International Review

Gerry Murphy
Group Chief Executive
Today’s agenda

• Formal presentation
• General Q&A
• Buffet lunch
• Networking with International business heads
 International business heads

Gerry Murphy

George Adams
Philippe Tible Patrick Langlade Steve Gilman
European
Castorama France Brico Depot France B&Q Asia
Development

Didier Cantreau Mariusz Gliwinski Claude Acquart

Brico Depot Spain B&Q China Castorama Poland

Yi Liu Peter Partma

B&Q Taiwan Castorama Russia

David Williams Giulio Maleci

B&Q Home, Korea Castorama Italy

Levent Cakiroglu
Koctas, Turkey
Kingfisher at a glance

• World’s third largest home improvement retailer

• Retail sales: £8bn, 50% non UK
• Over 680 stores in 11 countries in Europe and
Asia
Kingfisher – Europe’s no 1 home
improvement retailer
Sales €m
12 11.1

10
8
6 5.2 5

4 3
2.2 2.2 1.9 1.7
2 1.3 1.3

0
I

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r

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us
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B

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lin
he

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as

ac

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O

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is

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Fo
nb

ar
ak
M
gf

au

W
om
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Pr
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Source: Verdict - 2005
Consistent strategy…

• Build on strong leadership positions

– UK, France
• Expand proven growth businesses
– Screwfix, Poland, Italy, China and Taiwan
• Invest in new opportunities
– UK Trade, Spain, Russia, Korea, Turkey
• Capitalise on buying scale and international
diversity
18 years of experience outside main
domestic markets

• In Europe since 1988

– Italy,1988
– Poland,1997
– Turkey, 2001
– Ireland, 2002
– Spain, 2003
– Russia, 2006
• In Asia since 1996
– Taiwan,1996
– China,1999
– South Korea, 2005
Successful, sustainable international
development takes...

• Time and money

• Vision and long-term support
• Champions/evangelists
• Strong local management
• Realism
• And the ability to adapt, adapt and adapt…
International – a huge opportunity

• GROWTH
– Big markets developing fast
– £100 billion in International markets

• RETURNS
– Ahead of the cost of capital
– Supported by Group supply scale

• ACCELERATED INNOVATION
– Global consumer trends
– Sharing of products, ideas and talent
International Review

Duncan Tatton-Brown
Group Finance Director
Our international markets are four
times the size of the UK…
Markets size in £bn
£bn

25

46
128

31

26

UK France Proven New Total

 …with faster forecast growth
Forecast DIY Annual Market Growth 2006-
2006-2009

16%
14.0%
14%
12%
10.0%*
10%
8% 7.2% 7.1% 6.9% Weighted
6% 5.5% 5.1% 4.9%
Average
4.2%
4%
2%
0%

ly
n
nd

nd
na

ia

an

ce
ai

I ta
s
hi

an
la

la

iw
Sp
us
C

Po

I re

Ta

Fr
R

* Based on historical growth

Source: Euromonitor DIY markets 2005
International – a balanced approach

Invested
Sales 1 Capex 3
Capital 2
B&Q UK 47% 69% 33%
France 34% 16% 29%

Developed 81% 85% 62%

Proven 17% 14% 28%

New 2% 1% 10%

1. 6 months to 29 July 2006

2. As at 28 January 2006
3. 2006/07e
Attractive returns
Russia
Returns Turkey
Above Spain
France
China exc. OBI
Korea
Group Ireland
average
Taiwan
Poland
Italy

Below

2005/06 ROIC – size of bubble reflects invested capital weighting

 Spain - the Market

• Spain Population 44.1 million

• Larger cities population:
Madrid 2.9m
Barcelona 1.5m
Valencia 0.7m
Seville 0.7m
Zaragoza 0.6m
c. 20 towns 0.2m-0.5m

Sources: CIA World factbook Mongabay.com

Spain - profitable stores provide roll out
confidence

2005/06
£m

Overall retail loss (5.5)

Central head office costs (4.3)

Pre-
Pre-opening costs (2.1)

Underlying store contribution 0.9

Spain - overall profits expected soon

€m
20

15

10

0
20

20

20

20

20

20

20

20

20

20
-5
02

03

04

05

06

07

08

09

10

11
e

e
-10

Store rollout
International - strong control mechanisms

• Extensive country research prior to entry

• Board approval for new country entry
• Low cost entry model
• All store commitments agreed by CEO/CFO
• 5 year development plan – updated annually
• Annual budget sign off
• 3 monthly review with CEO/CFO
• Monthly accounts
• Daily sales
International - funding and property
strategy

• Local borrowing is a natural

hedge
• Freehold preferable
– Helps exit – e.g. Brazil
– Helps reconfigure – e.g. China
– Potential for additional value
– Poland property cost £208m
– Market value £269m*

* As at 28 January 2006
Freehold property - a key asset

Market Values* Yields

UK £1.2bn 5%

France £0.9bn 8%

Rest of Europe £0.7bn 7-10%

Asia £0.2bn 9%

£3.0bn

* As at 28 January 2006
Access to new products and suppliers

Poland

China
Buying power - a local advantage

Turkey
2002-
2002-2006
growth

Group product ranges +12%

Buying margin +500bps

EBIT +204%
International Review

Gerry Murphy
Group Chief Executive
International - key principles

• Retail rules!
• Vive la difference!
• Work together where it matters
• Work independently where it doesn’t
• Expand at the right rate
• Be prepared to exit
International - use local teams

• Casto Poland
– 6,000 FTE Polish
– 1 French
• China
– 10,000 FTE Chinese
– 5 Europeans
International expansion - choosing
the right markets
• Potential RMI market
big enough
• No1 or 2 position
achievable
• Economics potentially
attractive
• Availability of
products/employees
• Short time to economic
scale
International - using the right format

• Castorama, Brico Dépôt or B&Q?

• Big box versus small box?
• Consumer offer versus trade?

Brand?....usually not critical

Planning regime?
Property costs?
Russia - a good example

• Population 144 m • 11 cities > 1 m

• 70% of wealth west of the Urals • 20 cities > 0.5 m
• 2 cities > 4 m
Russia - growing economy
GDP Per Head at PPP £ 8000

5.2 %
6000
R
CAG
Actual
4000 Forecast

2000

0
1995 1997 1999 2001 2003 2005

Consumer Spend 10 ,0 0 0
£m
9 ,0 0 0

%
8 ,0 0 0
5. 9
GR
7 ,0 0 0 CA
6 ,0 0 0
Actual
5 ,0 0 0 Forecast
4 ,0 0 0

3 ,0 0 0

2 ,0 0 0

1,0 0 0

0
1995 1997 1999 2001 2003 2005
Source: EIU 2004
Russia - attractive home
improvement market

£m Russian DIY Market Size Market Fragmentation

6 ,0 0 0

3% Organised Stores
5 ,0 0 0 1 0 .9 % Wholesalers
GR: 27%
CA
4 ,0 0 0

3 ,0 0 0

2 ,0 0 0

1,0 0 0 70%
Open markets
0
19 9 9 2000 2 001 20 02 20 03 20 04
Total market size 2004 £3.8bn

Sources: Euromonitor 2004; Verdict On European DIY retailing

 The market is large and growing

Free transfer from State

85% of flats need total “remont”

Mortgage market
developing,
80m sq.m new housing p.a
property prices
rising

Apartments delivered bare 45% own a “dacha”

Est £5bn in
Moscow alone!
Castorama Russia
Castorama Russia - store format

• Format based on Castorama Poland

• Harder offer
• Focused on building/maintenance
• EDLP
B&Q China - adapting

• 300m+ households
• Growing middle class
• Home conscious
• HI market £27bn
• Western brands popular
• Limited DIY knowledge
B&Q China - adapting

Offer heavily adapted by local management:

• Different store format
• Authenticity promise
• Different ranges
• Different service/services model
B&Q China - store environment
B&Q China - authenticity promise
B&Q China - adapted product ranges
B&Q China - adapted service model

• More service
– More staff per store
– 350 vs 180 in UK
– Inc 200 vendor reps
• Full decoration service
– New apartment fit-
fit-out
B&Q China - full decoration service

15,000 apartment
fit-outs in 2005
B&Q China - clubs and DIY training

Children’s clubs and DIY training

B&Q China Comparison with B&Q UK
(Warehouse stores)

B&Q China B&Q UK

Store Size 8-20,000 sq.m 10-
10-15,000 sq.m
Two floor/one floor with
Format Warehouse – 1 floor
mezzanine
Number of SKUs 50,000 32,000

Staff/store 350 180

Sales/sq. metre £980* £1,700

Rent/sq. metre £40** £155

* £1900 on purchasing power parity basis (ppp

(ppp))
** £80 on ppp basis
B&Q China Comparison with B&Q UK
(Warehouse stores)

B&Q China B&Q UK

Sales Mix:
Installed Product 30% 2%
Trade 20% 11%
Gardening 1% 18%
Sharing format ideas
Spain

France

Poland
Sharing merchandising ideas

B&Q, Wednesbury

Castorama, Englos
Sharing new product ideas

Disney in China Disney in Turkey

Sharing international retail talent

Claude Acquart
– Castorama France 16 years
– Castorama Poland CEO 9 years

Mariusz Gliwinski
– Nomi Poland 7 years
– B&Q Taiwan CEO 3 years
– B&Q China CEO from November 06

Steve Gilman
– B&Q UK 18 years
– B&Q Asia CEO 10 years
Working together on global trends

Feminisation Busy lives

Global trends - Feminisation, busy lives

“Dressed” rooms Installation

Tradesman
International – a huge opportunity

• GROWTH
– Big markets developing fast
– £90 billion International markets

• RETURNS
– Ahead of the cost of capital
– Buying power

• ACCELERATED INNOVATION
– Global consumer trends
– Sharing of products, ideas and talent
International Review

Questions
Appendix

Country level information….sources

• Population and GDP data – EIU 2004
• RMI market sizes and own brand penetration –
Kingfisher estimates
• Sales, EBIT, KPI data – as reported
France

Population 61m
GDP growth: average last 5 years 1.1%
GDP growth: forecast 2006 1.6%
Estimated market size £31bn
Estimated market share 9% (24% UNIBAL DIY & gardening)
Sales 2005/06 £2.7bn
EBIT 2005/06 £230m
Store numbers H1 2006/07 181
FTE employee numbers H1 2006/07 18,667
Own brand penetration 17.4%
Leroy Merlin, Bricomarché , La
Competitors Platforme, Bâtiment, Bricoman,
Saint Gobain Group
China

Population 1.3bn
GDP growth: average last 5 years 8.1%
GDP growth: forecast 2006 9.6%
Estimated market size £27bn
Estimated market share 1%
Sales 2005/06 £312.8m
EBIT 2005/06 £0.2m
Store numbers H1 2006/07 51
FTE employee numbers H1 2006/07 9,868
Own brand penetration 4.2%
Orient Home, Homemart,
Competitors Homeway, Home Improvement
malls
Poland

Population 38m
GDP growth: average last 5 years 2.9%
GDP growth: forecast 2006 5.2%
Estimated market size £4bn
Estimated market share 10%
Sales 2005/06 £417.0m
EBIT 2005/06 £52.5m
Store numbers H1 2006/07 34
FTE employee numbers H1 2006/07 5,915
Own brand penetration 3.7%
Leroy Merlin, OBI, Praktiker,
Competitors
Platforma, NOMI
Italy

Population 58m
GDP growth: average last 5 years 1.0%
GDP growth: forecast 2006 1.8%
Estimated market size £13bn
Estimated market share 2%
Sales 2005/06 £266.9m
EBIT 2005/06 £28.7m
Store numbers H1 2006/07 27
FTE employee numbers H1 2006/07 2,156
Own brand penetration 5.4%
Competitors Leroy Merlin, OBI
Taiwan

Population 23m
GDP growth: average last 5 years 3.1%
GDP growth: forecast 2006 4.3%
Estimated market size £2bn
Estimated market share 10%
Sales 2005/06 Not consolidated
EBIT 2005/06 £7.4m
Store numbers H1 2006/07 21
FTE employee numbers H1 2006/07 1,857
Own brand penetration 8.1%
Hypermarkets, Department stores,
Competitors
Homebox
Spain

Population 44.1m
GDP growth: average last 5 years 3.5%
GDP growth: forecast 2006 2.8%
Estimated market size £5bn
Estimated market share 1%
Sales 2005/06 £49.3m
EBIT 2005/06 £(5.5)m
Store numbers H1 2006/07 7
FTE employee numbers H1 2006/07 473
Own brand penetration n/a
Leroy Merlin, Bricoman, Bricor,
Competitors Bricorama, BricoGroup, Bauhaus,
Saint Gobain Group, AKI
Turkey

Population 74m
GDP growth: average last 5 years 4.7%
GDP growth: forecast 2006 6.0%
Estimated market size £4bn
Estimated market share 3%
Sales 2005/06 Not consolidated
EBIT 2005/06 £2.0m
Store numbers H1 2006/07 9
FTE employee numbers H1 2006/07 1,039
Own brand penetration 17%
Competitors Praktiker, Bauhaus, Tekzen, IKEA
Russia

Population 142.8m
GDP growth: average last 5 years 6.0%
GDP growth: forecast 2006 6.4%
Estimated market size £10bn
Estimated market share n/a
Sales 2005/06 n/a
EBIT 2005/06 £(5.4)m
Store numbers H1 2006/07 2
FTE employee numbers H1 2006/07 565
Own brand penetration n/a
OBI, Leroy Merlin, K-rauta,
Competitors Maxidom, Metrika, Starik
Khottabych
South Korea

Population 49m
GDP growth: average last 5 years 3.6%
GDP growth: forecast 2006 4.5%
Estimated market size £6bn
Estimated market share n/a
Sales 2005/06 £5.2m
EBIT 2005/06 £(6.3)m
Store numbers H1 2006/07 1
FTE employee numbers H1 2006/07 161
Own brand penetration n/a
Competitors Hanssem, LG Decovile, Enex