Eurobond Roadshow Investor Presentation

Eurobond Roadshow Investor Presentation
November 2005
Contents
• Kingfisher Business Overview
• Geographical Analysis
• Financial Position
• Transaction Summary
1
Kingfisher – Our business
• Global home improvement retailer
• Leading positions in our core markets
• Well positioned to exploit upswings in global
DIY market
• Targeting growth markets to ensure long-term
expansion
2
Kingfisher – Market leading brands
UK and Ireland
France
No of stores
Market ranking
339
#1
102
67
#1
Poland
28
#1
Italy
23
#2
China
38
#1
Taiwan
19
#1
Turkey
5
#2
Spain
6
#5
Plus 21% strategic alliance with Hornbach, 119 stores in 8 European countries
3
Kingfisher – # 1 in Europe, # 3 in World
Leading European DIY retailers
60
12.6
10
8
5.8
6
5.7
3.3
4
2
2.8
2.3
2.0
2.0
1.7
1.6
1.4
0
50
40
28.1
30
20
12.6
10
K
in
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he
r
w
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s
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om
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ak
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H
om er
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B
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m
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W e
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fis
he
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K
56.2
H
Annualised Sales 2004 € bn
12
Annualised Sales 2004 € bn
14
Leading Global DIY retailers
Source: Verdict, Annual Reports
4
Home Improvement – Attractive
fundamentals
• Homes are most people’s biggest asset
• Homes have to be repaired
• People want to improve their home
– Style aspirations as we get richer
– Used as a home, an office, entertainment
• Global products and suppliers
• Low brand awareness allows increased
retailer power
5
Kingfisher – 628 stores, 10 countries and
room for growth
Market Size*
Market Share
UK
£28bn
16%
France
£32bn
8%
ROE
£27bn
2%
Asia
£29bn
<1%
Total
£116bn
7%
*where Kingfisher is present
6
Kingfisher – Strategy: growth and returns
Investing for growth
– New & revitalised
stores
– New markets
– Infrastructure
Improving returns
– Driving LFL
– Optimising supply
– Managing costs
Consistent, sustainable growth
in economic returns
7
Kingfisher – Scale and diversity
• Operating scale
– buying together, global sourcing
– better products, better prices
– Strategic Supplier Management £1bn targeted
savings in 5 years
• Diversity
– sharing ideas, accelerating innovation
– ranges, formats, brands and infrastructure
– people
8
Contents
• Kingfisher Business Overview
• Geographical Analysis
• Financial Position
• Transaction Summary
9
B&Q – Clear UK market leader
RMI market share 1999-2004
• For customers
– best value for money
– best choice of products
– 1st choice store
15%
12%
10.1%
11.2%
12.3%
13.5%
14.4%
14.7%
2003
2004
9%
6%
3%
0%
1999
• Ahead of competitors
4.0
2001
2002
2004 sales
5.0
£ bn
– double the size
– only big box player
2000
4.0
3.0
2.0
1.6
1.0
0.9
0.8
Wickes
Focus
0.0
B&Q
Homebase
10
UK – Tough retail environment
• Weakening consumer demand
• Sharpest fall in housing transactions since
1989
– Affects ‘big ticket’ projects
• Competition intensifying
– Retail space expansion continuing
– Deep price promoting
• Full year LFL cost inflation of 4%
11
B&Q – Sales opportunities
Short Term
• More aggressive promotion
– ‘10% off’ weekend
– EDLP to be “spiced up” with events
• Marketing refocus
– New campaigns: The Real Deal
– Direct to home flyers
Longer Term
• Increase B&Q’s 20% share of customers’ project spend
• Reach beyond core DIY customer
12
B&Q – New store format
• Re-configure the larger stores to display room projects
13
B&Q – Reducing costs, improving ROIC
• Head/regional offices reshaped
– 400 jobs affected
• Closed some underperforming stores
• One-off costs of approx. £200m, cash £150m
• Focus investment on:
– Existing store modernisation
– new lower cost, higher return mini warehouses
14
UK – Trade growth opportunity
• A £50 billion market*
• An attractive opportunity
– Large and growing
– Competition is highly fragmented
– Low capital intensity compared to retail
• Kingfisher have approx.1% share
• Two growth vehicles
– Screwfix Trade Counters
– Trade Depot
* AMA research and internal estimates
15
France – Addressing the full market
opportunity with two strong brands
• Castorama (102 stores)
– Targets mainstream consumer
– Broad choice, low price and “ideas and inspiration”
– Big stores, prime retail locations
• Brico Dépôt (67 stores)
– Targets the light trade and heavy DIY
– Very low price, limited range, stocked project
quantities
– Mid-size stores, secondary locations
16
France – Outperforming the market
Banque de France comparable stores
(adjusted for Brico)
Kingfisher France LFL
12%
10%
8%
6%
4%
2%
0%
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
3
2
1
4
3
2
1
4
3
2
1
05
05
05
04
04
04
04
03
03
03
03
-2%
6
/0
6
/0
6
/0
5
/0
5
/0
5
/0
5
/0
4
/0
4
/0
4
/0
4
/0
• Q3 05/06 market data indicates 4% growth
17
Castorama – Revitalisation on track
• Product ranges
– Entry price products now introduced
– Own brand participation at 15%
– Major new showroom and decorative
ranges rolled out through H1
• Price
– from 9th to 3rd lowest price perception
in 2 years
• Marketing
– Stronger marketing plan for H2
¾
¾
Catalogues
Billboard campaign
18
Brico Dépôt – Accelerating growth across
Europe
• France
– 17.7% LFL sales growth last year
– Highest ROIC in the Group
– 67 stores now, 3 more in H2
• Roll-out across Europe
Spain
– <1% market share
– 6 stores now, 2 more in H2
Poland
– First opening planned for 2006
19
Driving growth – Increasing contribution
from Rest of Europe and Asia
Retail Profit
90
83.0
80
70
61.8
£ millions
60
50
38.0
40
30
20
10
5.6
0
2001/02
2002/03
2003/04
2004/05
Note: excludes discontinued international operations.
Includes share of profits of Hornbach (21% stake), Taiwan and Turkey (JVs)
20
Rest of Europe and Asia
Country
Stores at July
05
H2 openings
Estimated
stores at Jan 06
Poland
28
1
29
Italy
23
3
26
Spain
6
2
8
Ireland
4
3
7
Turkey
5
1
6
Russia*
-
-
-
Total ROE
66
10
76
China
38
12
50
Taiwan
19
1
20
Korea
1
-
1
Total Asia
58
13
71
Total ROE and Asia
124
23
147
*first store planned for Q1 2006
21
B&Q China – Market leading position after
OBI acquisition, but still less than 1% share
No.9
Stores - end 2005
(estimate)
Coverage
50
National
25
North & West
24
National (mainly East)
11
North
5
Shanghai
Hugely Fragmented Market
22
B&Q China – Acquisition accelerates
store roll-out
Harbin
• Consolidates strong positions in
core cities:
1
Shenyang
2
– Beijing, Shanghai, Shenzhen,
Guangzhou
Beijing
4 1
Dalian
1
1 Tianjin
Qingdao
Nanjing
• New city entry opportunities
– Chengdu
– Shenyang
– Tianjin
21
1 2
Wuxi
Chengdu
2
Chongqing
Kunming
1
Xian
1
2
1 1 1 Suzhou
5
Wuhan
1
12
Guangzhou
Yangzhou 1
2
Dongguan 11
Shanghai
1
4
Hangzhou
1
Fuzhou
Xiamen
4 1 Shenzhen
B&Q
As End 2005
OBI
23
Contents
• Kingfisher Business Overview
• Geographical Analysis
• Financial Position
• Transaction Summary
24
Kingfisher – Financial position
• Strong sales and profit history
Home Improvement Sales
7,038
7,650
800
638.2
6,130
6,000
4,530
5,193
£ millions
£ millions
8,000
Home Improvement Operating Profit
4,000
600
400
2,000
200
0
0
2001
2002
2003
2004
2005
706.5
519.9
385.9
2001
424.1
2002
2003
2004
2005
25
Kingfisher – FYE 2004 and 2005 Highlights
FYE 05
FYE 04
Retail Sales
7,650
7,038
Retail Profit
707
638
Free Cashflow
303
415
EBITDA
830
839
FFO
689
355
Net Debt
794
844
86.8%
42.1%
Net Debt/ EBITDA
1.0x
1.0x
Interest Cover
33.2x
19.1x
£m
FFO/ Net Debt
26
Kingfisher – Interim results
HY ended
30 Jul 05
HY ended
31 Jul 04
Retail sales
4,079
3,948
Gross profit
1,444
1,447
Retail profit
289
367
Adjusted pre-tax profit*
254
329
£m, Continuing Group
* excluding IFRS retranslation of intercompany balances
27
Kingfisher – Cashflow
HY ended
30 Jul 05
HY ended
31 Jul 04
Operating Profit
270
342
Depreciation/other
85
73
Change in working capital
86
128
(160)
(116)
281
427
(235)
(81)
46
346
£m, Continuing Group
Retail capex
Underlying free cashflow
Acquisitions/ freehold purchases
Free Cashflow
28
Kingfisher – Net debt
HY ended
30 Jul 05
HY ended
31 Jul 04
Free cashflow
46
346
Interest
2
25
Corporation Tax
(100)
(68)
Dividends
(158)
(136)
7
29
Movement in net debt
(203)
196
Opening net debt
(841)
(891)
(4)
25
(1,048)
(670)
£m, Continuing Group
Other
Translation on debt
Closing net debt
29
Kingfisher – Capital investment and
property
Significant proportion of
investment in property
Unencumbered property
£2.4bn Portfolio
Capex 2004/5
25%
£0.5bn
39%
£1.1bn
13%
£0.8bn
23%
Ne w Store s - Fre e hold
UK
Ne w Store s - Re tail
France
Re vam ps and othe r Store Inve s tm e nt
Inte rnational
Infras tructure
Property value by location as at 29 January 2005
30
Kingfisher – Liquidity overview
£ 300m 364-day Bridge Facility – fully drawn
£ 500m 2010 Revolving Credit Facility – undrawn
£ 150m MTN 6.875% 2010
€ 500m MTN 4.500% 2010
£ 250m MTN 5.625% 2014
£ MTN
1,200
€ MTN
Revolving Credit Facility
1,000
£ equivalent millions
•
•
•
•
•
364-day Bridge Facility
150
800
340
600
400
500
300
200
250
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 >2014
31
Kingfisher – Credit ratings
•
“The ratings continue to reflect the group’s leading position in
the U.K. and French retail markets and its focus on the homehomeimprovement business, which has longterm
fundamentals”
long
•
“The negative outlook reflects that the ratings would come
under pressure if the negative trends prevalent in the U.K.
homehome-improvement market continue beyond the current fiscal
year”
•
“On review for possible downgrade, following the company’s
announcement of weak secondsecond-quarter results, in particular in
its core UK market, and a major restructuring at its UK division
B&Q….Moody’s expects that the change to the longlong-term rating,
if any, will be limited to one notch”
S&P
15/09/05
BBB+
Outlook Negative
Moody’s
15/09/05
Baa1
Watch Negative
•
“KF’s ratings are based upon its market leading position within
the core UK operation, coupled with restructuring at
Castorama”
Fitch
•
“The slowdown in the UK housing market as well as weak
consumer spending are hitting its UK operations heavily. KF is
better placed than many of its smaller competitors to withstand
the downturn”
BBB+
27/09/05
Outlook Negative
32
Kingfisher – Pension funding
• UK Defined Benefit Pension Scheme deficit
of £298m at 29 Jan 05
• £250m additional contribution over 3 years
• Invested in matching assets
• Balance sheet neutral under IFRS
33
Kingfisher – Summary
• Leading positions in attractive home
improvement market
• Leveraging the Group’s scale and diversity
• Investing for growth and improving returns
• Financials consistent with strong BBB credit
34
Contents
• Kingfisher Business Overview
• Geographical Analysis
• Financial Position
• Transaction Summary
35
Transaction Summary
•
•
•
•
•
•
•
•
•
•
•
•
Issuer:
Currency:
Size:
Maturity:
Listing:
Credit Ratings:
Change of Control:
Use of Proceeds:
Timing:
Documentation:
Denominations:
Bookrunners:
Kingfisher plc
Euro
Benchmark
7-10 years
London
Baa1/BBB+/BBB+
Included
General Corporate Purposes
Investor Meetings 8-11th Nov
€ 2.5bn EMTN Programme
€ 50,000
BNP Paribas
Royal Bank of Scotland
SG Corporate & Investment Banking
36
Eurobond Roadshow Investor Presentation
November 2005