Kingfisher : Full Year Results Presentation Transcript

Kingfisher plc 2020-21 full year results presentation transcript - 22 March 2021

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12 months ended 31 January 2021

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Speakers:

Thierry Garnier (TG), CEO, Kingfisher plc

Bernard Bot (BB), CFO, Kingfisher plc

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Slide: Divider slide (TG)

Good morning everyone. Thank you for joining us today. I am Thierry Garnier, CEO of Kingfisher and I'm joined by our CFO, Bernard Bot. I hope everyone is staying healthy during these difficult times and hopefully it won't be long before we are able to meet in person again.

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Slide: Welcome & agenda (TG)

Before I start, on behalf of our Group Executive and Board, I would like to express my sincere thanks to all our teams for their incredible efforts in the most testing of circumstances. We are extremely proud to be part of that team and inspired by their commitment every day.

Our agenda for today will start with an update on our operations and strategic progress. Bernard will present our financial performance and outlook before we open the meeting for Q&A.

Slide: Key Messages (TG)

On slide 5 I would like to set out the key messages. The home improvement markets we operate in are attractive and resilient and have supportive new longer-term drivers.

Current market trends, some of which have been brought forward by the COVID crisis, offer us opportunities and we are emerging from the COVID crisis stronger with a clear improvement in our competitive position, along with strong new customer growth and a step change in digital adoption.

We have made good progress fixing issues from previous years, although there is still work to do. And our new strategy is delivering. Our distinct retail banners are now empowered and much more agile, supported by Kingfisher's scale, strength and expertise.

And finally, we have set out clear financial priorities for the group supported by a set of key drivers.

Slide: Strong financial progress in FY 20/21 (TG)

On slide 6, I am pleased to report strong financial progress for the period with like for like sales up 7.1% and profit before tax and free cash flow strongly higher. Our competitive positioning is clearly improving in all key markets with market share growth at B&Q, Screwfix and Castorama France. We

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have strong current trading momentum with Q1 like for like to date up 24.2% supported by continued e-commerce sales growth of over 150%.

Finally, I would like to confirm we are resuming dividend payments with a proposed total dividend per share of 8.25p and we are establishing a progressive and sustainable dividend policy. I'll come back to this later.

Slide: Attractive market with new longer-term industry support (TG)

Turning to slide 7, with a total addressable spend of £130bn, the home improvement markets in which we operate are attractive, growing and have many structural drivers supporting long term growth. It is a relatively high margin industry, resilient against e-commerce pure play competitors and has proven robust through previous economic downturns. The key point on this slide however is that over the course of the COVID crisis we have seen the development of new longer-term trends that are clearly supportive of our industry.

During lockdown our homes have effectively been transformed into hubs where we work, exercise, entertain and rest. Longer term we believe that more working from home is here to stay. There is no doubt that the trend of flexible working arrangements has accelerated forward many years. Over time these factors will lead to material changes such as more wear and tear on the home and the need to organise living space differently, thereby creating a structurally supportive shift for home improvement.

One of the most interesting things we have seen in the last year is also the emergence of new cohorts of young DIYers with a big increase in motivation, new skills and enthusiasm for DIY. Recent surveys we undertook across our markets highlight that 18 to 34 year olds have done more home improvement than any other age group with 20% doing DIY for the first time, 55% doing more than they have previously done and 65% more confident to take on home improvement and learn new DIY skills. All of this is very encouraging for the future of our industry.

Slide: Market trends offer us opportunities (TG)

Moving on to slide 8 we can see some of the wider market trends which our strategy seeks to address. The COVID crisis has led to a surge in e-commerce. The acceleration of our capabilities in this area heavily leveraging our stores has facilitated significant online growth across our retail banners.

Smaller and more localised store formats are also becoming vital to serving the increased customer demands for speed and convenience. While Screwfix is already addressing this shift, there is a huge opportunity for our other banners to widen their reach.

Across Europe discounter format stores have been growing in line with a rising focus on value for money. Our own exclusive brands or OEB products, now 44% of group sales enable us to capture this trend. In addition, we are well placed in this area of the market with our Brico Dépôt discounter banner as well as our overall focus on attractive price positioning.

The COVID crisis has seen a pause of the trend towards 'do it for me' due to social distancing and also engagement with DIY as a cheaper and popular activity. We expect the 'do it for me' shift to remain gradual over the medium term and we are well positioned to benefit with Screwfix,

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TradePoint and Brico Dépôt and our acquisition in November 2020 of NeedHelp, one of Europe's leading services marketplaces. And being a responsible business is a priority for Kingfisher and during COVID has become more important than ever before. Customers are increasingly aware of what companies do for their colleagues and of the environmental impact of their purchasing choices.

Slide: Our strategic direction and key strengths (TG)

Turning to slide 9, let me briefly remind you of our 'Powered by Kingfisher' strategic direction.

First our retail banners are not the same and this is a strength. We see differentiation as an advantage more than ever in a world that is volatile and uncertain. We have a clear vision for our customer proposition based on e-commerce with stores at the centre, a mobile-first experience and a compelling services offer.

We will power our banners through Kingfisher's scale, resources and expertise enabling them to serve their customers better. And we will become simpler and leaner doing less, landing it faster and reducing our cost and inventory. Across the bottom of the slide you will also see the key strengths which underpin our strategy.

Slide: We are emerging from the COVID crisis stronger (TG)

Slide 10 outlines the reasons we believe we are emerging from the pandemic a stronger business. And this is thanks to the extraordinary work of our teams during these challenging times and the way in which we have embraced our new strategy and the agility we have shown in managing the crisis. The rollout of our plans is fully on track. The crisis has pushed us to be bolder and several elements of our strategy are ahead of schedule. We believe we have seen at least two years' worth of acceleration in e-commerce. Supported by our stores and rapid changes to our operating model, we have met an extraordinary surge in demand with group e-commerce sales of nearly £2.3bn up 158% in 2020 and now 18% of our sales.

Throughout the crisis we have remained committed to doing the right thing by our colleagues, customers and communities. We have done this by enhancing our safe operating standards, ringfencing and donating PPE, supporting our colleagues and rewarding frontline staff and developing our plans to help tackle climate change and deforestation. We also made significant repayments of government support. This includes foregoing UK and Irish furlough and business rates relief worth £150m and repaying in full government-supported debt in the UK and France worth over £1.1bn.

Our customer net promoter scores show a sharp increase in the awareness and reputation of our banners and along with a reconnection with DIY I mentioned earlier, we also saw a step-change in digital adoption across our banners with ten million new customers shopping with us online. The crisis has also underlined the longer-term opportunity to manage our costs and inventory with greater efficiency. We took multiple actions in 2020 and believe we can be even bolder in this area. All this is reinforced by a stronger balance sheet supported by disciplined cash management. Our net leverage is 0.9x EBITDA and we have access to over £2.2bn in total liquidity.

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Slide: We are making progress fixing issues from previous years (TG)

Turning to slide 11, while we continue to leverage some of the strengths developed by Kingfisher in past years such as group sourcing and buying, OEB and a common SAP platform, we entered into 2020 faced with many issues from previous years. You can see the significant progress we have made so far. We have rebuilt our teams, rebalanced our commercial operating model, reduced time and resources on non-critical activities and empowered our banners to adopt new trading approaches. These actions have had a very positive impact on our business. They have also set the path for the implementation of our new plan and helped us to respond to the challenges of the crisis. Looking at France, we have made great strides forward in repairing our business there. From new leadership and operational teams, addressing all the pain points of Casto SAP implementation, underlying improvements to the French supply chain and the benefits from many other initiatives noted here.

We have also reignited Brico credentials as one of the most powerful discounter brands in Europe in home improvement. The proof is in our like for like growth and even more importantly our performance relative to market. Castorama grew its share for the first time in several years. However, there is still work to do in France, in particular around our range rebuild at both banners and as well as further efficiencies with our supply chain.

Slide: Clear strategy and actions to drive share growth (TG)

Let me now turn to slide 12 and our actions to drive share growth in our key markets. Our distinct banners address diverse customer needs, and this is a strength. All our banners have a clear positioning and plan. Conscious of time in the following slides we will take a closer look at B&Q, Screwfix and Castorama France.

The role of Kingfisher Group is to support our banners to serve the customers better. These are the key group powers on the right-hand side of the page.

Slide: B&Q and TradePoint - revitalised and well positioned (TG)

Starting with B&Q and TradePoint on slide 13, the team did an excellent job managing unprecedented levels of demand in 2020 while moving all their key priorities forward at pace.

E-commerce sales grew by 117% and penetration doubled to 10%. This was supported by rapid changes to its operations and a focus on picking from our stores for click and collect. We successfully launched next day delivery from store and have started several innovative trials for last-mile delivery.

The group next-gen digital stack was fully implemented without disruption and now supporting enhanced mobile and web capabilities. Our new OEB ranges are performing very well and B&Q kitchen proposition is back, supported with design and installation in B&Q stores and is gaining market share in the UK. Our pricing has remained very competitive, indexing clearly below competitors and we also benefited from the introduction of targeted and localised trading events.

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B&Q has seen a material rise in its online customer base and is enhancing its mobile-first and service capabilities. The business is testing self-checkout, scan and go and tool hire concessions at TradePoint through Speedy Hire. B&Q also continues to test new compact store concepts as well as concessions in two Asda stores and we opened two medium box stores.

These strategic initiatives and the outstanding execution by the B&Q team resulted in a like for like growth of 13%, market share gains, strong new customer growth and a significant improvement in store customer NPS.

Slide: B&Q and TradePoint - 2021 focus areas (TG)

On slide 14 we have outlined B&Q key areas of focus for this year. Firstly, we'll continue rebuilding inventory and availability ahead of peak trading periods. We are already well placed in this regard. We will also build on the progress we have made in e-commerce with more ranges available for online orders and faster delivery options.

Ranges will be strengthened further with more choice through brands and through OEB. And we are excited to launch NeedHelp in B&Q which will cover all services excluding kitchen and bathroom installation for the time being. We are also relaunching our TradePoint banner which grew sales by over 10% last year and is nearly 20% of B&Q sales.

Following some early successes this year, we will look to open more compact stores and extend our rightsizing test.

Slide: Screwfix - positioned for next stage of growth (TG)

Turning to slide 15, Screwfix has been a phenomenal growth story with the sales CAGR of 14% over five years, one store opened per week on average over the same period and an exceptionally high return on capital employed.

In 2020 Screwfix exceeded £2bn of total sales with like for like sales growth of 6.6%. The business has also seen a step-change in new customer acquisition with net customer growth of 16% and online customer numbers up 146%. 11 million customers shopped with us in 2020, one in five in the UK adult population.

The team adjusted its operating model overnight during the first lockdown, shifting to nearly 100% online and mobile is now the biggest channel in the business accounting for 62% of online transactions. Pricing continues to be competitive and we are indexing below our closest peer. Finally, our expansion plans remain on track with 38 new stores in the UK and Republic of Ireland in 2020. As part of this we are trialling an innovative new compact format in central London.

Slide: Screwfix - 2021 focus areas (TG)

To slide 16 and Screwfix is ready for the next stage of its growth. Following the identification of further opportunities in catchment areas we now see a roadmap to over 900 stores in the UK and Ireland versus our previous target of 800 in just the UK.

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