • overheads 19
Slide 21: Key value levers
Business Strategy Key value levers • Driving B&Q • Revitalising Castorama France • Rollout of Brico Dépôt • Focused international growth • Leveraging supply side 20
Slide 22: Business Strategy - UK
Business Strategy - UK B&Q - drive growth and profitability • Grow LFL (range development, new services, mini-warehouse format) • Grow space (warehouse and mini- warehouse) • Continue cost price reduction programme • Improve efficiency (supply chain, shrinkage reduction) 21
Slide 23: Driving volume through lowering price
Business Strategy Driving volume through lowering price eg. paint (B&Q) Cost Price / Unit £ Quantity ‘000 10.77 110.0 7.02 14.8 2000 2002 2000 2002 Retail Price £ Net Margin £k 14.98 316.5 9.98 45.2 2000 2002 2000 2002 22
Slide 24: Business Strategy - Castorama France
Business Strategy - Castorama France • New leadership - Philippe Tible, CEO ex Leroy Merlin • Cost Price Reduction (CPR) • Pricing • Entry price products • Price leadership on key value lines • Price-led advertising • Range and layout • Entry level to aspirational • Lighting, showroom, decorative •
Slide 25: Business Strategy - Brico Dépôt
Business Strategy - Brico Dépôt Rollout • Potential to increase from 57 to 100 stores • Margin improvement as a result of economies of scale • Entry into Spain • Brico continues to show strong LFLs underlining the success of the format Brico Dépôt - LFL 14.1% 9.2% 7.9% FY 02 FY 03 H1 04 24
Slide 26: Business Strategy - International
Business Strategy - International Leveraging Kingfisher’s experience in international expansion • Focus on fast growing international businesses in Poland, Italy, China and Taiwan • Leverage group expertise in format development, ranging and own label products will help drive their successful growth
Slide 27: Leveraging supply side
Business Strategy Leveraging supply side…..reducing costs and adding value Cost reduction Value Added • cost price reduction • best sellers, key categories • strategic supplier • new products management • exclusive own brands • direct sourcing Effective Supply Chain, Process, Systems, People 26
Slide 28: Leveraging supply side - suppliers
Business Strategy Leveraging supply side………Kingfisher suppliers % of purchases - NOW % of purchases - FUTURE Top 200 = 60% Top 200 = 70% Top 100 Top 100 = 40% = 30% 7,800 = 40% 4,800 = 30% Total number of suppliers Total number of suppliers 8,000 5,000 Indicative figures only 27
Slide 29: Direct sourcing potential
Business Strategy Leveraging supply side………Direct sourcing potential Kingfisher Direct DIY shipments - £m 600 256 150 110 27 38 4 11 16 1996 1997 1998 1999 2000 2001 2002 2003 2008 28
Slide 30: Adding value by sharing best practice
Business Strategy Adding value by sharing best practice • Own brands • own label power tools (No.1 in UK - 38% market share) • own label range of decorative paint (19% market share in UK) • Product Innovation • wood flooring / decking • Services • installation of kitchens, bathrooms, fireplaces, win
Slide 31: Financial Overview
Financial Overview Section 4 30
Slide 32: Strong sales and retail profit growth - H1 2003-4
Financial Overview Strong sales and retail profit growth - H1 2003-4 Sales £bn Retail Profit £m +11% 3.9 +26% 335 3.6 266 2002 2003 2002 2003 Home Improvement only, restated at constant currency 31
Slide 33: Strong sales and retail profit growth - H1 2003-4
Financial Overview Strong sales and retail profit growth - H1 2003-4 Sales £bn Retail Profit £m +11% 3.9 +26% 335 3.6 0.3 Exiting 0.3 0.3 +36% 25 +67% International 0.2 Exiting 266 International 15 96 +31% 1.2 +11% France 1.1 France 73 UK 1.9 2.2 +12% 197 +16% UK 169 2002 2003 2002 2003 Home Improve
Slide 34: Net debt reduced by over £1bn in H1 2003-4
Financial Overview Net debt reduced by over £1bn in H1 2003-4 £m Net debt at start of period (1,926.4) Property Disposals 788.0 Discontinued operations pre-demerger (55.1) Debt De-merged 423.0 Costs of demerger (144.8) CDI squeeze out and ProMarkt disposal (97.0) Net Debt after exceptional activity
Slide 35: Debt maturity profile
Financial Overview Debt maturity profile Committed Bank Facilities and Capital Markets Issues (£m) • Kingfisher aims to manage the business going forward on a neutral cash basis • Capital markets issues will 265 540 extend the maturity profile • Intermediate maturities will 300 spread refinancing ri
Slide 36: Conservative approach to financing
Financial Overview Conservative approach to financing • Kingfisher believes the current rating is key to providing solid access to bank and capital markets • Significant committed bank facilities which provide strong liquidity • Financing arrangements are structured: • to minimise structural subordi
Slide 37: Kingfisher plc - Rating Agencies' Statements
Financial Overview Kingfisher plc - Rating Agencies’ Statements Standard & Poor’s: BBB+ (stable) • “above-average business profile underpinned by its very strong positions in the largely non-cyclical DIY markets in the UK and France” • “strong operating efficiency” • “streamlined management structur
Slide 38: Potential Offering
Potential Offering • Issuer: Kingfisher plc • Format: Eurobond • Currency: Euro and Sterling • Amount: Benchmark Size • Maturity: Intermediate • Documentation: EMTN (London Listed) • Use of Proceeds: Repayment of Outstanding Debt & General Corporate Purposes • Joint Bookrunners: Barclays, Deutsche,
Slide 39: Summary credit strengths
Financial Overview Summary credit strengths • Leading Home Improvement Retailer in Europe • clear focus • #1 market positions • Fast-growing market, resilient to changes in the economic cycle • Excellent opportunities for organic sales and margin growth • Focused on value & returns • Strong cash flo
Slide 40: Important Notice
Important Notice This document contains forward-looking statements based on current assumptions and forecasts made by Kingfisher’s management. Various known and unknown risks, uncertainties and other factors could lead to substantial differences between the actual future results, financial situation
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