Business review
Delivering Value
Kingfisher launched its seven-point ‘Delivering Value’ plan in 2008 with the aim of improving returns to shareholders. The information below details the progress in the past year and the key milestones for 2010/11.
Key
- UK & Ireland
- France
- Other International
- Group programmes
Progress & milestones
1. Driving up B&Q UK and Ireland's profit
Self-help measures to rebuild B&Q's retail margin to 7% are delivering results. Retail margin up from 2.8% to 4.9% during the year.
2009/10 progress
Stores
- 9 large and 8 medium store revamps
- 105 ‘showroom only’ revamps
- Around 1% new space added
Product and Service
- ‘Reserve and Collect’ rolled out nationally and 12,000 products for next day home delivery now on diy.com
- Self-service checkout rolled out nationally
- New monthly store team bonus introduced
- 4,000 staff graduated from the ‘Showroom Academy’, 15,500 staff achieved retail NVQs or City & Guilds qualifications
Margin and Costs
- Margin benefit of 50bps from closing one distribution centre and reducing shrinkage
- 120 double-decker distribution trailers introduced to save costs and reduce carbon emissions
- ‘Top stocks’* removed, overall stock reduction of £90 million
- Costs held flat, down 3% before higher staff bonuses
* stocks held at the top of in-store shelving
2010/11 milestones
Stores
- 15 large and 15 medium store revamps
- Around 100 ‘showroom only’ revamps (kitchen, bathroom and bedroom areas)
- No new space to be added
Product and Service
- To broaden B&Q’s customer offer several new or expanded product categories will be trialled in store to determine their suitability for a nationwide introduction in 2011/12 (eg eco and storage ranges)
- Extend retail NVQ or City & Guilds qualification training programme to a further 9,500 staff
Margin and Costs
- Direct sourcing to rise by 20%
2. Exploiting our UK Trade opportunity
Screwfix offer extended. B&Q in-store TradePoint successfully trialled.
2009/10 progress
- Opened 9 new Screwfix outlets
- Launched ‘Electricfix’, a new specialist mail order catalogue operated by Screwfix exclusively
for qualified electricians (14,000 electricians signed up) - Trialled trade counter proposition for Plumbfix (for qualified plumbers) and Electricfix through
7 existing Screwfix outlets - B&Q in-store trade offer (TradePoint) successfully trialled in 9 large stores maximising synergies
with Screwfix
2010/11 milestones
- National roll out of TradePoint format to 118 B&Q large stores
- Open 10 further Screwfix outlets
- Add specialist trade counters exclusive to plumbers and electricians within 100 existing Screwfix sites
3. Expanding our total French business
2% new space added. Buying optimisation and cost efficiencies supporting profitability.
2009/10 progress
- Opened 4 net new stores, 1 relocation and 5 revamps, adding 2% new space
- Buying optimisation programme initiated, supporting margins
- Stock shrinkage rates reduced, gross margin benefit of 10bps
- Delivered targeted operating cost savings of €65 million
2010/11 milestones
- Open 3 net new stores, 1 relocation and 8 revamps, adding around 2.5% new space
- Extend buying optimisation programme
- Direct sourcing to rise by around 30%
- Development of a joint-sourced value brand common to both businesses (‘Premier Prix’)
- More new product launches and new advertising campaigns for both businesses
4. Rolling out in Eastern Europe
20% space added during the year. Sales and profit growth continued.
2009/10 progress
- Opened 15 new stores, 5 in Poland, 5 in Turkey and 5 in Russia
- Total sales grew 10.9% (including 100% Turkey JV) to £1.6 billion*
* in constant currencies at 2008/09 year end exchange rates
2010/11 milestones
- Open a further 15 new stores, 6 in Poland, 5 in Turkey and 4 in Russia, adding around
15% new space - Open new central distribution centre in Poland in H2 of 2010/11 (to enable more direct sourcing)
- Trial smaller ‘city store’ format in Moscow (H2)
5. Turning around B&Q China
Repositioning plan on track. Prior year losses almost halved, free cash flow positive in the year.
2009/10 progress
- Store portfolio rationalised from 63 to 43, 2 stores downsized with more underway
- New store format trialled in Shanghai, now extended to a further 11 stores
- In store supplier-funded representatives replaced with B&Q trained staff in most product areas in new format stores
- New single room make-over and single product installation service launched
- Central cost reduction initiatives progressing well, one regional office closed
- Working capital reduction in line with target, helping B&Q China generate a positive free cash flow in the year
2010/11 milestones
- Complete the store rationalisation plan (2 further stores) and remaining downsizes
- Continue the new format trial
- Continue the work started in 2009 on re-engineering ranges from the current supplier led model to a more product led, traditional retail ranging model. This milestone will take around 2 years to complete, but is key to creating a sustainably profitable and scalable business
- Return to a profitable business model during H2 of 2010/11, on track for a return to overall profitability in 2011/12
6. Growing Group sourcing
Direct sourcing through the Kingfisher Sourcing Organisation (KSO) continued to grow.
2009/10 progress
- Shipped volumes of direct sourced product through Kingfisher’s global sourcing network increased by 14% to around US$800 million
- Work started on aligning buying processes within B&Q UK and Castorama France to enable more commonality of ranging in the future
2010/11 milestones
- Increase volume of direct sourced shipments by 26% to US$1 billion
- Commence alignment of range review calendars for major product categories to facilitate more cross-Group common sourcing
7. Reducing working capital
Excellent progress, net working capital reduced by over £300 million.
2009/10 progress
- Delivered £315 million reduction despite the negative effects of legislative changes shortening French payment terms (known as LME)
- Reducing moving annual average stock days by 15
- Average payment terms on direct sourced product extended by 25 days
2010/11 milestones
- Like for like working capital to remain constant. Overall balance may increase due to further negative effects of the French LME and investment required for new stores
- Further extend payment terms on direct sourced product by another 5 days