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Corporate Presentation overview KINGFISHER

Corporate Presentation overview KINGFISHER 17
KINGFISHER PLC FINAL RESULTS Year ended 31 January 2016Disclaimer You are not to construe the content of this presentation as investment, legal or tax advice and you should make you own evaluation of the Company and the market. If you are in any doubt about the contents of this presentation or the action you should take, you should consult a person authorised under the Financial Services and Markets Act 2000 (as amended) (or if you are a person outside the UK, otherwise duly qualified in your jurisdiction). This presentation has been prepared in connection with the announcement of the financial results for the full year ended 31 January 2016. The financial information referenced in this presentation is not audited and does not contain sufficient detail to allow a full understanding of the financial performance the Company. For more information, the entire text of the announcement for the full year ended 31 January 2016 can be found on the investor relations section of the Company’s website. Nothing in this presentation should be construed as either an offer or invitation to sell or any offering of securities or any invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Company or an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 (as amended). This presentation is being solely made and directed at persons to whom this presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Certain information contained in this presentation may constitute “forwardlooking statements” (including within the meaning of the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995), which can be identified by the use of terms such as “may”, “will”, “would”, “could”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue,” “target”, “plan”, “goal”, “aim” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. These forwardlooking statements include all matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, changes in tax rates, liquidity, prospects, growth and strategies. By their nature, forwardlooking statements involve risks, assumptions and uncertainties that could cause actual events or results or actual performance of the Company to differ materially from those reflected or contemplated in such forwardlooking statements. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forwardlooking statements. The Company does not undertake any obligation to update or revise any forwardlooking statement to reflect any change in circumstances or in the Company’s expectations. 2Agenda 1: Introduction 2: FY 2015/16 financials 2: First sharp decisions 3: 5 year transformation 4: Summary 5: Questions 3INTRODUCTION 4 4FY 2015/16: a productive and important year 1: 2: Announced ‘ONE’ Delivered good FY Kingfisher plan 2015/16 ‘business as usual’ performance 3: 4: Made solid Developed detailed progress on the first 5 year transformation sharp decisions plan 5: 6: Set ambitious 5 year Set operational financial targets milestones for FY 2016/17 5FY 2015/16 FINANCIALS 6 6Financial summary 2015/16 2014/15 YOY (1) (2) Adjusted sales (£m) 10,331 10,605 +3.8 (1) (2) Retail profit (£m) 746 742 +7.4 (1) (3) Adjusted PBT (£m) 686 684 +0.3 (4) Effective tax rate 26 27 +1 (1) (3) Adjusted basic EPS (p) 22.0 21.3 +3.3 Statutory posttax profit (£m) 412 573 (28.1) Free cash flow (£m) 483 400 n/a Reported net cash (£m) 546 329 n/a Lease adjusted ROCE 12.3 11.9 +40bps 10.1 10.0 +1.0 Full year ordinary dividend (p) (1) Excluding China (2) In constant currencies (3) Before exceptional items, impact of FFVR, amortisation of acquisition intangibles, related tax items and tax on prior year items 7 (4) Before exceptional items and prior year tax adjustmentsExceptional items £m (charge) / gain 2015/16 2014/15 UK Ireland and Europe restructuring (305) (17) Profit on disposal of BQ China 143 Impairment of Brico Dépôt Romania (18) Property and other disposals 14 (3) Transaction costs (15) Exceptional items before tax (166) (35) Exceptional tax items 67 106 Net exceptional items (99) 71 8Retail profit up 7.4 in constant currencies Other International UK Ireland (established) £326m £126m +18.0 +3.0 France £311m (1.6) New country development Loss £(17)m 9Impacted by £46m adverse FX on a reported basis Reported Growth +18.0 (10.9) (5.8) Constant Currency Growth +18.0 (1.6) +6.4 50 (5) 5 746 £m (46) 742 FX Impact (33) (13) FY 2014/15 FX Impact UK France Other FY 2015/16 International 10 Includes new country developmentFrance: traded well in soft markets Total Sales +1.2 LFL (0.4) Sales +0.1 Sales +2.5 GM GM +10bps LFL (0.2) LFL (0.5) Retail profit (1.6) Sales performance reflecting soft markets and 1 new space, driven by 4 new Brico Dépôt stores Controlled gross margin and continued focus on costs ‘Click, Pay and Collect’ in 161 stores (34 at FY 2014/15) 11 All in constant currenciesUK Ireland: sales and profit growth; strong contribution from Screwfix Total Sales +5.6 LFL +4.4 Sales +1.1 Sales +26.3 GM (50)bps LFL +1.9 LFL +15.3 Retail profit +18.0 Indoor LFL growth; store closures Strong growth driven by leading 0.4 of uplift omnichannel capability Online sales +29 New and extended trade ranges Productivity initiatives delivered 62 new outlets benefits 12 All in constant currencies(1) Other International (established) retail profit +3.0 Russia Poland Total Spain Sales +3.3 Sales +12.9 Sales +4.0 LFL +3.6 LFL +7.2 Sales (3.2) LFL +2.7 (1) Retail profit +6.0 Retail profit £6m LFL (5.0) Retail profit +3.0 Benefiting from Profits impacted by Breakeven new ranges and adverse FX good seasonal movements on sales (+6) cost base in an uncertain market All movements in constant currencies 13 (1) Turkey joint venture sales are not consolidated; retail profit includes contribution from TurkeyNew country development focusing on Screwfix Total Germany Romania Portugal Sales £111m FY Sales £91m Sales £3m Sales £17m Loss £(17)m 2015/16 Loss £(9)m Loss £(7)m Loss £(1)m More challenging 9 outlets now environment trading Europe Expect total Romania Portugal FY Inc. 9 more loss of 2016/17 Germany YOY losses expected to c.£(20)m outlets halve Expecting loss of c.£(15)m 14Uses of operating cash flow £m Lease Dividend adjusted cover 2.2x; 946 (130) (1) net debt £200m to EBITDAR (333) share 2.0x buyback 10 546 329 (432) 483 156 207 FY 2015/16 Tax net Gross capex Free cash flow Returns to Disposal of Net cash flow Opening FX Other Closing net Operating interest paid shareholders assets / other net cash cash cash flow (1) Excluding China 15Summary 1: 2: 3: Good ‘business as usual’ Adjusted PBT impacted Balance sheet remains strong performance by £46m adverse FX • Returned £432m to (1) • Retail profit +7.4 shareholders Outlook: • UK economic backdrop remains positive • Remain cautious on the outlook for France • Wider political and economic uncertainty 16 (1) In constant currenciesFIRST SHARP DECISIONS 17 17Solid progress on the first sharp decisions Develop unified unique outdoor and bathroom ranges Customer Develop unified core essential offer Offer Develop plan to cut existing product tail Space rationalisation: Retail Close c.15 surplus space at BQ; Close our few loss making stores in Europe Operations Pilot Big Box best practice across Europe Extend Screwfix trial in Germany Infrastructure Pilot unified IT platform, then accelerate Processes Unify £1.2bn goods not for resale (GNFR) process People Finalise new leadership team and wider organisation structure 18‘Cut the tail’ plan is on track 1 2 393k SKUs sold during FY 2014/15 Nonranged SKUs and stock value at year end SKUs £m stock value 165k 193,000 193,000 200,000 87k Down from £130m last year to £80m Nonranged Ranged 2014/15 2015/16 Screwfix Medium Box Big Box (1) Top 5 Opcos only 19 (2) All OpcosSpace rationalisation update BQ – on track to close c.15 space (65 stores) by end of FY 2016/17 Sales 40 30 transfer secured stores supports 1/3 lease exits to closed assumption date Europe Closure process of a few loss making stores underway Announced 2 in France and 1 in Russia to date 20Big Box best practice stores due to launch this year First step UK towards Will leverage more current best in France convergence class 4 Big Box best practice stores due to launch Summer 2016 Poland And provide learning platform for our ‘stores of Russia the future’ supported by new unified IT solution 21Screwfix Germany – encouraging early performance • 9 outlets now open in Frankfurt alongside national distribution capability • Strong customer feedback; high level of returning customers; growing brand awareness • Screwfix.de performing well • FY 2015/16 loss in line with expectations reflecting current limited scale Expected to To double the breakeven in FY number of 2019/20 outlets in FY 2016/17 22Unified IT platform roll out ahead of plan Rollout accelerated after successful pilot in BQ Ireland Launched rollout in BQ UK • Already in nearly half of stores Real time stock visibility reduced ‘task’ time in store Castorama France gearing up for launch later this year Company wide roll out to complete by end of FY 2018/19 23People: leadership team CFO CEO Véronique Laury Karen Witts Offer Supply Sales Retail Customer Digital IT HR Chain Operations Pierre Arja Steve JeanPaul Emily Woreczek Taaveniku Willett Constant Lawson ExMorrisons; ExDecathlon ExMcDonald’s ExIKEA ExScrewfix; BQ McKinsey Joining late summer 2016 245 YEAR TRANSFORMATION 25 25What we have said we will do 1: 2: 3: We will: Think of customer Design a Create unique needs first seamless and leading offer customer process with an integrated supply chain 4: 7: 5: 6: Create a leading Be a truly Work as ONE Be low cost customer sustainable always experience in our company stores 265 year transformation: a reminder Transformation BAU Unified Operational £500m Digital Unique Market Expansion Efficiency EBIT £50m Offer £100m uplift £350m £800m aggregate costs to achieve (capex + PL) c.£600m capital return over the next 3 years 275 year transformation: key profit driver assumptions Unified Operational Digital Unique Offer Efficiency £50m £350m £100m (1) ≈5 CPR on Largely driven Driving company buying by unifying ecommerce sales scale of £7bn £1.2bn GNFR from c.2 to c.6 28 (1) Cost Price ReductionWe will report underlying and reported profit • Underlying profit expected to show progression from 2016/17 onwards FY 2016/17 £20m £(70)m • Including up to c.£20m operational efficiency benefits £(50)m • Reported profit will be stated before and after exceptional items • Oneoff transformation and exceptional costs will be tracked • Both expected to be incurred largely in first three years • FY 2016/17 transformation costs up to c.£70m Underlying Transformation Reported Exceptional Reported • FY 2016/17 exceptional costs up to c.£50m profit costs profit costs profit (before (after exceptional exceptional costs) costs) 29FY 2016/17: guiding up to £450m for total capex including transformation Breakdown by type Existing Store Capex 15 c.£55m Maintenance 10 c.£25m Rightsizes (BQ) 36 Revamps and 21 c.£60m relocations Renewables 5 c.£20m 13 Existing Stores Screwfix Expansion New Stores (exScrewfix) IT Other Transformation 30Clear long term roadmap: a reminder 2015/16 2019/20 2016/17 2017/18 2018/19 2020/21 Unified Unique offer Unified New OSC organisation Unique Offer ‘Cut thetail’ Unified IT platform roll out Digital Digital 'Brilliant basics' BQ store closures Operational GNFR Efficiency Further operational efficiency initiatives Retail best practices Store of the future Retail Screwfix UK continental Europe retail expansion Operations Retail expansion (excluding Screwfix) 312016/17 operational milestones: a reminder Unified Deliver Offer Supply Chain Organisation (OSC) Unique Achieve 4 unified COGS Offer Complete unified IT platform roll out in BQ and start Castorama France roll out Digital Build Digital ‘Brilliant Basics’ platform for BQ Operational Complete closure of c.15 surplus space at BQ Efficiency Deliver benefits from unified Wave 1 of GNFR programme 321: Good ‘business as usual’ performance in FY 15/16 2: Solid progress with the first sharp decisions 3: SUMMARY Confident about our transformation plan 4: Clear roadmap with clear plan for FY 2016/17 33 33Cautionary note regarding forward looking statements Certain information contained in this presentation may constitute “forwardlooking statements” (including within the meaning of the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995), which can be identified by the use of terms such as “may”, “will”, “would”, “could”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue,” “target”, “plan”, “goal”, “aim” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. These forwardlooking statements include all matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, changes in tax rates, liquidity, prospects, growth and strategies. By their nature, forwardlooking statements involve risks, assumptions and uncertainties that could cause actual events or results or actual performance of the Company to differ materially from those reflected or contemplated in such forwardlooking statements. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forwardlooking statements. The Company does not undertake any obligation to update or revise any forwardlooking statement to reflect any change in circumstances or in the Company’s expectations. 34QuestionsAppendicesFY 2016/17 technical guidance Space: • Total company wide space expected to decline by 3.0 Income statement: • Underlying profit expected to include up to c.£20m operational efficiency benefits • Transformation PL costs of £220m over next five years to be mostly incurred in first three years; up to c.£70m for FY 2016/17 • Transformation exceptional costs of £270m over next five years to be mostly incurred in first three years; up to c.£50m for FY 2016/17 • Retail losses from new country development activity expected to be c.£20m driven by Screwfix Europe • Group interest charge expected to be c.£10m (excluding financing fair value remeasurements) • Effective tax rate expected to be around 26, subject to the blend of profit within the companies’ various jurisdictions • BQ closures – income statement impact expected to be broadly neutral assuming on average that up to a third of sales transfer Cash flow: • Investing up to c.£450m total capex for FY 2016/17 (includes BAU and transformation); c.£500m for FY 2017/18 and FY 2018/19 • Capital return of c.£600m over next three years expected to be via share buyback (£50m of shares repurchased since year end) 37Net debt to EBITDAR reconciliation 2015/16 2014/15 £m £m (1) EBITDA 941 953 (1) Property operating lease rentals 402 415 EBITDAR 1,343 1,368 Financial net cash (546) (329) (2) Property operating lease rentals (8x) 3,216 3,320 Lease adjusted net debt 2,670 2,991 Lease adjusted net debt to EBITDAR 2.0x 2.2x (1) Restated to exclude contribution from China following its disposal in April 2015 (2) Kingfisher believes 8x is a reasonable industry standard for estimating the economic value of its leased assets. 38Lease adjusted ROCE by division Capital Sales ROCE ROCE employed (CE) £bn 2015/16 2014/15 £bn France 3.8 1.6 14.1 14.4 UK Ireland 4.9 3.9 13.1 12.1 Other International 1.7 1.1 10.2 9.7 Central 0.1 Total 10.3 6.7 12.3 11.9 39ADR programme Kingfisher ADRs trade on OTCQX – the premier tier of the U.S. overthe Benefits of ADRs to U.S. investors: counter market under the following information: • Clear and settle according to normal U.S. standards Symbol KGFHY CUSIP 495724403 • Offer the convenience of stock quotes and dividend payments in U.S. dollars Ratio 1 ADR : 2 Country United Kingdom• Can be purchased/sold in the same way as other U.S. stocks via a U.S. broker Effective Date Jan 01, 1986 Underlying SEDOL 3319521 • Provide a costeffective means of international portfolio diversification Underlying ISIN GB0033195 Depositary Citi For questions about creating Kingfisher ADRs, please contact Citi: New York London Michael O’Leary Mike Woods email: michael.olearyciti.com email: michael.woodsciti.com Tel: +1 212 723 4483 Tel: +44 (0) 20 7500 2030 40Contacts Sarah Levy, Group Investor Relations Director +44 (0)20 7644 1032 Christian Cowley, Head of Investor Relations +44 (0)20 7644 1126 Giles Hartley, Investor Relations Manager +44 (0)20 7644 1082 Nigel Cope, Head of Media Relations +44 (0)20 7644 1030 Brunswick +44 (0)20 7404 5959 41
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