Business review

Delivering Value

The financial year 2011/12 will be a year of transition as we complete the final milestones for the Delivering Value phase and mobilise the activities that will drive the next phase of our development. A summary of progress to date since 2007/08 for each of the seven key Delivering Value steps is set out below along with detailed milestones for the final year.

  • UK & Ireland
  • France
  • Other International
  • Group

Self-help measures have rebuilt B&Q's retail margin to 5.6% despite weak markets. B&Q is on track to achieve a sustainable 7% operating margin

 

Operating margins (%)

Barchart showing the Operating margins (%). 07/08 = 3.2%, 08/09 = 2.8%, 09/10 = 4.9%, 10/11 = 5.6%.

Progress to date (2008-2011)

  • 66 full store revamps, 140 kitchen and bathroom area revamps
  • Stringent store operating standards implemented (Martini)
  • Self-service checkout rolled out nationally
  • 21,000 staff achieved retail NVQs or City & Guilds qualifications
  • 'Reserve and Collect' introduced
  • Created the successful Cooke & Lewis premium own brand
  • Gross Margin ahead 300bps, costs percentage to sales held flat
 

2011/12 milestones

  • Open 1 new medium sized store, revamp 37 stores
  • Roll out new storage range nationally
  • Create 200 'how to' videos available in-store and on diy.com
  • 4,000 staff to receive NVQ or City & Guilds qualification training
  • Direct sourcing shipments to rise by 15%
  • Open new distribution centre in Swindon (as part of the supply chain efficiency project previously announced)

Sales to the trade have increased significantly. Over 415,000 professional trades are now registered with TradePoint and 2.4 million registered with Screwfix

 

Total trade sales (£m)

Barchart showing the Total trade sales (£m). 08/09 = 747m, 09/10 = 768m, 10/11 = 828m.

Progress to date (2008-2011)

  • TradePoint was successfully added to 124 B&Q stores and a further 194 have a TradePoint 'order & collect' next day service
  • Opened 69 new Screwfix outlets (taking the total to 162)
  • Added specialist plumber and electrician counters within 110 Screwfix outlets and launched 'Plumbfix' and 'Electricfix' specialist catalogues
 

2011/12 milestones

  • Add new services for the Trade professional including improved credit and insurance, bulky goods delivery and a smart phone transactional application to allow easier online shopping
  • Open 20 further Screwfix outlets
  • Launch specialist websites for both 'Plumbfix' and Electricfix'

10% new space added and profits up 18% in constant currencies since 2007/08, supported by buying optimisation and more direct sourcing

 

Sales (£bn)

Barchart showing the French sales (£bn). 07/08 = 4.0bn, 08/09 = 4.1bn, 09/10 = 4.1bn, 10/11 = 4.2bn.

Retail profit (£m)

Barchart showing the French retail profit (£m). 07/08 = 294m, 08/09 = 299m, 09/10 = 311m, 10/11 = 348m.

Progress to date (2008-2011)

  • Opened 16 net new stores, 3 relocations and 21 revamps adding 10% new space
  • Castorama modernisation accelerated, innovative 'Do-it-Smart' advertising and products introduced
  • Gross Margin improvement of 260bps, supported by buying optimisation benefits
 

2011/12 milestones

  • Open 2 net new stores, 4 relocations and 2 revamps, adding 2% space
  • Continue upweighted new product launches across both businesses
  • Re-launch of the Brico Dépôt 'Le Book' pocket-sized catalogue
  • Extend buying optimisation programme, to include Brico Dépôt Spain
  • Roll out common incentive schemes to all store staff across both businesses incorporating new operational measures

59% space added with sales growth in Poland, Turkey and Russia, profit up 43% in constant currencies since 2007/08

 

Sales (£bn)‡

Barchart showing the Eastern Europe sales (£bn). 07/08 = 1.1bn, 08/09 = 1.4bn, 09/10 = 1.5bn, 10/11 = 1.6bn.

Progress to date (2008-2011)

  • Opened 41 net new stores, 17 in Poland, 15 in Turkey and 9 in Russia with total sales up 52%* to £1.6 billion (including Koçtas¸ JV 100%)
  • Opened new central distribution facilities in Poland and Turkey to unlock future direct sourcing and distribution benefits

*In constant currencies

 

2011/12 milestones

  • Open a further 16 new stores, 6 in Poland, 6 in Turkey and 4 in Russia, adding around 17% new space
  • Direct sourcing shipments in Poland and Turkey to increase by 50%
  • Open new format smaller 'city store' in Moscow

Repositioning plan on track. Annual losses have been reduced with the business now positioned for potential break-even in 2011/12

 

Losses (£m)

Barchart showing the B&Q China losses (£m). 07/08 = (28)m, 08/09 = (62)m, 09/10 = (36)m, 10/11 = (8)m.

Progress to date (2008-2011)

  • Appointed a new and highly experienced management team
  • Store portfolio rationalised from 63 to 41 of which 16 stores were downsized and space successfully sub-let
  • 16 of the remaining stores retro-fitted to offer an improved shopping experience
  • 30% of ranges have been re-engineered from the previous supplier-led model to a more typical European customer-led retail model with encouraging results
  • Introduced direct sourced Group own brands
  • Central costs reduced by 30%

*In constant currencies

 

2011/12 milestones

  • Continue the new format trial
  • Continue the work started in 2009 on re-engineering ranges, including more direct sourced Group own brands
  • Overall break-even target, subject to a stable Chinese home improvement market

Direct sourcing through the Kingfisher Sourcing Organisation (KSO) is up over 60% since 2007/08 with 90% of this value being channelled through common suppliers

 

Direct shipments (US$m)

Barchart showing the Direct shipments (US&m). 07/08 = 821m, 08/09 = 696m, 09/10 = 794m, 10/11 = 1,318m.

Progress to date (2008-2011)

  • Extended the sourcing network to Brazil, Israel, Turkey and Vietnam taking the total network to 10 locations sourcing from 32 countries (25% of direct sourced suppliers being located outside of China)
  • Created core range catalogues to facilitate more cross-Group common sourcing
  • Established 10 'superbrands' to replace 150+ local own brands. This is a critical first step in enabling the development and roll out of Group-wide common ranges in multi-lingual packaging
 

2011/12 milestones

  • Create a new Group commercial organisation aligning our sourcing, own brand and innovation capabilities more closely
  • Finalise common range planning and range review alignment between B&Q UK and Castorama France
  • Commence roll-out of Group-wide common ranges under the Blooma, Blyss and Verve 'superbrands'
  • Invest in an innovation and design team to increase product creation capability
  • Increase volume of direct sourced shipments by almost 15% to US$1.5 billion

Net working capital reduced by over £500 million since 2007/08 excluding around £180 million negative impact of French LME§

 

Cumulative reductions in working capital (£m)

Barchart showing the cumulative reductions in working capital (£m). 08/09 = -180m, 09/10 = -609m, 10/11 = -671m.

Before the impacts of the LME legislation in France.

Progress to date (2008-2011)

  • Reduced moving annual average stock by 11 days
  • Average payment terms on direct sourced product extended by 51 days (to 85 days)
 

2011/12 milestones

  • 'Like for like' working capital to remain constant. Overall balance will increase due to further negative effects of French LME and investment required for new stores
  • Further extend average payment terms on direct sourced product by another 5 days (to 90 days)
  • * restated at constant currency.
  • † restated to include Ireland.
  • § legislative changes shortening French payment terms
  • ‡ Poland, Russia, Turkey (100%)