international review - kingfisher plc · • networking with international business heads....
TRANSCRIPT
Today’s agendaToday’s agenda
•• Formal presentationFormal presentation•• General Q&AGeneral Q&A•• Buffet lunchBuffet lunch•• Networking with International business headsNetworking with International business heads
International business heads International business heads
Gerry Murphy
Philippe TibleCastorama France
Claude AcquartCastorama Poland
Peter PartmaCastorama Russia
Patrick LangladeBrico Depot France
Mariusz GliwinskiB&Q China
Yi LiuB&Q Taiwan
David WilliamsB&Q Home, Korea
Levent CakirogluKoctas, Turkey
Steve GilmanB&Q Asia
George AdamsEuropean
Development
Giulio MaleciCastorama Italy
Didier CantreauBrico Depot Spain
Kingfisher at a glanceKingfisher at a glance
•• World’s third largest home improvement retailerWorld’s third largest home improvement retailer•• Retail sales: £8bn, 50% non UKRetail sales: £8bn, 50% non UK•• Over 680 stores in 11 countries in Europe and Over 680 stores in 11 countries in Europe and
AsiaAsia
Kingfisher Kingfisher –– Europe’s no 1 home Europe’s no 1 home improvement retailer improvement retailer
11.1
5.2 5
32.2 2.2 1.9 1.7 1.3 1.3
0
2
4
6
8
10
12
Kingfisher
Leroy M
erlin OBI
Praktik
erHomebas
eBau
haus
Hornbac
hBric
omarche
FocusWicke
s
Source: Verdict - 2005
Sales €m
Consistent strategy…Consistent strategy…
•• Build on strong leadership positionsBuild on strong leadership positions–– UK,UK, FranceFrance
•• Expand proven growth businessesExpand proven growth businesses–– Screwfix,Screwfix, Poland, Italy, China and TaiwanPoland, Italy, China and Taiwan
•• Invest in new opportunitiesInvest in new opportunities–– UK Trade,UK Trade, Spain, Russia, Korea, TurkeySpain, Russia, Korea, Turkey
•• Capitalise on buying scale and international Capitalise on buying scale and international diversitydiversity
18 years of experience outside main 18 years of experience outside main domestic markets domestic markets
•• In Europe since 1988In Europe since 1988–– Italy,1988Italy,1988–– Poland,1997Poland,1997–– Turkey, 2001Turkey, 2001–– Ireland, 2002 Ireland, 2002 –– Spain, 2003Spain, 2003–– Russia, 2006Russia, 2006
•• In Asia since 1996In Asia since 1996–– Taiwan,1996Taiwan,1996–– China,1999China,1999–– South Korea, 2005South Korea, 2005
Successful, sustainable international Successful, sustainable international development takes...development takes...
•• Time and moneyTime and money•• Vision and longVision and long--term supportterm support•• Champions/evangelistsChampions/evangelists•• Strong local managementStrong local management•• RealismRealism•• And the ability to adapt, adapt and adapt…And the ability to adapt, adapt and adapt…
International International –– a huge opportunitya huge opportunity
•• GROWTHGROWTH–– Big markets developing fastBig markets developing fast–– £100 billion in International markets £100 billion in International markets
•• RETURNS RETURNS –– Ahead of the cost of capitalAhead of the cost of capital–– Supported by Group supply scale Supported by Group supply scale
•• ACCELERATED INNOVATIONACCELERATED INNOVATION–– Global consumer trendsGlobal consumer trends–– Sharing of products, ideas and talentSharing of products, ideas and talent
Duncan TattonDuncan Tatton--BrownBrown
Group Finance DirectorGroup Finance Director
International Review
26
31
46128
25
UK France Proven New Total
Our international markets are four Our international markets are four times the size of the UK…times the size of the UK…
Markets size in £Markets size in £bnbn
…with faster forecast growth…with faster forecast growth
14.0%
10.0%
7.2% 7.1% 6.9%5.5% 5.1% 4.9%
4.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
China
Russia
Poland
Irelan
d
Spain
Taiwan UK
France Ita
ly
*
* Based on historical growth* Based on historical growthSource: Source: EuromonitorEuromonitor DIY markets 2005DIY markets 2005
Forecast DIY Annual Market Growth 2006Forecast DIY Annual Market Growth 2006--20092009
Weighted Weighted AverageAverage
International International –– a balanced approacha balanced approach
62%62%85%85%81%81%DevelopedDeveloped
33%33%69%69%47%47%B&Q UKB&Q UK
28%28%14%14%17%17%ProvenProven
2%2%
34%34%
Sales Sales 11
10%10%1%1%NewNew
29%29%16%16%FranceFrance
CapexCapex 33Invested Invested Capital Capital 22
1.1. 6 months to 29 July 20066 months to 29 July 20062.2. As at 28 January 2006As at 28 January 20063.3. 2006/07e2006/07e
Attractive returnsAttractive returns
AboveAbove
Group Group averageaverage
BelowBelow
ReturnsReturns
France
China exc. OBI
Korea
Taiwan
Poland
Italy
Ireland
Spain
TurkeyRussia
2005/06 ROIC 2005/06 ROIC –– size of bubble reflects invested capital weightingsize of bubble reflects invested capital weighting
Spain Spain -- the Marketthe Market
•• SpainSpain Population 44.1 millionPopulation 44.1 million•• Larger cities population:Larger cities population:
MadridMadrid 2.9m2.9mBarcelonaBarcelona 1.5m1.5mValenciaValencia 0.7m0.7mSevilleSeville 0.7m0.7mZaragozaZaragoza 0.6m0.6mc. 20 towns c. 20 towns 0.2m0.2m--0.5m0.5m
Sources: CIA World factbook Mongabay.com
Spain Spain -- profitable stores provide roll out profitable stores provide roll out confidenceconfidence
0.90.9Underlying store contributionUnderlying store contribution
(4.3)(4.3)Central head office costsCentral head office costs(2.1)(2.1)PrePre--opening costsopening costs
(5.5)(5.5)Overall retail lossOverall retail loss
£m£m2005/062005/06
Spain Spain -- overall profits expected soonoverall profits expected soon
-10
-5
0
5
10
15
20
200220032004200520062007e2008e2009e2010e2011e
€m
Store rollout
International International -- strong control mechanismsstrong control mechanisms
•• Extensive country research prior to entryExtensive country research prior to entry•• Board approval for new country entryBoard approval for new country entry•• Low cost entry modelLow cost entry model•• All store commitments agreed by CEO/CFOAll store commitments agreed by CEO/CFO•• 5 year development plan 5 year development plan –– updated annuallyupdated annually•• Annual budget sign offAnnual budget sign off•• 3 monthly review with CEO/CFO3 monthly review with CEO/CFO•• Monthly accountsMonthly accounts•• Daily salesDaily sales
International International -- funding and property funding and property strategystrategy
•• Local borrowing is a natural Local borrowing is a natural hedgehedge
•• Freehold preferableFreehold preferable–– Helps exit Helps exit –– e.g. Brazile.g. Brazil–– Helps reconfigure Helps reconfigure –– e.g. Chinae.g. China–– Potential for additional valuePotential for additional value
–– Poland property cost £208mPoland property cost £208m–– Market value £269m*Market value £269m*
* As at 28 January 2006* As at 28 January 2006
Freehold property Freehold property -- a key asseta key asset
9%9%£0.2bn£0.2bnAsiaAsia
77--10%10%£0.7bn£0.7bnRest of EuropeRest of Europe
5%5%£1.2bn£1.2bnUKUK
£3.0bn£3.0bn
£0.9bn£0.9bn
Market Values* Market Values*
8%8%FranceFrance
Yields Yields
* As at 28 January 2006* As at 28 January 2006
TurkeyTurkey
+204%+204%EBIT EBIT
+500bps+500bpsBuying marginBuying margin
+12%+12%
20022002--2006 2006 growthgrowth
Group product rangesGroup product ranges
Buying power Buying power -- a local advantagea local advantage
International International -- key principleskey principles
•• Retail rules! Retail rules! •• Vive la difference!Vive la difference!•• Work together where it mattersWork together where it matters•• Work independently where it doesn’tWork independently where it doesn’t•• Expand at the right rateExpand at the right rate•• Be prepared to exit Be prepared to exit
International International -- use local teamsuse local teams
•• CastoCasto Poland Poland –– 6,000 FTE Polish6,000 FTE Polish–– 1 French 1 French
•• China China –– 10,000 FTE Chinese10,000 FTE Chinese–– 5 Europeans5 Europeans
InternationalInternational expansion expansion -- choosing choosing the right marketsthe right markets
•• Potential RMI market Potential RMI market big enough big enough
•• No1 or 2 position No1 or 2 position achievableachievable
•• Economics potentially Economics potentially attractiveattractive
•• Availability of Availability of products/employeesproducts/employees
•• Short time to economic Short time to economic scalescale
International International -- using the right formatusing the right format
•• Castorama, Castorama, BricoBrico DépôtDépôt or B&Q?or B&Q?•• Big box versus small box?Big box versus small box?•• Consumer offer versus trade? Consumer offer versus trade?
Brand?....usually Brand?....usually notnot critical critical
Planning regime?Planning regime?
Property costs?Property costs?
Russia Russia -- a good example a good example
•• Population 144 m Population 144 m •• 70% of wealth west of the Urals70% of wealth west of the Urals•• 2 cities > 4 m2 cities > 4 m
•• 11 cities > 1 m 11 cities > 1 m •• 20 cities > 0.5 m20 cities > 0.5 m
0
1,000
2 ,000
3 ,000
4 ,000
5 ,000
6 ,000
7 ,000
8 ,000
9 ,000
10 ,000Consumer SpendConsumer Spend £m
1995 1997 1999 2001 2003 2005
CAGR 5.9%
ActualForecast
0
2000
4000
6000
8000GDP Per Head at PPPGDP Per Head at PPP
1995 1997 1999 2001 2003 2005
ActualForecast
£
CAGR 5.2%
Source: EIU 2004
Russia Russia -- growing economy growing economy
Sources: Euromonitor 2004; Verdict On European DIY retailingSources: Euromonitor 2004; Verdict On European DIY retailing
3%
70%
27%Organised Stores
Open markets
Market Fragmentation
Total market size 2004 £3.8bn0
1,000
2 ,000
3 ,000
4 ,000
5 ,000
6 ,000
199 9 2000 2 001 20 02 20 03 20 04
Russian DIY Market Size£m
CAGR: 10.9% Wholesalers
Russia Russia -- attractive home attractive home improvement market improvement market
The market is large and growing The market is large and growing
EstEst £5bn in £5bn in Moscow alone!Moscow alone!
Free transfer from State
45% own a “dacha”Apartments delivered bare
80m sq.m new housing p.a
85% of flats need total “remont”
Mortgage market developing, property prices rising
Castorama Russia Castorama Russia -- store formatstore format
•• Format based on Castorama PolandFormat based on Castorama Poland•• Harder offerHarder offer•• Focused on building/maintenanceFocused on building/maintenance•• EDLPEDLP
B&Q China B&Q China -- adapting adapting
•• 300m+ households300m+ households•• Growing middle classGrowing middle class•• Home consciousHome conscious•• HI market £27bnHI market £27bn•• Western brands popularWestern brands popular•• Limited DIY knowledgeLimited DIY knowledge
B&Q China B&Q China -- adapting adapting
Offer heavily adapted by local management:Offer heavily adapted by local management:•• Different store formatDifferent store format•• Authenticity promiseAuthenticity promise•• Different rangesDifferent ranges•• Different service/services modelDifferent service/services model
B&Q China B&Q China -- adapted service modeladapted service model
•• More serviceMore service–– More staff per storeMore staff per store–– 350 350 vsvs 180 in UK180 in UK–– Inc 200 vendor repsInc 200 vendor reps
•• Full decoration serviceFull decoration service–– New apartment fitNew apartment fit--out out
B&Q China B&Q China -- full decoration servicefull decoration service
15,000 apartment 15,000 apartment fitfit--outs in 2005outs in 2005
B&Q China B&Q China -- clubs and DIY trainingclubs and DIY training
Children’s clubs and DIY trainingChildren’s clubs and DIY training
B&Q China Comparison with B&Q UK B&Q China Comparison with B&Q UK (Warehouse stores)(Warehouse stores)
32,00032,00050,00050,000Number of SKUsNumber of SKUs
£155£155£40**£40**Rent/sq. Rent/sq. metremetre£1,700£1,700£980*£980*Sales/sq. Sales/sq. metremetre
180180350350Staff/storeStaff/store
Warehouse Warehouse –– 1 floor1 floorTwo floor/one floor with Two floor/one floor with mezzaninemezzanineFormatFormat
1010--15,000 sq.m15,000 sq.m88--20,000 sq.m20,000 sq.mStore SizeStore SizeB&Q UKB&Q UKB&Q ChinaB&Q China
* £1900 on purchasing power parity basis (* £1900 on purchasing power parity basis (pppppp))** £80 on ** £80 on pppppp basisbasis
B&Q China Comparison with B&Q UK B&Q China Comparison with B&Q UK (Warehouse stores)(Warehouse stores)
11%11%18%18%
20%20%1%1%
TradeTradeGardeningGardening
2%2%30%30%Installed ProductInstalled ProductSales Mix:Sales Mix:
B&Q UKB&Q UKB&Q ChinaB&Q China
Sharing merchandising ideasSharing merchandising ideas
B&Q, B&Q, WednesburyWednesbury
Castorama, Castorama, EnglosEnglos
Sharing new product ideas Sharing new product ideas
Disney in ChinaDisney in China Disney in TurkeyDisney in Turkey
Sharing international retail talent Sharing international retail talent
Claude AcquartClaude Acquart–– Castorama France 16 yearsCastorama France 16 years–– Castorama Poland CEO 9 yearsCastorama Poland CEO 9 years
MariuszMariusz GliwinskiGliwinski–– Nomi Poland 7 yearsNomi Poland 7 years–– B&Q Taiwan CEO 3 yearsB&Q Taiwan CEO 3 years–– B&Q China CEO from November 06B&Q China CEO from November 06
Steve GilmanSteve Gilman–– B&Q UK 18 yearsB&Q UK 18 years–– B&Q Asia CEO 10 yearsB&Q Asia CEO 10 years
Global trends Global trends -- Feminisation, busy lives Feminisation, busy lives
“Dressed” rooms“Dressed” rooms InstallationInstallation
TradesmanTradesman
International International –– a huge opportunitya huge opportunity
•• GROWTHGROWTH–– Big markets developing fastBig markets developing fast–– £90 billion International markets £90 billion International markets
•• RETURNS RETURNS –– Ahead of the cost of capitalAhead of the cost of capital–– Buying power Buying power
•• ACCELERATED INNOVATIONACCELERATED INNOVATION–– Global consumer trendsGlobal consumer trends–– Sharing of products, ideas and talentSharing of products, ideas and talent
AppendixAppendix
Country level information….sourcesCountry level information….sources
•• Population and GDP data Population and GDP data –– EIU 2004EIU 2004•• RMI market sizes and own brand penetration RMI market sizes and own brand penetration ––
Kingfisher estimatesKingfisher estimates•• Sales, EBIT, KPI data Sales, EBIT, KPI data –– as reportedas reported
FranceFrance
1.6%1.6%GDP growth: forecast 2006GDP growth: forecast 2006
61m61mPopulationPopulation1.1%1.1%GDP growth: average last 5 years GDP growth: average last 5 years
£31bn£31bnEstimated market sizeEstimated market size9% (24% UNIBAL DIY & gardening)9% (24% UNIBAL DIY & gardening)Estimated market shareEstimated market share
£2.7bn£2.7bnSales 2005/06Sales 2005/06£230m£230mEBIT 2005/06EBIT 2005/06
181181Store numbers H1 2006/07Store numbers H1 2006/0718,66718,667FTE employee numbers H1 2006/07FTE employee numbers H1 2006/0717.4%17.4%Own brand penetrationOwn brand penetration
Leroy Merlin, Leroy Merlin, BricomarchéBricomarché , La , La PlatformePlatforme, , BâtimentBâtiment, , BricomanBricoman, ,
Saint Saint GobainGobain GroupGroupCompetitorsCompetitors
ChinaChina
9.6%9.6%GDP growth: forecast 2006GDP growth: forecast 2006
1.3bn1.3bnPopulationPopulation8.1%8.1%GDP growth: average last 5 years GDP growth: average last 5 years
£27bn£27bnEstimated market sizeEstimated market size1%1%Estimated market shareEstimated market share
£312.8m£312.8mSales 2005/06Sales 2005/06£0.2m£0.2mEBIT 2005/06EBIT 2005/06
5151Store numbers H1 2006/07Store numbers H1 2006/079,8689,868FTE employee numbers H1 2006/07FTE employee numbers H1 2006/074.2%4.2%Own brand penetrationOwn brand penetration
Orient Home, Orient Home, HomemartHomemart, , HomewayHomeway, Home Improvement , Home Improvement
mallsmallsCompetitorsCompetitors
PolandPoland
5.2%5.2%GDP growth: forecast 2006GDP growth: forecast 2006
38m38mPopulationPopulation2.9%2.9%GDP growth: average last 5 years GDP growth: average last 5 years
£4bn£4bnEstimated market sizeEstimated market size10%10%Estimated market shareEstimated market share
£417.0m£417.0mSales 2005/06Sales 2005/06£52.5m£52.5mEBIT 2005/06EBIT 2005/06
3434Store numbers H1 2006/07Store numbers H1 2006/075,9155,915FTE employee numbers H1 2006/07FTE employee numbers H1 2006/073.7%3.7%Own brand penetrationOwn brand penetration
Leroy Merlin, OBI, Leroy Merlin, OBI, PraktikerPraktiker, , PlatformaPlatforma, NOMI, NOMICompetitorsCompetitors
ItalyItaly
1.8%1.8%GDP growth: forecast 2006GDP growth: forecast 2006
58m58mPopulationPopulation1.0%1.0%GDP growth: average last 5 years GDP growth: average last 5 years
£13bn£13bnEstimated market sizeEstimated market size2%2%Estimated market shareEstimated market share
£266.9m£266.9mSales 2005/06Sales 2005/06£28.7m£28.7mEBIT 2005/06EBIT 2005/06
2727Store numbers H1 2006/07Store numbers H1 2006/072,1562,156FTE employee numbers H1 2006/07FTE employee numbers H1 2006/075.4%5.4%Own brand penetrationOwn brand penetration
Leroy Merlin, OBILeroy Merlin, OBICompetitorsCompetitors
TaiwanTaiwan
4.3%4.3%GDP growth: forecast 2006GDP growth: forecast 2006
23m23mPopulationPopulation3.1%3.1%GDP growth: average last 5 years GDP growth: average last 5 years
£2bn£2bnEstimated market sizeEstimated market size10%10%Estimated market shareEstimated market share
Not consolidatedNot consolidatedSales 2005/06Sales 2005/06£7.4m£7.4mEBIT 2005/06EBIT 2005/06
2121Store numbers H1 2006/07Store numbers H1 2006/071,8571,857FTE employee numbers H1 2006/07FTE employee numbers H1 2006/078.1%8.1%Own brand penetrationOwn brand penetration
Hypermarkets, Department stores, Hypermarkets, Department stores, HomeboxHomeboxCompetitorsCompetitors
SpainSpain
2.8%2.8%GDP growth: forecast 2006GDP growth: forecast 2006
44.1m44.1mPopulationPopulation3.5%3.5%GDP growth: average last 5 years GDP growth: average last 5 years
£5bn£5bnEstimated market sizeEstimated market size1%1%Estimated market shareEstimated market share
£49.3m£49.3mSales 2005/06Sales 2005/06£(5.5)m£(5.5)mEBIT 2005/06EBIT 2005/06
77Store numbers H1 2006/07Store numbers H1 2006/07473473FTE employee numbers H1 2006/07FTE employee numbers H1 2006/07n/an/aOwn brand penetrationOwn brand penetration
Leroy Merlin, Leroy Merlin, BricomanBricoman, , BricorBricor, , BricoramaBricorama, , BricoGroupBricoGroup, Bauhaus, , Bauhaus,
Saint Saint GobainGobain Group, AKIGroup, AKICompetitorsCompetitors
TurkeyTurkey
6.0%6.0%GDP growth: forecast 2006GDP growth: forecast 2006
74m74mPopulationPopulation4.7%4.7%GDP growth: average last 5 years GDP growth: average last 5 years
£4bn£4bnEstimated market sizeEstimated market size3%3%Estimated market shareEstimated market share
Not consolidatedNot consolidatedSales 2005/06Sales 2005/06£2.0m£2.0mEBIT 2005/06EBIT 2005/06
99Store numbers H1 2006/07Store numbers H1 2006/071,0391,039FTE employee numbers H1 2006/07FTE employee numbers H1 2006/0717%17%Own brand penetrationOwn brand penetration
PraktikerPraktiker, Bauhaus, , Bauhaus, TekzenTekzen, IKEA, IKEACompetitorsCompetitors
RussiaRussia
6.4%6.4%GDP growth: forecast 2006GDP growth: forecast 2006
142.8m142.8mPopulationPopulation6.0%6.0%GDP growth: average last 5 years GDP growth: average last 5 years
£10bn£10bnEstimated market sizeEstimated market sizen/an/aEstimated market shareEstimated market sharen/an/aSales 2005/06Sales 2005/06
£(5.4)m£(5.4)mEBIT 2005/06EBIT 2005/0622Store numbers H1 2006/07Store numbers H1 2006/07
565565FTE employee numbers H1 2006/07FTE employee numbers H1 2006/07n/an/aOwn brand penetrationOwn brand penetration
OBI, Leroy Merlin, KOBI, Leroy Merlin, K--rautarauta, , MaxidomMaxidom, , MetrikaMetrika, , StarikStarik
KhottabychKhottabychCompetitorsCompetitors
South KoreaSouth Korea
4.5%4.5%GDP growth: forecast 2006GDP growth: forecast 2006
49m49mPopulationPopulation3.6%3.6%GDP growth: average last 5 years GDP growth: average last 5 years
£6bn£6bnEstimated market sizeEstimated market sizen/an/aEstimated market shareEstimated market share
£5.2m£5.2mSales 2005/06Sales 2005/06£(6.3)m£(6.3)mEBIT 2005/06EBIT 2005/06
11Store numbers H1 2006/07Store numbers H1 2006/07161161FTE employee numbers H1 2006/07FTE employee numbers H1 2006/07n/an/aOwn brand penetrationOwn brand penetration
HanssemHanssem, LG , LG DecovileDecovile, , EnexEnexCompetitorsCompetitors