Preliminary results for the year ended 28 January 2012

 

22 March 2012

 

Creating the leader

February 2012 onwards

We start this new and exciting phase with a clear sense of purpose and new ambition, having now repositioned Kingfisher as a stronger business in the attractive home improvement market.

Our unique contribution as a business to our customers is that we can harness our international scale, sourcing capability, our heritage as a leader in sustainability and our home improvement experience to bring new, more sustainable and more affordable products to market. By also providing our customers with project advice and new shopping channels to complement our stores we will make it easier for them to adapt their homes to their evolving needs. Our shorthand for describing this new purpose is "Better Homes, Better Lives".

By working towards this purpose we will unlock more benefit for all our stakeholders; a more valuable business for our shareholders, a better partner for our suppliers, a more secure and brighter future for our colleagues and a more sustainable business for our local communities.

In March 2011 we set out the key elements of the 'Creating the Leader' phase that will form the cornerstones of our strategy for the coming years. In September 2011 we announced more details on the opportunity and the progress we have made with common ranging. In February 2012 we announced changes to the roles and responsibilities of the Group Executive team to provide the right organisational leadership for the future. Today we are providing more detail including announcing eight specific steps that make up the new medium term plan, along with their associated key success measures and short term milestones.

  • EASIER (Aim: become the world's expert at making home improvement easier for customers, thereby growing our like-for-like sales and our market share).

    1. Making it easier for our customers to improve their home
    Measure: LFL sales growth

    • Key work streams
      • Keeping prices low and competitive
      • Easier products to use
      • Easier stores to shop
      • DIY education & advice
      • Online research, design and forums
      • De-mystify 'eco' for the home
    • 2012/13 milestones
      • Complete UK roll out of DIY training classes
      • Launch B&Q You Tube channel with 'how to' video instructions for the most popular DIY projects
      • Test new formats in UK, France, Turkey, Russia & China
      • Prepare for the UK's 'Green Deal'
    • A revenue investment of £20 million over the next two years will be made, training colleagues, developing new products and services and on legal and technical advice in preparation for the launch of the UK government's 'Green Deal' later this year.
  • 2. Giving our customers more ways to shop
    Measure: Unique web users

    • Key work streams
      • Group multi-channel platform
      • Smartphone & tablets
      • Click, pay & collect in store
    • 2012/13 milestones
      • Launch Screwfix mobile click, pay & collect offer
      • Develop a Group multi-channel platform and implement first in 'TradePoint'
      • Upgrade B&Q's online offer
      • Trial 'click & collect' in Castorama France
  • COMMON (Aim: use our scale to accelerate innovation and make home improvement more affordable for our customers whilst boosting our profitability).

    3. Building innovative common brands
    Measure: Of all product sales, 50% to be common (versus c.2% today) and 35% to be direct sourced (versus 15% today). Note: common means same product or same supplier where common product is not possible e.g. electrical extension cable which is the same supplier but with different electrical sockets

    • Key work streams
      • Direct sourcing
      • Common ranges
      • New product innovation
      • Coordinated range change
    • 2012/13 milestones
      • 18% of sales to be direct sourced
      • 7% of sales to be common
      • Double direct sourcing in our developing markets (Poland, Russia, Turkey & China)
      • Extend 'Trade' common own brands in Screwfix and Brico Dépôt
  • 4. Driving efficiency and effectiveness everywhere
    Measures: Retail profit margin

    • Key work streams
      • Supply chain efficiency
      • Streamlining in-store processes
      • Harmonisation of IT
      • Goods not for resale (GNFR)
    • 2012/13 milestones
      • Develop a Group-wide stock forecasting and replenishment IT solution, implement first in B&Q UK
      • GNFR savings from European-wide supply negotiations including marketing catalogue printing and store fixture and fittings costs
  • EXPAND (Aim: accelerate and improve profitable expansion)

    5. Growing our presence in existing markets
    Measure: Kingfisher Economic Profit (KEP)

    • Key work streams
      • Opening new stores
      • Developing store formats
    • 2012/13 milestones
      • Open 67 new stores (UK 50, France 2, Poland 6, Russia 2, Turkey 4 & Spain 3)
      • Revamp and extend five Castorama France stores
  • 6. Expanding in new and developing markets
    Measure: Kingfisher Economic Profit (KEP)

    • Key work streams
      • Research new territory entry
      • Test a 'Do it For Me' (DFM) store format to complement our existing DIY and Trade formats
    • 2012/13 milestones
      • Test a DFM store format in China
  • ONE TEAM (Aim: harness our talent, become a force for good)

    7. Developing leaders and connecting people
    Measure: Engagement scores

    • Key work streams
      • Kingfisher Academy
      • Cross group networks
    • 2012/13 milestones
      • Launch the Kingfisher Academy
  • 8. Sustainability: becoming 'Net Positive'
    Measure: 'Net Positive' scorecard

    • Key work streams
      • Timber
      • Energy
      • Communities
      • Innovation
    • 2012/13 milestones
      • Launch 'Net Positive' and associated scorecard

Financial benefits

Becoming the best at making home improvement easier for our customers whilst at the same time driving more commonality throughout our business will drive significant financial benefits.

Five years from now we expect to have largely completed the work streams announced today. Predicting the potential retail profit benefits from this programme today, when we don't know the economic conditions or competitive landscape we will face in five years is difficult. However, whatever the conditions, we believe our efforts will drive higher LFL sales, higher gross margin and more cost efficiencies than would have been delivered without this programme.

We anticipate that around two additional percentage points of LFL sales growth(1), one additional percentage point of gross margin (after reinvesting some sourcing gains into lower prices) and a one percentage point reduction in the cost to sales ratio will arise from this programme. In total, we estimate that this would create an additional £300 million of annualised retail profit in the fifth year, net of price reinvestment and based on the size of the business and market conditions today.

  1. adding profit at the gross margin rate

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