Capital Markets Day - 25th January 2016

RNS Number : 8198M

Kingfisher PLC

25 January 2016

 

Kingfisher is hosting a capital markets day for institutional investors and analysts from 9am to 1pm today in London, UK

Kingfisher announces 5 year transformation to deliver £500m sustainable annual profit uplift (1) by the end of Year 5 over and above 'business as usual' Also announcing capital return of c£600m over the next 3 years in addition to the annual ordinary dividend

Véronique Laury, Kingfisher Chief Executive Officer, said:

"Following an in depth review of Kingfisher's business last year alongside in depth studies of our customers' home improvement needs, the leadership team announced the 'ONE' Kingfisher plan. This plan will leverage the scale of the business by becoming a single, unified company where those customer needs always come first.

"We are excited to now reveal our new strategy and our focus over the next five years based on the three key pillars of creating a unified, unique and leading home improvement offer, driving our digital capability and optimising our operational efficiency. 

"With a clear roadmap now in place alongside clear long term targets, the size of the five year opportunity is significant. We do acknowledge the challenges ahead, however having already made good progress since March last year, and with 80,000 committed colleagues, we feel confident about our plan and look forward to moving on to the first year of our transformation."

Our 5 year transformation

Our transformation plan is over and above 'business as usual'. By this we mean that we expect pre-transformation performance to be broadly in line with the macroeconomic backdrop in our respective markets. We will have limited expansion,  the focus of which, in the medium-term, will be Screwfix Europe.

We will track our progress against a set of financial KPIs and operational milestones and we will update as we progress.

Key financials

·     Expected to deliver £500m sustainable annual profit uplift by end of year 5 ·     Pre-exceptional reported profit expected to be impacted, net of operational efficiency benefits, by c£(50)m in Year 1 and £(70)-(100)m in Year 2 ·     Total expected cash cost of £800m (transformation capital expenditure + transformation P&L costs + P&L exceptional costs)  ·     Will deliver improved ROCE ·    Intend to return c£600m of capital to shareholders over the next three years (expected to be via share buyback), in addition to the annual ordinary dividend

Comprising 3 strategic pillars

1.   Creating a unified, unique & leading offer based on customer needs ·     Expected to generate £350m sustainable annual profit uplift by end of year 5; total cash cost £480m ·     Uplift broadly equates to 5% reduction in cost of goods sold; assumes higher sales from price reinvestment and a more unique & leading offer will be offset by range clearance and implementation costs ·     Very encouraging results from the first wave of our unified core essential offer, supporting the business case 2.   Driving our digital capability ·     Expected to generate £50m sustainable annual profit uplift by end of year 5; total cash cost £210m ·     Consists of 2 programmes; o  Investing in our core e-commerce platforms, leveraging our Screwfix best  in class capability ('Brilliant Basics') o  Building capability to enable us to unlock more of our customers' complex home improvement journeys 3.   Optimising our operational efficiency ·     Expected to generate £100m sustainable annual profit uplift by end of year 5; total cash cost £110m ·    Biggest opportunity is in unifying c.90% of £1.2bn goods not for resale (GNFR) spend (combination of cost savings & working in a simpler, more effective way)

Summary transformation technical guidance

Income statement P&L costs Exceptional costs Reported profit (before exceptionals)	£220m over 5 years (including range implementation) £270m over 5 years (Unified Offer & Supply Chain organisation set up + Unified common processes) +£500m by end of year 5 (over and above 'business as usual') Net impact over the first 2 years: Year 1 c.£(50)m; Year 2 £(70)-(100)m
Cash flow Transformation capital expenditure Total capital expenditure Capital return	£310m over 5 years (Unified & Unique offer store equipment & IT + Digital) c£500m per annum over next 3 years (including 'business as usual') c£600m over next 3 years expected to be via share buyback

Announcement and presentations

Presentations by the leadership team will be webcast. They will be followed by short seminars covering the 3 strategic pillars in more detail. There will be no update on current trading. This announcement and the presentations can be downloaded from www.kingfisher.com or viewed on the Kingfisher IR iPad App. We can be followed on twitter @kingfisherplc with the CMD results tag #KGFCMD.

Financial calendar update

Reflecting the long term nature of 'ONE' Kingfisher, Q1, Q2 and Q3 trading updates will continue to provide detail on sales performance but not retail profit.

Enquiries

Investor Relations	[phone]
Media Relations	[phone]
Brunswick	[phone]

(1) This does not constitute a profit forecast for Year 5 (FY 20/21) as it refers solely to the transformation and not to 'business as usual'. The £500m is pre-tax and at current exchange rates.

Forward-looking statements

You are not to construe the content of this announcement 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 announcement 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 announcement has been prepared in relation to the 25 January 2016 Capital Markets Day announcement. The financial information referenced in this announcement is not audited and does not contain sufficient detail to allow a full understanding of the results of the group.  Nothing in this announcement 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 group or an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 (as amended). 

Certain information contained in this announcement may constitute "forward-looking 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 forward-looking 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, forward-looking 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 forward-looking statements. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements.

The Company does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in the Company's expectations.

 

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