06 Left to right Euan Sutherl<strong>and</strong> Chief Executive, B&Q <strong>and</strong> Kingfi sher UK A conversation with the executive team Philippe Tible Chief Executive, France Ian Cheshire Group Chief Executive Peter Hogsted Chief Executive, International Kingfi sher plc <strong>Annual</strong> <strong>Report</strong> <strong>and</strong> <strong>Accounts</strong> 2009/10 Kevin O’Byrne Group Finance Director
Kingfi sher plc <strong>Annual</strong> <strong>Report</strong> <strong>and</strong> <strong>Accounts</strong> 2009/10 My priority right now is to success<strong>full</strong>y execute our Delivering Value programme. We’ve made a great start but there is a lot more to do. Ian Cheshire – Group Chief Executive You say Delivering Value is on track, is the fi nish line now in sight? After another successful <strong>and</strong> productive year the target is certainly more in sight, though much work has yet to be done to secure it. But as we get closer to achieving our target I increasingly see it as the starting line from which the real race starts, defi nitely not the fi nish line. Looking back, 2008 was a pivotal year of change. A new, stronger <strong>and</strong> more unifi ed leadership team was created <strong>and</strong> we put in place a clear recovery plan. In 2009, with the whole organisation engaged behind it, the fruits of that plan helped drive 49% higher earnings per share <strong>and</strong> £761 million of free cash generation. That’s a great result, especially in the tough markets we faced <strong>and</strong> I thank all our 78,000 staff worldwide for working so hard to deliver our goals. So where will future growth come from? Just to be clear, my priority right now is to success<strong>full</strong>y execute our Delivering Value programme. We’ve made a great start but there is a lot more to do. But the leadership team are increasingly turning their attention to life beyond 2012 <strong>and</strong> laying the foundations today for sustainable future growth. With signifi cant growth in consumer spending considered unlikely, we aim to invest in innovation to create our own opportunities. For example, we have been broadening our customer offer by introducing new product categories into our existing stores. The new specialist professional trade offer, TradePoint, which is now being rolled out in all of B&Q’s bigger stores, is a great example. And we continue to broaden our reach by opening new stores, particularly in France <strong>and</strong> Eastern Europe where returns are highest. But as well as broadening the business we need to harvest much more benefi t from our international buying scale. Our direct sourcing is growing strongly <strong>and</strong> we are doing the ground work now on our buying processes to enable more range harmonisation in the future. Where does the sustainability agenda fi t within Delivering Value? Everywhere, it’s simply part <strong>and</strong> parcel of being a leading business. Helping our customers to have more sustainable homes is a laudable aim given that around a quarter of all carbon emissions come from residential housing. But it makes great business sense as well because our customers are increasingly looking to buy products <strong>and</strong> services to make their homes more effi cient <strong>and</strong> less costly to run. That’s why we are increasing the proportion of our eco products <strong>and</strong> planning a Group-wide range of energy effi cient products. By leveraging our Group buying scale we can make these products more affordable for 07 the customer <strong>and</strong> more profi table for us. We made good progress with our corporate responsibility programmes during the year <strong>and</strong> are ahead of our targets in several areas. Sales of eco products topped £1 billion for the fi rst time, showing that consumer dem<strong>and</strong> is growing. It also makes sense for our own business to be as effi cient <strong>and</strong> sustainable as possible, reducing both our costs <strong>and</strong> our impact on the environment. That’s why we have been working with the Carbon Trust on ways to reduce our energy usage. At B&Q UK we have signifi cantly cut energy costs <strong>and</strong> made a CO 2 reduction of 16% since 2006. Philippe Tible – CEO, Kingfi sher France How were you able to grow profi t in what was the worst French home improvement retail market for many years? A lot of hard work from our 20,000 colleagues in France meant our sales outperformed what was the weakest market for many years <strong>and</strong> we were able to deliver the ambitious cost management target I set at the start of the year. Benefi ts from optimising our buying in France also meant that we were able to remain very price competitive in a more promotional market <strong>and</strong> maintain our overall gross margin percentage. Growing our business in such a diffi cult market was testament to the strength of having two complementary store br<strong>and</strong>s but one unifi ed strategy for France. Is there any growth left to go for in France? Absolutely, whilst France is already Kingfi sher’s highest profi t contributor <strong>and</strong> cash generator I remain very excited about the future growth potential of Kingfi sher France. Castorama, with its <strong>full</strong>er product <strong>and</strong> service offer <strong>and</strong> broader consumer appeal, continues to go from strength to strength. It has consistently grown market share as it gains momentum from its successful modernisation programme. But the glass is only half <strong>full</strong> – we have over 40% of our Castorama stores yet to modernise <strong>and</strong> the potential to open more new stores. In Brico Dépôt we have a very successful smaller, discount format aimed more at the specialist trade end of the market. With its tradesman bias it did suffer more last year due to the housing downturn but it has protected profi t thanks to the benefi ts from recent investment in new systems <strong>and</strong> logistics <strong>and</strong> a fi rm focus on cost effi ciency. I have no doubt that this business will return to sales growth as the market improves <strong>and</strong> we will continue to open more Brico Dépôt stores in France. Euan Sutherl<strong>and</strong> – CEO, B&Q <strong>and</strong> Kingfi sher UK B&Q’s retail margin increased from 2.8% to 4.9%. Are you still confi dent that 7% can be achieved? Yes, absolutely, <strong>and</strong> the exciting thing is that most of this is in our h<strong>and</strong>s – it’s a self-help recovery, not a market-led recovery. One of B&Q’s great strengths is its ‘Can do’ attitude <strong>and</strong> right now everyone at B&Q is working fl at out to drive effi ciencies through every line of the profi t <strong>and</strong> loss account. A great example is customer self check-outs where in one year we success<strong>full</strong>y rolled out these new tills to all stores. The stores did a brilliant job executing such a huge <strong>and</strong> complex project so well <strong>and</strong> these tills now account for over 40% of all transactions.
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