Description
In the broadest sense our business
creates value for society in a number
of ways. We help people to have better
homes for themselves and their families
and we have a long heritage of helping
them do this in a more sustainable
way. We operate in the heart of local
communities, supporting local projects,
positively impacting the environment and
importantly providing local employment.
Over 79,000 people work in our
businesses and many more work for
our suppliers. And we contributed
£1.71 billion in 2013/14 to the economies
in which we operate through taxes borneand collected. We aim to do more than
minimise our impact; instead we aspire
to have a positive impact on the world.
We call this approach Net Positive
and we believe this gives us a ‘licence
to operate’ for the long-term.
H
el ping
people have bet ter hom
es
Annual Report and Accounts 2013/14
Progress report on our Creating the Leader strategy
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Contents
Strategic Report
01 Key highlights
02 Kingfisher at a glance
04 Chairman’s statement
05 Group Chief Executive’s statement
06 Our business model
08 Our strategy – Creating the Leader &
Key Performance Indicators (KPIs)
18 Sustainability: Becoming Net Positive
20 Financial Review
28 Risks
Governance
32 Board of directors
34 Senior management
35 Corporate governance
47 Directors’ remuneration report
69 Directors’ report
71 Directors’ statement of responsibility
Accounts
72 Independent auditors’ report to the members
of Kingfisher plc
76 Consolidated income statement
77 Consolidated statement of comprehensive income
78 Consolidated statement of changes in equity
79 Consolidated balance sheet
80 Consolidated cash flow statement
81 Notes to the consolidated financial statements
120 Company balance sheet
121 Notes to the Company financial statements
134 Group five year financial summary
135 Shareholder information
IBC Glossary
Our online reporting
Increasing numbers of our shareholders are choosing to receive
their annual report online, which helps us reduce the impact on
the environment through lower paper usage. The online version,
available at www.kingfisher.com, enables you to download the
report to your computer desktop and access supplementary
content, such as video interviews with the Group Chief Executive
and Group Finance Director.
If you have a smartphone or tablet device, use the links
and QR codes in this printed copy to take you to that part
of the online report or Kingfisher’s corporate website.
For the online report homepage go to
http://annualreport.kingfisher.com/2013-14
Kingfisher plc is Europe’s leading home improvement retail group and
the third largest in the world, with over 1,120 stores in nine countries in
Europe and Asia. Its main retail brands are B&Q, Castorama, Brico Dépôt
and Screwfix. Kingfisher also operates the Koçtas¸ brand, a 50% joint
venture, in Turkey with the Koç Group.
www.kingfisher.com
1
Strategic Report Governance Accounts
Strategic Report
Key highlights
www.kingfisher.com
1
* See the Financial Review on pages 20 to 27.
** Excludes Turkey.
† On a sale and leaseback basis with Kingfisher in occupancy.
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23.4p
+4.9%
Adjusted basic earnings
per share* (p)
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£710m
+25.9%
Pro?t for the year (£m)
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£744m
+4.1%
Adjusted pre-tax pro?t* (£m)
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£759m
+9.8%
Pro?t before taxation (£m)
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Full year dividend (p)
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30.0p
+24.5%
Basic earnings per share (p)
Contribution to Group sales (£bn) Contribution to Group retail
pro?t (£m)
Property (at market value
†
) (£bn)
£11.1bn £805m £3.5bn
UK & Ireland
France
Other International**
40%
40%
£4.4bn
£4.4bn
20% £2.3bn
UK & Ireland
France
Other International
30%
49%
£238m
£396m
21% £171m
UK & Ireland
France
Other International**
26%
40%
£0.9bn
£1.4bn
34% £1.2bn
Statutory reporting
Annual Report and Accounts 2013/14
2
Strategic Report
Kingfisher at a glance
Annual Report and Accounts 2013/14
2
Our purpose
Our purpose is to make it easier
for customers to have better
and more sustainable homes.
This approach will unlock more customer demand and grow
our business to the benefit of all our shareholders – Kingfisher
will be a more valuable business for our shareholders and a
better partner for our suppliers; we will provide a more secure,
and brighter, future for our colleagues and a more sustainable
business for our local communities.
Key figures
*
Total sales
£11.1bn
Employees
79,000
* All figures as at 1 February 2014.
Adjusted pre-tax profit
£744m
Stores
1,124
Our brands
B&Q is the largest
home improvement and
garden centre retailer
in the UK and Ireland
offering around
40,000 products for the
homemaker, occasional
to serious DIYers, and
trade professionals. In
China, the business is
adapted to the local
preference for a
‘Do-it-for-Me’, model. It
specialises in the fitting
out and decoration of
new apartments.
With up to 50,000
products under one
roof, Castorama France
is one of the leading
home improvement
retailers in France.
Like B&Q, Castorama
targets retail customers
and DIYers and has an
emphasis on style
and inspiration for
homemakers. In Poland
and Russia there is a
bigger emphasis on
projects, as the home
improvement market
is at an earlier stage of
its development.
In both France and
Spain, Brico Dépôt
is primarily aimed at
serious DIYers and
professional builders.
It operates a low-price
format which offers
customers a choice
of 10,000 products
available in larger
product quantities.
The same format is
now being introduced
into Romania.
Screwfix is the UK’s
largest omnichannel
supplier of trade
tools, accessories
and hardware to trade
professionals and
serious DIY enthusiasts.
In addition to its
catalogue and website,
Screwfix operates stores
across the UK.
Koçtas¸, Kingfisher’s
joint venture in Turkey,
is now the number one
home improvement
retailer in the country.
Its stores are aimed
at mainstream
consumers,
homemakers
and occasional
to serious DIYers.
Kingfisher Group Executive
Kingfisher’s Group Executive team meets monthly and is responsible for the overall strategic decision-making of the Group.
It is supported by the One Team Board, more information about which can be found on page 34.
Sir Ian Cheshire
Group Chief
Executive
Guy Colleau
CEO Kingfisher
Sourcing & Offer
Kevin O’Byrne
CEO B&Q UK
& Ireland
Philippe Tible
CEO Castorama
& Brico Dépôt
brands
Steve Willett
CEO Group
Productivity &
Development
Karen Witts
Group Finance
Director
www.kingfisher.com
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Strategic Report Governance Accounts
www.kingfisher.com
3
Our operating countries
Kingfisher is Europe’s
largest home improvement
retailer with over 1,120
stores in nine countries.
A snapshot of our businesses and our markets
is set out in the table below.
Our markets
France
Country
Population
(m)*
Households
(m)*
Market
position**
GDP growth
2014 estimated
(%)
§
Market
brand
Store
numbers
Selling space
(‘000s m
2
)
Employees
(full time
equivalent)
France 63 27 2 0.9 105
1,118
11,322
109
608
6,875
UK & Ireland
Country
Population
(m)*
Households
(m)*
Market
position**
GDP growth
2014 estimated
(%)
§
Market
brand
Store
numbers
Selling space
(‘000s m
2
)
Employees
(full time
equivalent)
UK 62 28 1 2.4 360
†
2,570
†
21,146
‡
335
23
4,375
Ireland 4.5 2 – 1.8
Other International
Country
Population
(m)*
Households
(m)*
Market
position**
GDP growth
2014 estimated
(%)
§
Market
brand
Store
numbers
Selling space
(‘000s m
2
)
Employees
(full time
equivalent)
Poland 38 15 1 2.4 72
529
10,197
China 1,348 427.5 – 7.5 39
319
3,997
Spain 46.5 18 2 0.6 24
142
1,371
Russia 143 53 3 2.0 20
185
2,648
Romania 21 7.5 3 2.2 15
156
1,037
Turkey 74 19 1 3.5 45
216
3,333
Total 1,124
5,866
66,301
Store numbers, selling space and employee data as at 1 February 2014.
* Source: The Economist Pocket World in Figures 2014.
** Source: Kingfisher estimates.
§ Source: International Monetary Fund.
† Including Ireland.
‡ Including Ireland and Kingfisher Future Homes.
2014/15 new
market entries
Joint Venture
Annual Report and Accounts 2013/14
4
Strategic Report
Chairman’s statement
Annual Report and Accounts 2013/14
4
It has been another difficult year for
retailers, due to the challenging economic
environment which has affected several of
the markets in which Kingfisher operates.
In France, our biggest market, high levels
of unemployment and higher taxes
have led to consumer uncertainty, with
customers opting to save more rather than
spend more. In the UK, we saw a tough
start to the year but an improvement as
the year progressed, helped by falling
unemployment and positive signs in the
housing market.
Despite this weak economic backdrop,
Kingfisher was able to deliver some
growth, with adjusted pre-tax profits
increasing by 4.1% on the previous
year to £744 million. We generated
£559 million of free cash flow and
strengthened our balance sheet, finishing
the year with net cash of £238 million.
As a result, the Board recommended
an increase in the full year dividend of
4.7%, making a total of 9.9p. I am also
delighted to announce the start of a
programme to return surplus capital to
our shareholders, in addition to the annual
dividend, the first such programme in
Kingfisher’s 32-year history.
Highlights of the year included another
very strong performance from Screwfix
in the UK, which continued to expand
fast, opening its 300
th
outlet during the
year. B&Q had a more difficult year and
so the B&Q management team was
strengthened in order to better position
the business for the opportunities that any
improvement in the economy should
provide. In France, Castorama grew its
share of a market that was slightly down
during the year, and we continued to
expand the Brico Dépôt brand, with new
stores in France and Spain, as well as
the acquisition of 15 stores in Romania,
Kingfisher’s first new market since 2006.
We continued to make good progress
with our strategic agenda, Creating the
Leader, which aims to position Kingfisher
as a clear leader in home improvement
retailing. Many of the short-term benefits
of this programme have been used to
support our results in a weaker than
anticipated economic environment,
including improving prices for customers
in our major markets of France, the UK
and Poland.
Further progress was made on our
sustainability agenda through Kingfisher’s
Net Positive plan, with achievements in
responsibly sourced timber, energy usage
and community projects. You can read
more about these initiatives in the Chief
Executive’s statement on page 5 and
the Net Positive section on pages
18 to 19.
We are committed to diversity among our
workforce and there is further information
on our diversity policies and metrics on
pages 18 to 19, 37 and 69.
As always, I would like to thank our
79,000 staff for their hard work during
the year. In a people business such as
retailing their contribution is vital, and
it is through them that we can achieve
Kingfisher’s purpose of helping our
customers have better homes and
better lives.
Daniel Bernard
Chairman
“I am delighted to announce
the start of a programme to
return surplus capital to our
shareholders, in addition
to the annual dividend, the
first such programme in
Kingfisher’s 32-year history.”
Daniel Bernard
Chairman
Key highlights
Adjusted pre-tax profit
£744m
+4.1%
Profit before taxation
£759m
+9.8%
Adjusted basic
earnings per share
23.4p
+4.9%
Basic earnings
per share
30.0p
+24.5%
Full year dividend
9.9p
+4.7%
www.kingfisher.com
5
Strategic Report Governance Accounts
Group Chief Executive’s statement
www.kingfisher.com
5
Although the economic environment was
difficult, Kingfisher made good progress
during the year. After an extremely difficult
first quarter, which was affected by poor
spring weather, the environment improved
as the year progressed. The economic
backdrop was generally soft across
Europe for much of the year, particularly
in France, our most significant market.
However, our self-help programme
enabled us to grow profits and improve
our balance sheet strength, whilst also
investing in lower prices and improved
convenience for our customers. We
therefore finished the year in good shape.
We have continued to make good
progress with our Creating the Leader
strategy, which has supported short-term
trading results whilst also building
Kingfisher’s longer-term future. As well as
emphasising our affordability credentials
through price initiatives, we have
continued to make home improvement
easier for customers through an improved
online offer at B&Q in the UK & Ireland
and upgraded websites in Turkey, China,
Brico Dépôt France and Spain.
Further progress was made in sharing
our best ranges across more of our
businesses, with particular progress in
own brand paint. In October we held our
inaugural One Team Product Show in Lille
where 10,000 of our new product ranges
were unveiled to 6,000 store colleagues
from around the Group. Expansion
continued with more than 80 new stores
opened across Kingfisher, including 60 at
our Screwfix business. Screwfix had
another excellent year, growing sales by
more than 17% (on a 52 week basis) and
creating nearly 900 jobs, whilst continuing
to develop its industry-leading online
operations. Kingfisher continues to work
more closely as a networked organisation,
with further investment in our One Team
Academy, which provides training
modules for senior management.
At Kingfisher we are also committed to
making a positive contribution to society
and the planet as we grow our business.
Through our Net Positive programme
we help our customers to create more
sustainable homes, while improving
efficiency and opening up new sources
of revenue for our companies. We made
good progress this year towards many
of our ambitious targets in timber,
energy use and new community
engagement projects. See pages
18 to 19 for more details.
Looking ahead, we will continue to drive
our Creating the Leader programme this
year. Our key priorities will include
starting the roll-out of our omnichannel
programmes across the Group (allowing
customers to shop with us in any way
they prefer – via shops, the internet or
catalogues). In addition we will extend
our sourcing programmes and initiate
a four-year Group-wide IT change
programme. This will involve replacing
our physical infrastructure and software
to enable a step change in our customers’
shopping experience.
We are also seeking organic growth in
our selling space of 2% (71 new stores),
including two new country entries,
Brico Dépôt into Portugal and Screwfix
into Germany.
Importantly, we will focus our portfolio to
maximise our economic returns, including
the disposal of our stake in the Hornbach
business following our decision to expand
into the Romanian and German markets
where Hornbach operates. In China, our
B&Q business is now stable and so we are
now looking for a strategic partner to
help grow the business and replicate the
successful partner approach in Turkey.
B&Q UK & Ireland has performed resiliently
during the economic downturn, growing
profits in a declining market. Looking
ahead, with its customers and market
evolving very quickly B&Q has set about
redoubling its efforts to achieve future
growth and continued success. Following
the strengthening of the B&Q management
team in October 2013 under the direct
leadership of Kevin O’Byrne, B&Q is
working towards simplifying its business
to make it more agile in the marketplace.
The business aims to grow sales and
economic profit, for example by delivering
an improved omnichannel experience for
customers, an optimised store footprint
and driving footfall with better targeted
marketing and more competitive pricing.
Given the success of the last six years in
improving our balance sheet and cash
generation, and having successfully
resolved an outstanding French tax case, I
am delighted that we are able to announce
a multi-year programme of additional
capital returns. This will be in addition to
the annual dividend and will start during
2014/15 with around £200 million. At this
level Kingfisher would have the flexibility to
continue reinvesting in the business, pay
a healthy dividend and capitalise on value-
enhancing consolidation opportunities.
As we start the new financial year,
we are well placed to benefit from a
pick-up in consumer spending as
Europe’s economies return to growth.
Our prospects remain bright, giving us
confidence to invest in the business and
actively manage our portfolio, including
expanding into new markets, whilst also
commencing a programme to return
surplus capital to our shareholders.
Sir Ian Cheshire
Group Chief Executive
“Our prospects remain bright,
giving us confidence to invest
in the business and expand
into new markets, whilst also
commencing a programme
to return surplus capital
to shareholders.”
Sir Ian Cheshire
Group Chief Executive
To watch a video interview with Sir Ian Cheshire go to
http://annualreport.kingfisher.com/2013-14/strategic-
report/ceo-statement.html
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Annual Report and Accounts 2013/14
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Strategic Report
Our business model
Annual Report and Accounts 2013/14
6
What we do
Kingfisher is a retailer of home
improvement products and services.
The vast majority of our sales take place
through our 1,124 stores in nine countries
across Europe and in China. Increasingly
we are also selling via the internet.
How we do it – our Net
Positive ambitions
In the broadest sense our business
creates value for society in a number
of ways. We help people to have better
homes for themselves and their families
and we have a long heritage of helping
them do this in a more sustainable
way. We operate in the heart of local
communities, supporting local projects,
positively impacting the environment and
importantly providing local employment.
Over 79,000 people work in our
businesses and many more work for
our suppliers. And we contributed
£1.71 billion in 2013/14 to the economies
in which we operate through taxes borne
and collected. We aim to do more than
minimise our impact; instead we aspire
to have a positive impact on the world.
We call this approach Net Positive
and we believe this gives us a ‘licence
to operate’ for the long-term (see pages
18 to 19 for more information).
Financial value
This section concentrates on the financial
value that we create – that is, the cash
we generate. Cash is the life-blood of any
business as it can be reinvested to keep a
business healthy and growing, and is also
used to reward the owners who bear all
the investment risk. For Kingfisher
maximising our cash generation in a
responsible way means maximising sales
and minimising costs whilst observing
key behaviours – responsibility, honesty,
passion, openness and adaptability.
The better we are at this the more cash
we generate and the more value we
create for our people, our shareholders
and society at large.
Maximising sales
We believe home improvement is
an attractive retail sector as spending
on the home is a key priority
for householders.
As a specialist in this area we aim to
provide a wide product choice and
expert advice while using our international
strength and capability to bring new, more
sustainable and more affordable products
to market. There are four key areas we
focus on in order to maximise sales:
Customers
We aim to have mass appeal with a
compelling choice of products and
services so that we can capture a large
share of the home improvement market.
We recognise that ‘one size does not fit all’
and so we have adapted our customer
offer to best suit the different needs of
the Do-it-Yourself (DIY) customer, the
Do-it-for-Me (DFM) customer and the
professional tradesman.
People
Retail is a people business and it
is particularly true in our sector as
customers often need help and
advice when shopping for home
improvement products and services.
We aim to recruit and retain diverse
and talented teams to serve our
customers and we prioritise investment
in their training and development.
Products
We use our scale and international
reach to find the world’s best products
and make them available to customers in
their local market. The rate of innovation
in home improvement tends to be slower
than in other retail sectors, such as
electricals or clothing, and so we are
increasingly deploying our international
scale and experience to work with
suppliers to stimulate innovation and
create better, more sustainable and
affordable products.
Channels
We want to make home improvement
as easy as possible for our customers and
this includes giving them as wide a choice
as possible of ways to shop with us.
As well as having local stores with
extended opening hours we increasingly
offer home delivery and ‘click & collect’
via the internet. This type of retailing
is called omnichannel and our most
advanced business in this area is
Screwfix in the UK.
Minimising costs
The biggest cost in our business
is buying the products that we sell
to our customers.
Our suppliers benefit from the huge
scale that we can offer them as one of
the largest buyers of home improvement
products in the world. The certainty of
large scale orders means they can operate
their businesses more efficiently and
these benefits are shared between the
manufacturer and Kingfisher – helping
to minimise our costs.
The next major cost is selling and
distribution, principally the cost of running
our stores, the cost of getting products
to our stores and the cost of our people.
We are constantly working on a rolling
programme of cost efficiencies and
productivity initiatives to minimise these
costs sustainably.
Cash generated
The net result of maximising our sales
whilst minimising our costs is the
optimisation of the cash we generate
each year. Over the last six years we
have generated £5.5 billion of operating
cash flow from our business model.
We have strengthened our balance sheet
by eliminating our financial net debt
and we have reinvested £1.7 billion in
modernising and expanding our store
network and upgrading our IT and
supply chain infrastructure to underpin
our future prospects. And we have
returned £1.0 billion to our shareholders
as annual dividends. Over the same
period our market value has grown
from £3.4 billion to £8.8 billion.
Our strategy for delivering this, known
as Creating the Leader, is on pages
8 to 17, including Key Performance
Indicators (KPIs) and progress to date.
Our unique contribution as a business is to harness our home
improvement experience, our heritage as a leader in sustainability and
our scale and sourcing capability to bring new, more sustainable and
more affordable products to market. This means our customers can
have better homes, the planet’s resources can be protected and we
generate value for our people, communities and shareholders.
Maximising
sales
Minimising
costs
Sourcing,
cost productivity
Value
Better Homes,
Better Lives
Value for shareholders:
Healthy annual dividend &
commitment to return surplus
capital when appropriate
Value for society:
Creating employment and a brighter
future for our people, the environment
and wider communities
Creating a ‘licence to operate’
long-term
To view and download the business model go tohttp://annualreport.kingfisher.com/2013-14/strategic-report/our-business-model.html
Value for customers:
Relevant, better, sustainable and
affordable products and services
Creating brand preference
Strategy: Creating the Leader
Improve, modernise & expand for
long-term success and to become
net positive
Value for the business:
Brand preference
Cash retained for a strong balance sheet
‘Licence to operate’ long-term
Customers
DIY, DFM, Trade
professionals
Products
Innovation,
affordability,
quality, own
brands, sourcing,
sustainability
People
Recruitment,
retention, training,
development,
diversity
Channels
Stores,
online, mobile,
call centres,
catalogues, direct
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Strategic Report Governance Accounts
Strategic Report
Annual Report and Accounts 2013/14
8
Our markets
We currently operate in nine
countries, spanning nearly 600
million households.
Our research shows that spending on home improvement
is a key priority for householders, making this an attractive
sector for retailers. It is also attractive because of the relatively
small number of well-known manufacturer brands. This means
a specialist home improvement retailer provides a vital role for
the consumer by offering a wide product choice and expert
advice. We can offer a high proportion of own brand product,
achieve economies of scale and have a more defensible position
against online or generalist operators when compared with
other retail segments. Read more about our business model
on pages 6 to 7.
Our strategy
Our unique contribution as a
business to our customers is
that we can harness our home
improvement experience, our
heritage as a leader in sustainability
and our international scale and
sourcing capability to bring new,
more sustainable and more
affordable products to market.
This means our customers can have better homes, the
planet’s resources can be protected and we generate value
for our people, communities and shareholders.
By also providing our customers with project advice and new
shopping channels to complement our stores, we will make
it easier for them to adapt their homes to their evolving needs.
Our shorthand for describing this purpose is Better Homes,
Better Lives.
The next phase of our development towards this vision –
Creating the Leader – builds on the success of the previous
phase known as Delivering Value, which has repositioned
Kingfisher as a stronger business in the attractive home
improvement market.
Strategic Report
Page Heading
EAS IER
COMMON
EXPAND
Strategic Report
CREATING
THE
LEADER
Annual Report and Accounts 2013/14
8
Strategic Report
Annual Report and Accounts 2013/14
8
Our markets
We currently operate in nine
countries, spanning nearly 600
million households.
Our research shows that spending on home improvement
is a key priority for householders, making this an attractive
sector for retailers. It is also attractive because of the relatively
small number of well-known manufacturer brands. This means
a specialist home improvement retailer provides a vital role for
the consumer by offering a wide product choice and expert
advice. We can offer a high proportion of own brand product,
achieve economies of scale and have a more defensible position
against online or generalist operators when compared with
other retail segments. Read more about our business model
on pages 6 to 7.
Our strategy
Our unique contribution as a
business to our customers is
that we can harness our home
improvement experience, our
heritage as a leader in sustainability
and our international scale and
sourcing capability to bring new,
more sustainable and more
affordable products to market.
This means our customers can have better homes, the
planet’s resources can be protected and we generate value
for our people, communities and shareholders.
By also providing our customers with project advice and new
shopping channels to complement our stores, we will make
it easier for them to adapt their homes to their evolving needs.
Our shorthand for describing this purpose is Better Homes,
Better Lives.
The next phase of our development towards this vision –
Creating the Leader – builds on the success of the previous
phase known as Delivering Value, which has repositioned
Kingfisher as a stronger business in the attractive home
improvement market.
www.kingfisher.com
9
Creating the Leader: Self-help initiatives
Four Themes Eight Steps Key Performance Indicators (KPIs)
EASIER 1. Making it easier for customers to improve their home
2. Giving our customers more ways to shop
For more information see pages 10 to 11.
• Like-for-like sales growth (LFL)
• Unique web users
COMMON 3. Building innovative common brands
4. Driving efficiency and effectiveness everywhere
For more information see pages 12 to 13.
• % of Group sales direct sourced
• % of Group sales that are common
• Retail profit margin
EXPAND 5. Growing our presence in existing markets
6. Expanding in new and developing markets
For more information see pages 14 to 15.
• Kingfisher Economic Profit (KEP)*
* A measure of profit after a charge for the capital used
by the business. (See page 24.)
ONE TEAM 7. Developing leaders and connecting people
8. Sustainability: becoming Net Positive
For more information see pages 16 to 17.
• Group employee engagement scores
• Net Positive sustainability dashboard
Financial benefits
Predicting the potential retail profit benefits from this programme
today, when we don’t know the economic conditions or
competitive landscape we will face in the future, is very difficult.
However, whatever the conditions, we believe our efforts will
drive higher LFL sales, higher gross margin and more cost
efficiencies than would have been delivered without this
programme. In total we estimate that this would create an
additional £300 million of annualised retail profit in the fifth
year (2016/17), net of price reinvestment and based on the
size of the business and market conditions in 2011/12.
EAS IER
COMMON
EXPAND
ONE TEAM
H
e
l p
in
g
p
e
o
p
le
h
a
v
e
b
e
t
te
r h
o
m
e
s
www.kingfisher.com
9
Accounts Governance Strategic Report
www.kingfisher.com
9
Creating the Leader: Self-help initiatives
Four Themes Eight Steps Key Performance Indicators (KPIs)
EASIER 1. Making it easier for customers to improve their home
2. Giving our customers more ways to shop
For more information see pages 10 to 11.
• Like-for-like sales growth (LFL)
• Unique web users
COMMON 3. Building innovative common brands
4. Driving efficiency and effectiveness everywhere
For more information see pages 12 to 13.
• % of Group sales direct sourced
• % of Group sales that are common
• Retail profit margin
EXPAND 5. Growing our presence in existing markets
6. Expanding in new and developing markets
For more information see pages 14 to 15.
• Kingfisher Economic Profit (KEP)*
* A measure of profit after a charge for the capital used
by the business. (See page 24.)
ONE TEAM 7. Developing leaders and connecting people
8. Sustainability: becoming Net Positive
For more information see pages 16 to 17.
• Group employee engagement scores
• Net Positive sustainability dashboard
Financial benefits
Predicting the potential retail profit benefits from this programme
today, when we don’t know the economic conditions or
competitive landscape we will face in the future, is very difficult.
However, whatever the conditions, we believe our efforts will
drive higher LFL sales, higher gross margin and more cost
efficiencies than would have been delivered without this
programme. In total we estimate that this would create an
additional £300 million of annualised retail profit in the fifth
year (2016/17), net of price reinvestment and based on the
size of the business and market conditions in 2011/12.
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
10
Our key steps
1. Making it easier for
customers to improve
their home
2. Giving our customers
more ways to shop
What we did in 2013/14
Emphasised our affordability credentials:
• Launched ‘handy prices’ marketing campaign in B&Q
• Invested in pricing in Castorama France and Poland
• Rolled out Brico Dépôt ‘back to basics’ marketing campaign
• Extended Brico Dépôt France and Spain programme
of ‘arrivages’ (one-off special buys) to Turkey and Poland
• Launched UK Enterprise Finance Guarantee scheme
for tradesmen
Extended our omnichannel offer:
• Upgraded B&Q online offer (www.diy.com), including
20,000 extra products for home delivery (using Screwfix
omnichannel infrastructure)
• Preparatory work to extend TradePoint (B&Q’s trade-only
offer) website to main shop floor categories – e.g.
kitchens – continues
• Launched upgraded websites in Turkey, China,
Brico Dépôt France and Spain. Work to upgrade Poland’s
website continues
• Trialled ‘click & collect’ in Castorama France and in Turkey
EASIER
Strategic Report
Creating the Leader
AFFORDABLE
INSPIRATION
CONFIDENCE
TECHNOLOGY
RANGE
HELPFUL
ADVICE
AVAILABILITY
EDUCATION
CHOICE
Annual Report and Accounts 2013/14
10
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
10
Our key steps
1. Making it easier for
customers to improve
their home
2. Giving our customers
more ways to shop
What we did in 2013/14
Emphasised our affordability credentials:
• Launched ‘handy prices’ marketing campaign in B&Q
• Invested in pricing in Castorama France and Poland
• Rolled out Brico Dépôt ‘back to basics’ marketing campaign
• Extended Brico Dépôt France and Spain programme
of ‘arrivages’ (one-off special buys) to Turkey and Poland
• Launched UK Enterprise Finance Guarantee scheme
for tradesmen
Extended our omnichannel offer:
• Upgraded B&Q online offer (www.diy.com), including
20,000 extra products for home delivery (using Screwfix
omnichannel infrastructure)
• Preparatory work to extend TradePoint (B&Q’s trade-only
offer) website to main shop floor categories – e.g.
kitchens – continues
• Launched upgraded websites in Turkey, China,
Brico Dépôt France and Spain. Work to upgrade Poland’s
website continues
• Trialled ‘click & collect’ in Castorama France and in Turkey
Strategic Report Governance Accounts
www.kingfisher.com
11
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priority in 2014/15 is to:
• Extend omnichannel capabilities
across the Group
CONFIDENCE
CONVENIENT
RESEARCH
AVAILABILITY
EDUCATION
CHOICE
OMNICHANNEL
ACCESSIBLE
12/13
13/14
11/12 15
19
24
Unique web users (m)
Monthly Moving Annual Average
+0.7%
-2.9%
12/13
+1.3%
11/12
Like-for-like sales
13/14
www.kingfisher.com
11
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priority in 2014/15 is to:
• Extend omnichannel capabilities
across the Group
www.kingfisher.com
11
12/13
13/14
11/12 15
19
24
Unique web users (m)
Monthly Moving Annual Average
+0.7%
-2.9%
12/13
+1.3%
11/12
Like-for-like sales
13/14
TradePoint’s updated website is now
transactional on 14,000 products.
Further updates will include main shop
floor categories
B&Q’s improved online offer includes
20,000 extra products for home delivery
Accounts Governance Strategic Report
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
12
Our key steps
3. Building innovative
common brands
4. Driving efficiency
and effectiveness
everywhere
What we did in 2013/14
Product:
• Launched energy-efficient ‘iQE’ Group brand
• Extended common paint ranges
? Rolled out ‘Colours’ Group own-brand paint into Russia and Spain
? Commenced roll out of new ‘Colours’ own-brand emulsion paint
range across B&Q UK & Ireland (in 120 stores) and Castorama
France (all 105 stores completed)
? Launched exclusive ‘Valspar’ mixing desk paint into B&Q UK
& Ireland (now in 120 stores) and China
• Launch of ‘Site’ workwear into Brico Dépôt France now planned during
2014/15 following ‘arrivages’ (one-off special buys) trial during 2013/14
• Held inaugural European product show, attended by 6,000 store and
buying colleagues from the UK and France
• Achieved 9% common (up from 8% in 2012/13) and 20% direct
sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality
over quantity
• Extended French common supplier contracts to the wider Castorama
and Brico Dépôt brands division
Efficiency:
• Upweighted distribution centre and cross-docking capability in
Poland, Spain and Turkey
• SG&A
(1)
optimisation from media buying programmes across the
UK and France. Achieved c.£40m total savings from Group SG&A
initiatives since the start of Creating the Leader
• Extended Brico Dépôt shelf-ready packaging from 20% to 32%
• Rolled out France and Spain all-staff bonus programmes to Poland
(linked to individual store sales and profit growth)
• Undertook IT process mapping analysis at Castorama France in
readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.
COMMON
WORLD’S BEST PRODUCTS
LOCAL MARKETS
SCALE
EXCLUSIVE BRANDS
CUSTOMER
CHOICE
UNIQUE
EFFICIENCY
INNOVATION
INTERNATIONAL
Annual Report and Accounts 2013/14
12
Strategic Report
Creating the Leader
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
12
Our key steps
3. Building innovative
common brands
4. Driving efficiency
and effectiveness
everywhere
What we did in 2013/14
Product:
• Launched energy-efficient ‘iQE’ Group brand
• Extended common paint ranges
? Rolled out ‘Colours’ Group own-brand paint into Russia and Spain
? Commenced roll out of new ‘Colours’ own-brand emulsion paint
range across B&Q UK & Ireland (in 120 stores) and Castorama
France (all 105 stores completed)
? Launched exclusive ‘Valspar’ mixing desk paint into B&Q UK
& Ireland (now in 120 stores) and China
• Launch of ‘Site’ workwear into Brico Dépôt France now planned during
2014/15 following ‘arrivages’ (one-off special buys) trial during 2013/14
• Held inaugural European product show, attended by 6,000 store and
buying colleagues from the UK and France
• Achieved 9% common (up from 8% in 2012/13) and 20% direct
sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality
over quantity
• Extended French common supplier contracts to the wider Castorama
and Brico Dépôt brands division
Efficiency:
• Upweighted distribution centre and cross-docking capability in
Poland, Spain and Turkey
• SG&A
(1)
optimisation from media buying programmes across the
UK and France. Achieved c.£40m total savings from Group SG&A
initiatives since the start of Creating the Leader
• Extended Brico Dépôt shelf-ready packaging from 20% to 32%
• Rolled out France and Spain all-staff bonus programmes to Poland
(linked to individual store sales and profit growth)
• Undertook IT process mapping analysis at Castorama France in
readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.
www.kingfisher.com
13
Key Performance
Indicators (KPIs)
* The reduction in retail profit margin reflects difficult
economic conditions in Europe and our decision to
improve prices for customers in our major markets.
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are to:
• Extend sourcing programmes
(e.g. new cross-Group MacAllister
power and hand tools and
Blooma BBQs)
• Start four-year Group-wide IT
programme, consistent with our
ongoing capital expenditure plans
SCALE
CUSTOMER
CHOICE
EFFICIENCY
LOCAL TASTE
DIRECT SOURCING
INTERNATIONAL
EXCLUSIVE
STRONGER TOGETHER
DIVERSE
PRODUCTIVITY
www.kingfisher.com
13
www.kingfisher.com
13
Key Performance
Indicators (KPIs)
* The reduction in retail profit margin reflects difficult
economic conditions in Europe and our decision to
improve prices for customers in our major markets.
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are to:
• Extend sourcing programmes
(e.g. new cross-Group MacAllister
power and hand tools and
Blooma BBQs)
• Start four-year Group-wide IT
programme, consistent with our
ongoing capital expenditure plans
Kingfisher’s inaugural European product
show was held in October 2013 involving
6,000 colleagues from the UK and France
Blooma BBQs, one of our Group own brands,
feature dishwasher safe and reversible grills
Group own-brand MacAllister has developed
a new drill with a light for easy use in
confined spaces
Accounts Governance Strategic Report
12/13
13/14
11/12 2
8
9
8.1
7.4
7.2*
Common product sales
% of total sales
15
19
20
12/13
13/14
11/12
Products direct sourced
% of total sales
12/13
13/14
11/12
Retail pro?t margin
%
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
EXPAND
GROWTH
HIGHER RETURNS
TRADE
FLEXIBILITY
AMBITION
INFILL
CONSUMER REACH
BIG BOX
INTERNATIONAL CAPABILITY
LOCAL EXPERTISE
Annual Report and Accounts 2013/14
14
Strategic Report
Creating the Leader
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
www.kingfisher.com
15
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are:
• Organic growth of 2% (71 net new
stores, of which 54 are Screwfix outlets)
including entering two new markets
• To actively manage the portfolio
including completing the disposal of
Hornbach and looking for a strategic
partner for B&Q China (see the Group
CEO’s statement on page 5)
• To continue to capitalise on
consolidation opportunities (as we
did in Romania)
* See page 24.
HIGHER RETURNS
KINGFISHER ECONOMIC PROFIT
AMBITION
SMALL BOX
OMNICHANNEL
NEW TERRITORIES
INTERNATIONAL CAPABILITY
LOCAL EXPERTISE
www.kingfisher.com
15
www.kingfisher.com
15
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are:
• Organic growth of 2% (71 net new
stores, of which 54 are Screwfix outlets)
including entering two new markets
• To actively manage the portfolio
including completing the disposal of
Hornbach and looking for a strategic
partner for B&Q China (see the Group
CEO’s statement on page 5)
• To continue to capitalise on
consolidation opportunities (as we
did in Romania)
* See page 24.
Kingfisher acquired Bricostores’ 15 stores in
Romania in 2013/14. They will be rebranded
under the Brico Dépôt banner
Castorama France revamped two of its stores,
including this one in Dunkerque
Screwfix opened 60 new stores in the year,
taking the total to 335
Accounts Governance Strategic Report
12/13
13/14
11/12 131
44
74
King?sher Economic Pro?t (KEP)*(£m)
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
16
Our key steps
7. Developing leaders
and connecting people
8. Sustainability:
becoming Net Positive
What we did in 2013/14
People:
• Continued to extend the Kingfisher One Academy
Net Positive:
• Published first Net Positive report and appointed Richard
Gillies from Marks and Spencer Group plc as Group
Sustainability Director, to lead the Net Positive agenda
(see www.kingfisher.com/netpositive)
• Over 1,400 Kingfisher employees shared an estimated
gain of £10 million following the maturity of the ShareSave
scheme in December 2013
ONE TEAM
DEVELOPING LEADERS
FORCE FOR GOOD
NET POSITIVE
DIVERSITY
RECRUITMENT
AMBITION
COLLABORATION
ACADEMY
HARNESS
ENGAGEMENT
TALENT
Annual Report and Accounts 2013/14
16
Strategic Report
Creating the Leader
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
16
Our key steps
7. Developing leaders
and connecting people
8. Sustainability:
becoming Net Positive
What we did in 2013/14
People:
• Continued to extend the Kingfisher One Academy
Net Positive:
• Published first Net Positive report and appointed Richard
Gillies from Marks and Spencer Group plc as Group
Sustainability Director, to lead the Net Positive agenda
(see www.kingfisher.com/netpositive)
• Over 1,400 Kingfisher employees shared an estimated
gain of £10 million following the maturity of the ShareSave
scheme in December 2013
www.kingfisher.com
17
Key Performance
Indicators (KPIs)
* Based on a wider sample of employees with over
70,000 staff invited to participate in 2013/14. The
2012/13 figure of 4.11 for the leadership group rose
to 4.25 in 2013/14.
** For full information go to
www.kingfisher.com/netpositive/reporting
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the Creating
the Leader framework.
Our key priorities in 2014/15 are to:
People:
• Increase focus on talent management
• Continue to develop Kingfisher One
Academy with new programmes
Net Positive:
• Establish processes to accelerate
Net Positive innovation and to apply
what we learn across the Group
• Further integrate Net Positive into our
Operating Company business plans
DEVELOPING LEADERS
FORCE FOR GOOD
AMBITION
ACADEMY
CONNECTING PEOPLE
ENGAGEMENT
SKILLS
MOBILITY
TALENT
RETENTION
POSITIVE IMPACT
www.kingfisher.com
17
www.kingfisher.com
17
Key Performance
Indicators (KPIs)
* Based on a wider sample of employees with over
70,000 staff invited to participate in 2013/14. The
2012/13 figure of 4.11 for the leadership group rose
to 4.25 in 2013/14.
** For full information go to
www.kingfisher.com/netpositive/reporting
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the Creating
the Leader framework.
Our key priorities in 2014/15 are to:
People:
• Increase focus on talent management
• Continue to develop Kingfisher One
Academy with new programmes
Net Positive:
• Establish processes to accelerate
Net Positive innovation and to apply
what we learn across the Group
• Further integrate Net Positive into our
Operating Company business plans
The Kingfisher One Academy ran 10
programmes for the Group’s top 200 leaders
in 2013/14
The first report covering our performance
against our Net Positive targets was
published in June 2013
Kingfisher achieved Business in the Community’s
Corporate Responsibility Index Platinum Big Tick
in the 2013 survey. We are also included in two
socially responsible indices, the FTSE4Good and
Dow Jones Sustainability Index.
Accounts Governance Strategic Report
Engagement scores
Gallup Q12 survey (out of 5)*
13/14 £2.3bn (eco-product sales)
12/13 £2.1bn (eco-product sales)
11/12 £2.2bn (eco-product sales)
12/13
13/14
11/12 3.96
3.91
3.95
Sales of products with eco-credentials
% of total sales**
12/13
13/14
11/12 20
20
21
Annual Report and Accounts 2013/14
18
Strategic Report
Sustainability
Annual Report and Accounts 2013/14
18
Our Net Positive Approach
By becoming Net Positive we are making
it easier for our customers to enjoy homes
that are better and more sustainable. By
operating in a Net Positive way we aim to
become carbon positive, waste nothing,
be restorative to the environment, and
have a positive impact on people and
communities. This will enable us to create
sustained value for our business and
stakeholders. It is making our business
stronger, generating new streams of
revenue and reducing our costs. For
example, we have saved at least £30
million over three years through improved
recycling and energy efficiency at our
stores and operations.
We have 50 ambitious targets. Our
Group-level priorities – timber, energy,
innovation and communities – are areas
where we believe we can have the most
significant impact.
Our Net Positive priorities:
Timber
Timber is an essential raw material for
our business. Through responsible
sourcing, we aim to safeguard future
supplies at an affordable price while
protecting and enhancing forests.
This makes it easier for customers to
make more sustainable choices.
In 2013/14, 87% of the timber (by volume)
used in our products was responsibly
sourced (89% 2012/13). This decrease
reflects our work during 2013/14 to
improve the quality and scope of our
data, which identified a number of
products not previously included in the
data scope. B&Q UK achieved 100%
responsibly sourced timber in its
products in 2011.
During 2013 B&Q developed a responsibly
sourced sandpaper range, which will bring
it to 100% responsible sourcing for both
timber and paper products. Screwfix, Brico
Dépôt Spain and Brico Dépôt France have
all achieved over 90% responsible timber
and paper sourcing.
We have launched forest projects that are
enhancing biodiversity and safeguarding
forests or woodlands by getting local
communities involved. Brico Dépôt Spain,
for example, launched two projects during
2013 that support reforestation and
enable school children and employees to
take part in forest conservation. Protecting
and improving forests helps to ensure a
resilient and sustainable timber supply
chain for the future.
Energy
Our energy saving products and services
help customers to reduce their bills and
create more comfortable homes. Our
customers are now saving almost 7 TWh
(terawatt-hours*) every year through the
energy saving products they’ve purchased
from us since 2011/12. We estimate
this could save our customers over
£450 million every year (based on the
average UK household energy bill).
We reduced the energy intensity
(kWh/m
2
) of our property portfolio by
8% from our 2010/11 baseline through
measures such as the introduction of
energy efficient LED lighting in stores and
distribution centres. New stores built to
eco-design principles opened at several
Operating Companies including Moulins
(Brico Dépôt France) and Marseille
(Castorama France).
We reduced total Greenhouse Gas (GHG)
emissions by 5% from our 2010/11
baseline (see table on page 19).
Innovation
Sales of products with eco-credentials
(those with a lower environmental impact)
totalled 21% of total sales revenue,
against our 2020 target of 50%. ‘Best-in-
class’ eco-products (our most innovative
eco-products) accounted for 5% of sales.
We have an ambition to develop ‘closed
loop’ products and supply chains, so that
the raw materials used in our ranges can
be continually reused, repurposed and
recycled. This will enable us to reduce
costs and waste, and access new, more
sustainable sources of materials.
We launched our own closed loop
calculator in 2013. This practical tool
enables us to assess and improve the
closed loop credentials of our products.
Using the calculator we have identified
products in our ranges with ‘closed
loop credentials’. These include the
‘Infinite’ kitchen worktop developed
by Castorama France from waste
wood, which is lighter and more water
resistant than traditional worktops (see
www.kingfisher.com/netpositive/infinite).
Communities
It is important to us that we invest in
projects that help people to acquire
practical home improvement skills and
that improve the lives of those living in
the communities near to our stores and
within our supply chain.
A number of our community projects
address this ambition. For example,
to inspire the next generation of home
improvers, Castorama Poland runs free
DIY classes for school children, reaching
47,000 young people since 2012/13,
while B&Q UK supported projects to
help Scouts get their DIY badge.
Becoming Net Positive
Net Positive is how we make a positive contribution to society
while creating a more successful business.
Key highlights
Timber
87%
Responsibly sourced timber
in our products in 2013/14
Energy
7 TWh
Energy saved for
customers since 2011/12
Innovation
£2.3bn
Eco-product sales
in 2013/14
Communities
530
Community projects
since 2012/13
* Terawatt-hours (TWh) is a standard unit of energy measurement. 1 TWh is the equivalent of 1 billion kilowatt hours (kWh), the measure which is used in home energy
consumption calculations.
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19
We have supported 530 community
projects since 2012/13. Many Operating
Companies also have company-wide
programmes. Screwfix, for example,
has launched the Screwfix Foundation,
a new charity that will raise funds to fix,
repair, maintain and improve properties
and community facilities for those in need.
Other issues
We work on improving our performance
in three important areas: Employees,
including creating a diverse workforce and
improving health and safety performance;
Suppliers, including the standards we set
through our Code of Conduct for Factory
Working Conditions; and the Environment,
including reducing waste and water use,
protecting biodiversity and phasing out
harmful chemicals. Areas of focus during
2013/14 included:
Human Rights
We take steps to protect the human rights
of people affected by our business, in
line with the UN Universal Declaration
of Human Rights and the UN Guiding
Principles on Business and Human
Rights. This commitment applies to all
our interactions with our stakeholders,
including employees, suppliers and
communities. During 2013, we
commissioned a specialist consultancy
to assess how well our business practices
align with the Guiding Principles in the
areas of supply chain, communities,
human resources and partners. We are
using the feedback and the results of
a wider Net Positive policy review to
further strengthen our policies relating
to human rights. Our Code of Conduct
for Factory Working Conditions (see
www.kingfisher.com/netpositive/code) sets
out the human rights standards we expect
supplier factories to meet. We monitor the
compliance of key suppliers with our Code
and in 2013/14 we audited over 500
suppliers and factories.
Diversity
By creating an inclusive culture and
diverse workforce we benefit from
a wide range of skills, experience and
perspectives. This improves customer
insight, widens our talent pool and
enables better decision-making. We
encourage diversity in all its forms.
During 2013/14, women made up
27% of the Kingfisher Board, 18% of
senior managers
(1)
and 39% of our total
workforce (see the Directors’ Report on
page 69 for more information).
How we manage sustainability
Net Positive is a core part of our Creating
the Leader corporate strategy, with the
Group Sustainability Director reporting
directly to the Group Chief Executive. Our
Operating Companies are taking the lead
in implementing Net Positive. Each has a
three-year plan for how they will
contribute to our Net Positive goals, with
targets for their business. By making Net
Positive part of how our companies work,
we will ensure that our activities are
relevant and meaningful in each of our
markets and that our companies are able
to maximise the benefits for their
customers and their businesses.
We launched our One Academy Net
Positive executive education module
during 2013/14, designed to further
improve understanding of Net Positive
among our most senior leaders.
We established the Net Positive Advisory
Council in 2013, a group of senior
external experts in different aspects of
sustainability, who will provide advice,
insight and challenge to help us progress
towards Net Positive.
Further information
Our Net Positive Report is published annually at
www.kingfisher.com/netpositive. The 2013/14
report will be published in June 2014.
(1) Includes the One Team Leadership Group and
directors of the Group’s subsidiary companies.
The figure rises to 20% when excluding
subsidiary directors.
Greenhouse Gas Emissions (tonnes of CO
2
e)
*
Baseline
10/11 12/13 13/14
Progress towards
target / Change
GHG emissions from the combustion of fuel and operation of facilities 154,953 150,244 160,223 na
GHG emission from the purchase of electricity, heat and steam 305,082 295,084 278,665 na
Total GHG emissions (2020 target = 25% reduction) 460,035 445,328 438,888 (5%)
‡
GHG emissions per m
2
of floor space 66.6 60.3 59.0 na
Methodology: Our GHG emissions have been calculated using UK government (DEFRA) emissions factors. Our data covers our material impacts: emissions from property
energy use, dedicated delivery fleets and business travel by road. Our Net Positive Report contains further details of our GHG emissions, including data on scope 3 emissions.
Our target is set against a baseline year of 2010/11. The 2013/14 Net Positive report will be published in June 2014.
* Our Net Positive data, including our Greenhouse Gas data, covers all our Operating Companies and 50% of our Koçtas¸ Joint Venture.
‡
Reductions are measured against our baseline year 2010/11.
Board
Gender split
Female 27%
Male 73%
Senior Management
Female 18%
Male 82%
Total workforce (FTE)
Female 39%
Male 61%
11
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Annual Report and Accounts 2013/14
20
Strategic Report
Financial Review
Annual Report and Accounts 2013/14
20
A summary of the reported financial results for the year ended
1 February 2014 is set out below:
2013/14 2012/13 Increase
Sales £11,125m £10,573m +5.2%
Adjusted pre-tax profit £744m £715m +4.1%
Profit before taxation after
exceptional items £759m £691m +9.8%
Adjusted basic earnings
per share 23.4p 22.3p +4.9%
Dividends 9.9p 9.46p +4.7%
A reconciliation of statutory profit to adjusted profit is set
out below:
2013/14
£m
2012/13
£m Increase
Profit before taxation 759 691 +9.8%
Exceptional items (17) 26
Profit before exceptional
items and taxation 742 717 +3.5%
Financing fair value
remeasurements (FFVR) 2 (2)
Adjusted pre-tax profit 744 715 +4.1%
Profit and EPS including all exceptional items for the year
ended 1 February 2014 are set out below:
2013/14 2012/13 Increase
Profit after tax £710m £564m +25.9%
Basic EPS 30.0p 24.1p +24.5%
For glossary of terms used in the Financial Review see the
inside back cover.
Overview
Statutory profit after tax increased by 25.9% in the year to
£710 million. The statutory results for the year have benefited
significantly from exceptional items which add £17 million to
profit before tax, £131 million to profit after tax and 5.5p to
basic earnings per share. For comparative purposes adjusted
measures are therefore presented. The exceptional items are
detailed further below.
The Group’s financial reporting year ends on the nearest
Saturday to 31 January. The current year is for the 52 weeks
ended 1 February 2014 with the comparative financial year
being for the 53 weeks ended 2 February 2013. This only
impacts the UK & Ireland businesses with all of the other
businesses reporting on a calendar basis as a result of local
requirements. The effect of the 53rd week on the prior
year results of the Group is the inclusion of an additional
£72 million sales and an immaterial benefit to retail profit.
Total sales grew by 3.5% on a constant currency 52 week basis
and increased by 5.2% to £11.1 billion (2012/13: £10.6 billion)
on a reported rate basis. On a like-for-like basis, Group sales
were up 0.7%. During the year, a net additional 91 new stores
were opened, including 60 Screwfix outlets and 15 acquired
stores in Romania, taking the store network to 1,079 stores
(excluding 45 Turkey JV stores).
Retail profit before exceptional items increased by £27 million to
£805 million (2012/13 restated: £778 million), including a £24
million favourable foreign exchange movement representing a
0.7% increase on a constant currency basis.
Karen Witts
Group Finance Director
To watch a video interview with Karen Witts, go to
http://annualreport.kingfisher.com/2013-14/strategic-report/financial-review.html
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21
Trading Review by Major Geography
France
Sales £m 2013/14 2012/13
% Total
Change
Reported
% Total
Change
Constant
currency
% LFL
Change
France 4,423 4,194 +5.5% +0.8% (1.2)%
Retail
profit £m 2013/14 2012/13
% Change
Reported
% Change
Constant
currency
France 396 397 (0.4)% (4.7)%
All trading commentary below is in constant currencies.
Kingfisher France
Kingfisher France sales grew by 0.8% (-1.2% LFL) to £4,423
million in soft markets impacted by weak consumer confidence.
Across the two businesses, seven net new stores were opened
and four were revamped, adding around 4% new space.
Gross margins were down 30 basis points, with ongoing self-
help initiatives offset by higher price promotional activity across
both businesses. Continued focus on cost control, including
lower levels of variable pay, resulted in retail profit down
4.7% compared to last year.
Castorama total sales grew by 2.3% (+0.5% LFL) to £2,469
million. According to Banque de France data, sales for the home
improvement market were down 1.4%. Castorama benefited
from its innovative ‘Do-it-Smart’ approach aimed at making
home improvement projects easier for customers. LFL sales of
indoor products were up around 1% with sales of new kitchen,
bathroom and storage ranges performing particularly well.
Sales of outdoor seasonal products were down around 1%.
Brico Dépôt total sales declined by 1.0% (-3.0% LFL) to
£1,954 million. According to Kingfisher estimates, sales for
the comparable market, which more specifically targets trade
professionals and heavy DIYers, were down around 2%. Brico
Dépôt benefited from self-help initiatives which continued to
progress well. These included new ranges introduced last
year (e.g. kitchen, bathroom and power tool ranges) and
more ‘arrivages’ (rolling one-off special buys), reinforcing
Brico Dépôt’s value credentials.
UK & Ireland
Sales £m 2013/14 2012/13
% Total
Change
Reported
% Total
Change
Constant
currency 52
week basis
% LFL
Change
UK &
Ireland 4,363 4,316 +1.0% +2.7% +1.1%
Retail
profit £m 2013/14 2012/13
% Change
Reported
% Change
Constant
currency
UK &
Ireland 238 231 +3.3% +3.4%
All trading commentary below is in constant currencies and % movements on
a 52 week basis.
Note: 2012/13 retail profit comparatives restated by £3 million to reflect
reclassification of pension administrative expenses from finance costs to retail
profit, as per the amended IAS 19.
Kingfisher UK & Ireland
Kingfisher UK & Ireland total sales were up 2.7% (+1.1% LFL)
to £4,363 million supported by a strong performance from
Screwfix and encouraging early signs in the smaller tradesman
market, offset by a slower underlying retail market.
Kingfisher UK & Ireland delivered retail profit growth of 3.4%
to £238 million. Gross margins were up 10 basis points with the
benefits from ongoing self-help initiatives offset by investment
in pricing across both businesses. A strong focus on operating
cost efficiencies continued.
B&Q UK & Ireland’s total sales were up 0.4% (+0.1% LFL) to
£3,698 million. Sales of outdoor products were up around 2%.
Sales of indoor products were down around 1%. TradePoint
continues to progress with sales up around 7% compared
to last year.
In Ireland, following the conclusion of the Examinership process
in May 2013, one store was closed and significant rent reductions
achieved across the remaining stores. The business returned to
break even in the second half of the year.
The market for the UK’s leading home improvement retailers was
up 3.8%, including seasonal ranges up 5.0%, following record
adverse weather last year. On a comparable basis, B&Q UK &
Ireland sales were up 1.7% and including Screwfix, up 4.1%.
Strengthened management team
B&Q is a strong brand with the market leading position in
the attractive UK home improvement market. Despite a very
challenging housing and economic backdrop for the last six
years, during which its market declined around 12% (as per
Kingfisher estimates – BCG commissioned report), Kingfisher
UK & Ireland delivered broadly flat sales and achieved profit
growth of 50% by exploiting the UK trade market opportunity,
delivering a number of self-help initiatives whilst continuing to
invest in B&Q’s stores and infrastructure. Looking ahead, its
customers and market are evolving very quickly and B&Q UK
& Ireland has set about redoubling its efforts to achieve future
growth and continued success.
In October 2013, Kevin O’Byrne, an executive director of
Kingfisher plc, assumed direct leadership of B&Q UK & Ireland.
He subsequently further strengthened the B&Q UK & Ireland
board with the appointment of three executives from the fast
growing, highly successful Screwfix business (Steve Willett,
previously Screwfix CEO; David Lowther, Supply Chain; and Guy
Eccles, HR) and the appointment of two senior executives from
outside Kingfisher (Chris Moss as Marketing Director, formerly
Virgin, Orange and 118 118; and more recently Darren Blackhurst
as Commercial Director, formerly Tesco, ASDA and Matalan).
This significantly strengthened management team has made
an encouraging early start, working towards two key aims:
1. Re-energising the business. Examples of priorities include
improving store navigation and customer communication,
and driving footfall with better targeted marketing.
2. Simplifying the business and growing sales and economic
profit to make it more agile in the market place and more
efficient. Examples of priorities include delivering a seamless
and efficient omnichannel experience for customers,
optimising the store footprint, reducing complexity in the
end-to-end supply chain, thereby reducing costs to support
lower prices, and undertaking a detailed review of all the
19 categories across our stores, focusing on customer needs
and business models.
Annual Report and Accounts 2013/14
22
Strategic Report
Financial Review continued
Annual Report and Accounts 2013/14
22
Screwfix grew total sales by 17.6% (+7.3% LFL) to £665 million,
benefiting from a strong promotional programme, extended
opening hours, the continued roll out of new outlets and the
successful introduction of a mobile ‘Click, Pay & Collect’ offer
last year. Sixty outlets were opened, taking the total to 335.
The market for the smaller tradesman was up around 2%.
Other International
Sales £m 2013/14 2012/13
% Total
Change
Reported
% Total
Change
Constant
currency
% LFL
Change
Other
International 2,339 2,063 +13.3% +10.5% +3.4%
Retail profit £m 2013/14 2012/13
% Change
Reported
% Change
Constant
currency
Other
International 171 150 +14.2% +11.4%
All trading commentary below is in constant currencies.
Other International total sales increased by 10.5% (+3.4% LFL)
to £2,339 million driven by the acquisition of Romania, LFL
growth in Poland, Russia and China and new store openings.
Retail profit increased by 11.4% to £171 million primarily
driven by Poland.
During the year 15 net new stores were opened, two in Poland,
one in Russia, four in Spain and eight in Turkey
(1)
. Including the
acquisition of 15 additional stores in Romania in Q2, 17% net
new space was added compared to last year.
Sales in Poland were up 3.9% (+1.2% LFL) to £1,109 million
reflecting new store openings. Gross margins were up 60 basis
points with self-help initiatives more than offsetting investment
in pricing which annualised during Q2. Productivity initiatives
largely offset cost inflation resulting in a 10.9% increase in retail
profit to £123 million.
In Russia sales grew by 9.2% (+8.0% LFL) to £453 million
benefiting from new store openings. LFL sales were up 10.5%
in H1 though slower in H2 (+5.8% LFL). Retail profit was
£15 million (2012/13: £16 million reported retail profit) reflecting
higher pre-opening and advertising costs compared to last year.
In Turkey, Kingfisher’s 50% JV, Koçtas¸, grew sales by 8.0%
(+5.0% LFL) to £332 million reflecting new store openings.
Retail profit contribution was up 24.4% to £11 million.
Brico Dépôt Spain sales grew by 16.4% (-3.1% LFL) to £284
million reflecting new store openings offset by a difficult market.
Retail profit was £1 million (2012/13: £1 million reported retail
profit). Bricostore Romania, acquired in Q2, contributed sales
of £72 million and retail profit of £1 million.
Hornbach, in which Kingfisher had a 21% economic interest
(2)
,
contributed £26 million to retail profit (2012/13: £26 million
reported retail profit).
B&Q China sales increased by 8.0% (+8.7% LFL) to £421
million benefiting from additional promotional activity. The retail
loss was £6 million (2012/13: £9 million reported loss) largely
relating to costs on the new format store trial which opened in
March 2013.
(1) Including four Koçtas¸ ‘Fix’ outlets.
(2) Following the disposal of the Group’s unlisted shares in Hornbach, going forward
the Group will no longer record its share of Hornbach’s results within retail profit.
Interest
The net interest income for the year was £23 million, compared
with a restated prior year charge of £1 million. A breakdown of
this is shown below.
2013/14
£m
2012/13
(restated)
£m
Underlying net interest (2) (3)
FFVR (2) 2
Exceptional items 27 –
Statutory net interest 23 (1)
The principal movement in net interest is driven by the release of
a £27 million exceptional repayment supplement provision on the
Kesa demerger French tax case (see exceptional items below).
Profit before tax increased by 9.8% to £759 million. After
removing the impact of exceptional items and fair value
remeasurements, adjusted pre-tax profit grew by 4.1% to
£744 million.
Profit after tax for the year was £710 million (2012/13: £564
million). This resulted in the Group recording a basic EPS of
30.0p in the year (2012/13: 24.1p).
Taxation
The effective corporation tax rate, excluding exceptional and prior
year items is 26% this year compared with 27% in 2012/13. The
overall rate of tax includes the impact of exceptional items and
prior year adjustments. The impact of such items reduced the
rate from 26% to 6% (2012/13: 18%) reflecting the positive
decision in the Kesa demerger French tax case (see exceptional
items below), the impact on deferred taxes of the further 3% fall
in the UK rate and the release of prior year provisions either
reassessed or time expired.
Kingfisher’s effective tax rate is sensitive to the blend of tax rates
and profits in the Group’s various jurisdictions. The adjusted
effective rate of tax, calculated on profit before exceptional items,
prior year tax adjustments and the impact of rate changes, is
26% (2012/13: 27%). This is higher than the UK statutory rate
because of the amount of Group profit that is earned in higher
tax jurisdictions and because no future benefit is assumed for
losses incurred in overseas jurisdictions such as China.
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Effective tax rate
calculation
Profit
£m
Tax
£m
2013/14
%
2012/13
%
Profit before tax
and tax thereon 759 49 6 18
Exceptional items (17) 114
Prior year items
and rate changes – 27
Total – adjusted 742 190 26 27
The effective rate of tax is lower than in 2012/13 as a result of
the mix of profits and tax rate changes in some of the countries
in which we operate. The most significant rate changes in
2013/14 were the UK statutory tax rate falling from 24% to
23% regarding current year profits and from 23% to 20%
regarding deferred tax, offset by an increase in the French
tax rate from 36% to 38%.
The tax rates for this financial year and the expected rates for
next year are as follows:
Jurisdiction
Statutory tax rate
2014/15
Statutory tax rate
2013/14
UK 21% 23%
France 34.4% – 38.0% 34.4% – 38.0%
Poland 19% 19%
Rest of Europe 0% – 34% 0% – 34%
Asia 16.5% – 25% 16.5% – 25%
Tax contribution
Kingfisher makes a significant economic contribution to the
countries in which it operates. In 2013/14 it contributed £1.71
billion in taxes it both pays and collects for these governments.
The Group pays tax on its profits, its properties, in employing
79,000 people, in environmental levies, in customs duties and
levies as well as other local taxes. The most significant taxes it
collects for governments are the sales taxes charged to its
customers on their purchases (VAT) and employee payroll
related taxes. Taxes paid and collected together represent
Kingfisher’s total tax contribution which is shown below:
Total taxes paid as a result of Group operations
2013/14
£bn
2012/13
£bn
Taxes borne 0.74 0.70
Taxes collected 0.97 0.90
Total tax contribution 1.71 1.60
Kingfisher participates in the Total Tax Contribution survey
that PwC perform for the Hundred Group of Finance Directors.
The 2013 survey ranked Kingfisher 31st for its Total Tax
Contribution in the UK. In 2013, 101 companies contributed
to the survey.
Taxation governance and risk management
The Kingfisher Code of Conduct applies high standards of
professionalism and integrity which underpin the Group’s
approach to tax policy, strategy and governance, which is Board
approved. Our core tax objective is to pay the right amount of tax
at the right time and to comply with all relevant tax legislation in
all Group entities. The Kingfisher Group undertakes its activities,
and pays tax in the countries in which it operates, in compliance
with the local and worldwide tax rules. In all countries where it
has activities, it has the staff, premises and other assets required
to run its business there. The responsibility for tax policy and
management of tax risks lies with the Group Finance Director
and the Group Tax Director who engage regularly with the main
Board and the Audit Committee on all tax matters.
We manage the tax that we pay and the risks that arise having
regard to the interests of all stakeholders including our investors,
our customers, our staff and the governments and communities
in the countries in which we operate. Tax risks can arise from
changes in law, differences in interpretation of law and the failure
to comply with the applicable rules and procedures. We manage
and control these risks through local management, the tax
professionals we employ and using advice from reputable
professional firms. Where disputes arise with the authorities
these are dealt with promptly in a professional open and
constructive manner.
Exceptional items
2013/14
£m Gain/
(charge)
2012/13
£m Gain/
(charge)
Kesa demerger French tax case –
repayment supplement 27 –
Net impairment of investment
in Hornbach (14) –
Acquisition and integration costs (5) –
Ireland restructuring 7 (21)
UK restructuring – (16)
Net pension gain – 11
Gain on disposal of properties 2 –
17 (26)
Tax on exceptional items (4) 1
Kesa demerger French tax case 118 –
Net exceptional items 131 (25)
In the year the Group booked net post-tax exceptional income
of £131 million (2012/13: £25 million charge).
Total value of taxes borne
Business rates
Employers social
security
Corporation tax
Other taxes
£0.7bn
Annual Report and Accounts 2013/14
24
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Annual Report and Accounts 2013/14
24
Kingfisher paid €138 million tax to the French tax authorities
in the year ended 31 January 2004 as a consequence of the
Kesa Electricals demerger and recorded this as an exceptional
tax charge. Following a successful appeal Kingfisher received
a refund totalling €169 million from the French tax authorities
in September 2009. The French tax authorities appealed this
decision with the final level of court finding in Kingfisher’s favour
in July 2013. This decision removed any uncertainty over the
position and resulted in an exceptional credit of £145 million
(€169 million), of which £27 million has been recognised in
interest and £118 million in taxation.
In 2013/14 Kingfisher acquired Bricostore in Romania
and announced its intention to pilot four Screwfix outlets in
Germany in 2014. At the same time Kingfisher undertook
a review of its strategic investment in Hornbach, which has
operations in both of these markets. On 31 January 2014 the
Group decided to divest its equity stake in Hornbach and also
waive its right to appoint directors to the Hornbach board.
This decision has impacted the 2013/14 financial statements
by changing the basis on which the Group accounts for its
shareholding, resulting in a net £14 million exceptional loss with
the investment being impaired to its market value of £198 million
and reclassified as an asset held for sale. In 2013/14 the Group
recorded a £14 million pre-exceptional profit in relation to its
share of Hornbach’s results, comprising £26 million of retail
profit less £12 million share of interest and tax.
Following the end of the 2013/14 financial year, on 24 March
2014 Kingfisher agreed to sell all the shares it holds in Hornbach
Holding AG and Hornbach-Baumarkt AG which together
formed its 21.2% stake in Hornbach, for approximately £195
million. The stakes in the listed Hornbach Holding preference
shares and Hornbach Baumarkt have been sold to international
institutional investors in an ‘accelerated bookbuilding’ by
Berenberg Bank. The Hornbach family have agreed to buy
the non-listed ordinary shares in Hornbach Holding AG.
Acquisition and integration costs of £5 million principally
comprise costs of acquiring and integrating the Bricostore
Romania business.
The current year also includes an exceptional credit of £7 million
for Ireland restructuring, reflecting the release of provisions
recorded in January 2013 when B&Q Ireland entered into an
Examinership process. Following the conclusion of this process
in May 2013, only one store was closed rather than the potential
of five, with over 600 jobs saved.
Earnings per share
Basic earnings per share (EPS) have increased by 24.5%
to 30.0p (2012/13: 24.1p). On a more comparable basis,
removing the impact of exceptional items, financing fair value
remeasurements and the effect of prior year tax adjustments,
adjusted basic earnings per share increased by 4.9% to
23.4p (2012/13: 22.3p).
Earnings
£m 2013/14
Earnings
£m 2012/13
Basic earnings per share 709 30.0p 564 24.1p
Net exceptional items (131) (5.5)p 25 1.1p
Prior year tax items
and rate changes (27) (1.1)p (66) (2.8)p
FFVR (net of tax) 1 – (1) (0.1)p
Adjusted earnings
per share 552 23.4p 522 22.3p
Dividends
The Board has proposed a final dividend of 6.78p which
results in a full year dividend of 9.9p, an increase of 4.7%
(2012/13: 9.46p). The final dividend maintains full year dividend
cover on adjusted earnings at 2.4 times (2012/13: 2.4 times).
Going forward, the Group continues to aim to move towards a
medium-term annual dividend cover of around 2.5 times.
At this level, the Board believes the dividend will continue to
be prudently covered by earnings and free cash flow and remain
consistent with the capital needs of the business.
The final dividend for the year ended 1 February 2014 will be
paid on 16 June 2014 to shareholders on the register at close
of business on 16 May 2014, subject to approval of shareholders
at the Annual General Meeting, to be held on 12 June 2014.
A dividend reinvestment plan (DRIP) is available to shareholders
who would prefer to invest their dividends in the shares of the
Company. The shares will go ex-dividend on 14 May 2014. For
those shareholders electing to receive the DRIP the last date for
receipt of electing is 23 May 2014.
Economic returns
Management are focused on Kingfisher Economic Profit (KEP)
as a main measure of return on capital. It is used in the capital
investment process, to assess performance and drive returns in
strategic plans. KEP is derived from the concept of Economic
Value Added representing earnings after a charge for the annual
cost of capital employed in the business. Earnings are defined as
adjusted post-tax profit, excluding interest, property lease costs
and exceptional items. A charge is then deducted by applying
the weighted average cost of capital (WACC) to capital employed.
For the purposes of consistency both WACC and capital
employed are lease adjusted. Leases are capitalised based on
an estimate of their long-term property yields. In order to focus
on controllable factors both WACC and long-term property yields
are based on those in place when KEP was introduced.
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2013/14
£m
2012/13
£m
Increase
£m
Kingfisher Economic
Profit (KEP) 74 44 30
For comparison purposes, WACC rates and long-term yields
are based on rates that existed when the measure was
introduced in 2011.
Geographic divisional return
Kingfisher’s underlying KEP by geographic division is set out
below. The divisional invested capital excludes central goodwill
of £2.4 billion.
Sales
£bn
Proportion
of Group
sales %
Invested
Capital
(IC) £bn
Proportion
of Group
IC %
Returns £m KEP
2013/14 2012/13
UK 4.4 40% 5.9 48% 17 (5)
France 4.4 40% 2.4 20% 137 150
Other
International 2.3 20% 1.5 12% 46 37
Goodwill &
Central 2.4 20% (126) (138)
Total 11.1 12.2 74 44
Free cash flow
A reconciliation of free cash flow is set out below:
2013/14
£m
2012/13
£m
(restated)
Operating profit (before exceptional items) 746 718
Other non-cash items
(1)
265 264
Change in working capital 27 (178)
Pensions and provisions (before
exceptional items) (37) (42)
Operating cash flow 1,001 762
Net interest paid (8) (4)
Tax paid (142) (129)
Gross capital expenditure (304) (316)
Disposal of assets 12 17
Free cash flow 559 330
Dividends paid (224) (221)
Acquisition of Bricostore Romania
(including debt) (63) –
Other
(2)
(1) (10)
Share purchase for employee incentive
schemes (24) –
Net cash flow 247 99
Opening net cash/(debt) 38 (88)
Other movement including foreign
exchange (47) 27
Closing net cash 238 38
(1) Other non-cash items includes depreciation and amortisation, impairment
losses, share-based compensation charge, share of post-tax results of JVs
and associates, pension operating cost and profit/loss on retail disposals.
(2) Includes dividends received from JVs and associates, issue of shares and
exceptional items (excluding property disposals).
Net cash at the end of the year was £238 million (2012/13:
£38 million net cash).
Free cash flow of £559 million was generated in the year,
an increase of £229 million year on year primarily due to the
movement in working capital. This is a combination of LME and
week 53 impacts in the prior year, the reversal of a higher stock
position last year ahead of an early Easter and Chinese New
Year, and a higher level of showroom deposits at the year end,
following a solid kitchens, bedrooms & bathrooms trading
strategy for B&Q UK in Q4.
During the year free cash flow generated was utilised by the
dividend being increased to £224 million, the acquisition of
Bricostore Romania and an additional £24 million to acquire
6 million shares to cover existing share incentive schemes,
thereby avoiding dilution of current shareholders.
Capital expenditure
Gross capital expenditure for the year was £304 million
(2012/13: £316 million) with a further £63 million invested
on Bricostore Romania. A total of £12 million of proceeds from
disposals was received during the year (2012/13: £17 million).
The Group has a rigorous approach to capital allocation and
authorisation. The process includes:
• An annual strategic planning process based on detailed
medium-term plans for all businesses for the next three
years. This process drives the key strategic capital allocation
decisions and the output is reviewed by the Board;
• A capital approval process through a capital expenditure
committee, attended by the Group Chief Executive, Group
Finance Director, CEO Group Productivity and Development,
Group Property Director and Group General Counsel.
The committee is delegated to review all projects above
£0.75 million and to sign-off the projects between £0.75
million and £15.0 million (including the capitalised value of
lease commitments);
• Projects above £15.0 million are required to be approved
by the Board. All projects above £0.75 million are notified
to the Board;
• Clear investment criteria including KEP and NPV (Net Present
Value) and challenging hurdle rates for IRR (Internal Rate of
Return) and DPB (Discounted PayBack);
• An annual post-investment review process to undertake a
full assessment of all projects above £0.75 million which
were completed in the last 2 to 4 years. The findings of this
exercise are considered by both the capital expenditure
committee and the Board and used to inform the
assumptions for similar project proposals going forward;
• An annual review of KEP by store is performed which
drives plans to improve the returns of weaker stores, and
develop lessons from higher returning stores.
Annual Report and Accounts 2013/14
26
Strategic Report
Financial Review continued
Annual Report and Accounts 2013/14
26
Financial risk management
Kingfisher’s treasury function has primary responsibility
for managing certain financial risks to which the Group is
exposed, details of which are provided in note 24 of the
Group Financial Statements.
Management of balance sheet and liquidity
risk and financing
The Group finished the year with £238 million of net cash
on the balance sheet. However, the Group’s overall leverage is
more significant when including capitalised lease debt that in
accordance with accounting standards does not appear on the
balance sheet. The ratio of the Group’s lease adjusted net debt
(capitalising leases at 8 times annual rent) to EBITDAR is 2.3
times as at the year end. At this level the Group has financial
flexibility whilst retaining an efficient cost of capital.
A reconciliation of lease adjusted net debt to EBITDAR is set
out below:
2013/14
£m
2012/13
(restated)
£m
EBITDA 1,024 984
Property operating lease rentals 440 435
EBITDAR 1,464 1,419
Financial (net cash) (238) (38)
Pension position 100 –
Property operating lease rentals (8x)
(1)
3,520 3,480
Lease adjusted net debt 3,382 3,442
Lease adjusted net debt to EBITDAR 2.3x 2.4x
(1) Kingfisher believes 8x is a reasonable industry standard for estimating the
economic value of its leased assets.
Kingfisher aims to maintain its solid investment grade credit
rating whilst investing in the business where economic returns
are attractive and paying a healthy annual dividend to
shareholders. After satisfying these key aims and taking into
account the economic and trading outlook, any surplus capital
would be returned to shareholders.
Taking all these factors into account, in addition to increasing the
annual dividend by 5% (to an estimated £234 million) the Board
has approved a multi-year programme of additional capital
returns to shareholders, starting with around £200 million during
the financial year 2014/15. At this level we will retain flexibility to
continue reinvesting in the business, paying a healthy dividend
and capitalising on value enhancing consolidation opportunities
(as we did in Romania).
The timing and mechanism for this capital return will be kept
under review to ensure we maximise value creation for our
shareholders. Updates will be given with our interim and full
year results.
Kingfisher regularly reviews the level of cash and debt facilities
required to fund its activities. This involves preparing a prudent
cash flow forecast for the next three years, determining the
level of debt facilities required to fund the business, planning
for repayments of debt at its maturity and identifying an
appropriate amount of headroom to provide a reserve
against unexpected outflows.
Kingfisher has a £200 million committed bank facility maturing
in August 2016, which remained undrawn at the year end.
The terms of the US Private Placement note agreement and
the committed bank facility require only that the ratio of Group
operating profit, excluding exceptional items, to net interest
payable must be no less than 3:1 for the preceding 12 months
at half year and full year ends. At the year end the Group’s ratio
was significantly higher than this requirement.
The maturity profile of Kingfisher’s debt is illustrated at:
www.kingfisher.com/debtmaturity
Kingfisher deposits surplus cash with a number of banks with the
strongest short-term credit ratings and with money market funds
which have the strongest, AAA, credit rating and offer same day
liquidity. A credit limit for each bank or fund is agreed by the
Board covering the full value of deposits and the fair value of
derivative contracts. The credit risk is reduced further by
spreading the investments and derivative contracts across
several counterparties. At the year end, the Group had a total
of around £500 million of cash deposited with banks and in
money market funds. The highest cash deposit with a single
counterparty was £50 million.
The Group has entered into interest rate derivative contracts
to convert the fixed rate payable on its bonds and US Private
Placement notes to a floating rate of interest. The floating interest
rates paid by the Group under its financing arrangements are
based on LIBOR and EURIBOR plus a margin. The margins
were not changed during the year.
www.kingfisher.com
27
Strategic Report Governance Accounts
www.kingfisher.com
27
Capital risk management
The Group’s objectives when managing capital are:
• To safeguard the Group’s ability to continue as a going
concern and retain financial flexibility in order to continue
to provide returns for shareholders and benefits for other
stakeholders; and
• To maintain a solid investment grade credit rating of BBB.
The Group manages its capital by:
• Continued focus on free cash flow generation;
• Setting the level of capital expenditure and dividend in the
context of current year and forecast free cash flow generation;
• Rigorous review of capital investments and post investment
reviews to drive better returns; and
• Monitoring the level of the Group’s financial and leasehold
debt in the context of Group performance and its credit rating.
Kingfisher Insurance Limited, a wholly owned subsidiary, is
subject to minimum capital requirements as a consequence of
its insurance activities. The Group complied with the externally
imposed capital requirements during the year.
Acquisitions
On 31 May 2013, the Group acquired 100% of Bricostore
Romania, a home improvement business operating 15 stores
including eight freeholds. Kingfisher paid £35 million of cash
consideration and acquired £7 million of cash with Bricostore
Romania. In addition, debt of £35 million was acquired with the
business, which was immediately settled, resulting in a total
amount invested of £63 million. Goodwill of £18 million has
been recognised on acquisition.
The year end results include seven months’ trading of Bricostore
Romania, in which it contributed sales of £72 million and a retail
profit of £1 million. Since acquisition, Romania traded under its
acquired brand Bricostore. In March 2014, two stores were
converted into the Brico Dépôt format.
Property
The Group owns a significant property portfolio, most of which is
used for trading purposes. A valuation was performed for internal
purposes in November 2013 with the portfolio valued by external
professional valuers. Based on this exercise, on a sale and
leaseback basis with Kingfisher in occupancy, the value of
property is £3.5 billion at year end (2012/13: £3.6 billion).
This is compared to the net book value of £2.8 billion
(2012/13: £2.9 billion) recorded in the financial statements.
Pensions
At the year end, the Group had a net deficit of £100 million
(2012/13: £nil) in relation to defined benefit pension
arrangements of which a £29 million deficit (2012/13: £71
million surplus) is in relation to the UK Scheme. The adverse
movement is driven by UK scheme actuarial losses following the
inclusion of updated membership data from the 2013 triennial
funding valuation, partially offset by employer contributions
in the year.
The approach used to prepare the pension valuation is in line with
current market practice and international accounting standards,
and has been applied consistently. This accounting valuation
is very sensitive to a number of assumptions and market rates
which are likely to fluctuate in the future. To aid understanding
of the impact that changes to the assumptions could have on the
reported UK pension position, we have included sensitivity analysis
as part of the pension disclosure in note 27 of the Group Financial
Statements. Further details of key assumptions are also contained
within the note (see page 111).
The Group has adopted a revised pensions accounting standard
in the year. This has resulted in a reclassification of £3 million
of administrative costs of running the UK scheme from interest
to retail profit in both the current and prior years.
In the prior year, and following consultation with the active
members, the UK final salary pension scheme was closed
to future benefit accrual and replaced by an enhanced
defined contribution scheme offered to all UK employees.
Auto-enrolment of eligible employees into this scheme
commenced in the year, with around two-thirds of all
UK employees now participating.
Strategic Report Approval
The Strategic Report, including the Risk report on pages
28 to 31, is approved for and on behalf of the Board by:
Sir Ian Cheshire
Group Chief Executive
24 March 2014
Annual Report and Accounts 2013/14
28
www.kingfisher.com
11
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priority in 2014/15 is to:
• Extend omnichannel capabilities
across the Group
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
10
Our key steps
1. Making it easier for
customers to improve
their home
2. Giving our customers
more ways to shop
What we did in 2013/14
Emphasised our affordability credentials:
• Launched ‘handy prices’ marketing campaign in B&Q
• Invested in pricing in Castorama France and Poland
• Rolled out Brico Dépôt ‘back to basics’ marketing campaign
• Extended Brico Dépôt France and Spain programme
of ‘arrivages’ (one-off special buys) to Turkey and Poland
• Launched UK Enterprise Finance Guarantee scheme
for tradesmen
Extended our omnichannel offer:
• Upgraded B&Q online offer (www.diy.com), including
20,000 extra products for home delivery (using Screwfix
omnichannel infrastructure)
• Preparatory work to extend TradePoint (B&Q’s trade-only
offer) website to main shop floor categories – e.g.
kitchens – continues
• Launched upgraded websites in Turkey, China,
Brico Dépôt France and Spain. Work to upgrade Poland’s
website continues
• Trialled ‘click & collect’ in Castorama France and in Turkey
Strategic Report
Risks
Annual Report and Account 2013/14
28
Given the scale of our businesses, the Board of directors recognises that the nature, scope and potential impact of our key business
and strategic risks are subject to constant change. As such, the Board has implemented the necessary framework to ensure that it
has sufficient visibility of the Group’s key risks and the opportunity to regularly review the adequacy and effectiveness of our mitigating
controls and strategies.
During the year the Board has also considered the nature and level of risk that we are prepared to accept in order to deliver our
business strategies and has reviewed and approved our internal statement of risk appetite. This describes both the current and
desired levels of acceptable risk, supported by high level qualitative risk statements, ensuring that risks are proactively managed
to the level desired by the Board.
The Corporate governance report on page 45 describes the systems and processes through which the directors manage and mitigate
risks. The Board considers that the principal risks to achieving its strategic aims are set out below.
Easier
Strategic aim Group risks Mitigation
Making it easier
for our customers
to improve
their home
Our ‘Easier’ initiatives fail to
deliver demand and value
due to a lack of rigorous
change management
disciplines, capabilities
and resources.
Across our markets we are committed to ensuring that our stores and online
fulfilment channels are aligned with our desire to optimise our customers’ retail
experience. To support this we continue to evolve and innovate across our
product ranges, formats and customer offer.
However, changes are only implemented once we have completed an appropriate
level of planning and testing, relative to the risk. In addition, we ensure for any
such changes that the assumptions and insight that support the introduction
of new products or services will deliver the benefits to both our customers and
our shareholders.
Giving our
customers more
ways to shop
Our investment in systems
and supply chain
platforms fails to deliver
the anticipated benefits.
We continue to invest in new systems and technologies to support the
business including:
• Warehouse management, forecasting and replenishment technologies to
ensure we maximise operational agility and optimise the flow of product in order
to meet customer demand;
• Optimising distribution and logistics platforms to ensure we can deliver products
via the most efficient routes to market;
• The delivery of leading edge web architectures and platforms to provide a
compelling online offer, including the options to deliver enhanced ‘click, pay and
collect’ functionality, across smartphone and tablet-based applications; and
• We are investing in our financial and operational systems to develop a Group-
wide IT solution across our Operating Companies.
All investments are evaluated and monitored via the project management
methodologies in place across the Operating Companies. Post investment reviews
are performed on all investments over £0.75 million after 12 months to assess the
benefits achieved (see the Financial Review on page 25 for more information).
As customers change
the way they shop we fail to
adapt our business model
to these changes.
Across our businesses we recognise both the threats and opportunities presented
by omnichannel retailing and are taking the necessary steps to ensure we remain
competitive in our respective markets.
We continue to invest in omnichannel technologies and take learnings from our
businesses which have well developed models e.g. Screwfix.
Within B&Q we are developing a platform which will be rolled out to the rest of the
Group to offer alternative channels for customers.
Our investment in the IT strategy project should provide systems and capabilities
to respond to the changing ways in which customers shop.
We are developing plans for each Operating Company to address how the business
model needs to be adapted to cope with changes in consumer behaviour in each
of our markets.
www.kingfisher.com
29
Strategic Report Governance Accounts
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
12
Our key steps
3. Building innovative
common brands
4. Driving efficiency
and effectiveness
everywhere
What we did in 2013/14
Product:
• Launched energy-efficient ‘iQE’ Group brand
• Extended common paint ranges
? Rolled out ‘Colours’ Group own-brand paint into Russia and Spain
? Commenced roll out of new ‘Colours’ own-brand emulsion paint
range across B&Q UK & Ireland (in 120 stores) and Castorama
France (all 105 stores completed)
? Launched exclusive ‘Valspar’ mixing desk paint into B&Q UK
& Ireland (now in 120 stores) and China
• Launch of ‘Site’ workwear into Brico Dépôt France now planned during
2014/15 following ‘arrivages’ (one-off special buys) trial during 2013/14
• Held inaugural European product show, attended by 6,000 store and
buying colleagues from the UK and France
• Achieved 9% common (up from 8% in 2012/13) and 20% direct
sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality
over quantity
• Extended French common supplier contracts to the wider Castorama
and Brico Dépôt brands division
Efficiency:
• Upweighted distribution centre and cross-docking capability in
Poland, Spain and Turkey
• SG&A
(1)
optimisation from media buying programmes across the
UK and France. Achieved c.£40m total savings from Group SG&A
initiatives since the start of Creating the Leader
• Extended Brico Dépôt shelf-ready packaging from 20% to 32%
• Rolled out France and Spain all-staff bonus programmes to Poland
(linked to individual store sales and profit growth)
• Undertook IT process mapping analysis at Castorama France in
readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
www.kingfisher.com
29
Common
Strategic aim Group risks Mitigation
Building
innovative
common brands
We fail to unlock the
potential to generate
further shareholder value
through the optimisation
of combined purchasing
and commercial
synergies, while retaining
accountability at our
Operating Companies.
The development of common brands and synergies remains a priority across the
organisation. We aim to offer customers a product range which is differentiated
from that of our competitors through innovation and exclusivity. To increase and
maximise scale efficiencies we:
• Are carrying out customer insight research to ensure that we understand
customer buying behaviours, habits and our product insight across all of our
businesses. In addition, we are ensuring that we are able to identify specific
opportunities to drive the optimal, and most profitable, outcomes from our
common buying decisions;
• Are implementing common range reviews across our larger Operating
Companies. Performance of the ranges and brands is tracked and strategies
updated accordingly;
• Have four sourcing offices focused on selected ranges; and
• Are working with our vendors to ensure we achieve the best value for
our customers.
We fail to create enough
innovation opportunities
to sufficiently differentiate
our product offer.
We view innovation as an area of future growth. We have an innovation team
that is working with our suppliers to ensure that we develop and deliver innovative
products to our customers. We recognise that this is an area where we need to do
further work to maximise the opportunities and we are working with our Operating
Companies to put plans in place.
Expand
Strategic aim Group risks Mitigation
Growing our
presence in
existing markets
Our investments in new
store formats, customer
markets and customer
proposition strategies fail
to stimulate increased
consumer spend and do
not deliver the desired
like-for-like sales growth
in our mature markets.
Despite the ongoing challenges of global austerity programmes and their impact
on consumer confidence, we are committed to re-investing in our mature markets
to maintain market share and to ensure market leadership.
We continue to invest in our existing store portfolio while seeking to minimise its
cost base and optimise sales densities. Where there are opportunities to expand
and innovate we will do so using a combination of existing and new formats. We
will pursue low risk market entry and new flexible store format strategies based
on the utilisation of current Operating Company skills and resources. We take the
learnings from trials and ensure these are adopted across the Group in future
projects. We continue to invest in our omnichannel strategy.
Uncertainty surrounding
the resilience of the global
economy and volatility in
the eurozone continues
to impact both consumer
confidence and the
long-term sustainability
and capabilities of our
supplier base.
With continuing market volatility and uncertainty across all of the economies in
which we operate, particularly within the eurozone, we continue to monitor
potential exposures and risks and provide effective risk management solutions
to both our businesses and our strategic suppliers. These include:
• The provision of supply chain finance programmes to support strategic suppliers;
• Support from a strong portfolio of international banking partners that provide
flexibility, access to funding and reliable local retail cash and card payment
processing services;
• Diversification of cash holdings across a number of financial institutions with the
strongest short-term credit rating; and
• An appropriate and prudent mix of hedging policies, cash deposits and debt
financing to minimise the impact of foreign exchange currency volatility on
the Group.
We have also assessed a number of alternative scenarios in relation to the volatility
and uncertainty within the eurozone.
Annual Report and Accounts 2013/14
30
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
16
Our key steps
7. Developing leaders
and connecting people
8. Sustainability:
becoming Net Positive
What we did in 2013/14
People:
• Continued to extend the Kingfisher One Academy
Net Positive:
• Published first Net Positive report and appointed Richard
Gillies from Marks and Spencer Group plc as Group
Sustainability Director, to lead the Net Positive agenda
(see www.kingfisher.com/netpositive)
• Over 1,400 Kingfisher employees shared an estimated
gain of £10 million following the maturity of the ShareSave
scheme in December 2013
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
Strategic Report
Risks continued
Annual Report and Account 2013/14
30
Expand continued
Strategic aim Group risks Mitigation
Expanding in new
and developing
markets
Our investments in
overseas expansion fail
to deliver sufficient sales
and profits.
We continually review and assess opportunities for expansion, in terms of both
online and bricks and mortar retail, across all of the territories and regions in
which we operate.
Country and market entry strategies are based on the application of a proven
operating model and supported by the Operating Company with the most relevant
experience, capabilities and capacity to successfully lead a market entry strategy.
We also ensure that any proposed acquisition or market entry strategy is subject to
an appropriate level of challenge and due diligence from both the Group Executive
and specialist Group functions which may include the Tax, Treasury, Legal, Group
Finance and Group Risk and Internal Audit functions. This due diligence is also
supported by external and independent advisers when necessary.
Following an acquisition, integration plans are prepared and monitored at
divisional and Group levels. Existing management teams are supplemented
with Group resources to monitor and assist with the integration.
We monitor the political and economic risks of operating in new and
developing markets.
One Team
Strategic aim Group risks Mitigation
Developing
leaders and
connecting
people
We do not make the
necessary investment in
our people to ensure that
we have the appropriate
calibre of staff, skills
and experience.
Across our businesses we are developing our talent, building our leadership
capability and connecting our people through intelligent networks. Specific
examples of this include:
• The continued investment in the development of our senior leaders through the
Kingfisher One Academy, including the 2020 Leadership Programme and the
development of networks across our businesses;
• Focused development activities for our store-based colleagues, including the roll
out of national apprenticeship schemes across our UK and French businesses,
and an increased focus on how we support and recognise the role of our
customer advisers across the organisation; and
• Recognition of the importance of ensuring a constant flow of developing talent
through structured graduate and management trainee programmes, providing
sustainable career development paths supported by new and innovative reward
and bonus frameworks (see www.kingfisher.com/people).
Sustainability:
Becoming
Net Positive
We fail to deliver our
sustainability targets
due to not integrating our
sustainability plan into the
day to day operations of
the business.
• Our commitment to sustainability remains one of Kingfisher’s key values and
across the organisation we continue to ensure that we engage and take advice
from our expert partners (WWF, BioRegional and Forum for the Future);
• As part of our business planning process we set and annually review
sustainability plans for each Operating Company;
• Monthly Board reports monitor the progress of our largest Operating Companies
in achieving their sustainability targets;
• Data is reported annually to the Group and signed off by the local Boards;
• Within each Operating Company responsibility has been assigned to a team or
individual for the delivery of the sustainability targets. Meetings of the Corporate
Social Responsibility teams are held twice a year to exchange best practice and
progress common projects;
• Our Net Positive Advisory Council provides an external review of our processes
as well as technical support and advice (see page 19).
www.kingfisher.com
31
Strategic Report Governance Accounts
Strategic Report
Annual Report and Accounts 2013/14
8
Our markets
We currently operate in nine
countries, spanning nearly 600
million households.
Our research shows that spending on home improvement
is a key priority for householders, making this an attractive
sector for retailers. It is also attractive because of the relatively
small number of well-known manufacturer brands. This means
a specialist home improvement retailer provides a vital role for
the consumer by offering a wide product choice and expert
advice. We can offer a high proportion of own brand product,
achieve economies of scale and have a more defensible position
against online or generalist operators when compared with
other retail segments. Read more about our business model
on pages 6 to 7.
Our strategy
Our unique contribution as a
business to our customers is
that we can harness our home
improvement experience, our
heritage as a leader in sustainability
and our international scale and
sourcing capability to bring new,
more sustainable and more
affordable products to market.
This means our customers can have better homes, the
planet’s resources can be protected and we generate value
for our people, communities and shareholders.
By also providing our customers with project advice and new
shopping channels to complement our stores, we will make
it easier for them to adapt their homes to their evolving needs.
Our shorthand for describing this purpose is Better Homes,
Better Lives.
The next phase of our development towards this vision –
Creating the Leader – builds on the success of the previous
phase known as Delivering Value, which has repositioned
Kingfisher as a stronger business in the attractive home
improvement market.
www.kingfisher.com
31
Operational Risks
Strategic aim Risk Mitigation
Pricing A lack of perceived
price competitiveness,
particularly when
compared to more
discount based or online
competitors, would affect
our ability to maintain
or grow market share.
Significant investment in pricing to reinforce and communicate our value
credentials. This is supported by:
• The use of improved customer insight and analytical tools to optimise product
ranging and pricing strategies;
• Increased margin flexibility through partnerships with strategic vendors and
the leveraging of Group buying opportunities; and
• More targeted use of online and mass media tools to communicate and
reinforce price perception (for example, price comparison websites, such as
www.kitchen-compare.com and www.bathroomcompare.com in the UK).
Key supplier
resilience
and continuity
Key product suppliers lack
the necessary resilience
or disaster recovery
capabilities to manage the
impact of ongoing global
economic volatility or the
increasing impacts of
extreme weather cycles
and patterns on their
operations and extended
supply chains.
We continue to support our strategic suppliers through a combination of
relationship management, and ongoing supplier vulnerability assessments,
supported by supplier financing programmes where appropriate.
We also seek to ensure continuity of supply through the expansion of our own
brand programmes and dual sourcing strategies where possible and commercially
viable. Ongoing investment in our sourcing offices outside of Asia, notably in
Poland and Turkey, also provides increased flexibility for our sourcing strategies.
Health & safety We fail to maintain a
safe environment for
our customers and store
colleagues, which results
in a major incident or
fatality that is directly
attributable to a failure
in our health and safety
management systems.
With 79,000 employees and millions of customers visiting our stores each week,
robust health and safety systems are a priority. The Board is committed to creating
and sustaining a safe environment for both our staff and customers and regularly
reviews and challenges health and safety performance, standards and targets
across our businesses.
As regulatory requirements vary from country to country, each Operating Company
is required to designate a director with specific responsibility for health and safety.
This person is then responsible for ensuring that a written health and safety policy
is communicated and that appropriate health and safety arrangements are in
place to protect our employees and customers and that we comply with local
regulatory requirements.
The Group Health and Safety Committee sets the policy and standards for the Group.
Compliance is monitored across our businesses through a programme of self-
certification and health and safety audits, with issues reported through local Audit
Committees and escalated to the Group Executive, Group Audit Committee or
Board where necessary (see the Governance report on page 36).
Environmental or
ethical failure
Kingfisher’s reputation
and brand are affected
by a major environmental
or ethical failure, a
significant corporate
fraud or material non-
compliance with legislative
or regulatory requirements
resulting in punitive or
custodial procedures.
Both employees and suppliers working for or with Kingfisher must conduct
themselves according to our minimum standards of ethics and behaviours as
defined by our Code of Conduct. Responsibility for compliance with our Code
of Conduct rests with each Group Operating Company Chief Executive and
appropriate resources are available to our businesses to ensure that both staff
and suppliers are aware of, and comply with, the Code and that our businesses
can manage the legislative or regulatory challenges presented by their
respective jurisdictions (see www.kingfisher.com/netpositive/code).
Annual Report and Accounts 2013/14
32
Governance
Board of directors
The Board is made up of a non-executive Chairman, four executive
directors and six non-executive directors who have overall collective
responsibility for the direction of the Company. The role and composition
of the Board is set out on page 36 of the Governance section.
Annual Report and Accounts 2013/14
32
Daniel Bernard
Chairman
Current directorships: Joined the Board as Deputy
Chairman in May 2006 before being appointed
Chairman on 3 June 2009. He is President of
Provestis, his own investment company, and since
January 2010, has been Chairman of MAF Retail
Group, Dubai. He has also been Senior Advisor of
TowerBrook Capital Partners since October 2010.
He is a non-executive director of Alcatel Lucent and
Capgemini and Phase Eight Ltd. He is also President
a member of the Advisory Board of HEC.
Expertise and experience: Daniel provides considerable
retailing experience and expertise to the Kingfisher
Board. He was Chairman and Chief Executive of
Carrefour, the Paris-based retail group and world’s
second largest retailer, from 1992 to 2005. Prior to
Carrefour, he was Chief Operating Officer of METRO,
Germany’s leading international retailer. He was
previously a non-executive director of Compagnie
de St Gobain until June 2006.
Sir Ian Cheshire
Group Chief Executive
Current directorships: Appointed to the Board in June
2000 and as Group Chief Executive in January 2008.
He is also Senior Independent Director of Whitbread
plc, lead non-executive member on the Department
for Work and Pensions Board, Chair of the Prince of
Wales’ Corporate Leaders Group on Climate Change,
and President of the Business Disability Forum. In
October 2012, Ian became the Chairman of the British
Retail Consortium.
Expertise and experience: Ian was previously
Chief Executive, B&Q UK from June 2005. He
was appointed Chief Executive International and
Development in September 2002, Chief Executive of
e-Kingfisher in May 2000 and was Group Director of
Strategy & Development. Before joining Kingfisher he
worked for a number of retail businesses including
Sears plc where he was Group Commercial Director.
Karen Witts
Group Finance Director
Current directorships: Appointed to the Board in
October 2012. She is a non-executive director
of Imperial Tobacco Group PLC.
Expertise and experience: Karen provides additional
recent relevant finance expertise to the Board. She was
previously Chief Financial Officer, Africa, Middle East,
Asia and Asia Pacific for Vodafone plc. From 1999 to
2010 she worked at BT plc, most recently as Chief
Financial Officer, BT Retail and Managing Director
Enterprises and before that as Managing Director
Operations, Openreach. She is a chartered accountant
and has experience in finance and management
roles at companies such as Paribas, Diageo, Mars
Electronics, The Observer Newspaper and Ernst
& Whinney.
Andrew Bonfield
Non-Executive Director
Current directorships: Appointed to the Board in
February 2010. He is Finance Director of National Grid
plc. He is also a committee member of the Hundred
Group of Finance Directors.
Expertise and experience: Andrew brings significant
current finance experience to the Kingfisher Board.
He was previously Chief Financial Officer of Cadbury
plc and prior to that he was Chief Financial Officer of
Bristol-Myers Squibb from 2002 to 2007, Finance
Director of BG Group plc from 2001 to 2002 and
Chief Financial Officer of SmithKline Beecham Plc
from 1999 to 2000 during an 11 year period with the
pharmaceuticals group.
Pascal Cagni
Non-Executive Director
Current directorships: Appointed to the Board in
November 2010. He is an independent director of the
supervisory board of Vivendi.
Expertise and experience: Pascal provides the Board
with expertise in the field of digital and online retailing.
He was formerly Vice President and General Manager
of Apple Europe, Middle-East, India and Africa, and
was with Apple for ten years in a variety of roles. His
previous experience includes roles at NEC, Compaq
and Booz Allen Hamilton. He has also held the position
of non-executive director on the board of Egg Banking
plc, the online banking arm of Prudential plc, from
2002 to 2006 and on the board of Atari, the computer
games company.
Clare Chapman
Non-Executive Director
Current directorships: Appointed to the Board in
December 2010. She is currently Group People
Director of BT.
Expertise and experience: Clare brings significant
human resources expertise to the Kingfisher Board.
She was previously the Director General of Workforce,
for the NHS and Social Care and was also a non-
executive director of TUI Travel plc and Chairman
of its Remuneration Committee. Her previous
experience also includes Group HR Director of Tesco
plc from 1999 to 2006 and HR Vice President of Pepsi
Cola’s West and Central European operations from
1994 to 1999.
of the HEC Business School Foundation in Paris and
Governance
Board of directors
The Board is made up of a non-executive Chairman, four executive
directors and six non-executive directors who have overall collective
responsibility for the direction of the Company. The role and composition
of the Board is set out on page 36 of the Governance section.
Annual Report and Accounts 2013/14
32
Daniel Bernard
Chairman
Current directorships: Joined the Board as Deputy
Chairman in May 2006 before being appointed
Chairman on 3 June 2009. He is President of
Provestis, his own investment company, and since
January 2010, has been Chairman of MAF Retail
Group, Dubai. He has also been Senior Advisor of
TowerBrook Capital Partners since October 2010.
He is a non-executive director of Alcatel Lucent and
Capgemini and Phase Eight Ltd. He is also President
a member of the Advisory Board of HEC.
Expertise and experience: Daniel provides considerable
retailing experience and expertise to the Kingfisher
Board. He was Chairman and Chief Executive of
Carrefour, the Paris-based retail group and world’s
second largest retailer, from 1992 to 2005. Prior to
Carrefour, he was Chief Operating Officer of METRO,
Germany’s leading international retailer. He was
previously a non-executive director of Compagnie
de St Gobain until June 2006.
Sir Ian Cheshire
Group Chief Executive
Current directorships: Appointed to the Board in June
2000 and as Group Chief Executive in January 2008.
He is also Senior Independent Director of Whitbread
plc, lead non-executive member on the Department
for Work and Pensions Board, Chair of the Prince of
Wales’ Corporate Leaders Group on Climate Change,
and President of the Business Disability Forum. In
October 2012, Ian became the Chairman of the British
Retail Consortium.
Expertise and experience: Ian was previously
Chief Executive, B&Q UK from June 2005. He
was appointed Chief Executive International and
Development in September 2002, Chief Executive of
e-Kingfisher in May 2000 and was Group Director of
Strategy & Development. Before joining Kingfisher he
worked for a number of retail businesses including
Sears plc where he was Group Commercial Director.
Karen Witts
Group Finance Director
Current directorships: Appointed to the Board in
October 2012. She is a non-executive director
of Imperial Tobacco Group PLC.
Expertise and experience: Karen provides additional
recent relevant finance expertise to the Board. She was
previously Chief Financial Officer, Africa, Middle East,
Asia and Asia Pacific for Vodafone plc. From 1999 to
2010 she worked at BT plc, most recently as Chief
Financial Officer, BT Retail and Managing Director
Enterprises and before that as Managing Director
Operations, Openreach. She is a chartered accountant
and has experience in finance and management
roles at companies such as Paribas, Diageo, Mars
Electronics, The Observer Newspaper and Ernst
& Whinney.
Andrew Bonfield
Non-Executive Director
Current directorships: Appointed to the Board in
February 2010. He is Finance Director of National Grid
plc. He is also a committee member of the Hundred
Group of Finance Directors.
Expertise and experience: Andrew brings significant
current finance experience to the Kingfisher Board.
He was previously Chief Financial Officer of Cadbury
plc and prior to that he was Chief Financial Officer of
Bristol-Myers Squibb from 2002 to 2007, Finance
Director of BG Group plc from 2001 to 2002 and
Chief Financial Officer of SmithKline Beecham Plc
from 1999 to 2000 during an 11 year period with the
pharmaceuticals group.
Pascal Cagni
Non-Executive Director
Current directorships: Appointed to the Board in
November 2010. He is an independent director of the
supervisory board of Vivendi.
Expertise and experience: Pascal provides the Board
with expertise in the field of digital and online retailing.
He was formerly Vice President and General Manager
of Apple Europe, Middle-East, India and Africa, and
was with Apple for ten years in a variety of roles. His
previous experience includes roles at NEC, Compaq
and Booz Allen Hamilton. He has also held the position
of non-executive director on the board of Egg Banking
plc, the online banking arm of Prudential plc, from
2002 to 2006 and on the board of Atari, the computer
games company.
Clare Chapman
Non-Executive Director
Current directorships: Appointed to the Board in
December 2010. She is currently Group People
Director of BT.
Expertise and experience: Clare brings significant
human resources expertise to the Kingfisher Board.
She was previously the Director General of Workforce,
for the NHS and Social Care and was also a non-
executive director of TUI Travel plc and Chairman
of its Remuneration Committee. Her previous
experience also includes Group HR Director of Tesco
plc from 1999 to 2006 and HR Vice President of Pepsi
Cola’s West and Central European operations from
1994 to 1999.
of the HEC Business School Foundation in Paris and
Strategic Report Governance Accounts
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33
www.kingfisher.com
33
Kevin O’Byrne
CEO B&Q UK & Ireland
Current directorships: Appointed to the Board as
Group Finance Director in October 2008, and
became CEO, B&Q and Koçta s¸ brands in October
2012 responsible for the Group’s businesses in China,
Turkey, the UK and investment in Germany. He
assumed direct leadership of B&Q UK & Ireland in
October 2013, and is Deputy Chairman of Kingfisher’s
joint venture in Turkey, Koçta s¸. He was also a
director of Hornbach Holdings AG. He is the Senior
Independent Director and Chairman of the Audit
Committee of Land Securities Group plc.
Expertise and experience: Previously he was Group
Finance Director, a role he held from 2008 to 2012.
He previously worked for Dixons Retail plc from 2002
to 2008 where he was Group Finance Director. Before
this he was European Finance Director at Quaker
Oats Limited.
Philippe Tible
CEO Castorama &
Brico Dépôt brands
Current directorships: Appointed to the Board in
October 2012.
Expertise and experience: Philippe was appointed
CEO Castorama & Brico Dépôt brands after nine years
with the Group. He previously spent four years as Chief
Executive of Kingfisher France. Prior to this he spent
five years as CEO of Castorama France. He holds
responsibility for the Castorama and Brico Dépôt
businesses in France, Poland, Romania, Russia and
Spain. He previously held senior roles at DIY retailer
Leroy Merlin and furniture retailer Conforama.
Audit Committee
Remuneration Committee
Nomination Committee
See pages 35 to 68 for further details.
Anders Dahlvig
Non-Executive Director
Current directorships: Appointed to the Board in
December 2009. He is a director of Oriflame
Cosmetics AB, H&M Hennes & Mauritz AB and
Axel Johnson AB; and is Chairman of The New Wave
Group and a member of the Advisory Board of Lund
University Business School. He is also a director of
Resurs Bank AB and Pret a Manger Limited.
Expertise and experience: Anders brings extensive
commercial retailing expertise to the Board. He was
previously Chief Executive and President of The IKEA
Group from 1999 to 2009, having spent 26 years with
the company. Prior to becoming Chief Executive, he
was Vice President of IKEA Europe from 1997 to 1999
and Managing Director of IKEA UK from 1993 to 1997.
Janis Kong
Non-Executive Director
Current directorships: Appointed to the Board in
December 2006. She is a non-executive director
of Portmeirion Group PLC, NetworkRail and TUI
Travel plc. She is also a non-executive director of
Copenhagen Airports A/S.
Expertise and experience: Janis provides important
experience to the Kingfisher Board. She was previously
a non-executive director of The Royal Bank of Scotland
Group Plc and, until her retirement in March 2006,
was a director of BAA plc and Chairman of Heathrow
Airport Ltd for five years as well as being Chairman of
Heathrow Express. Prior to that she was Managing
Director of Gatwick Airport and has held a number of
operational roles within BAA during her 33-year career
with the company.
Mark Seligman
Senior Independent Director
Current directorships: Appointed to the Board in
January 2012. He is a non-executive director of BG
Group plc, where he is also Chairman of the Audit
Committee. He serves as an alternate member of the
Panel on Takeovers and Mergers, is a member of the
Regional Growth Fund advisory panel and non-
executive deputy Chairman of G4S, where he is also
Chairman of the Audit Committee.
Expertise and experience: Mark provides substantial
expertise to the Kingfisher Board in the field of finance.
He was a senior adviser at Credit Suisse. He began his
career at Price Waterhouse and spent over 30 years in
the City, including senior roles at SG Warburg, BZW
and Credit Suisse First Boston. At Credit Suisse he was
Deputy Chairman Europe from 1999 to 2005 and later
Chairman UK Investment Banking from 2003 to 2005.
Annual Report and Accounts 2013/14
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Governance
Senior management
Annual Report and Accounts 2013/14
34
In addition to the Kingfisher plc Board, the Group Executive is
responsible for the overall strategic decision-making of the Group.
The One Team Board, made up of Operating Company CEOs
and senior directors at Group level, is responsible for implementing
the strategy and fulfilling our Better Homes, Better Lives mission.
Alp Özpamukçu
CEO, Koçtas¸
Clare Wardle
Group General Counsel
Benedikt Benenati
Group Internal
Communications Director
Tanguy Dewavrin
CEO, Castorama Poland
Ian Harding
Group Communications
Director
Pascal Gil
CEO, Brico Dépôt Spain
Christophe Mistou
Group Commercial
Sourcing Director
Andrew Livingston
CEO, Screwfix
Jacques Hayaux du Tilly
CEO, B&Q China
Sir Ian Cheshire
Group Chief Executive
Kevin O’Byrne
CEO, B&Q UK
and Ireland
Philippe Tible
CEO, Castorama
and Brico Dépôt brands
Steve Willett
CEO, Group Productivity
and Development
Guy Colleau
CEO, Group
Sourcing and Offer
Karen Witts
Group Finance Director
Group Executive
One Team Board
Richard Gillies
Group Sustainability
Director
Vincent Guffroy
CEO, Castorama Russia
Véronique Laury
CEO, Castorama France
Evelyn Gardiner
Group Human
Resources Director
Alexandre Falck
CEO, Brico Dépôt
France
Alain Souillard
CEO, Brico Dépôt
brand, International
Marc Ténart
Finance Director, Castorama
and Brico Dépôt brands
Ian Playford
Group Property Director
Strategic Report Governance Accounts
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35
Corporate governance
www.kingfisher.com
35
Dear Shareholder
I am pleased to present the Company’s Corporate Governance
report for the year ended 1 February 2014.
Over a number of years, the Board of Kingfisher plc has put in
place a robust, efficient and effective governance framework and
associated systems by which the whole Group is governed and
reviewed. This report aims to provide a clear explanation of those
arrangements which we consider to be essential for the long-
term success of the Company and the continued promotion
of the highest standards of Corporate Governance across the
Kingfisher Group.
It is the role of the Board to support, advise and where necessary
provide appropriate challenge to the executive team. I believe
that the Kingfisher Board, with its vast experience and diversity
of expertise, assists the Company in delivering its strategy and
maximising shareholders’ long-term interests, whilst conducting
itself in line with the Group’s Code of Conduct, which mandates
minimum standards of behaviour for employees and suppliers of
the Group. Our Code of Conduct can be found within the Net
Positive section of our website www.kingfisher.com.
The Company is required to review its operations annually by
reference to the UK Corporate Governance Code (‘the Code’).
Last year I advised that the Company was confident of reporting
compliance with the revised September 2012 edition of the Code
and a statement of compliance with the Code is set out on
page 36.
During the year, we have enhanced and formalised elements
of our governance framework to ensure compliance with the
Code and also the Large and Medium-sized Companies and
Groups (Accounts and Reports) (amendment) Regulations 2013
(‘the Regulations’) which requires us to report in a different way to
previous years. The most significant reporting changes have
occurred within the Directors’ Remuneration Report and are fully
detailed within that report which can be found on pages 47 to 68.
An additional change to reporting requires a statement from the
Company’s directors that we consider the Annual Report and
Accounts, when taken as a whole, to be fair, balanced and
understandable. During the year, the Board requested that the
Audit Committee advise on the statement and conduct such
activities to support the directors in reaching that conclusion.
A fuller description of the activities of the Audit Committee in this
area can be found on pages 42 to 45, along with other additional
disclosures required in respect of how the Committee addressed
the key issues it considered during the year.
The Board constantly reviews its governance framework, adjusting
where necessary the roles, structure and accountabilities of its
mechanisms of governance. During the year, the governance
structure below the Board and primary committee level was again
reviewed to ensure the correct and accurate flow of information
and responsibility. The review included a full review of the terms
of reference of the Group Executive Committee, the Kingfisher
Capital Expenditure Committee and the Financial Initiatives,
Tax and Treasury Committee, and, where necessary, these
were amended to reflect the operations of those committees and
the authorities delegated to them. As part of the review, in order
to make the governance structure below primary committee
level more relevant and agile, the focus on trading and operational
matters was transferred to the Group Executive Committee and
the implementation of strategy is now the focus of the One Team
Board. In addition, a Health and Safety Committee, with the remit
to review health and safety matters across the Group as a whole
and better enable the sharing of best practice, was established.
A Disclosure Committee was also established to formalise the
review and verification of the Group’s full, half-year and quarterly
announcements of results.
The revised Group governance structure, together with an overview
of each of these Committees, is set out on pages 40 to 46.
Maintaining and promoting the highest standards of corporate
governance remains central to my role as Chairman and I believe
the changes implemented during the year have enhanced the
framework governing the Group’s operations. I am pleased to
endorse this Report, which I believe demonstrates how, through
its actions, the Board and its Committees fulfil their governance
responsibilities and how the Board works proactively to embed
good governance practices across the Group on an ongoing basis.
Daniel Bernard
Chairman
24 March 2014
“Maintaining and promoting the
highest standards of corporate
governance remains central to my
role as Chairman and I believe the
changes implemented during the
year have enhanced the framework
governing the Group’s operations.”
Daniel Bernard
Chairman
Annual Report and Accounts 2013/14
36
Governance
Corporate governance continued
Annual Report and Accounts 2013/14
36
Compliance with the UK Corporate
Governance Code
Kingfisher is subject to, and has reviewed, its operations and
governance framework to ensure that it reflects the principles
of the UK Corporate Governance Code, published by the
Financial Reporting Council (the FRC) and available on their
website, www.frc.org.uk. The edition of the Code, published in
September 2012, applied throughout the financial year ended
1 February 2014. In accordance with the Listing Rules of the
UK Listing Authority, the Board confirms that, throughout the
year ended 1 February 2014, and as at the date of this report,
the Company has complied with the provisions set out in
Section 1 of the Code, save for as set out below.
Provision D.1.1 provides that grants under long-term incentive
schemes should normally be phased rather than awarded in
one large block.
As reported in our 2011/12 annual report, the Company set
stretching long-term targets for management as part of the
Creating the Leader phase of Kingfisher’s strategy. The
Remuneration Committee approved awards under the
Performance Share Plan (the ‘Plan’) of up to 500% of
base salary.
The award was higher than the normal award of 200% but
in making it the Committee took into account the fact that
no further awards would be made under the Plan until the
financial year 2014/15, and felt that it created a better focus
on a single performance period aligned to the next phase of
the Group’s strategy, rather than the more commonly used
overlapping performance periods.
Leadership
The role of the Board
The Board’s primary responsibility is to promote the long-term
success of the Company and deliver sustainable shareholder
value. The Board has ultimate responsibility for the management,
direction and performance of the Group, and leads and controls
the Group’s business. The Board is also responsible for ensuring
appropriate resources are in place to achieve its strategy and
deliver sustainable performance. Through authorities delegated
to its Committees, the Board directs and reviews the Group’s
operations within an agreed framework of controls, allowing risk
to be assessed and managed within agreed parameters. The
Board is collectively accountable to the Company’s shareholders
for the proper conduct and success of the business.
The Board’s powers are set out in the Company’s Articles of
Association, which are available to view on its website, and
may be amended by a special resolution of its members. The
Board may exercise all powers conferred on it by the Articles,
in accordance with the Companies Act 2006 and other
applicable legislation.
The Board has established a formal schedule of matters reserved
for its approval, and has delegated other specific responsibilities
to its principal committees: the Audit, Remuneration and
Nomination Committees. These are clearly defined within
the written terms of reference of the respective committees.
Information on the responsibilities and work of each of the
Board’s committees is set out on pages 42 to 68.
During the year, as part of its annual review process, the
matters reserved for the Board were reviewed, and where
necessary amended to reflect best practice. The schedule
of matters reserved for the Board includes the consideration
and approval of:
• the Group’s overall strategy, medium-term plans and
annual budgets;
• financial statements and Group dividend policy, including
recommendation of the final dividend;
• major acquisitions, disposals and capital expenditure;
• major changes to the capital structure including tax and
treasury management;
• major changes to accounting policies or practices;
• the Group’s corporate governance and compliance
arrangements;
• the system of internal control and risk management policy;
• the Group’s risk appetite statements; and
• review of management development strategy.
Composition of the Board
The Board is made up of the non-executive Chairman, four
executive directors and six non-executive directors. The
current balance of the Board’s skills, experience and knowledge,
together with regular briefings by executives below Board level,
ensures that views, perceptions and discussions are not
dominated by any one specific view. The structure, size and
composition of the Board is continually reviewed to ensure it
remains suitable for the needs of the business.
There is an established, formal, rigorous and transparent
procedure for the selection and appointment of new directors
to the Board, and this is described in the Nomination Committee
Report on page 46. At the Annual General Meeting to be held on
12 June 2014, shareholders will be asked, in accordance with
Principle B.7.1 of the Code, to re-appoint all their directors.
Role of the non-executive directors
Non-executive directors provide a strong, independent and
external insight to the Board and its Committees, and have a
wealth of experience and business knowledge from other sectors
and industries. The terms and conditions of appointment of each
of the non-executive directors are available for inspection at the
Company’s registered office and will also be available for
inspection at the Annual General Meeting.
At its meeting in January 2014, the Board considered the
independence of each of the non-executive directors (other than
the Chairman, who was deemed independent by the Board at
the date of his appointment) against the criteria specified in the
Code, and concluded that each remained fully independent of
management and free from any relationship that could interfere
with the exercise of their independent judgement.
Strategic Report Governance Accounts
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www.kingfisher.com
37
Role of the Senior Independent Director
Since his appointment in January 2012, Mark Seligman has
acted as Senior Independent Director (SID), supporting the
Chairman, and is available for approach or representation from
significant shareholders who feel they are unable to raise issues
with the Chairman, Group Chief Executive or Group Finance
Director. In accordance with the FRC guidelines, the role of
the SID is formally set out in writing, and available on the
Company’s website.
Roles of the Chairman and Group Chief Executive
The roles and responsibilities of the Chairman and Group
Chief Executive are separate and clearly defined. As part of
the annual review process, the written roles of the Chairman
and Group Chief Executive were reviewed to ensure they
remained compliant with, and took account of, best practice
developments, and were in line with FRC guidance. The written
roles for both are available to view on the Company’s website.
In accordance with best practice, the Chairman is responsible for
the overall operation, leadership and governance of the Board,
setting the tone and style of Board discussions, and creating the
conditions for overall Board and individual director effectiveness.
He is also responsible for ensuring that all members of the Board
develop an understanding of the views of major shareholders,
that there is an open dialogue with shareholders, and that the
Chairmen of the Board’s principal committees are available to
answer shareholder questions at the Annual General Meeting.
The Group Chief Executive is responsible for executive
management of the Group’s business, consistent with the
strategy and commercial objectives agreed by the Board.
He leads the Group Executive team in effecting decisions
of the Board and its Committees, and is responsible for the
maintenance and protection of the reputation of the Company
and its subsidiaries. The Group Chief Executive is also
responsible for promoting and conducting the affairs of the
Group with the highest standards of integrity, probity and
corporate governance.
Company Secretary
The Company Secretary acts as Secretary to the Board and its
committees and, with the consent of the Board, may delegate
responsibility for the management of the committees to other
suitably qualified staff. The Company Secretary is responsible
for ensuring that good quality information flows from executive
management to the Board and its committees and that correct
Board procedures are followed. She advises the Board on
corporate governance matters and facilitates the inductions of
new directors and assists in providing professional development
as required. All directors have access to the advice and services
of the Company Secretary, and her appointment and removal
is one of the matters reserved to the Board. The Board also
has access to the Group General Counsel for legal and
compliance advice.
Diversity on the Board
In September 2011, the Board announced its approach to
diversity. The statement, which is available on the Company’s
website, confirmed that the Board is committed to ensuring
directors of the Company possess and demonstrate a broad
balance of skills, experience, independence, knowledge and
diversity, including gender diversity. In order to maintain the
appropriate balance of skills, experience and knowledge on the
Board, the Nomination Committee considers each prospective
candidate on their individual merits, regardless of gender, age,
race, nationality, religion or disability, in the belief that balanced
and diverse Boards are effective. The Board is committed to
maximising the benefits of a diverse workforce to deliver real
sustainable benefits for the Group and its shareholders. The
Board remains committed to this statement.
Charts demonstrating the gender split at Board level, Senior
Management level, and for the workforce as a whole can be
found on page 19.
Effectiveness
Board meetings
The Board holds regular scheduled meetings throughout
the year and unscheduled supplementary meetings as
and when necessary. These meetings are structured to allow
open discussion. At each meeting the Board receives certain
regular reports which include an update from the Group Chief
Executive, current trading/finance (including liquidity) reports
from the Group Finance Director, capital expenditure approvals
and reports from the Company Secretary (including governance,
legal, insurance and risk updates), people-related updates
from the Group Human Resources Director and Net Positive
progress updates and public affairs updates from the Group
Sustainability Director.
All directors participate in discussing strategy, trading and
financial performance, and risk management of the Group.
Comprehensive briefing papers are circulated to all directors
approximately one week before each meeting in digital format.
Should a director be unable to attend a particular meeting, they
are provided with all relevant briefing papers and are given the
opportunity to discuss any issues with the Chairman or the Group
Chief Executive and, where possible, participate by telephone
for critical discussions and approvals on specific matters.
The Board generally meets at the Group’s head office in London
but holds at least one meeting each year overseas. During the
year under review, the Board held a meeting in Marseille, France
where it reviewed the Brico Dépôt and Castorama brands and
visited a number of stores in the area. It is the Board’s intention
to hold one off-site meeting within the UK in the coming year,
to receive presentations from the UK Executive team, and also
conduct at least one meeting outside the UK in a country in
which the Group operates.
The Chairman and the non-executive directors meet regularly
without executive directors being present.
The Chairman maintains regular contact with the SID.
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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Activities during the year
During the year, in addition to its regular business, the Board:
• received a progress update on the Group’s Net
Positive strategy;
• reviewed and approved the Group’s renewed IT
programme and processes;
• reviewed the Group’s risk profile and reviewed the Group
risk appetite statement;
• considered the Group’s capital structure and cash position;
• considered post-investment reviews of capital expenditure
projects over three years;
• reviewed and approved the Group’s Health and Safety
action plan for 2014;
• reviewed the Group’s anti-bribery and corruption policies
and procedures to ensure continued compliance with
the UK Bribery Act; and
• received regular strategic presentations from management and
held ‘deep dive’ discussions with management of the Group’s
Operating Companies, information technology and Group
sourcing management.
Board evaluation
To ensure that they continue to be effective and each director
remains committed to their role and has sufficient time to
manage their commitment to their roles, the Board and its
committees conduct a review of their performance each year.
In accordance with provision B.6.2. of the Code, the Board
commissioned an externally facilitated evaluation during the
year under review. The evaluation was conducted by Geoffrey
Shepheard of ICSA Board Evaluation (‘ICSA’). Mr Shepheard and
ICSA are both completely independent and, other than having
conducted a similar evaluation in 2010, have no connection with
the Company.
The evaluation was carried out in November and December
2013 and Mr Shepheard conducted one-to-one interviews with
each member of the Board, the Group Executive Committee and
the Company Secretary. Each interview lasted approximately two
hours and covered topics agreed in advance of the process with
the Chairman and Company Secretary. The topics were as
follows:
• Board responsibilities;
• Oversight;
• Board meetings;
• Support for the Board;
• Board composition;
• Working together; and
• Outcome and achievements.
As part of the interview process, interviewees were also
encouraged to raise any issues which they considered were
pertinent to the process, and following each meeting, the
interviewee was provided with a short synopsis of the facilitator’s
understanding of the interview and an opportunity for further
comment was provided.
A report on the findings of the evaluation process was
prepared by ICSA and presented to the Board at its meeting
in January 2014.
The report concluded that the review had been extensive
and the Board was assessed as being in the upper quartile
of FTSE companies on governance. The report was positive
about the overall performance of the Board and recognised
continued improvement since the last external review
conducted in 2010. No significant issues were highlighted
and the evaluation indicated that the Board continued to
work efficiently and effectively, that the contribution of each
director and their interaction with each other was good and
that the non-executive directors offered robust challenge
where appropriate.
As a result of the evaluation, a number of actions were agreed
and will be implemented in the 2014/15 financial year:
• review of format and timing of strategy days;
• review of annual standing agenda schedule for meetings of
the Nomination Committee; and
• continuing improvement of the quality of information and
papers submitted to the Board.
As part of the evaluation process, the Group Chief Executive
carried out a performance review of the executive directors.
The non-executive directors, led by the SID, conducted a
performance review of the Chairman in respect of the
financial year.
The Board has confirmed that the contribution of each of
the directors continues to be effective and that shareholders
should be supportive of their re-appointment to the Board.
The Board will continue to review its procedures, effectiveness
and development in the year ahead, and the Chairman will use
the output of the ICSA evaluation in his individual meetings with
directors during the year.
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Board and Committee meeting attendance
The following table shows the number of years each director has served on the Board as at the financial year end, and their
attendance at the scheduled Board and Committee meetings:
Tenure
in years Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Daniel Bernard 7 8/8 – 5/5 1/1
Andrew Bonfield 4 8/8 4/4 5/5 1/1
Pascal Cagni 3 8/8 – – 1/1
(1)
Clare Chapman 3 8/8 – 5/5 1/1
(1)
Ian Cheshire 13 8/8 – – –
Anders Dahlvig 4 8/8 3/4 – 1/1
Janis Kong 7 8/8 4/4 5/5 1/1
Kevin O’Byrne 5 8/8 – – –
Mark Seligman 2 8/8 4/4 – 1/1
Philippe Tible 1 8/8 – – –
Karen Witts 1 8/8 – – –
(1) Directors were not present during the part of the meeting where their own reappointment was considered.
Induction, information and professional development
All new directors appointed to the Board receive an induction
pack as part of their comprehensive induction programme
tailored to their experience, background and particular areas
of focus. The induction programme is designed to develop
directors’ knowledge and understanding of the Group’s
operations and culture.
The induction programme includes:
• individual one-to-one meetings with the Chairman, the
Group Chief Executive, the Group Finance Director and
other directors;
• site visits to the Group’s stores and those of its competitors;
• meetings with management of the Group’s Operating
Companies and other senior management; and
• if required, external training courses at the Group’s expense.
In accordance with best practice, the Chairman considers and
addresses the development needs of the Board as a whole, if
any, and ensures that each director updates their individual
skills, knowledge and expertise.
During the year, the Company Secretary arranged for the Group’s
corporate lawyers to provide an update session on the duties and
responsibilities of directors of a UK listed company. Amongst
other topics, the training covered Listing Rules compliance and
the control and release of inside information, and provided case
studies and practical situations for the directors to consider.
Detailed updates have also been provided on the new reporting
requirements contained within this year’s Annual Report and
Accounts, and, in particular, the new remuneration regulations
and the fair, balanced and understandable statement directors
have been required to make.
Subsequent training in specific aspects of the Group’s
businesses is provided to directors, when requested, or regularly
as part of site visits. Directors are briefed on issues at Board and
Committee meetings and have full and timely access to relevant
information ahead of each meeting.
The Board also receives regular reports and feedback from
discussions with the Company’s institutional shareholders and
are informed of any issues or concerns raised by them. This
process allows directors to develop necessary understanding of
the views of these shareholders and also enables the Board to
judge whether investors have a sufficient understanding of the
Group’s objectives. In addition to planned development and
briefings, each director is expected to take responsibility for
identifying their own individual needs and to take necessary
steps to ensure that they are adequately informed about the
Group and their responsibilities as a director. The Board is
confident that all its members have the requisite knowledge,
ability and experience to perform the functions required
of the directors of a listed company. There is also an agreed
procedure whereby directors may take independent professional
advice at the Group’s expense in the furtherance of their duties.
Conflicts of interest
Each director has a duty under the Companies Act 2006 to avoid
a situation where he or she may have a direct or indirect interest
that conflicts with the interests of the Company. The Company
has robust procedures in place to identify, authorise and manage
such conflicts of interest, and these procedures have operated
effectively during the year.
A register of directors’ situational and transactional conflicts is
maintained by the Company Secretary and reviewed by the
Board on a regular basis and directors have a continuing duty
to update the Board with any changes to their conflicts of
interest. Following review, the Board confirmed that there
were no situations of which they were aware which would, or
potentially could, give rise to conflicts with the interests of the
Company, other than those that might arise from directors’
other appointments, which are set out in the directors’
biographies on pages 32 to 33.
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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Relations with shareholders
The Company is committed to communicating its strategy
and activities clearly to its shareholders and, to that end,
maintains an active dialogue with investors through a planned
programme of investor relations activities. The investor relations
programme includes:
• formal presentations of preliminary and interim results;
• Q1, Q2 pre-close and Q3 trading statements with conference
calls at Q2 and Q3;
• regular meetings between institutional investors and senior
management to ensure that the investor community receives
a balanced and complete view of the Group’s performance
and the issues faced by the Group;
• hosting investors’ and analysts’ sessions at which senior
managers from relevant Operating Companies deliver
presentations which provide an overview of their individual
businesses;
• responding to enquiries from shareholders through the
Company’s investor relations team;
• regular meetings between institutional investors and
analysts and the Group Chief Executive and Group
Finance Director to discuss business performance; and
• a comprehensive investor relations section on the
Company’s website.
The Chairman, the Senior Independent Director and the
chairmen of the Board’s committees are available to meet major
investors on request. The Senior Independent Director has a
specific responsibility to be available to shareholders who have
concerns, and for whom contact with the Chairman, Group Chief
Executive or Group Finance Director has either failed to resolve
their concerns, or for whom such contact is inappropriate.
The Chairman of the Remuneration Committee consulted with
major shareholders on the comprehensive review of the
Company’s remuneration arrangements and took on board their
views when proposing the design and policy changes detailed
within the Directors’ Remuneration Report on pages 47 to 68.
Annual General Meeting
The principal means of communication with private investors is
by electronic communications and through the Annual General
Meeting, which is attended by all the Company’s directors, and
allows all shareholders present the opportunity to question the
Chairman and the directors, as well as the chairmen of the
Board’s Committees. After the Annual General Meeting,
shareholders have the opportunity to meet informally with
directors. A summary business presentation is given at the
Annual General Meeting before the Chairman deals with the
formal business of the meeting. At the Annual General Meeting
in June 2014, the Chairman will use his discretion to call for
a poll on all resolutions. The results of the poll in relation to
all resolutions will be disclosed to those in attendance at the
meeting, published on the Company’s website and announced
to the London Stock Exchange shortly after the conclusion of
the Annual General Meeting.
Committees
The Board has delegated authority to its principal committees to
carry out certain tasks as defined in each committee’s respective
terms of reference. The written terms of reference in respect of
the Audit, Remuneration and Nomination Committees are
available on the Company’s website. The Board is satisfied that
the terms of reference for each of these committees satisfy the
requirements of the Code. The terms of reference of the principal
committees are reviewed on an ongoing basis.
The minutes of committee meetings are made available to all
directors on a timely basis. In addition, at each Board meeting,
the chairmen of the principal committees provide the Board with
a brief synopsis of the work carried out by their committee, if any,
between Board meetings.
In addition to the principal committees, the Board is supported
by the work of the Group Executive Committee and its
subcommittees. Together these committees form a fundamental
element of the Company’s corporate governance framework.
The Group’s governance structure and a brief explanation of the
work of the Group Executive Committee and the other
management committees is set out below:
Group Executive
Committee
Organisation and Governance Structure
Board
Group Health and
Safety Committee
One Team
Board
Audit
Committee
Disclosure
Committee
Remuneration
Committee
Nomination
Committee
King?sher Capital
Expenditure
Committee
Financial Initiatives,
Tax & Treasury
Committee
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Group Executive Committee
The responsibilities, structure and composition of the Group
Executive Committee were reviewed during the year. The
Committee consists of the executive directors, the CEO Group
Productivity and Development, and the CEO Group Sourcing and
Offer. The Committee meets formally ten times a year under the
chairmanship of the Group Chief Executive. The members’
details are set out on page 34.
The Committee’s primary focus is the strategic direction of the
Group. In addition, the Committee monitors top talent within the
business and reviews key items requiring formal Board approval,
including dividend planning, key projects and strategic capital
expenditure decisions.
In accordance with its formal terms of reference, the Group
Executive Committee is also responsible for reviewing and
making recommendations to the Board on:
• strategic and business plans of individual businesses;
• the Group’s capital structure and funding;
• strategic capital expenditure proposals, major acquisitions or
disposals of businesses;
• the Group’s key risks;
• management development and senior executive succession
plans; and
• the Group’s Net Positive programme.
During the year, the Committee met ten times and, in addition
to its standing agenda, reviewed:
• the Group’s branding strategies and Group procurement
and sourcing arrangements;
• operating budgets and monthly trading performance;
• the Group’s IT strategy and planning;
• the strategy for embedding sustainability into Group
behaviours; and
• HR proposals for management development and
succession planning.
One Team Board
The One Team Board consists of the Group Executive
Committee, the CEOs of each of the Group’s Operating
Companies and other senior Group employees who report
directly to members of the Group Executive Committee. The
primary purpose of the Board, which meets four times a year, is
the implementation of Group Strategy and the day to day
management of the Group’s businesses. At its meetings, the One
Team Board considers performance against strategy and budget
and reviews Group-wide people-related activities.
Kingfisher Capital Expenditure Committee
The Capital Expenditure Committee is responsible for reviewing
and approving all capital expenditure projects relating to property
and non-property proposals in excess of an agreed threshold of
£0.75m, which is reviewed periodically.
The decisions of the Committee are reported to the Board
following each meeting, and the Committee will review and make
recommendations to the Board regarding all projects exceeding
its agreed approval threshold of £15m. The Committee
comprises the Group Chief Executive, Group Finance Director,
Group Property Director, CEO Group Productivity and
Development, the Group General Counsel, and the Head of
Property Finance.
Financial Initiatives, Tax and Treasury Committee
The primary purpose of the Committee is to monitor compliance
with policies and control issues relating to Group Finance, and
to review key proposals from Group Finance, Treasury, Tax
and Secretariat functions, and, where appropriate, recommend
certain initiatives for approval of the Board. The Committee
comprises the Group Finance Director, Group Finance and
Planning Director, Group Treasurer, Group Tax Director,
Head of Group Pensions, Group General Counsel, Company
Secretary and Group Audit and Risk Management Director.
Disclosure Committee
The primary purpose of the Committee is to ensure that
information to be disclosed by the Company in its reports is
properly identified, recorded, processed, summarised and
reported to senior management of the Company and to the Audit
Committee. The Committee assists in ensuring that disclosures
fairly represent the financial position of the Company and the
Group and, in the case of the Annual Report and Accounts,
ensure that when taken as a whole, they are fair, balanced and
understandable and provide shareholders with the information
needed to assess performance, business model and strategy.
The Committee comprises the Group Finance Director, Group
Finance and Planning Director, Group Company Secretary,
Group Chief Accountant, Group Communications Director
and Group General Counsel.
Group Health and Safety Committee
The Committee’s primary purpose is to review the management
of health and safety risks across the Group and monitor
performance on, and compliance with, Group policies,
procedures and practices in relation to all aspects of health
and safety with the aim of providing safe environments for
employees, customers, suppliers and contractors and driving
continuous improvements. The Committee comprises the Group
General Counsel, the Director of Risk & Compliance, a regional
representative of each of Kingfisher’s Divisions and the Group
Property Services Director. The Group Finance Director has Board
responsibility for health and safety and attends meetings of the
Committee on a regular basis and delegates day to day oversight
to the Group General Counsel as Chairman of the Committee.
Details of each of the Board’s principal committees, including
membership, are set out in the following reports.
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
42
Audit Committee Report
Andrew Bonfield
Dear Shareholder
I am pleased to present the report of the Audit Committee for
2013/14.
During the year under review, the Committee was required
to carry out its duties in line with the revised UK Corporate
Governance Code (‘the Code’). The Committee reviewed its
operations in relation to the Code and where necessary amended
its actions and terms of reference to reflect any changes.
Last year, in anticipation of the changes to the Code, this report
included enhanced disclosure in a number of areas, including
the assessment of the effectiveness of the external auditors
and the external audit process. In this report the Committee
is required to include a description of those significant issues
considered by it during the year and, as such, further detail is
provided later in this report.
The Board has asked the Committee to oversee the process for
determining whether the Annual Report and Accounts, when
taken as a whole, is fair, balanced and understandable, and
further description of this process is also contained later in
the report.
The Committee is appointed by the Board from amongst its
non-executive directors, and its principal duties are to provide
effective oversight and governance of the internal control and
risk management processes of the Company, to review the
financial statements and related accounting policies, review the
effectiveness of the internal and external audit functions and
provide updates and recommendations to the Board.
In addition to the activities outlined above, during the year, the
Committee continued the analysis of the Company’s risks and
associated mitigating controls and focused on compliance,
financial governance and internal audit functions. It maintained
its good working relationship with the Group Audit and Risk
Management Director, the Group Finance and Planning Director,
the Company Secretary and the Group’s external auditor, Deloitte
LLP. The Committee maintained, reviewed and where necessary
amended its standing agenda, which is linked to the Group’s
financial calendars.
In order to improve the understanding of their operations, during
the year the Committee received in-depth presentations from
management of the Group’s Operating Companies, including
the key strategic risks impacting each business. The Committee
considered and reviewed the Group’s adequate procedures
in relation to bribery and corruption, the provision of a
whistleblowing service and approved accounting judgements
in relation to the Group’s investment in Hornbach.
A fuller description of the operations of the Committee is set
out below. I will be available at the Annual General Meeting to
answer any questions about the work of the Committee.
For and on behalf of the Committee
Andrew Bonfield
Chairman of the Audit Committee
24 March 2014
Committee composition
The Audit Committee comprises four non-executive directors:
• Andrew Bonfield (Chairman)
• Anders Dahlvig
• Janis Kong
• Mark Seligman
All Committee members are considered independent in
accordance with provision B.1.1 of the UK Corporate
Governance Code.
Audit Committee meeting attendance
From Attendance
Andrew Bonfield (Chairman) 11/02/2010 4 of 4
Anders Dahlvig 16/12/2009 3 of 4
Janis Kong 11/02/2011 4 of 4
Mark Seligman 01/01/2012 4 of 4
Duties
In accordance with its terms of reference, the Audit Committee
is required, amongst other things, to:
• monitor the integrity of the financial statements of the Group;
• review, understand and evaluate the Group’s internal financial
risk, and other internal controls and their associated systems;
• monitor and review the effectiveness of the Group’s internal
audit function on an annual basis;
• oversee the relationship with the external auditor,
making recommendations to the Board in relation to their
appointment, remuneration and terms of engagement;
• agree the scope of both the external and internal auditor’s
annual audit programme and review the output; and
• monitor and review the external auditor’s independence,
objectivity and effectiveness and to approve the policy
on the engagement of the external auditor to supply
non-audit services.
The Committee’s terms of reference were reviewed during the
year and following amendment to reflect the changes to the
Code, in particular in relation to oversight of the fair, balanced
and understandable nature of content in the Annual Report
and Accounts, are considered fit for purpose and reflect best
practice. The terms of reference are available on the Company’s
website (www.kingfisher.com).
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Governance
In accordance with the requirements of provision C.3.1 of the
UK Corporate Governance Code, Andrew Bonfield is designated
as the Committee member with recent and relevant financial
experience. All other members of the Audit Committee are
deemed to have the necessary ability and experience
to understand financial statements. The attendance by
members at Committee meetings is set out on page 42.
All members of the Committee receive appropriate induction,
in addition to the induction which all new directors receive.
The induction programme includes an overview of the business,
its financial dynamics and risks. New Committee members
also obtain access to the Group’s operations and staff, and
all members of the Committee undertake ongoing training
as required.
The Committee is required, under its terms of reference, to
meet at least three times a year. During the year, the Committee
met four times. The Committee has a standing agenda linked to
events in the Group’s financial calendar for consideration at each
meeting, and within the annual audit cycle, to ensure that its
work is in line with the requirements of the Code. At the invitation
of the Committee, the Chairman of the Board and the Group
Chief Executive attended all meetings, as did the Group Finance
Director, Group Audit and Risk Management Director, Group
Finance and Planning Director and the external auditor. Private
meetings were also held with the external and internal auditors
at which management were not present.
The effectiveness of the Audit Committee was considered as
part of the external Board evaluation detailed on page 38.
At its meeting in January 2014, the Committee considered the
contents of the review and concluded that the evaluation had
found the Committee to operate effectively and provide robust
challenge to the business. It was agreed that no specific actions
were required by the Committee as a result of the review.
Detailed below is the key work undertaken by the Committee
during the year under review and up to the date of this
Annual Report.
Activities of the Audit Committee during the year
Internal controls and risk
The Committee received and considered reports during the
year from the Group’s external auditor, Deloitte LLP, and the
Group’s internal audit function on the work they had undertaken
in reviewing and auditing the Group, in order to assess the
quality and effectiveness of the internal control system.
The Committee considered reports on the output from the
Group-wide process used to identify, evaluate and mitigate
risks and reviewed the annual report on the Group’s systems of
internal control and their effectiveness, and reported the results
of the review to the Board. Further information on the Group’s
risk management and internal control procedures can be found
on page 45.
As part of the Committee’s continuing programme to increase
its awareness of the Group’s operations and to understand the
implementation of Operating Company control processes,
the Committee met with, and received presentations from,
the senior management of Operating Companies in the UK
(B&Q and Screwfix), China, Russia, Turkey, Poland and
Romania. The significant matters the Committee considered
in the year included:
• Internal audit perform store audits in each of our Operating
Companies. As part of this work, control issues relating to
health and safety processes were identified across the Group.
The issues have been isolated instances of non-compliance
with our health and safety procedures. Action plans have
been put in place to address these issues. An initiative has
also been launched by the Group Chief Executive to raise
awareness of the importance of health and safety and how
non-compliance will not be tolerated. This is supported by
the Group Health and Safety Committee. The Committee
was satisfied that the necessary steps were being taken to
improve the standards of health and safety across the Group.
• several control issues were raised in B&Q China during the
year in relation to non-compliance with health and safety
policies, compliance with new social payment regulations and
store operational controls. The Committee considered papers
detailing the steps being taken locally and at Group level to
improve the situation. Project teams have been established
to address these issues and these are supported by Group
resources. The Committee concluded that the issues would be
rectified by rigorous control of process management and the
monitoring of the projects by fortnightly governance meetings.
Progress is reported to the Committee regularly.
In addition, the Committee continued to monitor the progress
on the standardisation and improvement of the Group’s internal
control processes, in a number of key areas.
The Committee reviewed the operation of the Group
whistleblowing helpline which allows employees within the
Group and its suppliers to make disclosures about alleged
financial and operational improprieties. The ‘SpeakUp’
service was reviewed along with arrangements to acknowledge,
investigate and close down reports at the Committee’s meeting
in January 2014 and, having considered the output from the
service, and the number, location and type of incidents reported,
the Committee concluded that the Group continued to maintain
adequate mechanisms for recording disclosures.
Financial reporting and significant financial issues
During the year, the Committee formally reviewed the
Company’s annual and interim financial statements and
associated announcements. The reviews considered significant
accounting principles, policies and practices and their
appropriateness, financial reporting issues and significant
judgements made. The Committee also considered whether
the 2013/14 Annual Report and Accounts are fair, balanced
and understandable, having received input and guidance from
the Disclosure Committee.
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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In conducting these reviews, the Committee considered the
work and recommendations of the Group finance function
and received reports from the Group’s external auditor on their
findings, including any control observations relevant to their
audit work. The significant reporting matters the Committee
considered in the year are detailed below:
• the Committee considered the carrying value of goodwill to
determine whether any impairment had been suffered. The
Committee reviewed the significant financial assumptions
used, including validity of cash flow projections and the
selection of appropriate discount and long-term growth rates;
• the Committee considered the treatment of exceptional items,
which are presented as exceptional to help provide an
indication of the Group’s underlying business performance;
• the Committee reviewed significant judgemental provisions
and accruals held, including those in respect of tax, legal,
property and inventory risks; and
• the Committee considered the judgements made by
management in concluding that the Group ceased to have
the ability to exercise significant influence over the Hornbach
businesses. The Committee was satisfied that this conclusion,
the balance sheet classification and measurement, and the
resulting net exceptional loss were appropriate.
Group Internal Audit
The Committee considered and reviewed updates from the
internal audit programme at each of its meetings during the
year. Reports from the internal audit function to the Committee
included updates on the Group’s risk management systems,
findings from reviews, and reviews of the remit, organisation,
annual plan and resources of the internal audit function. During
the year, the Committee reviewed the effectiveness of the internal
audit function. The review was conducted using an internal
questionnaire with input from the function’s key stakeholders
within the Group, in addition to the Committee. No significant
issues were highlighted by the review.
External Audit
During the year, the Committee agreed the approach and
scope of the audit work to be undertaken by the external auditor,
Deloitte LLP, and undertook an assessment of their qualification,
expertise and resources, independence and the effectiveness of
the external audit process. The Committee also reviewed and
agreed the terms of engagement, the fees, and areas of
responsibility and the work to be undertaken by the external
auditor, and agreed the fees payable in respect of the 2013/14
audit work. Details of the amounts paid to the external auditor
for their audit services are given in note 7 to the accounts on
page 92. In addition, the external auditor provided the
Committee with a schedule of each matter on which there was
an initial difference between them and management in relation
to the accounting treatment, and with the final decisions on
these issues.
During the year, the Committee considered the effectiveness
and independence of the external auditor. In consideration
of its effectiveness, the Committee reviewed the experience
and expertise of the audit team, the fulfilment of the agreed
audit plan and any variations to it, feedback from the Group’s
businesses and the contents of the external audit report.
In considering the independence of the external auditor, the
Committee received a statement of independence from the
auditor, a report describing their arrangements to identify,
report and manage any conflicts of interest, and reviewed
the extent of non-audit services provided to the Group. The
Committee concluded that it is satisfied with the effectiveness
and independence of the external auditor.
In addition to their statutory duties, the services of Deloitte LLP
are also engaged where, as a result of their position as external
auditor, they either must, or are best placed to, perform the work
in question. This is primarily work in relation to matters such as
shareholder circulars, Group borrowings, tax advice, regulatory
filings and certain business acquisitions and disposals. Other
work is awarded on the basis of competitive tendering.
The Committee reviewed and approved the scope of non-audit
services provided and proposed by the external auditor to ensure
that there was no impairment of independence and objectivity,
and subsequently monitored the non-audit work performed to
ensure it was within policy guidelines.
The Group has a policy on the use of its external auditor for
non-audit work and this is regularly reviewed. The external
auditor is precluded from engaging in non-audit services that
would compromise their independence or violate any laws or
regulations affecting their appointment as external auditor.
The approval of the Chairman of the Committee is required
prior to awarding contracts for non-audit services to the external
auditor, where in excess of specified amounts. The Group’s
policy on the use of the external auditor for non-audit work
can be found on the Group’s website.
During the year, Deloitte LLP charged the Group £1.8m
(2012/13: £1.6m) for audit and audit-related services and a
further £0.4m (2012/13: £0.4m) for non-audit services.
The Committee reviews and makes recommendations to the
Board with regard to the reappointment of the external auditor.
In doing so, the Committee takes into account auditor
independence and audit partner rotation. Deloitte LLP were
appointed as external auditor in 2009/10 following a formal
tender process. Panos Kakoullis was appointed lead audit
partner at that time and will step down following the conclusion
of the 2013/14 audit process, when he will be replaced by
Richard Muschamp. Richard will serve as lead audit partner
until the external audit contract is put out to tender, which will
be in 2019 at the latest. During the year under review, Deloitte
also replaced the lead audit partner for B&Q UK. The Committee
noted provision C.3.7 of the Code in relation to audit tendering
and has taken into account the UK Competition Commission’s
recent decision to introduce mandatory audit tendering at
ten-year intervals, in making the decision to tender the external
audit contract by 2019 at the latest.
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45
The Committee has recommended to the Board that Deloitte
LLP be proposed for re-appointment by shareholders as the
Company’s external auditor at the forthcoming Annual General
Meeting. As a result of its work during the year, the Committee
has concluded that it acted in accordance with its terms of
reference and has ensured the independence and objectivity
of the external auditor.
Accountability, Risk Management and Internal Control
Internal control
The Board has overall responsibility for the Group’s system of
internal control, which is designed to safeguard the assets of the
Group and ensure the reliability of the financial information for
both internal use and external publication, and to comply with
the Turnbull guidance and the Code.
The Board confirms that it has reviewed the effectiveness of
the internal control system, including financial, operational and
compliance controls and risk management in accordance with
the Code, for the period from 2 February 2013 to the date of
approval of this Annual Report and Accounts 2013/14.
If significant losses were to be incurred during the year as a
result of a failure of controls, a detailed report would be provided
to the Audit Committee and the Board. The Board confirms that
no significant weaknesses were identified in relation to the review
carried out during the year and therefore, no remedial action
was required.
The Board has approved a set of policies, procedures and
frameworks for effective internal control. The Group has
procedures for the delegation of authorities for significant
matters, to ensure approval is sought at the appropriate level.
These procedures are subject to regular review and provide an
ongoing process for identifying, evaluating and managing the
significant risks faced by the Group. Such a system is designed
to manage rather than eliminate the risk of failure to achieve
business objectives and can provide only reasonable and not
absolute assurance against material misstatement or loss.
The responsibility for designing, operating and monitoring the
system and the maintenance of effective control is delegated to
the management of each of the Group’s Operating Companies.
The Group’s risk management and reporting process helps
Group management to identify, assess, prioritise and mitigate
risk. Management at each Operating Company has responsibility
for the identification and evaluation of the significant risks
applicable to their business and any mitigating actions to be
taken. The Group Executive Committee reviews, identifies and
evaluates the risks that are significant at a Group level, as well
as the mitigating actions against those risks. These are then
considered by the Board. The types of risks identified included
both strategic and material operational risks and are detailed on
pages 28 to 31 of the report.
Management is required to apply judgement in evaluating the
risks facing the Group in achieving its objectives, in determining
the risks that are considered acceptable to bear, in assessing the
likelihood of those risks materialising, in identifying the Group’s
ability to reduce the incidence and impact on the business of
risks that do materialise, and in ensuring the costs of operating
particular controls are proportionate to the benefit provided.
Monitoring
There are clear processes for controlling and monitoring the
system of internal control and reporting any significant control
failings or weaknesses together with details of corrective action.
These include:
• an annual planning process and regular financial reporting,
comparing results with plan and the previous year on a
monthly and cumulative basis;
• written reports from the Group Chief Executive and Group
Finance Director submitted at each Board meeting;
• Operating Company management report formally to the
Audit Committee on a regular basis on the control environment
in their business and actions taken to maintain or improve
the environment as appropriate; and
• reports and presentations to the Board on certain areas
of specialist risk. These include treasury, insurance, tax
and pensions.
A formal bi-annual certification is provided by the CEO and
Finance Director of each Operating Company stating that
appropriate internal controls were in operation and confirming
compliance with Group policies and procedures. Any
weaknesses are highlighted and the results are reviewed by
Operating Company management, the Group Audit and Risk
Management Director, the Group Finance and Planning Director,
the Audit Committee and the Board. The internal audit function
monitors and selectively checks the results of this exercise,
ensuring that representations made are consistent with the
results of its work during the year.
The internal audit function follows a planned programme of
reviews that are aligned to the Group’s risks. The function:
• works with the Operating Companies to develop, improve
and embed risk management tools and processes into their
business operations;
• reports directly to the Audit Committee and has the authority
to review any relevant part of the Group;
• oversees the operation of the individual Operating Companies’
audit committees; and
• provides the Audit Committee and the Board with objective
assurance on the control environment across the Group.
Risk appetite
During the year, the Board also considered the nature and level
of risk that it was prepared to accept in order to deliver business
strategies, and has reviewed and approved the Group’s internal
statement of risk appetite. This describes both the current
and desired levels of acceptable risk, supported by high level
qualitative risk statements, ensuring that risks are proactively
managed to the level desired by the Board.
Annual Report and Accounts 2013/14
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
46
Nomination Committee Report
Daniel Bernard
Committee composition
The Committee comprises the Chairman and all the non-
executive directors and meets periodically as required. External
advisers may be invited to attend meetings when particular
issues are to be considered. During the year the Committee
met once. The members of the Nomination Committee are:
• Daniel Bernard (Chairman)
• Andrew Bonfield
• Pascal Cagni
• Clare Chapman
• Anders Dahlvig
• Janis Kong
• Mark Seligman
Nomination Committee meeting attendance
From Attendance
Daniel Bernard (Chairman) 24/05/2006 1/1
Andrew Bonfield 11/02/2010 1/1
Pascal Cagni 17/11/2010 1/1
Clare Chapman 02/12/2010 1/1
Anders Dahlvig 19/12/2009 1/1
Janis Kong 08/12/2006 1/1
Mark Seligman 01/01/2012 1/1
Directors did not attend those parts of the meeting where their own reappointment
was considered.
Duties
The primary objective of the Nomination Committee is to review
the composition of the Board and plan for its refreshment as
applicable with regard to composition, balance and structure.
The Committee is also asked to lead, on behalf of the Board,
the selection process for new Board appointments and to
make recommendations in respect of such appointments
while maintaining an appropriate balance of diversity and
skills. In accordance with its terms of reference, the Nomination
Committee is required to:
• review the structure, size and composition of the Board
and make recommendations to the Board, as appropriate;
• identify the balance of skills, knowledge, diversity
and experience on the Board and nominate candidates
to fill Board vacancies;
• review the time commitment required from the
non-executive directors;
• consider succession planning, taking into account the
challenges and opportunities facing the Group and the
future skills and expertise needed on the Board; and
• review the leadership needs of the organisation, both
executive and non-executive, with a view to ensuring the
continued ability of the organisation to compete effectively
in the marketplace.
The Committee’s terms of reference were reviewed during
the year and were amended in line with best practice and are
available on the Company’s website (www.kingfisher.com).
Activities during the year
During the year, the Committee considered the reappointment
of Clare Chapman and Pascal Cagni, following the expiry of
their initial three-year terms of appointment as directors. The
Committee concluded that both directors continued to provide
the necessary balance of skills and experience to the Board,
including considerable Human Resources and Remuneration
experience, and in-depth IT and ecommerce knowledge. The
Committee therefore recommended to the Board that each be
reappointed as a director of the Company for an additional
three-year term.
At its meeting in October 2013, the Committee considered
a talent and succession review presented by the Group HR
Director, which outlined succession planning and talent pipeline
considerations across the entire Kingfisher Group in support
of the Group’s Creating the Leader strategy.
Following the reappointment of Ms Chapman and Mr Cagni,
and a review of the Board and its Committees, the Committee
firmly believes that the current composition represents a strong,
well balanced and diverse Board. The Board membership
is made up of specialists in retail, technology, finance and
human resources, and possesses considerable knowledge,
experience and skills to meet the current and future
requirements of the Group. The Chairman will be available
at the Annual General Meeting to answer any questions about
the work of the Committee.
Daniel Bernard
Chairman of the Nomination Committee
24 March 2014
Strategic Report Governance Accounts
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Directors’ Remuneration Report
www.kingfisher.com
47
Annual Statement from the Chairman
of the Remuneration Committee
Dear Shareholder
I am pleased to present the 2013/14 Directors’ Remuneration
Report on behalf of the Board.
As required by the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations
2013, the rest of this remuneration report is split into two sections:
• The directors’ remuneration policy which sets out the
Company’s proposed policy on directors’ remuneration for
the three years from the 2014 Annual General Meeting (the
‘Remuneration Policy’). The Remuneration Policy will be
subject to a binding shareholder vote at this year’s AGM
and thereafter at least every three years.
• The annual report on remuneration sets out the payments
made to directors and details the link between Group
performance and remuneration for the 2013/14 financial
year (the ‘Annual Remuneration Report’). The Annual
Remuneration Report together with this letter will be
subject to an advisory shareholder vote at this year’s AGM.
Changes to the layout of the Directors’ Remuneration Report
are intended to improve transparency and demonstrate how the
remuneration arrangements are aligned with the Group’s strategy.
Outcome 2013/14
2013/14 proved to be another challenging year for retailers but
although the economic environment was difficult, Kingfisher
made solid progress, with profit increased and like-for-like sales
growth delivered. Further information regarding the Group’s
performance during the year can be found in the Strategic
Report on pages 1 to 31. This results in bonus payments being
awarded for performance between threshold and on-target
levels. As a result, bonuses in respect of performance were
between 24% and 36% of maximum which were similar to the
previous year.
The 2011 Performance Share Plan vesting percentage is
determined by the 2013/14 EPS result and the 2011/12 to
2013/14 cumulative KEP result. EPS was below the required
threshold but KEP was within the target range, resulting in an
overall award of 31% of maximum. The awards will vest in
two equal tranches in June 2014 and June 2015.
2013/14 Remuneration Review
During the year, the Committee conducted a thorough and
comprehensive review of the Group’s executive remuneration
arrangements. The focus of this review was to ensure that the
overall executive remuneration structure supports the Creating
the Leader strategy and is aligned to long-term shareholder
value creation. The review also considered the structure of a
new long-term incentive plan to replace the Kingfisher Incentive
Share Scheme and the Performance Share Plan. The rules of
the new plan will be submitted to shareholders for approval at
the AGM in 2014.
Our major shareholders were consulted as part of this review
to ensure that we took on board their views on the proposed
changes to our remuneration structure.
Following this thorough review, the Committee is satisfied
that the Group’s executive remuneration arrangements create
a strong link between competitive pay and performance. The
Committee agreed to propose a number of changes to the
Group’s executive remuneration policy to strengthen alignment
with long-term sustainable performance by increasing deferral,
extending malus provisions and raising shareholding
requirements. The specific changes are:
• Annual bonus deferral for executive directors to be increased
to 50% (from 33%);
• Reverting to annual grants under the proposed new
long-term incentive plan, at the level of 200% of salary, with
the flexibility in future to award up to 250% for the Group
Chief Executive, subject to stretching performance targets;
• Increased shareholding requirements – to 300% of salary
for the Group Chief Executive and 200% of salary for other
executive directors; and
• Extension of malus provisions to include instances of
reputational damage linked to executive actions.
The full proposed Remuneration Policy is set out on pages 49 to 58.
At our 2013 AGM, 98% of shareholders voted in favour of our
Directors’ Remuneration Report. I very much hope you will
support the Remuneration Policy and 2013/14 Annual
Remuneration Report at our forthcoming meeting. I will be
available at the AGM in June to answer any questions about
the work of the Committee.
“During the year the Committee
conducted a comprehensive review of
executive remuneration arrangements
to ensure they are aligned to long-term
shareholder value creation.”
Clare Chapman
Chairman of the Remuneration Committee
To download the Remuneration Report go tohttp://annualreport.kingfisher.com/2013-14/governance.html
Clare Chapman
Chairman of the Remuneration Committee
24 March 2014
Annual Report and Accounts 2013/14
48
Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
48
At a Glance
In this section, we summarise the purpose of our Remuneration Policy and its linkage to
our strategic objectives, and we highlight the performance and remuneration outcomes
for 2013/14. More detail can be found in the Remuneration Policy and Annual
Remuneration Report.
How has the structure changed year-on-year?
Proposed changes to Remuneration Policy
Component
value Operation of the component Maximum potential
Performance metrics
used, weighting and time
period applicable
Base salary no difference no difference n/a
Benefits no difference no difference n/a
Annual bonus 33% of 2013/14 annual
bonus will be deferred
for three years.
50% of the 2014/15 annual
bonus will be deferred for
three years under the
new plan.
no difference, maximum
opportunity remains at 200%
of base salary.
In 2013/14 the annual
bonus was based on the
following metrics:
• Profit 30%
• Relative LFL sales 30%
• Sourcing &
Productivity 20%
• Personal
performance 20%
LTIP Following the one-off award
of 500% of base salary made
in 2011 under the PSP, no
awards were made in 2012
or 2013. Annual awards will
be made in future.
No awards were made in
2013/14. In future awards will
be granted on an annual basis
at a maximum of 200% of base
salary (with flexibility to award up
to 250% of salary for the Group
Chief Executive).
No award was made
in 2013/14
How have we performed against our performance objectives?
Outcomes achieved as a % of Maximum
Performance Measure Target Actual
Sir Ian
Cheshire
Kevin
O’Byrne
Philippe
Tible Karen Witts
Profit before tax £765m £744m 0% – – 0%
Retail operating profit – – – 5% 0% –
Like for like sales 3.3% 0.7% 15% – – 15%
Divisional like for like sales – – – 10% 15% –
Sourcing and productivity – – 58% 71% 17% 58%
Personal objectives – – 80% 85% 78% 85%
Totals 32% 36% 24% 33%
Bonus receivable £’000 532.7 453.9 239.4 319.8
Performance Measure
Threshold –
15 %
vesting
Maximum –
100%
vesting Actual
% of
maximum
achieved.
Earnings per share (EPS) 25.8p 31.2p 23.4p 0%
Kingfisher Economic Profit (KEP) £229m £386m £288.4m 62.2%
Total 31.1%
Single total figure of remuneration for executive directors 2013/14
Executive Directors
Salary
£’000
Taxable
benefits
£’000
Bonus
£’000
LTIP
£’000
Pension
£’000
Total
£’000
Ian Cheshire 832.3 30.6 532.7 1,909.5 260.4 3,565.5
Kevin O’Byrne 627.0 24.3 453.9 1,404.0 123.1 2,632.3
Philippe Tible 509.3 11.7 297.6 1,072.5 320.0 2,211.1
Karen Witts 484.5 26.3 319.8 607.2 103.1 1,540.9
Total 2,453.1 92.9 1,604.0 4,993.2 806.6 9,949.8
The key principles of our
Remuneration Policy are to:
• provide executive directors with a
remuneration package that recognises
the experience of the individual
concerned and the value created;
• ensure performance-related
remuneration constitutes a
substantial proportion of the
remuneration package;
• ensure executive directors’ interests
are aligned with shareholders’ by
delivering rewards in shares, and
requiring a significant personal holding
in Kingfisher shares in accordance
with the Group’s ownership policy;
• be competitive in the talent markets
in which the Group operates;
• be fair, transparent and straightforward
to understand; and
• ensure remuneration principles apply
consistently throughout the Group,
and where practical are translated
into local practice at the appropriate
organisational level.
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49
Remuneration Policy
The Remuneration Policy set out in this section is intended to
apply for three years from the date of the 2014 AGM, subject to
shareholder approval. Where the forward-looking policy differs
from the policy that was in operation in 2013/14, we have
provided explanations of these differences. The Remuneration
Committee (the ‘Committee’) will review the Remuneration Policy
on an annual basis to ensure that it remains aligned to the
Creating the Leader strategy and is appropriately positioned
relative to the market. There is no current intention to revise the
policy more frequently than every three years. Where a material
change to policy is considered, the Group will consult with its
major shareholders prior to submitting the revised policy to all
shareholders for approval.
The Remuneration Policy will be displayed on the Group’s
website www.kingfisher.com immediately after the 2014 AGM.
The Remuneration Policy is designed to attract, retain and
motivate executives of the highest quality, incentivising them
to deliver exceptional business performance aligned with the
interests of shareholders, and to deliver the Group’s Creating the
Leader strategy. The Remuneration Policy continues to ensure
that a significant element of executive directors’ remuneration
remains ‘at risk’.
The key principles of the Remuneration Policy are to:
• provide executive directors with a remuneration package
that recognises the experience of the individual concerned
and the value created;
• ensure that performance-related remuneration constitutes
a substantial proportion of the remuneration package;
• ensure that executive directors’ interests are aligned with
shareholders by delivering rewards in shares and requiring
a significant personal holding in Kingfisher shares in
accordance with the Group’s share ownership policy;
• be competitive in the talent markets in which the
Group operates;
• be fair, transparent and straightforward to understand; and
• ensure remuneration principles apply consistently throughout
the Group, and where practical are translated into local
practice at the appropriate organisational level.
The Committee is satisfied that this Remuneration Policy strikes
an appropriate balance between the fixed and variable elements
of remuneration, and between promoting short and long-term
business objectives.
Future Remuneration Policy
Element and purpose Operation Maximum opportunity Assessment of performance
Base salary
Base salary reflects the
individual’s role, experience
and contribution to the
Group and is set at levels
that support the recruitment
and retention of executive
directors of the calibre
required by the Group.
Base salaries are set with reference to two primary
comparator groups; i) FTSE 25-75 excluding
financial services organisations, and ii) FTSE100
retailers and privately held retailers which are
considered to be of a similar size and market
capitalisation to the Group. The Committee also
takes account of pay levels in other large European
retailers. Alternative peer groups may need to be
referenced depending on the domicile of
individual executive directors outside the UK.
The Committee does not apply a strict
mathematical approach to the market data,
which it considers to be only one relevant input.
Instead, the Committee has regard to its overall
assessment of appropriate levels of salary, within
the benchmark range taking into account the
market, economic conditions, affordability, the
level of increases awarded to employees generally
and the individual’s performance, contribution
and experience.
Salaries are reviewed, but not necessarily
adjusted, annually. Out of cycle reviews may
be conducted in exceptional circumstances if
determined appropriate by the Committee.
Base salaries are paid monthly in cash.
Whilst there is no prescribed or
formulaic maximum, the annual
increase will normally not exceed
the level awarded to the general
workforce. Higher increases may
be made where there have
been significant changes in the
responsibility and accountability
in a role, or where there are large
variances to the market, for
example in the case of a recently
appointed executive director
appointed on a salary below the
market median. Any significant
increases will be fully explained.
Individual performance is an
important factor considered by the
Committee when reviewing base
salary each year.
Annual Report and Accounts 2013/14
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Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
50
Future remuneration policy continued
Element and purpose Operation Maximum opportunity Assessment of performance
Benefits
Benefits are provided to
assist executive directors
in the performance of their
roles and are designed
to be competitive and
cost effective.
The Group may provide pension contributions
(set out below), a company car or cash alternative,
allowance for financial planning, medical
insurance, and life assurance cover. Other benefits
may be provided from time to time if considered
reasonable and appropriate by the Committee,
to include items such as relocation allowances,
and will be explained in the next Annual
Remuneration Report.
The Group pays the cost of providing benefits on
a monthly basis or as required for one-off events
such as financial planning advice.
Store discount may be offered to all directors
on the same basis as offered to other
Group employees.
Maximum levels of benefit
provision are:
• Car allowance £25,000 per annum
• Private medical insurance
on a family basis
• Life assurance cover of 4x
base salary
• Financial planning at
£2,500 per annum
There are a number of variables
and unknowns impacting the
maximum payable in the event of
relocation; however, the Committee
would pay no more than is necessary
in such situations.
Store discount of up to 20%
is offered.
By exception, death in service cover
for Kevin O’Byrne is provided at 7x
base salary. The additional 3x cover is
funded by him through an equivalent
0.25% reduction in his pension
cash allowance.
None
All-employee share plans
To enable investment in
shares in Kingfisher on the
same terms as other UK-
based employees.
UK-based executive directors may participate in
a tax approved all-employee scheme (Sharesave)
under which they make monthly savings over a
period of three or five years, that may be used to
buy Kingfisher shares at a discounted price when
the scheme matures. They may also choose to
withdraw their savings at the end of the savings
period or at any time during the savings contract.
UK-based executive directors may also participate
in the Share Incentive Plan (SIP). Designed to
promote employee share ownership, the SIP
enables participants to make monthly investments
in Kingfisher shares.
The maximum monthly limit for
the Sharesave plan is currently
£250 per month.
The maximum monthly amount an
individual may invest in partnership
shares is currently £125 per month.
The SIP also allows the award of free
and matching shares up to the limits
set by the Government.
The Group may increase the amounts
that can be saved or invested under
the Sharesave and SIP plans in line
with any increases authorised by the
UK Government for approved plans.
None
Pension
To provide retirement
benefits and support
retirement planning in a
tax efficient way through
a competitive scheme.
Pension provision for executive directors (with
the exception of Philippe Tible) is by way of
contributions to a defined contribution scheme.
A cash allowance is available to those who choose
not to participate in the defined contribution
scheme as a result of having applied for protection
upon exceeding or getting close to Lifetime
Allowance limits. For executive directors who
choose to remain in the scheme, to avoid total
member and employer contributions exceeding
the Annual Allowance (£40,000 for the tax year
2014/15), employer contributions can be paid as a
taxable cash allowance on a cost neutral basis to
the Company.
A French non-contributory defined benefit
arrangement is in operation for Philippe Tible
as divisional CEO of Castorama and Brico Dépôt.
For the defined contribution scheme
or cash allowance, the maximum
annual pension contribution is 30%
of base salary for the Group Chief
Executive and 20% of base salary for
other UK-based executive directors.
For the defined benefit arrangement
in which the divisional CEO of
Castorama and Brico Dépôt, Philippe
Tible participates, the pension
notionally accrues at a value of 1.5%
of final pensionable pay for each year
of service, with crystallisation of the
pension being conditional upon him
retiring from the Company.
None
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Element and purpose Operation Maximum opportunity Assessment of performance
Annual bonus
To incentivise executive
directors to achieve or
exceed annual financial,
strategic and personal
objectives set by the
Committee at the start of
each financial year. The
deferred element of the
annual bonus is intended
to support longer-term
shareholder alignment
and retention.
Annual bonuses are paid after the end of the
financial year to which they relate.
50% of the annual bonus is paid in cash shortly
after the financial year end. The remaining 50%
of the annual bonus is deferred for three years in
Kingfisher shares. Vesting of these shares is not
subject to performance conditions and no match
is applied. Shares delivered on the exercise of an
award attract additional dividend shares calculated
on the basis of the re-investment back into shares
of the dividend that would have been received
had the shares been beneficially held.
The Committee has the discretion to adjust the
bonus outcome if the pure application of a formula
is not felt to produce an appropriate result in light
of overall underlying performance. In particular the
Committee has the discretion to adjust payments
downwards if profits have fallen. Any adjustment
made using this discretion will be explained.
Malus may be applied whereby part or all of an
unvested deferred bonus award may be reduced
(including, if appropriate, reduction to zero) in the
event of financial misstatement, serious
reputational damage, or material misconduct in
individual cases.
Deferred bonus awards will vest in full in the event
of a change of control of the Company.
The on-target and maximum
annual bonus payable are
100% and 200% of base
salary respectively.
The level of payment at threshold
is set on an annual basis but will
not exceed 25%.
The specific measures, targets and
weighting may vary from year to year in
order to align with the Group’s strategy,
but always with a substantial proportion
based on key financial metrics. For the
2014/15 financial year, 60% of the
annual bonus is linked to key financial
metrics, 20% is related to KPIs for which
there is a particular focus during the year
in question; examples would include
Group sourcing and productivity. 20%
is for personal performance based on
achievement of personal objectives and
contribution to the One Team strategy,
including behaviours.
Where executive directors have specific
management accountability for the
results of one or more Operating
Companies they may, in addition to, or
as a substitute for Group targets, also
have targets related to the performance
of those businesses.
The actual performance targets set are
not disclosed at the start of the financial
year, as they are considered to be
commercially sensitive.
Long-term incentive plan
To incentivise executive
directors to achieve
superior returns for
shareholders and drive
shareholder alignment and
retention of executives over
the performance period
of the awards.
Performance conditions
are aligned with
shareholder interests
and the Group’s
strategic objectives.
Awards will be granted annually under the
Kingfisher Incentive Share Plan, subject to
a three-year vesting period and stretching
performance conditions.
Shares delivered on the exercise of an award
attract additional dividend shares calculated on
the basis of the re-investment back into shares of
the dividend that would have been received had
the shares been beneficially held.
The Committee has the discretion to adjust the
LTIP outcome if the pure application of a formula
is not felt to produce an appropriate result in
light of overall underlying performance.
Malus may be applied whereby part or all of an
unvested long-term incentive award may be
reduced (including, if appropriate, reduction
to zero) in the event of financial misstatement,
serious reputational damage, or material
misconduct in individual cases.
In the event of a change of control of the
Company, awards will vest subject to assessment
of performance up to the date of change of control
and will be reduced on a time pro-rated basis
unless the Committee considers that such a
reduction is inappropriate.
The maximum annual award is
200% for executive directors, with
the flexibility to award up to 250%
for the Group Chief Executive. The
Group Chief Executive’s award in
2014/5 will be 200%.
25% of the award vests for
threshold performance.
Awards vest based on performance
over three years against performance
measures chosen by the Committee
to align with business and strategic
priorities. For the 2014/5 financial year
the measures for executive directors are:
50% EPS
50% Kingfisher Economic Profit (KEP)
The Committee may adjust the
performance measures attaching to
awards and the weighting of these
measures if it feels this will create
greater alignment with business and
strategic priorities.
A significant change to the measures
used would only be adopted following
consultation with major shareholders.
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Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
52
Future remuneration policy continued
Element and purpose Operation Maximum opportunity Assessment of performance
Profit sharing arrangements
Participation Scheme
To enable French
employees to share in the
financial success of the
French businesses
Philippe Tible participates in this scheme as an
employee of a French company on the same
terms as all French employees.
The Participation scheme is a mandatory scheme
based on a legal requirement for a proportion of
the Castorama and Brico Dépôt France profits
to be distributed to employees. It is paid in cash
shortly after the financial year end, although the
scheme provides the option to defer the payment
for a period of five years to receive certain
taxation exemptions.
Under the Participation Scheme
the maximum opportunity is set by
the French government. There are
two limits set which are based on a
multiple of the Annual Social
Security ceiling (PASS). This is
updated each year but for 2014
stands at €37,548.
These limits are:
The maximum salary that the
award level as a % of salary is
applied to is 4x PASS (€150,192)
The maximum possible payment is
0.75x PASS (€28,161)
The award level is determined
as a proportion of profits as set with
reference to the minimum required
by the French government and a
more favourable formula that
has been agreed with the French
Works Council.
Over the last five years the award
level as a % of salary (up to the salary
cap) has remained within the 5% –
7% range. On Philippe Tible’s actual
salary the award levels have been less
than 2% of salary.
Interessement Scheme
To enable French employees
to share in the financial
success of growth in the
French businesses
Philippe Tible participates in this scheme as an
employee of a French company on the same
terms as all French employees.
This scheme creates a profit pool which is divided
by the cost of wages and salaries to determine
an award level as a % of salary.
Payments are made in cash on a quarterly basis
although the scheme provides the option to defer
the payment for a period of five years to receive
certain taxation exceptions.
Since the design is in the form of
a profit pool, there is no set cap as
such. However, the award level for
Philippe Tible has not exceeded
20% of salary historically.
The profit pool is based on a formula
which is linked to a proportion of
the sales and profit growth.
Shareholding requirements
To ensure alignment of
interests of executive
directors and shareholders
over the long-term.
Executive directors are required to build a
significant shareholding in the Company before
the fifth anniversary of the date of their first award
under a qualifying share plan. Consideration will
be given to extending the five-year time frame in
the event that share awards vesting from deferred
bonus shares or the LTIP alone do not provide
enough shares to meet the shareholding
requirement. Unvested deferred bonus awards are
not included in the assessment of the holding
requirement until the transfer of beneficial
ownership to the executive director at the end of
the three-year deferral period. Nil-cost options
which have vested but the executive has yet
to exercise are considered to count towards
the shareholding.
Group Chief Executive:
shareholding of 300% of
base salary.
Other executive directors:
shareholding of 200% of
base salary.
None
Legacy Awards
Performance Share
Plan (‘PSP’)
A one-off exceptional award of 500% of base
salary was granted under the PSP in 2011.
This award was granted to create focus on a
single three-year period of the Creating the
Leader strategy. The awards vest in two equal
tranches in June 2014 and June 2015.
On exercise, additional dividend shares are
added to the award, with a value equivalent to
the value of dividends reinvested into shares from
the date of grant to the date of transfer.
Malus may be applied to unvested awards, if the
Committee determines that the grant of awards
was not justified.
Certain awards granted prior to 2011 have vested
but have not been exercised and therefore
remain outstanding.
500% of base salary for all
executive directors.
Awards are subject to stretching
performance targets, 50% based
on EPS and 50% on KEP.
Following completion of the financial
year, the vesting percentage has
been determined by the Committee
at 31% of the maximum award level,
subject to continued employment.
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Element and purpose Operation Maximum opportunity Assessment of performance
Kingfisher Incentive
Share Scheme (‘KISS’)
Under the KISS, executive directors defer 33% of their
Annual Bonus into Kingfisher shares. Awards are deferred
for three years and are subject to forfeiture should the
executive leave the Group before the vesting date. Malus
may be applied to unvested awards, if the Committee
determines that the grant of awards was not justified.
On exercise, additional dividend shares are added to the
award, with a value equivalent to the value of dividends
reinvested into shares from the date of grant to the date
of transfer.
Awards were granted annually under the KISS and will be
granted in 2014 in respect of the 2013/14 annual bonus.
Awards will vest in full in the event of a change of control
of the Company.
33% of the Annual Bonus at the
time of award, plus additional
dividend shares accrued from the
date of grant to the date of transfer.
None
Company Share Option
Plan (‘CSOP’)
An HMRC approved share option plan was used to grant
awards with a value up to a limit of £30,000. The option
price was determined at the time of grant by reference to
the market price immediately before the date of grant.
The options are linked to an underpinning KISS Award
and the two awards must be exercised simultaneously. On
exercise, the proceeds of the underpinning KISS Award
are used to fund the exercise price of the CSOP Award.
Up to £30,000 None
Chairman and non-
executive director fees
To attract and retain a
Chairman and non-executive
directors of the calibre
required by the Group.
The fees paid to the Chairman are determined by
the Committee, while the fees of the non-executive
directors are determined by the Board with affected
persons absenting themselves from the discussions
as appropriate.
The Committee reviews the Chairman’s fees annually.
The Chairman’s fees are determined with reference to
time commitment and relevant benchmark market data.
Contributions may be made towards the cost of running
the Chairman’s office.
The Board determines non-executive directors’ fees under
a policy which seeks to recognise the time commitment,
responsibility and technical skills required to make a
valuable contribution to an effective Board.
A base fee is paid to all non-executive directors
and additional fees are also paid to the Senior
Independent Director and the Chairmen of the Audit
and Remuneration Committees.
The Board annually reviews fees paid to non-executive
directors against those in similar companies and taking
into account the time commitment expected of them.
Fees are paid monthly.
The Chairman and the non-executive directors do not
participate in any of the Company’s performance-related
pay programmes and do not receive pension benefits.
The Chairman and the non-executive directors are not
entitled to any compensation for loss of office.
The Chairman and the non-executive directors do not
receive any other benefits with the exception of store
discount of up to 20%.
Aggregate annual fees paid to
the Chairman and non-executive
directors are limited by the
Company’s Articles of Association,
which may be varied by special
resolution of the shareholders. The
current limit contained within the
Articles of Association is £1 million
and it is proposed that this be
increased to £1.75 million at the
AGM in 2014, to allow sufficient
headroom for future increases.
Contributions towards the cost of
running the Chairman’s office will
not exceed £60,000 per annum
and are included within the
aggregate fees set out above.
None
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Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
54
Future remuneration policy continued
Element and purpose Operation Maximum opportunity Assessment of performance
Approach to recruitment
remuneration
When hiring a new executive director, or making internal
promotions to the Board, the Committee will in principle
apply the same policy as for existing executive directors,
as detailed in the Remuneration Policy. The rationale for
the package offered will be explained in the next Annual
Remuneration Report.
Base salary would be set at an appropriate level to recruit
the best candidate based on their skills, experience and
current remuneration.
Benefits would be in line with normal policy and may
include, where appropriate, relocation benefits or other
benefits reflective of normal market practice in the
territory in which the executive director is employed.
Normal incentive awards would be made under the
annual bonus plan and long-term incentive plan in
line with the Remuneration Policy.
For internal promotions any commitments made prior
to appointment may continue to be honoured as the
executive is transitioned to the new remuneration
arrangements.
The Committee would be mindful of best practice
guidelines in considering whether any enhanced LTIP or
other award was necessary on recruitment in order to
secure the preferred candidate (e.g. to buy out awards
forgone from the incoming executive’s previous employer).
The Committee’s policy is to seek to avoid buying out
awards forgone. Normally the Committee would seek only
to make performance-related awards under the long-term
incentive plan, for example by pro-rating them into
recently awarded plan cycles to ensure alignment with
existing executive directors. However, each case will
need to be considered on its own facts at the particular
time such awards are made. If a buy-out award would
be required, the Committee would aim to reflect the
nature, timing and value of an award forgone in any
replacement award which may be in the form of a
restricted stock or performance-related award as
appropriate. The Committee would aim to minimise
the cost to the Company.
Normal Awards
The normal maximum incentive
opportunity on recruitment will be
in line with the Remuneration
Policy for executive directors.
Additional LTIP Award
Under the plan rules, the
Committee may, on the
recruitment of an executive
director, make an additional one-
off performance linked award
under the long-term incentive plan
of up to an equal face value to the
normal policy award (i.e. up to
250% of base salary for the Group
Chief Executive and 200% of base
salary for the other executive
directors). This provision is
normally used to pro-rate incoming
executives into recently awarded
long-term incentive plan cycles.
Buy-out Award
The Committee normally seeks to
avoid explicitly buying out awards
forgone at a previous employer,
preferring instead to make long-
term incentive plan awards as set
out above.
Where, in exceptional
circumstances, buy-out awards are
made, they are not subject to a
formal maximum, although would
be designed to reflect only
the value forgone or less. In
establishing the appropriate value
of any buy-out the Committee
would also take into account the
value of any additional long-term
incentive plan award made
on joining.
None
The Committee will operate the Kingfisher Incentive Share Plan (which will be subject to shareholder approval at the AGM in
June 2014) and the Group’s legacy plans (the Performance Share Plan, Kingfisher Incentive Share Scheme and Company Share
Option Plan) (together the ‘Plans’) in accordance with the rules of those Plans and where relevant with the UKLA Listing Rules.
In addition to the discretions set out as part of this Remuneration Policy, the rules provide the Committee with discretion in certain
matters regarding the administration and operation of these Plans, including, but not limited to the following:
• the impact of a change of control or restructuring;
• any adjustments to performance conditions or awards required as a result of a corporate event (such as a transaction, corporate
restructuring event, special dividend or rights issue);
• the operation of malus provisions; and
• minor administrative matters to improve the efficiency of operation of the plans or to comply with local tax law or regulation.
The Committee retains certain discretions in relation to the Annual Bonus Plan, which include but are not limited to:
• the determination of and timing of any bonus payment;
• the impact of a change of control or restructuring;
• any adjustments required as a result of a corporate event (such as a transaction, corporate restructuring event, special dividend
or rights issue)
In relation to the Plans and the Annual Bonus Plan, the Committee retains the ability to amend the performance conditions and/or
measures in respect of any award or payment if one or more event(s) have occurred which would lead the Committee to consider
that it would be appropriate to do so, provided that such an amendment would not be materially less difficult to meet.
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If the Committee used any of the discretions set out above these would, where relevant, be disclosed in the next Annual
Remuneration Report and the views of major shareholders may also be sought.
Discretion in relation to the Group’s All-Employee Share Plans (Sharesave and Share Incentive Plan) would be exercised within
the parameters of the HMRC and the UKLA Listing Rules.
Notes to the future remuneration policy table
Annual bonus
The performance conditions are set annually based on the metrics the Committee feels are most appropriate for the business.
Like-for-like sales is a key metric in the Creating the Leader strategy, and Profit Before Tax ensures that this sales growth is delivered
in a way that creates value for shareholders. Other strategic KPIs are chosen to support particular objectives for the year, and the
individual component enables outstanding contributions to be incentivised and rewarded.
Annual bonus targets are set with reference to internal budgets and analyst consensus forecasts, with maximum pay-out requiring
performance well ahead of budget.
Long-term incentive plan
The Committee believes that long-term incentive plan measures should be aligned to shareholder value while providing line of sight
to management, so that they are meaningful and incentivising. EPS growth is a key measure of our success in growing value for
shareholders over time, while KEP balances profit growth with efficient use of our balance sheet.
The setting of LTIP targets takes into account analyst consensus forecasts, internal projections, and the levels of performance
required over the long-term to deliver absolute value appreciation for shareholders.
Differences in remuneration policy for all employees
All employees are entitled to base salary and benefits and may also receive bonus, pension, profit share and share awards which
vary according to local jurisdiction and market practice. The maximum provision and incentive opportunity available are determined
by the seniority and responsibility of the role.
Service contracts and policy on payment for loss of office
Provision Policy
Notice period
12 months’ notice by either the director or the Company for Sir Ian Cheshire, Kevin O’Byrne and Karen Witts. Three months’
notice for Philippe Tible.
Remuneration
As described in this report.
Cash benefits
Car allowance (as an alternative to a company car) and pension benefit.
Non-cash benefits
The Company provides a range of additional benefits, including private medical insurance on a family basis, death in service
cover equal to four times base salary, a subsidised staff canteen, a staff discount card, allowance for financial planning and
30 working days’ holiday per year.
Expenses
Reimbursement of reasonably incurred costs in accordance with their duties.
Non-compete
During employment and for 12 months after leaving. In respect of Philippe Tible, an amount equal to 50% of annual salary
and car benefit must be paid to him on a monthly basis if his employment is terminated by the Company. This amount is
standard under French law in order to ensure that the non-compete provision is enforceable.
Contractual
termination payment
Executive directors
In the case of resignation, no payments on departure will be made on termination, even if by mutual agreement the notice
period is cut short. If notice is served by the Company in full, no other payments should be due on departure. For any period
of notice period not served, the payment takes the form of liquidated damages, which pays the departing executive 8.3% of
salary per month for the remainder of their notice period. These monthly payments are subject to mitigation. The maximum
payment post departure would be one times base salary.
If notice is served by either party, the executive director may continue to receive base salary, benefits and pension for the
duration of their notice period, during which time the executive director may continue their duties or be assigned a period of
garden leave. The Group’s policy is that payments for termination will not exceed 12 months’ base salary.
The terms of the phased payment clauses in the service contracts of Sir Ian Cheshire and Kevin O’Byrne were consistent with
the governance guidelines at the time the contracts were put in place. In circumstances where the Company terminates their
agreements, they will receive phased payments of 15% and 12% of base salary respectively for a maximum of 12 months
from the date of termination subject to mitigation.
The termination clause in Philippe Tible’s contract is determined by the collective convention which applies to all French
employees. A termination payment would be made up of two parts (i) the dismissal indemnity which is 3% of annual
remuneration per year of service and (ii) a payment for any unpaid notice which would be a maximum of three months’
remuneration. The current combination cost based on years of service to date is approximately one times base salary.
Remuneration for this purpose consists of base salary, car benefit and cash bonus award.
In the event of a settlement agreement, the Committee may agree payments it considers reasonable in settlement of legal
claims. This may include an entitlement to compensation in respect of their statutory rights under employment protection
legislation in the UK or in other jurisdictions. The Committee may also include in such payments reasonable reimbursement
of professional fees in connection with such agreements.
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Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
56
Service contracts and policy on payment for loss of office continued
Provision Policy
Contractual
Termination payment
continued
Chairman and
non-executive directors
Non-executive directors are appointed under letters of engagement. Appointments have historically been for an initial period of
three years and invitations to act for subsequent three-year terms are subject to a review of performance, and taking into account
the need to progressively refresh the Board.
The appointment may be terminated by either party giving the other not less than three months’ prior written notice, unless
terminated earlier in accordance with the Company’s Articles of Association, and the Company has no obligation to pay
compensation when their appointment terminates.
Leaver provisions for
annual bonus
If notice is served by either party, the executive director may receive bonus payments in cash on a pro-rated basis from the start of
the financial year up to the date of termination of employment, based on the determination of the results at the year-end against
targets set.
In the event that an executive director ceases to be employed during or shortly after the financial year and before the date of the
annual bonus award, the Committee has the discretion to make a bonus payment and determine the basis upon which it is made
and its value taking into account the individual circumstances of the departure. If the executive ceases employment as a result
of a reason defined as a good leaver (which includes ill-heath or retirement), then the normal approach would be to award a time
pro-rated bonus in cash based on the actual results against the performance measures set once they have been determined
following the end of the financial year. In the case of resignation, no bonus award will be made.
Leaver provisions for
share incentives
The rules of the Kingfisher Incentive Share Plan (which will be subject to shareholder approval at the AGM in June 2014) and
the Group’s legacy plans (the Performance Share Plan, Kingfisher Incentive Share Scheme and Company Share Option Plan)
(together the ‘Plans’) set out the treatment that will be applied to awards and options if a participant leaves the Group before the
end of the vesting period. A summary of the treatment is set out below:
Long-Term Incentive Awards (granted under the Kingfisher Incentive Share Plan (‘KISP’) from 2014 onwards and the Performance
Share Plan (‘PSP’))
Awards will normally lapse upon cessation of employment (with the exception of unvested awards granted under the KISP, which
lapse on the date of notice of termination of employment), except in certain circumstances as described below. In determining the
extent to which awards should vest when an executive departs, the Committee will consider all the facts of the executives
departure, including their performance and the extent to which the departure is at the instigation of the Company.
If an executive director ceases to be employed as a result of a reason defined as a good leaver within the rules of the KISP or the
PSP, which includes ill-health, retirement or any other reason at the discretion of the Committee, then the awards will vest on the
normal vesting date, but will be adjusted on a time pro-rated basis (unless the Committee decides, acting fairly and reasonably,
that such an adjustment would be inappropriate). The Committee retains the discretion to reduce further awards granted under
the KISP to reflect any personal performance issues. If the award is structured as a nil-cost option, it will normally be exercisable
for a period of six months from the normal vesting date (unless the Committee determines that it may vest on the date of
cessation). In circumstances where the participant ceases to be employed as a result of death, then the award will vest on the
date the Company is notified and, if the award is structured as a nil-cost option, then it will be exercisable for a period of twelve
months from the date of notification. The Committee will determine the vesting of the award based upon the performance
conditions attached to the awards and a reduction in the number of shares on a time pro-rated basis (unless the Committee
decides, acting fairly and reasonably, that such an adjustment would be inappropriate).
In the event of a takeover or other corporate event (such as the winding-up of the Company), awards will vest on the date of
notification, but will be adjusted on a time pro-rated basis (unless the Committee decides, in its absolute discretion, that such an
adjustment would be inappropriate) and in the case of an award structured as a nil-cost option, will be exercisable for a period of
one month from the date of notification.
Deferred Bonus Awards (granted under the KISP from 2015 onwards and the KISS up to 2014)
Awards granted under the KISS lapse if the executive director resigns or is dismissed for cause. In all other circumstances, the
award will vest in full on the date of cessation of employment and will remain exercisable for a period of six months (12 months in
the case of death).
Deferred Bonus Awards which will be granted under the KISP from 2015 onwards will lapse if the executive director resigns or is
dismissed for cause. If an executive director ceases to be employed as a result of a reason defined as a good leaver which
includes ill-health, disability or any other reason at the discretion of the Committee, then the awards will vest on the normal vesting
date. If the award is structured as a nil-cost option, it will be exercisable for a period of six months from the normal vesting date. In
circumstances where the participant ceases to be employed as a result of death, then the award will vest in full on the date the
Company is notified and, if the award is structured as a nil-cost option, then it will be exercisable for a period of twelve months
from the date of notification.
In the event of a takeover or other corporate event (such as the winding-up of the Company), awards will vest on the date of
notification and in the case of an award structured as a nil-cost option, will be exercisable for a period of one month from the date
of notification.
Company Share Option Plan (‘CSOP’)
The CSOP is an HMRC approved share option plan. Options granted under the CSOP are linked to an underpinning deferred
bonus award granted under the KISS and the two must be exercised simultaneously. Options granted under the CSOP will
normally lapse upon cessation of employment. If an executive director ceases to be employed as a result of a reason defined as
a good leaver within the rules of the CSOP, which include injury, disability or the sale or transfer of the business or company
that employs them the option will vest on the cessation of employment and will be exercisable for a period of six months. If the
executive director leaves due to retirement, the award will vest on the normal vesting date or if the cessation of employment is
within six months of the normal vesting date it will vest on the date of cessation.
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Statement of Implementation of Remuneration Policy in 2013/14
The differences between the Remuneration Policy for 2013/14 and the policy on which shareholders will vote at the 2014 AGM
are set out below.
Component value Operation of the component Maximum potential
Performance metrics used, weighting and
time period applicable
Base salary no difference no difference n/a
Benefits no difference no difference no difference
Annual bonus 33% of 2013/14 annual bonus
will be deferred for three years.
50% of the 2014/15 annual
bonus will be deferred for three
years under the new plan.
no difference, maximum
opportunity remains at 200%
of base salary.
In 2013/14 the annual bonus was
based on the following metrics:
• Profit 30%
• Relative LFL sales 30%
• Sourcing & Productivity 20%
• Personal performance 20%
LTIP Following the one-off award of
500% of base salary made in
2011 under the PSP, no awards
were made in 2012 or 2013.
Annual awards will be made
in future.
No awards were made in
2013/14. In future awards will be
granted on an annual basis at a
maximum of 200% of base salary
(with flexibility to award up to
250% of salary for the Group
Chief Executive).
No award was made in 2013/14
Statement of consideration of employment conditions elsewhere in the Group
The Committee invites the Group HR Director to present at its meeting the proposals for salary increases for the employee population
generally and on any other changes to remuneration policy within the Group. The Group HR Director consults with the Committee on
the KPIs for the executive directors’ bonuses and the extent to which these should be cascaded to other employees. The Committee
has oversight of all LTIP awards across the Group.
The Committee is provided with data on the remuneration structure for all One Team Board members, approves the policy on share
award levels for all employees and uses this information to ensure that there is consistency of approach throughout the Group.
The Company did not consult with employees when drafting the Directors’ Remuneration Policy.
Directors’ service contracts/letters of appointment
Current directors
Date of service contract /
letter of appointment Expiry of current term
Length of service
at 1 February 2014
Daniel Bernard 24/05/2006 30/06/2015 7 years
Andrew Bonfield 11/02/2010 15/12/2015 4 years
Pascal Cagni 17/11/2010 16/11/2016 3 years
Clare Chapman 02/12/2010 01/12/2016 3 years
Sir Ian Cheshire 28/01/2008 Rolling 13 years
Anders Dahlvig 16/12/2009 15/12/2015 4 years
Janis Kong 08/12/2006 06/12/2015 7 years
Kevin O’Byrne 01/10/2008 Rolling 5 years
Mark Seligman 01/01/2012 31/12/2014 2 years
Philippe Tible 01/10/2012 Rolling 1 year
Karen Witts 01/10/2012 Rolling 1 year
Annual Report and Accounts 2013/14
58
Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
58
Illustrations of the application of the Remuneration Policy
The tables and charts below provide estimates of the potential total future remuneration for each executive director in respect of the
remuneration opportunity granted to them in 2014/15. Potential outcomes based on different performance scenarios are provided
for each executive director. The scenarios do not take into account share price appreciation or dividends.
The total remuneration for each of the executive directors that could result from the Remuneration Policy in 2014/15 under three
different performance levels is shown below.
Notes
Base salary as at 1 February 2014.
Benefits: Estimate based upon benefits received during 2013/14 and recorded in the single figure table of remuneration.
Pension: based upon pension of 30% of base salary for Sir Ian Cheshire and of 20% of base salary for Kevin O’Byrne and Karen Witts. Philippe Tible’s pension is based
on that for 2013/14.
Below threshold performance would result in the payment of the fixed elements of pay only.
On-target performance is the level of performance required to deliver 50% of the maximum annual bonus and 50% of the full LTIP award.
On-target for the Participation Scheme £8,500, maximum £23,900.
On-target for the Interessement Scheme 10% of salary, maximum 20% of salary.
Maximum performance would result in the maximum bonus payment and 100% vesting of the LTIP award.
Performance scenarios
Below threshold On-target Maximum
• Only the fixed pay elements
(base salary, benefits and pension)
of the package are earned.
• Minimum performance targets for
the Annual Bonus and LTIP are not
achieved, therefore no payments will
be made and LTIP awards will lapse.
• Fixed pay elements plus on-target
Annual Bonus plus on-target
LTIP vesting.
• Annual Bonus on-target performance is
achieved, resulting in a bonus of 50%
of maximum – 100% of base salary.
• For the LTIP, the on-target vesting level is
50% of maximum – 100% of base salary.
• Fixed pay elements plus maximum
Annual Bonus plus maximum LTIP
award vesting.
• Annual Bonus at maximum, resulting
in a bonus of 100% of maximum –
200% of base salary.
• LTIP maximum is 200% of base salary.
Sir Ian Cheshire
Value of package (£m)
Total Remuneration Performance Charts
Maximum
£4,530,291
Target £2,832,291
Below
Threshold
£1,134,291
Kevin O’Byrne
Value of package (£m)
Maximum
Target
Below
Threshold
£791,737
Philippe Tible
Value of package (£m)
Maximum
Target
Below
Threshold
£3,056,504
£1,950,211
£813,355
Karen Witts
Value of package (£m)
Maximum
Target
Below
Threshold
£2,756,325
£1,706,325
£656,325
£3,349,897
£2,070,817
+ Salary Salary Bene?ts Bene?ts + + +
Total
Remuneration
Bonus Bonus LTIP =
Pensions Pensions
19% 37% 37% 1% 6%
19% 38% 38% 1% 4%
30% 30% 30% 1% 9%
31% 31% 31% 1% 6%
75% 3%
17% 38% 34% 1% 10%
26% 30% 27% 1% 16%
61% 1% 22%
81% 3% 16%
38%
19% 38% 38% 1% 4%
31% 31% 31% 1% 6%
80% 4% 16%
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Annual Remuneration Report
Single total figure of remuneration for each director (Audited)
The following table shows a single figure of remuneration in respect of directors’ qualifying services for the financial years 2013/14
and 2012/13.
Base salary and fees
£’000
Taxable benefits
£’000
Bonus
£’000
(5)
LTIP
£’000
(6)
Pension
£’000
Total
£’000
2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13
Executive Directors
Sir Ian Cheshire 832.3 816.0 30.6 30.8 532.7 502.7 1,909.5 1,157.6 260.4 310.1
(8)
3,565.5 2,817.2
(7)
Kevin O’Byrne 627.0 600.0 24.3 24.9 453.9 345.6 1,404.0 832.0 123.1 117.9 2,632.3 1,920.4
Philippe Tible
(2)
509.3 436.1 11.7 11.2 297.6
(3)
398.6
(3)
1,072.5 862.8 320.0 306.0 2,211.1 2,014.7
Karen Witts
(1)
484.5 158.3 26.3 8.7 319.8 97.5 607.2 – 103.1 31.7 1,540.9 296.2
Total 2,453.1 2,010.4 92.9 75.6 1,604.0 1,344.4
4,993.2 2,852.4 806.6 765.7 9,949.8 7,048.5
Chairman and non-
executive directors
Daniel Bernard
(2)(4)
472.4 443.7 472.4 443.7
Andrew Bonfield 81.2 80.0 81.2 80.0
Pascal Cagni 61.2 60.0 61.2 60.0
Clare Chapman 76.2 75.0 76.2 75.0
Anders Dahlvig 61.2 60.0 61.2 60.0
Janis Kong 61.2 60.0 61.2 60.0
Mark Seligman 78.6 77.4 78.6 77.4
Total 892.0 856.1 892.0 856.1
(1) Karen Witts joined the Group on 1 October 2012 and her remuneration for 2012/13 was prorated accordingly.
(2) Philippe Tible’s remuneration and the fees paid to Provestis in respect of the provision of Daniel Bernard as Chairman, are paid in euros and are converted to sterling
for the purpose of the table at the average exchange rate over the course of the relevant year (2013/14: £1:€1 1782).
(3) Includes payments in relation to Interessement and Participation schemes in France (£58,190). The 2012/13 figure has been restated to include Interessement and
Participation schemes payments not included within prior year disclosure (£51,846).
(4) Fees for the provision of Daniel Bernard as Chairman are paid to a service company, Provestis, which also receives a contribution towards the cost of running the
Chairman’s office in Paris of €61,800 (£52,456). The 2012/13 figure has been restated to include the contribution for office costs in 2012/13 (£50,144).
(5) The annual bonus will be paid in April 2014 for the financial year 2013/14. One third of the bonus awarded will be deferred under the KISS into Kingfisher shares for
three years and will be available to vest in April 2017.
(6) The LTIP value is based upon the 2011 PSP awards which are due to vest in June 2014 and June 2015, based upon performance over the three financial years ending
1 February 2014. The award has been valued using the average Kingfisher share price over the three months to 31 January 2014 (380.31p).
(7) Excludes £8,888, included in the 2012/13 report which represented the net equivalent gain following the exercise of phantom options awarded in April 2002 and
exercised in 2012.
(8) The prior year comparison for Sir Ian Cheshire’s pension contribution has been restated to include the increase in transfer value (net of director’s contributions) on the
defined benefit pension scheme.
.
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Notes to the single total figure of remuneration for each director (Audited)
Base salary and fees
Executive directors’ salaries were increased with effect from 31 January 2013. Base salaries for 2013/14 and 2012/13 are shown below.
Base salary
£’000
% increase
As at 3
Feb 2013
As at 29
Jan 2012
Sir Ian Cheshire 832.3 816.0 2.0%
Kevin O’Byrne
(1)
627.0 600.0 4.5%
Philippe Tible
(2)
509.3 436.1 9.0%
(3)
Karen Witts 484.5 475.0 2.0%
(1) The increase in Kevin O’Byrne’s base salary reflected the broadening of his role as CEO of the B&Q division and responsibility for the Group’s joint ventures.
(2) The increase in Philippe Tible’s base salary was in recognition of the expansion of his role as executive director of the Company. His remuneration is paid in euros
and is converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant year.
(3) The percentage increase is depicted in constant currency and reflects the increase in Philippe Tible’s base salary from €550,000 to €600,000.
The Chairman and non-executive directors’ fees were increased with effect from 1 February 2013. Fee rates for 2013/14 and
2012/13 are shown below.
Fees £’000
% increase
As at 3
Feb 2013
As at 29
Jan 2012
Chairman
(1)
472.4 443.7 2%
Non-executive director fee 61.2 60.0 2%
Senior Independent Director 17.4 17.4 0%
Chairman of Audit Committee 20.0 20.0 0%
Chairman of Remuneration Committee 15.0 15.0 0%
(1) Fees for the provision of the Chairman are paid in euros and converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant
year. The percentage increase for the Chairman is depicted in constant currency.
Taxable benefits
The benefits provided to executive directors for both 2013/14 and 2012/13 included car benefit (or cash allowance), private medical
insurance, death in service cover and financial advice.
Annual bonus
The executive directors’ targets for the 2013/14 bonus were based on both financial targets and individual objectives as set out in
the tables below, with annual bonus payments determined by reference to performance over the financial year ending 1 February
2014. For the financial targets achievement is calculated on a straight-line basis between start to earn and target and between target
and maximum.
Group profit before tax at constant exchange rates grew modestly year-on-year, but was behind the Threshold level of performance
and so no bonus was paid on this element. Retail operating profit performance for B&Q and Koçtas¸ brands was just above Threshold
and so warranted a small bonus payment on this element for Kevin O’Byrne.
Like-for-like sales growth was below target as we faced significant sector-wide declines in a number of our markets. However, in a
number of our markets we grew market share even if absolute levels of like-for-like sales growth were below target. Overall this
performance resulted in a level of payment modestly above Threshold.
In the face of challenging trading conditions the Group made good productivity improvements at the level of store productivity but also
in identifying and delivering cost savings across the Group. As a result our productivity targets were slightly exceeded, leading to a
payment between Target and Maximum.
Similarly good progress was achieved on our sourcing strategy where synergies and improvements in direct sourcing and own brand
sourcing resulted in the Group as a whole being just above the target level of payment on this measure.
Personal components of bonus reflected generally strong performance against personal objectives and contribution to the One
Team behaviours.
Measure
Profit before
tax/retail
operating profit Like-for-like sales
KPI (Sourcing
and productivity)
Personal
performance
Weighting at maximum bonus 30% 30% 20% 20%
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Outcomes achieved as a % of Maximum
Performance Measure Target Actual Sir Ian Cheshire Kevin O’Byrne Philippe Tible Karen Witts
Profit before tax
(1)
£765m £744.0m 0% – – 0%
Retail operating profit
(2)
– – – 5% 0% –
Like for like sales
(3)
3.3% 0.7% 15% – – 15%
Divisional like for like sales
(2)
– – – 10% 15% –
Sourcing and productivity
(4)
– – 58% 71% 17% 58%
Personal objectives – – 80% 85% 78% 85%
Totals 32% 36% 24% 33%
Bonus receivable £ 532.7 453.9 239.4 319.8
(1) The award level was determined after removing any impact of exchange rate variations. Once the favourable exchange rate movement had been removed from the
results, the award level was determined as nil.
(2) Retail operating profit and divisional like-for-like sales, measured at the business unit level, are considered commercially confidential and are therefore not disclosed.
(3) The targets were set based on absolute like-for-like performance, with the ability for the Committee to use its judgement in adjusting awards up and down taking
into account like-for-like out-turn versus local market and any consequent improvement or deterioration in market share.
(4) Sourcing and productivity included measures related to cost price reduction and cost savings achieved from additional opportunities not included in the budget.
These measures are considered commercially confidential and are therefore not disclosed.
Long-term incentive plan
The LTIP amount included in the 2013/14 single figure table is the PSP award granted in 2011. Vesting is dependent upon
performance over the three financial years ending 1 February 2014 and continued employment up to the vesting date in June 2014.
The performance against performance targets is set out below.
Performance Measure
Threshold –
15 % vesting
Maximum –
100% vesting Actual
% of maximum
achieved.
Earnings per share (EPS) 25.8p 31.2p 23.4p 0%
Kingfisher Economic Profit (KEP) £229m £386m £288.4m 62.2%
Total 31.1%
KEP is defined in the Financial Review on page 24.
As the awards had not vested at the date this report was finalised, the average share price for the last three months of the financial
year (380.31p) has been used to determine the value for the purposes of the single figure total. The awards held by executive
directors were as follows:
2011 PSP awards
Number of
shares
awarded
Number of
dividend shares
applied
Number of
shares
vesting
Value of
shares
vesting
Sir Ian Cheshire 1,502,043 111,548 502,079 £1,909,457
Kevin O’Byrne 1,104,443 82,018 369,175 £1,404,009
Philippe Tible
(2)
851,440 54,914 282,018 £1,072,543
Karen Witts
(1)
498,857 14,240 159,653 £607,176
(1) Karen Witts received an award on joining the Group on 1 October 2012 based upon 285% of her base salary. The award was time pro-rated equivalent to the 500%
award the other executive directors received in June 2011.
(2) An additional award was made to Philippe Tible in May 2012 in recognition of the expansion of his role and to bring him in line with the other executive directors who
received awards of 500% compared to Mr Tible’s initial award of 375%.
For all participants, the vesting of awards have been estimated as if the full award were released and was available for exercise. However, 50% of the award will vest and
will be available for exercise in June 2014 with the remaining 50% to vest and be available to directors in June 2015.
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62
Directors’ pension plan benefits
The Company operates a defined contribution pension plan for executive directors based in the United Kingdom.
Sir Ian Cheshire’s defined contribution pension arrangement provides a Company contribution of 30% of his base salary, and Kevin
O’Byrne’s and Karen Witts’ arrangements provide a Company contribution of 20% of base salary. The Company operates a policy
to limit pension contributions during the tax year up to the Annual Allowance, with the excess being directed into a taxable monthly
cash payment. Following pension and tax legislation changes which took effect in 2012 and which reduced the lifetime allowance
from £1.8 million to £1.5 million, the Company has offered a fully taxable cash alternative, at no additional cost to the Company, to
executive directors wishing to exit the defined contribution scheme completely.
Kevin O’Byrne has chosen to receive his Company pension contributions as a taxable monthly cash supplement in full.
Philippe Tible is a member of a separate Group defined benefit pension scheme, for which eligibility requires him to retire with the
Kingfisher Group. He has now met the age criteria of 62 in this scheme to retire and for the pension to crystallise. Based upon 11
years’ service, the pension accrued is valued at £3.3m. The increase in the value of his pension over the course of the financial year
is £320,000 as shown in the single figure table. These figures are based on a crystallised pension and have not been discounted in
any way for the risk of forfeiture.
The following table shows details required under the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 as they apply to Kingfisher for the year ended 1 February 2014.
The value of the increase in pension savings over the year is split between:
• Defined benefit arrangements – the additional value achieved in the year based on the ‘HMRC methodology’
• Defined contribution arrangements – the cash value of any employer contributions over the year.
Source of remuneration
Pension
arrangement
Changes in
pension savings
£’000
Sir Ian Cheshire
Final Salary Defined benefit 2
Money Purchase Plan Defined contribution 0
Payment in lieu of retirement benefits n/a 258.4
Sir Ian Cheshire ceased to accrue future benefits in the Final Salary section on 30 June 2012. Under that scheme, Sir Ian’s normal retirement age is 65 and his accrued
pension figure at 1 February 2014 was £34,077.
The increase in Sir Ian Cheshire’s defined benefit arrangement is because the ‘HMRC methodology’ increases the opening pension (2 February 2013) with the change
in the CPI index whereas the closing pension (1 February 2014) includes an increase at 1 April 2013 based on the change in the RPI index. Note that there have been
no member contributions payable in respect of the Final Salary section since 30 June 2012.
The defined contribution figure above represents employer contributions to the Money Purchase Plan over the year in question. Member contributions of £52,000 were
paid on behalf of Sir Ian Cheshire through salary sacrifice.
The following table shows the employer contributions made to the defined contribution scheme, or cash alternative in relation to
service during the financial year to 1 February 2014:
Cash alternative
(1)
£’000 2013/14 2012/13
Sir Ian Cheshire
(2)
258.4 230.7
Kevin O’Byrne 123.1 114.6
Karen Witts
(3)
103.1 31.7
(1) Following pension and tax legislation changes, effective 6 April 2011, tax relief on the value of pension contributions and defined benefit accrual has been limited to
£50,000 p.a. The Company has offered, as an alternative to contributions into the defined contribution pension scheme, a taxable cash payment to the executive directors
at no additional cost to the Company.
(2) The payments to Sir Ian Cheshire in 2013/14 and 2012/13 include a goodwill payment received following the closure of the Kingfisher defined benefit scheme and
his transfer to the Kingfisher defined contribution scheme. These payments were offered to all members of the scheme on the same terms.
(3) Member contributions under the Kingfisher defined contribution pension scheme of £54,000 were paid on behalf of Karen Witts through salary sacrifice.
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Outside appointments for executive directors
Subject to the rules governing conflicts of interest, the Company is supportive of its executive directors holding non-executive roles
outside the Group as it recognises that such roles can broaden their experience and knowledge, which can be of benefit to the Group.
Subject to the Committee’s agreement, any fees may be retained by the individual.
Kevin O’Byrne is a non-executive director, Senior Independent Director and Chairman of the Audit Committee of Land Securities
Group plc, and during the year was paid £63,750, £10,000 and £17,500 per annum respectively for fulfilling these roles and he
retains these fees.
Sir Ian Cheshire is a non-executive director, member of the Remuneration Committee and Senior Independent Director of Whitbread
plc, and is paid £55,000, £5,000 and £10,000 per annum respectively for fulfilling these roles and he retains these fees. In addition,
Sir Ian Cheshire is lead non-executive member of the Department for Work and Pensions Board, for which he waives his fee.
Karen Witts became a non-executive director of Imperial Tobacco Group plc following the end of the financial year and will be paid
£72,500 per annum for fulfilling this role. She will retain her fee for this role.
Scheme interests awarded during the financial year (Audited)
Options and awards over shares were made during the year ended 1 February 2014 under the KISS and the CSOP. KISS awards
were made in respect of the executive directors’ annual bonus earned for the performance during 2012/13 and are deferred for three
years. The only qualifying condition for the options and awards to vest is for the director to be in the employment of the Company at
the vesting date.
Name Number of shares
Face value
of award
£
Market value
of shares at
date of grant
p
(2)
Vesting date Lapse date
Sir Ian Cheshire 57,603 171,196 297.2 11/04/2016 10/04/2020
Kevin O’Byrne 39,605 117,706 297.2 11/04/2016 10/04/2020
Philippe Tible 41,780 124,170 297.2 11/04/2016 10/04/2020
Karen Witts KISS Award 864 2,568 297.2 11/04/2016 10/04/2020
Karen Witts CSOP Option
(1)
10,313 30,650 297.2 11/04/2016 10/04/2020
(1) The option was granted at an option price of 290.87p calculated by reference to the average closing price of Kingfisher plc shares for the three dealing days immediately
before the date of grant.
(2) The market price of shares was determined by reference to the closing price of Kingfisher plc shares on the date of grant (11 April 2013).
Included as an element of the KISS award, Karen Witts was granted options under the CSOP, a HMRC approved plan. The CSOP is underpinned in part by a matching fixed
value element of the KISS share awards granted on the same day. On exercise, the proceeds of part of the KIS share award are used to fund the exercise price of the CSOP
award. The total value of the KISS share award is unchanged.
Dilution limits
Kingfisher’s share plans contain limits that set out the quantum of newly issued shares that may be used to satisfy awards granted
under those plans. These limits are in line with the current Association of British Insurers (ABI) guidance on headroom limits which
provide that overall dilution under all plans should not exceed 10% over a ten-year period in relation to the Company’s issued share
capital, with a further limitation of 5% in any ten-year period on executive plans. The Company has always operated within these
limits. The Committee regularly monitors the position and prior to the making of any award considers the effect of potential vesting
of options or share awards to ensure that the Company remains within these limits. Any awards which are required to be satisfied
by market purchased shares are excluded from such calculations. No treasury shares were held or utilised in the year ended
1 February 2014.
Payments to past directors and payments for loss of office
No payments were made to past directors or for loss of office during the year.
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64
Statement of directors’ shareholding and share interests (Audited)
All executive directors are required to build up a significant shareholding in the Company within five years from the date of their first
award under a qualifying plan as described in the section on Remuneration Policy on page 52. Unvested deferred bonus awards are
not included when assessing holding requirements until the transfer of beneficial ownership at the end of the deferral period. Current
shareholdings are summarised in the following table. Calculations are based on a share price of £3.696 (being the closing price on 31
January 2014).
Shares held Awards over shares
Shareholding
required
(% of salary)
Current
shareholding
(% of salary)
Requirement
met
Number of shares
owned outright
Vested
but not
exercised
Unvested
(3)
and subject
to continued
employment
Unvested
and
subject to
performance
conditions 2013/14 2012/13
Executive directors
Sir Ian Cheshire 2,348,088 1,147,527 – 434,067 1,613,591 300% 1042% Yes
Kevin O’Byrne 141,431 141,431 1,393,280 320,049 1,186,461 200% 519% Yes
Philippe Tible 589,461 104,968 – 246,901 906,354 200% 427% Yes
Karen Witts 58,283
(2)
58,186 – 24,664 513,097 200% 44.5% n/a
(1)
Non-executive directors
Daniel Bernard 121,717 120,766
Andrew Bonfield 10,000 10,000
Pascal Cagni 30,570 30,000
Clare Chapman 6,990 6,990
Anders Dahlvig 75,000 75,000
Janis Kong 24,000 24,000
Mark Seligman 15,000 15,000
(1) Karen Witts has until 16 October 2017 to achieve the shareholding requirement, being five years from the date of her first award under a qualifying scheme.
(2) Between 1 February 2014 and the date of this report, Karen Witts acquired an additional 63 partnership shares under the Kingfisher Share Investment Plan (SIP).
(3) For UK based directors, this includes options granted under the CSOP, a HMRC approved plan and the CSOP underpin award, a matching fixed value element of the
KISS award granted on the same day as the KISS. Also included are options under the HMRC approved sharesave scheme.
As potential beneficiaries under the Kingfisher Employee Benefit Trust (the ‘Trust’), Sir Ian Cheshire, Kevin O’Byrne, Philippe Tible and Karen Witts are deemed to have an
interest in the Company’s ordinary shares held by the Trust. The Trust held 10,043,624 ordinary shares at 1 February 2014.
Nil-cost options which have vested but have yet to be exercised are considered to count towards the shareholding requirement, other than any such shares that correspond
to the estimated income tax and national insurance contributions that would arise on their exercise.
Non-executive directors do not have a shareholding requirement but are encouraged to hold shares in the Company.
Scheme interests exercised during financial year (Audited)
Name
Number of
shares
Exercise
price
p
Market value
of shares at
date of
exercise
p
Gain on
exercise of
options
£’000
Sir Ian Cheshire
ESOS 2003 award 134,538 237.8 288.3 67.9
KISS 2010 award 269,779 nil 288.7 777.9
PSP 2008 matching award 1,299,886 nil 292.7 3,805.2
PSP 2009 award 328,726 nil 297.7 962.3
PSP 2010 award 368,413 nil 324.8 1,196.7
Kevin O’Byrne
PSP 2008 award 665,000 nil 292.7 1,946.7
Philippe Tible
ESOS 2003 award 52,105 237.8 288.3 26.3
KISS 2010 award 132,368 nil 411.2 544.3
PSP 2010 award 274,602 nil 326.7 920.3
(1)
(1) Gain includes 247,224 shares transferred to Philippe Tible on 15 May 2013 at a market price of 326.7 pence per share and 27,378 shares exercised and sold on
11 September 2013 at a price of 411.2 pence per share.
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Performance graph and table
The graph below shows Kingfisher’s total shareholder return (‘TSR’) for the five years to 1 February 2014 which assumes that £100
was invested in Kingfisher on 1 February 2009. The Company chose the FTSE100 Index as an appropriate comparator for this graph
as Kingfisher has been a constituent of that index throughout the period.
Group Chief Executive’s pay in last five financial years
Year 2009/10 2010/11 2011/12 2012/13 2013/14
Group Chief Executive’s total single figure £’000 3,067.8 5,350.8 8,628.3 2,817.2 3,565.5
Bonus % of maximum awarded % 98.7 83.8 93.5 30.8 32.0
LTIP % of maximum vesting % 44.6 100.0 98.9 50.0 31.1
Percentage change in remuneration of director undertaking the role of Group Chief Executive
The table below shows how the percentage change in the Group Chief Executive’s salary, benefits and bonus between 2012/13 and
2013/14 compared with the average percentage change in the average of each of those components for all full-time equivalent employees
based in the UK. The UK employee workforce was chosen as a suitable comparator group as Sir Ian Cheshire is based in the UK (albeit
with a global role and responsibilities) and pay changes across the Group vary widely depending on local market conditions.
Group Chief Executive All employees
To 1 February
2014
£’000
Percentage
change
2013/14 vs
2012/13
Percentage
change
2013/14 vs
2012/13
Base salary 832.3 2.0% 2.0%
Taxable benefits 30.6 -0.6% -1.0%
Annual bonus 532.7 6.0% 71.8%
Total 1,395.6 3.4% 6.3%
The decrease in benefits is driven by a reduction in the private medical cover premium, rather than a reduction in the benefits offered.
The significant annual bonus % increase for all UK employees is driven off a relatively low base for 2012/13, hence this does not impact the overall increase significantly.
Relative importance of spend on pay
The table below shows the relative importance of spend on employee remuneration when compared with distributions
to shareholders.
£m 2013/14 2012/13
Percentage
change
Overall expenditure on pay 1,587 1,577 0.6%
Dividends paid in the year 224 221 1.4%
100
150
200
250
300
350
2009 2010 2011 2012 2013 2014
King?sher FTSE 100
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Statement of implementation of Remuneration Policy in the following financial year
The Remuneration Policy will be implemented with effect from the AGM in 2014 in line with policy as follows:
Base salary and fees
Base salary and fees £’000
% increase As at 1 Feb 2014 As at 1 Feb 2013
Sir Ian Cheshire 849.0 832.3 2%
Kevin O’Byrne 639.5 627.0 2%
Philippe Tible 519.5 509.3 2%
Karen Witts 525.0 484.5 8%
Chairman 480.8 472.4 2%
Non-executive director fee 62.4 61.2 2%
Senior Independent director 17.4 17.4 0%
Chairman of Audit Committee 20.0 20.0 0%
Chairman of Remuneration Committee 15.0 15.0 0%
Philippe Tible’s remuneration and the fees paid to Provestis in respect of the provision of Daniel Bernard as Chairman, are paid in euros and are converted to sterling for
the purpose of the table at the average exchange rate over the course of the relevant year.
The increase awarded to Karen Witts was based on the intention to bring her up to the market median position as she develops into her role, and gains more experience
as a Group Financial Director.
Benefits
Implemented in line with policy.
All employee share plans
Implemented in line with policy.
Pension
Implemented in line with policy.
Annual bonus
Implemented in line with policy.
Weighting of annual bonus for 2014/15
• Profit before tax – 30%
• Like-for-like sales – 30%
• Cashflow – 20%
• Personal objectives – 20%
At the threshold level of performance, the award will be 10% of maximum.
Profit before tax is calculated on the basis of budgeted exchange rates and excludes exceptional items according to the judgement
of the Committee.
Like-for-like sales is set as an absolute target, but the Committee applies judgement in measuring the outcome against target,
taking into account sales growth against the local market out-turn and any consequent increase or decrease in market share.
Cashflow excludes capital expenditure, but the Committee may apply judgement to ensure that the measure has not been met at
the expense of investment.
Any exchange rate upsides/downsides will be removed from the results when determining award levels, since they are deemed to be
outside the executive directors’ control.
Long-term incentive plan
Implemented in line with policy.
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Performance measures for long-term incentives to be awarded in 2014/15
Performance measure
Threshold –
25% vesting
Maximum –
100% vesting
Earnings per share – compound annual growth up to 2016/17 4% 11.5%
The EPS growth targets have been set to be consistent with market practice in the FTSE100 and in particular the retail sector.
The intention is to operate this range consistently over the policy period. The Threshold level of performance provides for real
growth, which is considered suitably challenging in what remains an uncertain economic environment, but sets an achievable level
of performance to ensure participants place value on the plan and are motivated by it. The Maximum performance level ensures that
full vesting is only achieved for outstanding double-digit performance over the three-year period, well in excess of typical industry
growth rates.
Performance targets also include a KEP measure. KEP targets are calibrated to be consistent with the EPS growth targets, recognising
that in weaker performance scenarios offsetting capital efficiencies should be identified, whereas stronger performance scenarios
may allow increased capital investment. KEP is defined in the same way as set out in the Financial Review.
Consideration by the directors of matters relating to directors’ remuneration
The Committee has delegated responsibility from the Board for reviewing and approving the remuneration of the executive directors
and the members of the Group Executive and for setting the remuneration package for the Chairman. The Committee also has
oversight of the remuneration policy and packages for other senior members of staff.
Members of the Committee
The Committee comprised the following independent non-executive directors during the financial year to 1 February 2014.
From Attendance
Clare Chapman (Chairman) 16/02/2011 5/5
Daniel Bernard 03/06/2009 5/5
Andrew Bonfield 17/06/2010 5/5
Janis Kong 08/12/2006 5/5
At the invitation of the Committee, except where their own remuneration was being discussed, the following people attended
meetings and provided advice to the Committee: Sir Ian Cheshire (Group Chief Executive), Karen Witts (Group Finance Director),
Evelyn Gardiner (Group HR Director), Louise Bentham (Head of Group Reward) and Kathryn Hudson (Company Secretary).
Activities
During 2013/14 the Committee:
• agreed the performance targets for the annual bonus in the financial year and monitored progress against those targets;
• agreed the operation of the long-term incentive plans and policy for executive share plan awards to new recruits, and
promotions, including the level of individual awards and performance conditions;
• agreed the award level of the 2012/13 annual bonus;
• agreed the vesting levels of the 2010 PSP;
• recommended the 2012/13 Directors’ Remuneration Report for endorsement by the Board and subsequent approval
by shareholders;
• reviewed the Group’s remuneration strategy; and
• reviewed the Group’s Executive Remuneration Policy prior to recommending it for approval by shareholders.
Annual Report and Accounts 2013/14
68
Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
68
Advisers to the Remuneration Committee
The Committee has authority to obtain the advice of external independent remuneration consultants and is solely responsible
for their appointment, retention and termination. In February 2013, following a robust tender process, the Committee appointed
PricewaterhouseCoopers LLP as its principal adviser. During the financial year to 1 February 2014, the following external advisers
provided services to the Committee. Unless otherwise stated, the advisers have no other connection with the Group, and the
Committee firmly believes that the advice received was, and continues to be, objective and independent:
PricewaterhouseCoopers LLP (PwC)
PwC provided the Committee with executive remuneration advice, including the operation of employee and executive share plans.
PwC is a member of the Remuneration Consultants Group (the professional body for executive remuneration consultants) and
provided certain other services to the Group. Total fees for advice provided to the Committee during the year were £195,000 of
which £91,000 related to the comprehensive review of executive remuneration conducted during the year.
Allen & Overy LLP (A&O)
A&O provided legal advice to the Committee on service and employment contracts, and for other employment and remuneration
issues. A&O also provides advice to the Group on other legal matters.
Statement of voting at the Annual General Meeting
At the Annual General Meeting (the ‘AGM’) on 13 June 2013 the annual advisory votes on the remuneration report were cast
as follows:
Votes for (and percentage
of votes cast)
Votes against (and percentage
of votes cast)
Proportion of
share capital
voting
Shares on
which votes
were withheld
Resolution
Remuneration report for year
ended 2 February 2013 1,585,211,665 97.66% 38,040,731 2.34% 68.41% 116,857,614
The Remuneration Policy contained within this report will be subject to a binding vote by shareholders at the AGM on 12 June 2014.
The Annual Remuneration Report will be subject to an advisory vote at the same meeting. The Chairman of the Committee will be
available at the meeting to answer any questions about the work of the Committee.
The 2014/15 Annual Remuneration Report will include details of the binding vote on the Remuneration Policy.
For and on behalf of the Committee
Clare Chapman
Chairman of the Remuneration Committee
24 March 2014
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69
Directors’ report
Annual Report and Accounts 2013/14
69
The Company is required by the Companies Act 2006 to present
a Directors’ Report for the financial year ended 1 February
2014. It is also required to report on its compliance with the
UK Corporate Governance Code (the ‘Code’) for the year and
provide certain disclosures in respect of the United Kingdom
Listing Authority’s (the UKLA) Disclosure and Transparency
and Listing Rules. The report, together with the Corporate
Governance report on pages 35 to 41 the Audit Committee report
on pages 42 to 45, and the Directors’ Remuneration Report on
pages 47 to 68 are incorporated into this Directors’ Report by
reference, and when taken together with cross references to
disclosures elsewhere in the Annual Report and Accounts, fulfil
the Company’s disclosure requirements.
Strategic Report
The Companies Act 2006 requires the Company to present
a fair review of the operations of the business during the year
to 1 February 2014 and the position of the Company at year
end along with the principal risks and uncertainties faced. The
Strategic Report of the Company, which includes the Group’s
Key Performance Indicators, a statement on Corporate
Responsibility, a Financial Review including financial and
capital risk, is detailed on pages 1 to 31 and is incorporated
by reference and deemed to form part of this report.
Dividends
The directors recommend a final dividend of 6.78p (2012/13:
6.37p) per ordinary share amounting to £160m (2012/13:
£150m) to be paid on 16 June 2014 to members appearing on
the Register at the close of business on 16 May 2014. Together
with the interim dividend of 3.12p (2012/13: 3.09p) per ordinary
share, amounting to £74m (2012/13: £73m), paid on 15
November 2013, the total dividend for the financial year ended
1 February 2014 will be 9.90p (2012/13: 9.46p) per ordinary
share, amounting to £234m (2012/13: £224m).
The Kingfisher Employee Benefit Trust has waived all dividends
payable by the Company in respect of the ordinary shares held
by it. The total dividends waived in the year to 1 February 2014
were in aggregate £1.1m.
Directors
Full biographical details of the current directors are set out on
pages 32 and 33. In accordance with the principles of the
UK Corporate Governance Code, all directors will retire and be
submitted for re-appointment at the AGM in 2014.
Directors’ indemnity arrangements
The Company has provided qualifying third-party deeds of
indemnity for the benefit of each director and former director
who held office during the 2013/14 financial year. The Company
has also purchased and maintained Directors’ and Officers’
liability insurance throughout 2013/14. Neither the indemnities
nor the insurance provides cover in the event that the director
concerned is proved to have acted fraudulently.
Directors’ interests
Details of directors’ remuneration, service contracts and interests
in the Company’s shares and share options are set out in the
Directors’ Remuneration Report on pages 47 to 68. No director
had a material interest at any time during the year in any derivative
or financial instrument relating to the Company’s shares.
Principal risk identification and management
The principal risks and uncertainties facing the Group have been
reviewed by the Board and are shown in the Risks section on
pages 28 to 31. The Risks section also provides information on
the performance of the Board in actively managing those risks, to
allow assessment of how the directors have performed their
statutory duty to promote the success of the Company.
Employees
The commitment of the Group’s employees is vital to ensure that
high standards of customer care and service are maintained
throughout the business. The Group is fully committed to treating
its employees and customers with dignity and respect, and to
valuing diversity. It is Group policy to:
• ensure there is no discrimination in employment on the
grounds of race, gender, age, disability, marital status,
sexual orientation or religious belief;
• implement measures in stores to ensure a level of customer
service for disabled people equivalent to that offered to
non-disabled people; and
• maintain a mechanism which customers and employees can
use to give feedback on the Group’s performance and ensure
that all customer comments are analysed, responded to and
acted upon.
A breakdown of employee gender diversity, as required by the
Companies Act 2006, can be found on page 19 the Net
Positive section of the Strategic Report and forms part of the
Directors’ Report disclosures. During the year B&Q UK
continued its long-established policy of promoting age diversity,
with around a quarter of its employees aged over 50.
The Group’s statement on employee development is set
out in the People section of the Company’s website
(www.kingfisher.com).
There are a number of communication channels in place to
help employees to develop their knowledge of, and enhance
their involvement with, the Group. These channels include
engagement surveys, briefing groups, internal magazines and
newsletters that report on business performance and objectives,
community involvement and other applicable issues. Directors
and senior management regularly visit stores and discuss
matters of current interest and concern with employees.
Greenhouse Gas Emissions
The Group is required to state the annual quantity of emissions
in tonnes of CO2 equivalent from activities for which the Group
is responsible. Details of our emissions for the year ended 1
February 2014 and the actions the Group is taking to reduce
their impact are set out within the Sustainability section of the
Strategic Report on pages 18 and 19 and form part of this
Directors’ Report.
Political donations
The Board annually seeks and obtains shareholders’ approval
to enable the Group to make donations or incur expenditure
in relation to EU political parties, other political organisations
or independent election candidates under section 366 of the
Companies Act 2006.
in
Annual Report and Accounts 2013/14
70
Governance
Directors’ report continued
Annual Report and Accounts 2013/14
70
The Group made no political donations during the year
(2012/13: £nil). As with previous annual approvals, the Group
has no intention of changing its current policy and practice of not
making political donations. The Board seeks the approval on a
precautionary basis to avoid any unintentional breach of the
relevant provisions. Shareholder approval will be sought at this
year’s AGM to renew this authority; further details are provided
in the Notice of AGM.
Significant agreements – change of control
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Company following
a takeover bid, such as bank loan agreements, Medium Term
Note (‘MTN’) documentation, private placement debt and
employee share plans. None of these are deemed to be
significant in terms of their potential impact on the business
of the Group as a whole except for:
• the £200 million credit facility dated 8 July 2011 between
the Company, HSBC Bank plc (as the facility agent) and the
banks named therein as lenders, which contains a provision
such that in the event of a change of control any lender may,
if they so require, notify the agent that they wish to cancel
their commitment whereupon the commitment of that lender
will be cancelled and all their outstanding loans, together
with accrued interest, will become immediately due and
payable; and
• the US$297 million US Private Placement notes, issued
pursuant to a note purchase agreement dated 24 May 2006
by the Company to various institutions, which contains a
provision such that in the event of a change of control, the
Company is required to make an offer to the holders of the
US Private Placement notes to prepay the principal amount
of the notes together with interest accrued.
The Company does not have agreements with any director or
officer that would provide compensation for loss of office or
employment resulting from a takeover, except that provisions of
the Company’s share incentive schemes may cause options and
awards granted under such schemes to vest on a takeover.
Share capital
Details of the Company’s issued share capital are set out in
note 28 to the consolidated financial statements. All of the
Company’s issued ordinary shares are fully paid up and rank
equally in all respects.
The rights and obligations attaching to the Company’s ordinary
shares, in addition to those conferred on their holders by law, are
set out in the Company’s Articles of Association, copies of which
can be obtained from the Company’s website. The holders of
ordinary shares are entitled to receive the Company’s Annual
Report and Accounts, to attend and speak at general meetings
of the Company, to appoint proxies and to exercise voting rights.
There are no restrictions on the transfer of ordinary shares or on
the exercise of voting rights attached to them, except (i) where
the Company has exercised its right to suspend their voting rights
or to prohibit their transfer following the omission of their holder
or any person interested in them to provide the Company with
information requested by it in accordance with Part 22 of the
Companies Act 2006 or (ii) where their holder is precluded from
exercising voting rights by the Financial Services Authority Listing
Rules or the City Code on Takeovers and Mergers.
The Company has a Sponsored Level 1 American Depositary
Receipt (‘ADR’) programme in the United States.
Authority to allot shares
At the AGM in 2013, shareholders approved a resolution to give
the directors authority to allot shares up to an aggregate nominal
value of £124,279,699. In addition, shareholders approved a
resolution to give the directors authority to allot up to a nominal
amount of £248,559,398 in connection with an offer by way
of a rights issue in accordance with ABI guidance. If this
additional allotment authority were used, the ABI guidance
would be followed. The directors have no present intention to
issue ordinary shares, other than pursuant to employee share
incentive schemes. These resolutions remain valid until the
conclusion of this year’s AGM when resolutions will be proposed
to renew these authorities.
Authority to purchase own shares
At the AGM in 2013, shareholders approved a resolution
for the Company to make purchases of its own shares to a
maximum number of 237,261,243 ordinary shares, being
approximately 10% of the issued share capital. This resolution
remains valid until the conclusion of this year’s AGM. As at 24
March 2014, the directors have not used this authority. In order
to retain maximum flexibility, a resolution will be proposed at
this year’s AGM to renew this authority. It is the Company’s
current intention that shares acquired under this authority
will be cancelled.
Financial instruments
The Group’s financial risk management objectives and policies
are set out in note 24 to the financial statements on pages
107 to 109. Note 24 also details the Group’s exposure to foreign
exchange, interest, credit and liquidity risks. These notes are
included by reference and form part of this report.
Major shareholders
As at 24 March 2014, the Company had been notified of the
following interests in its shares:
Number of
ordinary
shares held
% of total
voting rights
The Capital Group Companies Inc. 139,479,920 6.05%
Annual General Meeting
The 2014 Annual General Meeting of the Company will be
held on 12 June 2014 at the Hilton London Paddington Hotel,
Paddington at 11.00am. A full description of the business to be
conducted at the meeting is set out in the separate Notice of
Annual General Meeting.
By order of the Board
Kathryn Hudson
Company Secretary
24 March 2014
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71
Directors’ statement of responsibility
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71
Going concern
The directors confirm that, after reviewing expenditure
commitments, expected cash flows and borrowing facilities,
they have a reasonable expectation that Kingfisher plc (the
‘Company’) and the Kingfisher group of companies (the ‘Group’)
have adequate resources to continue in operational existence for
the next financial year and the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing
these financial statements. Further details of the Group’s liquidity
are provided in the financial review on page 20.
Disclosure of information to auditors
Each person who is a director at the date of approval of this
report confirms that: so far as he or she is aware, there is no
relevant audit information (as defined by section 418 of the
Companies Act 2006) of which the Company’s auditors are
unaware; and each director has taken all the steps that he or
she ought to have taken as a director in order to make himself
or herself aware of any relevant audit information and to establish
that the Company’s auditors are aware of that information.
Responsibility for preparing financial statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
• UK company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (‘IFRS’) as adopted by the European
Union and Article 4 of the IAS Regulation and have elected
to prepare the parent Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards
and applicable law). Under company law the directors must
not approve the accounts unless they are satisfied that they
give a true and fair view of the state of affairs of the Company
and of the profit or loss of the Company for that period.
In preparing the parent Company financial statements, the
directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• follow applicable UK Accounting Standards (except where
any departures from this requirement are explained in the
notes to the parent Company financial statements); and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements in accordance
with IAS 1, ‘Presentation of Financial Statements’, the directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• present information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
• make an assessment of the Group’s ability to continue as a
going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement
The directors confirm that to the best of their knowledge:
• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole;
• the strategic report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face; and
• The Annual Report and financial statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
By order of the Board
Kathryn Hudson
Company Secretary
24 March 2014
Annual Report and Accounts 2013/14
72
Accounts
Independent Auditor’s Report to the members of Kingfisher plc
Annual Report and Account 2013/14
72
Opinion on financial statements of Kingfisher plc
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at
1 February 2014 and of the Group’s profit for the 52 weeks
then ended;
• the Group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
• the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the
IAS Regulation.
The financial statements comprise the consolidated income
statement, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity,
the consolidated and Parent Company balance sheets, the
consolidated cash flow statement and the related notes 1 to
38 for the Group and 1 to 15 for the Parent Company financial
statements. The financial reporting framework that has been
applied in the preparation of the Group financial statements is
applicable law and IFRSs as adopted by the European Union.
The financial reporting framework that has been applied in
the preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Going concern
As required by the Listing Rules we have reviewed the directors’
statement on page 71 that the Group is a going concern.
We confirm that:
• we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial
statements is appropriate.
• we have not identified any material uncertainties that may
cast significant doubt on the Group’s ability to continue as a
going concern.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below
are those that had the greatest effect on our audit strategy, the
allocation of resources in the audit and directing the efforts of
the engagement team:
Subject Nature of risk How the scope of our audit responded to the risk
Inventories Assessing net realisable value is an area
of significant judgement, in particular with
regards to the estimation of provisions for
slow-moving and obsolete inventory.
We focused on the valuation of year end
inventory levels, including challenging
judgements taken regarding obsolescence.
Inventory provisioning has been assessed
using historic stock performance and
compared to the Group provision recognised.
Our procedures included assessing the
adequacy of, and movements in, inventory
provisions held by recalculating a sample of
items included within the provision to ensure
appropriate basis of valuation.
Supplier rebates Assessing the timing of recognition of rebate
income earned from suppliers, including
adherence to contractual terms, is an area
of complexity. The subsequent recoverability
of amounts due from suppliers is also an
area of management judgement.
We reviewed agreements with suppliers
and adherence to terms to assess whether
sufficient evidence to support the recognition
of rebate income exists. We circularised a
sample of suppliers where the outstanding
balances were significant at the year end in
order to assess recoverability.
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Subject Nature of risk How the scope of our audit responded to the risk
Property
As a result of the diverse property
portfolio across the Group, there are several
technically complex or judgemental aspects
of property accounting and accounting for
leases across the Group, including:
• The assessment of carrying values of
freehold stores;
• accounting for store closure costs; and
• other property related provisions,
including onerous leases.
For leasehold property, we focused our work
on the identification of complex or unusual
lease contracts to assess whether they were
appropriately accounted for under IAS 17:
‘Leases’. We also performed procedures to
identify leases which could be considered
onerous – for example, we reviewed the
properties currently under lease, and identified
those which may be vacant or underutilised,
or where properties are sublet whether the
estimated rental income leads to an
onerous contract.
For freehold properties, we reviewed
management’s assessment of carrying
values, challenged key assumptions used
in, and performed sensitivity analysis on,
the impairment models where indicators of
impairment were identified.
We considered the assumptions used by
management in estimating store closure costs
and challenged the timing of recognition of
associated provisions.
Goodwill and intangible assets Determining the appropriate carrying
value of goodwill and intangible assets
requires management to make significant
estimates. Cash generating units are
reviewed for impairment using a value in
use model, as described in note 12 to the
financial statements.
We reviewed the assumptions used in the
impairment model for goodwill and intangible
assets, including comparison of the input
assumptions to externally and internally
derived data, as well as forming our own
assessments, and challenged the key inputs
used, including specifically the operating cash
flow projections, discount rates, and long-term
growth rates. We considered the sensitivity of
the model to changes in key assumptions.
We also considered the adequacy of the
Group’s disclosures in respect of impairment
testing and whether disclosures about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
properly reflected the risks inherent in
the assumptions.
Taxation Due to the estimation uncertainty as referred
to in the Critical Accounting Estimates and
Judgements in the Consolidated Financial
Statements at page 88 in respect of
settlements with tax authorities around the
world, assessing the Group’s exposure to
significant tax risks and the level of provisions
recognised is a judgemental area.
We considered all significant taxation
exposures across the Group, including
challenging the estimates and judgements
made by management when calculating the
income tax payable in each territory and the
associated provisions held.
We reviewed correspondence with taxation
authorities in significant locations, as well as
reviewing the support or opinions received
from external counsel and other advisers
where management has relied on such
opinions to make assumptions on the level
of taxation payable.
The Audit Committee’s consideration of risks is set out on page 43.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and
not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect
to any of the risks described above, and we do not express an opinion on these individual matters.
Annual Report and Accounts 2013/14
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Accounts
Independent Auditor’s Report to the Members of Kingfisher Plc continued
Annual Report and Account 2013/14
74
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.
We determined materiality for the Group to be £35 million,
which is below 5% of adjusted pre-tax profit, and below 1% of
equity. We use adjusted pre-tax profit to exclude the effect of
volatility due to exceptional items from our determination.
We agreed with the Audit Committee that we would report to
them all audit differences in excess of £700,000, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit scope focused primarily on all significant
trading entities and the Group head office, and included B&Q
UK, Castorama France, Brico Dépôt France, Castorama Poland,
Castorama Russia, B&Q China, Screwfix, Brico Dépôt Spain,
Bricostore Romania and the Koçtas¸ joint venture. These locations
represent the principal business units and account for 99% of
the Group’s revenue, 98% of the Group’s profit before tax after
taking into account the allocation of central sourcing costs, and
97% of the Group’s net assets. The locations in scope were
selected to provide an appropriate basis for undertaking audit
work to address the risks of material misstatement identified
above. Our audit work at these locations was executed at levels
of materiality applicable to each individual entity which were
lower than Group materiality. The entities which are out of our
scope are primarily individually insignificant cost entities, the
Hornbach investment and other smaller operations.
The Group audit team continued to follow a programme of
planned visits that has been designed so that the Senior
Statutory Auditor visits locations considered the most significant
each year. For the remaining locations where Group audit work is
performed but no visit is carried out, the Senior Statutory Auditor
has discussed and challenged the key areas of judgement with
the lead audit partner of the relevant component in the current
year, and a senior member of the Group engagement team has
visited the location. We also held regional planning briefings,
attended by the component auditors from each of the eleven
locations discussed above, at which we discussed developments
in the Group relevant to our audit, including risk assessment and
audit procedures to respond to the risks identified.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the
Companies Act 2006; and
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting
records
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not received all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Parent Company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report
if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the Directors’ Remuneration
Report to be audited is not in agreement with the accounting
records and returns. We have nothing to report arising from
these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of
the Corporate Governance Statement relating to the company’s
compliance with nine provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we
are required to report to you if, in our opinion, information in the
Annual Report is:
• materially inconsistent with the information in the audited
financial statements; or
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in
the course of performing our audit; or
• otherwise misleading.
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In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider
the annual report is fair, balanced and understandable and
whether the annual report appropriately discloses those
matters that we communicated to the Audit Committee which we
consider should have been disclosed. We confirm that we have
not identified any such inconsistencies or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express
an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors. We
also comply with International Standard on Quality Control 1 (UK
and Ireland). Our audit methodology and tools aim to ensure that
our quality control procedures are effective, understood and
applied. Our quality controls and systems include our dedicated
professional standards review team, strategically focused
second partner reviews and independent partner reviews.
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the Parent
Company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all
the financial and non-financial information in the annual report
to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with,
the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications
for our report.
Panos Kakoullis
Senior statutory auditor
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London 24 March 2014
Annual Report and Accounts 2013/14
76
Accounts
Consolidated income statement
Year ended 1 February 2014
Annual Report and Accounts 2013/14
76
2013/14
2012/13
(Restated – note 2)
£ millions Notes
Before
exceptional
items
Exceptional
items
(note 5) Total
Before
exceptional
items
Exceptional
items
(note 5) Total
Continuing operations:
Sales 4 11,125 – 11,125 10,573 – 10,573
Cost of sales (7,005) – (7,005) (6,618) – (6,618)
Gross profit 4,120 – 4,120 3,955 – 3,955
Selling and distribution expenses (2,883) 2 (2,881) (2,768) (17) (2,785)
Administrative expenses (550) – (550) (525) (9) (534)
Other income 37 2 39 36 – 36
Share of post-tax results of joint ventures
and associates 17 22 (14) 8 20 – 20
Operating profit 746 (10) 736 718 (26) 692
Analysed as:
Retail profit 4 805 (10) 795 778 (26) 752
Central costs (42) – (42) (42) – (42)
Share of interest and tax of joint ventures
and associates (17) – (17) (18) – (18)
Finance costs (12) – (12) (16) – (16)
Finance income 8 27 35 15 – 15
Net finance income/(costs) 6 (4) 27 23 (1) – (1)
Profit before taxation 7 742 17 759 717 (26) 691
Income tax expense 9 (163) 114 (49) (128) 1 (127)
Profit for the year 579 131 710 589 (25) 564
Attributable to:
Equity shareholders of the Company 709 564
Non-controlling interests 1 –
710 564
Earnings per share 10
Basic 30.0p 24.1p
Diluted 29.7p 23.8p
Adjusted basic 23.4p 22.3p
Adjusted diluted 23.2p 22.0p
The proposed final dividend for the year ended 1 February 2014, subject to approval by shareholders at the Annual General
Meeting, is 6.78p per share.
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Strategic Report Governance Accounts
Consolidated statement of comprehensive income
Year ended 1 February 2014
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£ millions Notes 2013/14 2012/13
Profit for the year 710 564
Actuarial losses on post-employment benefits 27 (127) (29)
Tax on items that will not be reclassified 65 (18)
Total items that will not be reclassified subsequently to profit or loss (62) (47)
Currency translation differences
Group (210) 122
Joint ventures and associates (25) 8
Transferred to income statement (31) –
Cash flow hedges
Fair value losses (4) (14)
Losses/(gains) transferred to inventories 9 (8)
Tax on items that may be reclassified 2 4
Total items that may be reclassified subsequently to profit or loss (259) 112
Other comprehensive income for the year (321) 65
Total comprehensive income for the year 389 629
Attributable to:
Equity shareholders of the Company 388 629
Non-controlling interests 1 –
389 629
5
Annual Report and Accounts 2013/14
78
Accounts
Consolidated statement of changes in equity
Year ended 1 February 2014
Annual Report and Accounts 2013/14
78
Attributable to equity shareholders of the Company
£ millions
Share
capital
Share
premium
Own
shares
held
Retained
earnings
Other
reserves
(note 29) Total
Non-controlling
interests
Total
equity
At 3 February 2013 373 2,204 (60) 3,106 525 6,148 8 6,156
Profit for the year – – – 709 – 709 1 710
Other comprehensive income
for the year – – – (62) (259) (321) – (321)
Total comprehensive income
for the year – – – 647 (259) 388 1 389
Share-based compensation – – – 7 – 7 – 7
New shares issued under
share schemes – 5 – – – 5 – 5
Own shares issued under
share schemes – – 49 (41) – 8 – 8
Own shares purchased – – (24) – – (24) – (24)
Dividends – – – (224) – (224) – (224)
At 1 February 2014 373 2,209 (35) 3,495 266 6,308 9 6,317
At 29 January 2012 372 2,199 (134) 2,869 413 5,719 8 5,727
Profit for the year – – – 564 – 564 – 564
Other comprehensive income
for the year – – – (47) 112 65 – 65
Total comprehensive income
for the year – – – 517 112 629 – 629
Share-based compensation – – – 9 – 9 – 9
New shares issued under
share schemes 1 5 – – – 6 – 6
Own shares issued under
share schemes – – 74 (68) – 6 – 6
Dividends – – – (221) – (221) – (221)
At 2 February 2013 373 2,204 (60) 3,106 525 6,148 8 6,156
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Strategic Report Governance Accounts
Consolidated balance sheet
At 1 February 2014
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£ millions Notes 2013/14 2012/13
Non-current assets
Goodwill 12 2,417 2,399
Other intangible assets 13 222 166
Property, plant and equipment 14 3,625 3,748
Investment property 15 50 66
Investments in joint ventures and associates 17 32 289
Post-employment benefits 27 – 71
Deferred tax assets 25 12 17
Derivatives 23 40 55
Other receivables 19 15 18
6,413 6,829
Current assets
Inventories 18 2,054 2,083
Trade and other receivables 19 590 545
Derivatives 23 5 33
Current tax assets 15 9
Cash and cash equivalents 20 535 398
Assets held for sale 34 208 –
3,407 3,068
Total assets 9,820 9,897
Current liabilities
Trade and other payables 21 (2,486) (2,430)
Borrowings 22 (94) (99)
Derivatives 23 (27) (17)
Current tax liabilities (175) (289)
Provisions 26 (8) (35)
(2,790) (2,870)
Non-current liabilities
Other payables 21 (86) (115)
Borrowings 22 (230) (332)
Derivatives 23 – (12)
Deferred tax liabilities 25 (251) (303)
Provisions 26 (46) (38)
Post-employment benefits 27 (100) (71)
(713) (871)
Total liabilities (3,503) (3,741)
Net assets 4 6,317 6,156
Equity
Share capital 28 373 373
Share premium 2,209 2,204
Own shares held (35) (60)
Retained earnings 3,495 3,106
Other reserves 29 266 525
Total attributable to equity shareholders of the Company 6,308 6,148
Non-controlling interests 9 8
Total equity 6,317 6,156
The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:
Sir Ian Cheshire Karen Witts
Group Chief Executive Group Finance Director
Annual Report and Accounts 2013/14
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Accounts
Consolidated cash flow statement
Year ended 1 February 2014
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80
£ millions Notes 2013/14 2012/13
Operating activities
Cash generated by operations 31 976 730
Income tax paid (142) (129)
Net cash flows from operating activities 834 601
Investing activities
Purchase of businesses, net of cash acquired 33 (28) –
Purchase of property, plant and equipment, investment property and intangible assets 4 (304) (316)
Disposal of property, plant and equipment, investment property and intangible assets 12 17
Interest received 8 18
Dividends received from joint ventures and associates 11 10
Net cash flows from investing activities (301) (271)
Financing activities
Interest paid (12) (18)
Interest element of finance lease rental payments (4) (4)
Repayment of bank loans (89) (31)
Repayment of Medium Term Notes and other fixed term debt (33) (162)
Receipt on financing derivatives 6 –
Capital element of finance lease rental payments (13) (12)
New shares issued under share schemes 5 6
Own shares issued under share schemes 8 6
Own shares purchased (24) –
Dividends paid to equity shareholders of the Company (224) (221)
Net cash flows from financing activities (380) (436)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts 153 (106)
Cash and cash equivalents and bank overdrafts at beginning of year 398 485
Exchange differences (17) 19
Cash and cash equivalents and bank overdrafts at end of year 32 534 398
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Notes to the consolidated financial statements
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1 General information
Kingfisher plc (‘the Company’), its subsidiaries, joint ventures
and associates (together ‘the Group’) supply home improvement
products and services through a network of retail stores and
other channels, located mainly in the United Kingdom,
continental Europe and China.
The Company is incorporated in the United Kingdom. The nature
of the Group’s operations and its principal activities are set out in
the Strategic Report on pages 1 to 31.
The address of its registered office is 3 Sheldon Square,
Paddington, London W2 6PX.
The Company is listed on the London Stock Exchange.
These consolidated financial statements have been approved
for issue by the Board of Directors on 24 March 2014.
2 Principal accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to the years presented,
unless otherwise stated. A prior year restatement as a result of
the amendments to IAS 19 (revised), ‘Employee benefits’, is
described in section a of this note.
a. Basis of preparation
The consolidated financial statements of the Company, its
subsidiaries, joint ventures and associates are made up to the
nearest Saturday to 31 January each year, except as disclosed
in note 17 and in note 4 of the Company’s separate financial
statements. The current financial year is the 52 weeks ended
1 February 2014 (‘the year’ or ‘2013/14’). The comparative
financial year is the 53 weeks ended 2 February 2013 (‘the prior
year’ or ‘2012/13’). The 53 weeks in the prior year only impacted
the UK and Ireland businesses with all of the other businesses
reporting on a calendar basis as a result of local requirements.
The directors of Kingfisher plc, having made appropriate
enquiries, consider that adequate resources exist for the Group
to continue in operational existence for the foreseeable future
and that, therefore, it is appropriate to adopt the going concern
basis in preparing the consolidated financial statements for the
year ended 1 February 2014. Refer to the Directors’ statement
of responsibility on page 71.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (‘IFRS’) and those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS and therefore the consolidated financial statements comply
with Article 4 of the EU IAS legislation.
The following new standards, amendments and interpretations,
which are mandatory for the first time for the financial year
ended 1 February 2014, are relevant and material for
the Group:
• IAS 1 (amended), ‘Presentation of items of other
comprehensive income’ (effective from 1 July 2012);
• IAS 19 (revised), ‘Employee benefits’ (effective from
1 January 2013);
• IFRS 7 (amended), ‘Disclosures – Offsetting financial assets
and financial liabilities’ (effective from 1 January 2013);
• IFRS 13, ‘Fair value measurement’ (effective from
1 January 2013).
The impact on the Group of the application of the above
standards is as follows:
• The amendments to IAS 1, ‘Presentation of items of other
comprehensive income’, require items presented in ‘other
comprehensive income’ to be grouped by those items that
may be reclassified subsequently to profit or loss and
those that will never be reclassified, together with their
associated income tax. The amendments have been
applied retrospectively and the presentation of items of
comprehensive income has been adjusted accordingly.
• IAS 19 (revised), ‘Employee benefits’, amends the accounting
for employment benefits and the Group has applied it
retrospectively in accordance with the transition provisions of
the standard. The impact on the Group has been in the
following areas:
– The standard replaces the interest cost on the defined
benefit obligation and the expected return on plan assets
with a single net interest expense or income based on the
net defined benefit asset or liability and the discount rate,
measured at the beginning of the year. There is no change
to determining the discount rate; this continues to reflect
the yield on high-quality corporate bonds. For the current
and comparative year, the Group’s reported profit before
taxation was not impacted as the expected rate of return
on assets at the start of the current and prior year was the
same as the discount rate for the UK scheme, the Group’s
principal defined benefit pension plan.
– The revised standard also requires administrative costs of
running the UK scheme to be reclassified from net finance
costs to operating costs. For the current year the Group’s
reported operating profit is £3m lower and net finance
income £3m higher than they would have been prior to the
adoption of IAS 19 (revised). For the year ended 2 February
2013 the Group’s reported operating profit is £3m lower
and net finance costs £3m lower than previously reported.
• IFRS 7 (amended), ‘Disclosures – Offsetting financial assets
and financial liabilities’, amended the required disclosures
surrounding the effect or potential effect of netting
arrangements, including rights of set-off associated with
recognised financial assets and liabilities, on the Group’s
financial position.
• IFRS 13, ‘Fair value measurement’, has impacted the
measurement of fair value for certain financial assets and
liabilities as well as introducing new disclosures.
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
82
2 Principal accounting policies continued
The following amendments and interpretations, which are
mandatory for the first time for the financial year ended
1 February 2014, are either not currently relevant or not
material for the Group:
• IFRS 1 (amended), ‘First time adoption’ on government
loans (effective from 1 January 2013);
• Amendments to IFRS 10, IFRS 12 and IAS 27 –
Investment entities;
• Annual improvements to IFRSs 2009-2011 (effective from
1 January 2013);
• IFRIC 20 ‘Stripping Costs in the Production Phase
of a Surface Mine’;
• Amendments to IFRS 1 Government Loans.
At the date of authorisation of these financial statements,
the following new standards, amendments and interpretations,
which have not been applied in these financial statements,
were in issue but not yet effective (and in some cases had
not yet been adopted by the EU):
• IFRS 9, ‘Financial instruments’ (effective from
1 January 2018);
• IFRS 10, ‘Consolidated financial statements’ (effective
from 1 January 2014);
• IFRS 11, ‘Joint arrangements’ (effective from
1 January 2014);
• IFRS 12, ‘Disclosure of interests in other entities’ (effective
from 1 January 2014);
• IAS 27 (revised), ‘Separate financial statements’ (effective
from 1 January 2014);
• IAS 28 (revised), ‘Investments in associates and joint ventures’
(effective from 1 January 2014);
• IAS 32 (amendment), ‘Financial instruments: Presentation’
on offsetting financial assets and financial liabilities
(effective from 1 January 2014).
The directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group in future periods, except that IFRS
9 will impact both the measurement and disclosures of
financial instruments.
Beyond the information above, it is not practicable to provide
a reasonable estimate of the effect of these standards until a
detailed review has been completed.
The consolidated financial statements have been prepared
under the historical cost convention, as modified by the use
of valuations for certain financial instruments, share-based
payments and post-employment benefits. A summary of the
Group’s principal accounting policies is set out below.
The preparation of financial statements in conformity with
IFRS requires the use of certain accounting estimates and
assumptions. It also requires management to exercise its
judgement in the process of applying the Group’s accounting
policies. The areas involving critical accounting estimates and
judgements, which are significant to the consolidated financial
statements, are disclosed in note 3.
Use of non-GAAP measures
In the reporting of financial information, the Group uses certain
measures that are not required under IFRS, the Generally
Accepted Accounting Principles (‘GAAP’) under which the Group
reports. Kingfisher believes that retail profit, adjusted
pre-tax profit, effective tax rate, adjusted post-tax profit and
adjusted earnings per share provide additional useful information
on underlying trends to shareholders. These and other non-
GAAP measures such as net debt/cash are used by Kingfisher
for internal performance analysis and incentive compensation
arrangements for employees. The terms ‘retail profit’, ‘exceptional
items’, ‘adjusted’, ‘effective tax rate’ and ‘net debt/cash’ are not
defined terms under IFRS and may therefore not be comparable
with similarly titled measures reported by other companies.
They are not intended to be a substitute for, or superior to,
GAAP measures.
Like-for-like (‘LFL’) sales growth is defined as the constant
currency, year-on-year sales growth for stores that have been
open for more than a year.
Retail profit is defined as continuing operating profit before
central costs (principally the costs of the Group’s head office),
exceptional items, amortisation of acquisition intangibles
and the Group’s share of interest and tax of joint ventures
and associates.
The separate reporting of non-recurring exceptional items,
which are presented as exceptional within their relevant income
statement category, helps provide an indication of the Group’s
underlying business performance. The principal items which
are included as exceptional items are:
• non-trading items included in operating profit such as
profits and losses on the disposal, closure or impairment
of subsidiaries, joint ventures, associates and investments
which do not form part of the Group’s trading activities;
• profits and losses on the disposal of properties; and
• the costs of significant restructuring and incremental
acquisition integration costs.
The term ‘adjusted’ refers to the relevant measure being
reported for continuing operations excluding exceptional items,
financing fair value remeasurements, amortisation of acquisition
intangibles, related tax items and prior year tax items (including
the impact of changes in tax rates on deferred tax). Financing
fair value remeasurements represent changes in the fair value
of financing derivatives, excluding interest accruals, offset by
fair value adjustments to the carrying amount of borrowings
and other hedged items under fair value hedge relationships.
Financing derivatives are those that relate to underlying items
of a financing nature.
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2 Principal accounting policies continued
The effective tax rate represents the effective income tax
expense as a percentage of continuing profit before taxation
excluding exceptional items. Effective income tax expense is
the continuing income tax expense excluding tax on exceptional
items and tax adjustments in respect of prior years and the
impact of changes in tax rates on deferred tax.
Net debt/cash comprises borrowings and financing derivatives
(excluding accrued interest), less cash and cash equivalents
and current other investments.
b. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company, its subsidiaries, joint ventures
and associates.
(i) Subsidiaries
Subsidiary undertakings are all entities over which the Group
has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one half
of the voting rights. Subsidiary undertakings acquired are
recorded under the acquisition method of accounting and their
results included from the date of acquisition. The results of
subsidiaries which have been disposed are included up to the
effective date of disposal.
The consideration transferred for the acquisition of a subsidiary
is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. On an acquisition-by-acquisition basis,
the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the non-
controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests having
a deficit balance. Prior to 31 January 2010, losses exceeding
the non-controlling interest in the equity of a subsidiary were
required to be attributed to the parent; the resulting deficit
balances were not restated following amendment to IAS 27,
‘Consolidated and separate financial statements’.
The excess of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the acquisition-
date fair value of any previous equity interests in the acquiree
over the fair value of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of
the net assets of the subsidiary acquired in the case of
a bargain purchase, the difference is recognised directly
in the income statement.
Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Accounting policies of acquired subsidiaries have been
changed where necessary to ensure consistency with the
policies adopted by the Group.
(ii) Joint ventures and associates
Joint ventures are entities over which the Group has joint
control, with a third party, to govern the financial and operating
activities of that entity. The equity method is used to account
for the Group’s investments in joint ventures.
Associates are entities over which the Group has the ability
to exercise significant influence but not control, generally
accompanied by a shareholding of between 20% and 50%
of the voting rights. The equity method is used to account
for the Group’s investments in associates.
Under the equity method investments are initially recognised at
cost. The Group’s investments in joint ventures and associates
include goodwill (net of any accumulated impairment losses)
identified on acquisition.
The Group’s share of post-acquisition profits or losses is
recognised in the income statement within operating profit,
and its share of post-acquisition movements in reserves is
recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of
the investment. When the Group’s share of losses equals or
exceeds its interest, including any other long-term receivables,
the Group does not recognise any further losses, unless it has
incurred obligations or made payments on behalf of the joint
venture or associate.
Unrealised gains on transactions between the Group and its
joint ventures and associates are eliminated to the extent of the
Group’s interest. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of joint ventures and associates
have been changed where necessary to ensure consistency with
the policies adopted by the Group.
The equity method of accounting is discontinued from the date
an investment ceases to be a joint venture or associate, that is
the date on which the Group ceases to have joint control or
significant influence over the investee or on the date it is
classified as held for sale.
c. Foreign currencies
(i) Presentation and functional currencies
The consolidated financial statements are presented in
Sterling, which is the Group’s presentation currency. Items
included in the financial statements of each of the Group’s
entities are measured using the currency of the primary
economic environment in which the entity operates
(i.e. its functional currency).
(ii) Transactions and balances
Transactions denominated in foreign currencies are
translated into the functional currency at the exchange rates
prevailing on the date of the transaction or, for practical
reasons, at average monthly rates where exchange rates
do not fluctuate significantly.
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
84
2 Principal accounting policies continued
Monetary assets and liabilities denominated in foreign
currencies are translated into Sterling at the rates of exchange
at the balance sheet date. Exchange differences on monetary
items are taken to the income statement. Exceptions to this are
where the monetary items form part of the net investment in a
foreign operation or are designated and effective net investment
or cash flow hedges. Such exchange differences are initially
deferred in equity.
(iii) Group companies
The balance sheets of overseas subsidiary undertakings
are expressed in Sterling at the rates of exchange at the
balance sheet date. Profits and losses of overseas subsidiary
undertakings are expressed in Sterling at average exchange
rates for the period. Exchange differences arising on the
retranslation of foreign operations, including joint ventures and
associates, are recognised in a separate component of equity.
On consolidation, exchange differences arising from the
retranslation of the net investment in foreign entities, and of
borrowings and other currency instruments designated as
hedges of such investments, are taken to equity. When a foreign
operation is sold, such exchange differences recorded since
1 February 2004 are recognised in the income statement as
part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the rates of exchange at the
balance sheet date. Goodwill arising prior to 1 February 2004
is denominated in Sterling.
Principal rates of exchange against Sterling:
2013/14 2012/13
Average
rate
Year end
rate
Average
rate
Year end
rate
Euro 1.18 1.22 1.23 1.15
US Dollar 1.57 1.64 1.59 1.57
Polish Zloty 4.95 5.17 5.13 4.79
Chinese Renminbi 9.62 9.97 10.01 9.80
d. Revenue recognition
Sales represent the supply of home improvement products and
services. Sales exclude transactions made between companies
within the Group, Value Added Tax, other sales-related taxes
and are net of returns, trade and staff discounts.
Sales of in-store products are generally recognised at the point
of cash receipt. Where award credits such as vouchers or loyalty
points are provided as part of the sales transaction, the amount
allocated to the credits is deferred and recognised when the
credits are redeemed and the Group fulfils its obligations to
supply the awards.
For delivered products and services, sales are recognised either
when the product has been delivered or, for installation income,
when the service has been performed. Sales from delivered
products and services represent only a small component of
the Group’s sales as the majority relates to in-store purchases
of products.
Other income is generally composed primarily of external
rental income and profits and losses on disposal of assets.
Rental income from operating leases is recognised on a straight
line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and
recognised on a straight line basis over the lease term.
e. Rebates
Rebates received from suppliers mainly comprise volume
related rebates on the purchase of inventories.
Volume related rebates are recognised based on actual
purchases in the period as a proportion of total purchases
forecast over the rebate period where it is probable the rebates
will be received and the amounts can be estimated reliably.
Rebates relating to inventories purchased but still held at the
balance sheet date are deducted from the carrying value so
that the cost of inventories is recorded net of applicable rebates.
Such rebates are credited to the income statement when the
goods are sold.
f. Dividends
Interim dividends are recognised when they are paid to the
Company’s shareholders. Final dividends are recognised
when they are approved by the Company’s shareholders.
g. Intangible assets
(i) Goodwill
Goodwill represents the future economic benefits arising
from assets acquired in a business combination that are
not individually identified and separately recognised.
Such benefits include future synergies expected from the
combination and intangible assets not meeting the criteria
for separate recognition.
Goodwill is carried at cost less accumulated impairment losses.
Goodwill is not amortised and is tested annually for impairment
by assessing the recoverable amount of each cash generating
unit or groups of cash generating units to which the goodwill
relates. The recoverable amount is assessed by reference
to the net present value of expected future pre-tax cash flows
(‘value-in-use’) or fair value less costs to sell if higher. The
discount rate applied is based upon the Group’s weighted
average cost of capital with appropriate adjustments for the risks
associated with the relevant cash generating unit or groups of
cash generating units. When the recoverable amount of the
goodwill is less than its carrying amount, an impairment loss is
recognised immediately in the income statement which cannot
subsequently be reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the
entity sold.
(ii) Computer software
Acquired computer software licences are capitalised on the
basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their
estimated useful lives of two to ten years.
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2 Principal accounting policies continued
Costs that are directly associated with the production of
identifiable and unique software products controlled by the
Group, which are expected to generate economic benefits
exceeding costs beyond one year, are recognised as intangible
assets. Direct costs include software development, employee
and consultancy costs and an appropriate portion of relevant
overheads. These costs are amortised over their estimated
useful lives of two to ten years. Costs associated with identifying,
sourcing, evaluating or maintaining computer software are
recognised as an expense as incurred.
h. Property, plant and equipment
(i) Cost
Property, plant and equipment held for use in the business
are carried at cost less accumulated depreciation and any
provisions for impairment.
Properties that were held at 1 February 2004 are carried at
deemed cost, being the fair value of land and buildings as
at the transition date to IFRS. All property acquired after
1 February 2004 is carried at cost.
(ii) Depreciation
Depreciation is provided to reflect a straight line reduction
from cost to estimated residual value over the estimated useful
life of the asset as follows:
Freehold land – not depreciated
Freehold and long leasehold buildings – over remaining useful life
Short leasehold land and buildings – over remaining period
of the lease
Fixtures and fittings – between 4 and 20 years
Computers and electronic equipment – between 3 and 5 years
Motor cars – 4 years
Commercial vehicles – between 3 and 10 years
Long leaseholds are defined as those having remaining lease
terms of more than 50 years. Asset lives and residual values
are reviewed at each balance sheet date.
(iii) Impairment
Property, plant and equipment are reviewed for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. When a review for impairment
is conducted, the recoverable amount is assessed by reference
to the net present value of expected future pre-tax cash flows
(‘value-in-use’) of the relevant cash generating unit or fair
value less costs to sell if higher. The discount rate applied is
based upon the Group’s weighted average cost of capital with
appropriate adjustments for the risks associated with the relevant
cash generating unit. Any impairment in value is charged to the
income statement in the period in which it occurs.
(iv) Disposal
The gain or loss arising on the disposal or retirement of an asset
is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement. Sales of land and buildings are accounted for
when there is an unconditional exchange of contracts.
(v) Subsequent costs
Subsequent costs are included in the related asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item
can be measured reliably.
All other repairs and maintenance are charged to the income
statement in the period in which they are incurred.
i. Leased assets
Where assets are financed by leasing agreements which give
rights approximating to ownership, the assets are treated as if
they had been purchased outright. The amount capitalised is the
lower of the fair value or the present value of the minimum lease
payments during the lease term at the inception of the lease.
The assets are depreciated over the shorter of the lease term or
their useful life. Obligations relating to finance leases, net of
finance charges in respect of future periods, are included, as
appropriate, under borrowings due within or after one year.
The finance charge element of rentals is charged to finance
costs in the income statement over the lease term.
All other leases are operating leases and the rental payments
are generally charged to the income statement in the period
to which the payments relate, except for those leases which
incorporate fixed minimum rental uplift clauses. Leases which
contain fixed minimum rental uplifts are charged to the income
statement on a straight line basis over the lease term.
Where a lease is taken out for land and buildings combined,
the buildings element of the lease may be capitalised as a
finance lease if it meets the criteria for a finance lease, but the
land element will in most cases be classified as an operating
lease. If the contracted lease payments are not split between
land and buildings in the lease contract, the split is made based
on the market values of the land and buildings at the inception
of the lease.
Incentives received or paid to enter into lease agreements are
released to the income statement on a straight line basis over
the lease term.
j. Investment property
Investment property is property held by the Group to earn rental
income or for capital appreciation. The Group’s investment
properties are carried at cost less depreciation and provision for
impairment. Depreciation is provided on a consistent basis with
that applied to property, plant and equipment.
k. Capitalisation of borrowing costs
Interest on borrowings to finance the construction of properties
held as non-current assets is capitalised from the date work
starts on the property to the date when substantially all the
activities which are necessary to get the property ready for
use are complete. Where construction is completed in parts,
each part is considered separately when capitalising interest.
Interest is capitalised before any allowance for tax relief.
l. Inventories
Inventories are carried at the lower of cost and net realisable
value, on a weighted average cost basis.
Trade discounts and rebates received are deducted in
determining the cost of purchase of inventories. Cost includes
appropriate attributable overheads and direct expenditure
incurred in the normal course of business in bringing goods
to their present location and condition. Costs of inventories
include the transfer from equity of any gains or losses on
qualifying cash flow hedges relating to purchases.
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
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2 Principal accounting policies continued
Net realisable value represents the estimated selling price in the
ordinary course of business less the estimated costs necessary to
make the sale. Write downs to net realisable value are made for
slow moving, damaged or obsolete items and other events
or conditions resulting in expected selling prices being lower
than cost. The carrying value of inventories reflects known and
expected losses of product in the ordinary course of business.
m. Employee benefits
(i) Post-employment benefits
The Group operates various defined benefit and defined
contribution pension schemes for its employees, some of which
are required by local legislation. A defined benefit scheme is a
pension scheme which defines an amount of pension benefit
which an employee will receive on retirement. A defined
contribution scheme is a pension scheme under which the
Group usually pays fixed contributions into a separate entity.
In all cases other than some of the legally required schemes,
a separate fund is being accumulated to meet the accruing
liabilities. The assets of each of these funds are either held
under trusts or managed by insurance companies and are
entirely separate from the Group’s assets.
The asset or liability recognised in the balance sheet in respect
of defined benefit pension schemes is the fair value of scheme
assets less the present value of the defined benefit obligation
at the balance sheet date. The defined benefit obligation is
calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high quality corporate
bonds which are denominated in the currency in which the
benefits will be paid and which have terms to maturity
approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are credited or charged to
the statement of comprehensive income as they arise.
For defined contribution schemes, the Group has no further
payment obligations once the contributions have been paid.
The contributions are recognised as an employee benefit
expense when they are due.
(ii) Share-based compensation
The Group operates several equity-settled, share-based
compensation schemes. The fair value of the employee
services received in exchange for the grant of options or
deferred shares is recognised as an expense and is calculated
using Black-Scholes and stochastic models. The total amount
to be expensed over the vesting period is determined by
reference to the fair value of the options or deferred shares
granted, excluding the impact of any non-market vesting
conditions. The value of the charge is adjusted to reflect
expected and actual levels of options vesting due to
non-market vesting conditions.
n. Taxation
The income tax expense represents the sum of the tax
currently payable and deferred tax. The tax currently payable
is based on taxable profit for the year.
Taxable profit differs from profit before taxation as reported
in the income statement because it excludes items of income
or expense which are taxable or deductible in other years or
which are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit and is
accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available
against which deductible temporary differences or unused tax
losses can be utilised. Deferred tax liabilities are not recognised
if the temporary difference arises from the initial recognition
of goodwill in a business combination. Deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction which affects
neither the taxable profit nor the accounting profit. Deferred tax
liabilities are recognised for taxable temporary differences arising
on investments in subsidiaries, joint ventures and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Current and deferred tax are calculated using tax rates which
have been enacted or substantively enacted by the balance
sheet date and are expected to apply in the period when the
liability is settled or the asset is realised.
Current and deferred tax are charged or credited to the income
statement, except when they relate to items charged or credited
directly to equity, in which case the current or deferred tax is
also recognised directly in equity.
Current and deferred tax assets and liabilities are offset against
each other when they relate to income taxes levied by the same
tax jurisdiction and when the Group intends to settle its current
tax assets and liabilities on a net basis.
o. Provisions
Provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to
settle the obligation and the amount can be reliably estimated.
Provisions are not recognised for future operating losses.
If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a
pre-tax rate which reflects current market assessments of the
time value of money and, where appropriate, the risks specific
to the liability.
p. Financial instruments
Financial assets and financial liabilities are recognised on the
Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are
derecognised when the contractual rights to the cash flows
from the financial asset expire or the Group has substantially
transferred the risks and rewards of ownership. Financial
liabilities (or a part of a financial liability) are derecognised
when the obligation specified in the contract is discharged
or cancelled or expires.
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2 Principal accounting policies continued
Financial assets and liabilities are offset only when the Group
has a currently enforceable legal right to set-off the respective
recognised amounts and intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously.
(i) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits
held on call with banks and other short-term highly liquid
investments with original maturities of three months or less.
(ii) Borrowings
Interest bearing borrowings are recorded at the proceeds
received, net of direct issue costs and subsequently measured
at amortised cost. Where borrowings are in designated and
effective fair value hedge relationships, adjustments are made
to their carrying amounts to reflect the hedged risks. Finance
charges, including premiums payable on settlement or
redemption and direct issue costs, are amortised to the
income statement using the effective interest method.
(iii) Other investments
Other investments include bank deposits, government bonds
and other short-term investments with original maturities of
more than three months. Investments classified as ‘available-
for-sale’ under IAS 39, ‘Financial instruments: Recognition
and measurement’, are initially measured at fair value, with
subsequent changes in fair value recorded directly in equity.
Any dividends received are recognised in the income statement.
On disposal, the accumulated fair value adjustments recognised
in equity are transferred to the income statement.
(iv) Trade receivables
Trade receivables are initially recognised at fair value and are
subsequently measured at amortised cost less any provision
for bad and doubtful debts.
(v) Trade payables
Trade payables are initially recognised at fair value and are
subsequently measured at amortised cost.
(vi) Derivatives and hedge accounting
Where hedge accounting is not applied, or to the extent to
which it is not effective, changes in the fair value of derivatives
are recognised in the income statement as they arise. Changes
in the fair value of derivatives transacted as hedges of operating
items and financing items are recognised in operating profit
and net finance costs respectively.
Derivatives are initially recorded at fair value on the date a
derivative contract is entered into and are subsequently carried
at fair value. The accounting treatment of derivatives and other
financial instruments classified as hedges depends on their
designation, which occurs at the start of the hedge relationship.
The Group designates certain financial instruments as:
• a hedge of the fair value of an asset or liability or unrecognised
firm commitment (‘fair value hedge’);
• a hedge of a highly probable forecast transaction or firm
commitment (‘cash flow hedge’); or
• a hedge of a net investment in a foreign operation (‘net
investment hedge’).
Fair value hedges
For an effective hedge of an exposure to changes in fair
value, the hedged item is adjusted for changes in fair value
attributable to the risk being hedged with the corresponding
entry being recorded in the income statement. Gains or losses
from remeasuring the corresponding hedging instrument
are recognised in the same line of the income statement.
Cash flow hedges
Changes in the effective portion of the fair value of
derivatives that are designated as hedges of future cash flows
are recognised directly in equity, with any ineffective portion
being recognised immediately in the income statement
where relevant. If the cash flow hedge of a firm commitment or
forecast transaction results in the recognition of a non-financial
asset or liability, then, at the time it is recognised, the associated
gains or losses on the derivative that had previously been
recognised in equity are included in the initial measurement of
the non-financial asset or liability. For hedges that result in the
recognition of a financial asset or liability, amounts deferred in
equity are recognised in the income statement in the same
period in which the hedged item affects net profit or loss.
Net investment hedges
Where the Group hedges net investments in foreign operations
through foreign currency borrowings, the gains or losses on the
retranslation of the borrowings are recognised directly in equity.
If the Group uses derivatives as the hedging instrument, the
effective portion of the hedge is recognised in equity, with any
ineffective portion being recognised immediately in the income
statement. Gains and losses accumulated in equity are
recycled through the income statement on disposal of the
foreign operation.
In order to qualify for hedge accounting, the Group documents
in advance the relationship between the item being hedged
and the hedging instrument. The Group also documents and
demonstrates an assessment of the relationship between the
hedged item and the hedging instrument, which shows that the
hedge has been and will be highly effective on an ongoing basis.
The effectiveness testing is re-performed at each period end to
ensure that the hedge remains highly effective.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting. At that time, any cumulative gain or loss
on the hedging instrument recognised in equity is retained in
equity until the highly probable forecast transaction occurs.
If a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognised in equity is transferred
to the income statement.
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host
contracts, and the host contracts are not carried at fair value
with unrealised gains or losses reported in the income statement.
q. Assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amounts will be recovered through a sale
transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and
the asset or disposal group is available for immediate sale in
its present condition subject only to terms that are usual and
customary for sales of such assets.
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
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2 Principal accounting policies continued
Management must be committed to the sale, which should
be expected to qualify for recognition as a completed sale within
one year from the date of classification as held for sale.
Non-current assets and disposal groups classified as held for
sale are measured at the lower of carrying amount and fair value
less costs to sell. This excludes financial assets, deferred tax
assets and assets arising from employee benefits, which are
measured according to the relevant accounting policy.
Property, plant and equipment and intangible assets are not
depreciated once classified as held for sale. The group ceases to
use the equity method of accounting from the date on which an
interest in a jointly controlled entity or an interest in an associate
becomes held for sale.
3 Critical accounting estimates
and judgements
The preparation of consolidated financial statements under
IFRS requires the Group to make estimates and assumptions
that affect the application of policies and reported amounts.
Estimates and judgements are continually evaluated and are
based on historical experience and other factors including
expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates. The estimates and assumptions which have a
significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year
are discussed below.
Impairment of goodwill and other assets
As required, the Group applies procedures to ensure that its
assets are carried at no more than their recoverable amount.
The procedures, by their nature, require estimates and
assumptions to be made. The most significant are set out below.
The Group is required, on at least an annual basis, to test
whether goodwill has suffered any impairment. As part of this
testing the recoverable amounts of cash generating units have
been determined based on value-in-use calculations. The
use of this method requires the estimation of future cash flows
expected to arise from the continuing operation of the cash
generating unit and the choice of suitable discount and long-
term growth rates in order to calculate the present value of the
forecast cash flows. Actual outcomes could vary significantly
from these estimates. Further information on the impairment
tests undertaken, including the key assumptions, is given
in note 12.
Property, plant and equipment are reviewed for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. When a review for impairment
is conducted, the recoverable amount of an asset or a cash
generating unit is determined as the higher of fair value less
costs to sell and value-in-use, calculated on the basis of
management’s assumptions and estimates.
At each reporting date the Group is required to assess whether
there is objective evidence that its investments in associates
and joint ventures may be impaired. This requires estimates
of the investments’ recoverable amounts, including present
values of the Group’s share of future cash flows.
Inventories
As inventories are carried at the lower of cost and net realisable
value this requires the estimation of the eventual sales price of
goods to customers in the future. A high degree of judgement
is applied when estimating the impact on the carrying value of
inventories of factors such as slow moving items, shrinkage,
damage and obsolescence. The quantity, age and condition of
inventories are regularly measured and assessed as part of range
reviews and inventory counts undertaken throughout the year
and across the Group. Refer to note 18 for further information.
Income taxes
The Group is subject to income taxes in numerous jurisdictions
and there are many transactions for which the ultimate tax
determination is uncertain during the ordinary course of
business. Significant judgement may therefore be required in
determining the provision for income taxes in each territory. The
Group recognises liabilities for anticipated tax audit issues based
on estimates of whether additional taxes will be due. Where the
final outcome of these matters is different from the amounts
which were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which
such determination is made. These adjustments in respect of
prior years are recorded in the income statement or directly
in equity as appropriate. Refer to notes 9 and 25 for further
information.
Restructuring provisions
The Group carries a number of provisions in relation to
historical and ongoing restructuring programmes. The most
significant part of the provisions is the cost to exit stores and
property contracts. The ultimate costs and timing of cash flows
are dependent on exiting the property lease contracts on the
closed stores and subletting surplus space. Refer to note
26 for further information.
Post-employment benefits
The present value of the defined benefit liabilities recognised on
the balance sheet is dependent on a number of assumptions
including interest rates of high quality corporate bonds, inflation
and mortality rates. The net interest expense or income is
dependent on the interest rates of high quality corporate bonds.
The assumptions are based on the conditions at the time and
changes in these assumptions can lead to significant movements
in the estimated obligations. To help the reader understand the
impact of changes in the key assumptions, a sensitivity analysis
is provided in note 27.
Investment in Hornbach
During the year a number of developments have occurred
in respect of our strategic investment in Hornbach. This
has required judgement to be exercised surrounding the
ability of the Group to exercise significant influence over
Hornbach based on accounting definitions, and therefore the
appropriateness of continuing to account for the investment as
an associate. Following the decision to waive the right to appoint
directors to the board, the Directors have judged that the Group
ceased to have the ability to exercise significant influence from
31 January 2014. Further judgements have been required in
assessing the classification of the investment as an asset held for
sale, the valuation as at 1 February 2014 and whether it should
be classified as a discontinued operation, the latter not being
judged appropriate given its size relative to the Group as a
whole. Refer to notes 17 and 34 for further information.
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4 Segmental analysis
Income statement
2013/14
Other International
£ millions UK & Ireland France Poland Other Total
Sales 4,363 4,423 1,109 1,230 11,125
Retail profit 238 396 123 48 805
Exceptional items (10)
Central costs (42)
Share of interest and tax of joint ventures and associates (17)
Operating profit 736
Net finance income 23
Profit before taxation 759
2012/13 (Restated)
Other International
£ millions UK & Ireland France Poland Other Total
Sales 4,316 4,194 1,029 1,034 10,573
Retail profit 231 397 107 43 778
Exceptional items (26)
Central costs (42)
Share of interest and tax of joint ventures and associates (18)
Operating profit 692
Net finance costs (1)
Profit before taxation 691
The current financial year is the 52 weeks ended 1 February 2014 with the comparative financial year being the 53 weeks ended
2 February 2013. This only impacts the UK & Ireland businesses with all of the other businesses reporting on a calendar basis as
a result of local requirements. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional
£72m sales and an immaterial benefit to retail profit.
Balance sheet
2013/14
Other International
£ millions UK & Ireland France Poland Other Total
Segment assets 1,356 1,364 563 611 3,894
Central liabilities (232)
Goodwill 2,417
Net cash 238
Net assets 6,317
2012/13
Other International
£ millions UK & Ireland France Poland Other Total
Segment assets 1,458 1,443 600 620 4,121
Central liabilities (402)
Goodwill 2,399
Net cash 38
Net assets 6,156
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
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4 Segmental analysis continued
Other segmental information
2013/14
Other International
£ millions UK & Ireland France Poland Other Central Total
Capital expenditure 90 127 24 63 – 304
Depreciation and amortisation 127 84 19 30 1 261
Impairment losses
(1)
2 – – – – 2
Non-current assets
(2)
3,246 1,970 565 518 15 6,314
2012/13
Other International
£ millions UK & Ireland France Poland Other Central Total
Capital expenditure 125 93 49 43 6 316
Depreciation and amortisation 133 72 14 26 3 248
Impairment losses 8 – – – – 8
Non-current assets
(2)
3,332 1,984 584 459 20 6,379
(1) Impairment losses exclude the exceptional impairment of the investment in Hornbach of £45m.
(2) Non-current assets comprise goodwill, other intangible assets, property, plant and equipment and investment property.
The operating segments disclosed above are based on the information reported internally to the Board of Directors and Group
Executive. This information is predominantly based on the geographical areas in which the Group operates and which are
managed separately. The Group only has one business segment being the supply of home improvement products and services.
The ‘Other International’ segment consists of Poland, China, Spain, Russia, Romania, the associate Hornbach and the joint venture
Koçtas¸ in Turkey. Poland has been shown separately due to its significance.
Central costs principally comprise the costs of the Group’s head office. Central liabilities comprise unallocated head office and other
central items including pensions, interest and tax.
5 Exceptional items
£ millions 2013/14 2012/13
Included within selling and distribution expenses
Acquisition and integration costs (5) –
Ireland restructuring 7 (21)
UK restructuring – 4
2 (17)
Included within administrative expenses
UK restructuring – (20)
Net pension gain – 11
– (9)
Included within other income
Profit on disposal of properties 2 –
2 –
Included within share of post-tax results of joint ventures and associates
Net impairment of investment in Hornbach (14) –
(14) –
Included within finance income
Kesa demerger French tax case – repayment supplement income 27 –
27 –
Exceptional items before tax 17 (26)
Tax on exceptional items (4) 1
Kesa demerger French tax case 118 –
Exceptional items 131 (25)
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5 Exceptional items continued
Acquisition and integration costs of £5m principally comprise costs of acquiring and integrating the Bricostore Romania business.
The exceptional credit of £7m for Ireland restructuring reflects the release of provisions recorded in January 2013 when B&Q
Ireland entered into an Examinership process. It successfully exited Examinership in May 2013 with the closure of only one store.
A net impairment loss of £14m has been recognised in the year on the Group’s investment in Hornbach. This comprises a loss of
£45m on remeasurement of the investment to fair value, offset by a £31m gain on the transfer from reserves of cumulative foreign
exchange gains since transition to IFRS and is discussed further in note 17.
A £27m repayment supplement provision and £118m taxation provision related to the Kesa demerger French tax case have been
released in the year. Refer to note 9 for further details.
6 Net finance income/(costs)
£ millions 2013/14
2012/13
(Restated)
Bank overdrafts and bank loans (3) (8)
Medium Term Notes and other fixed term debt (3) (7)
Finance leases (4) (4)
Financing fair value remeasurements (2) 2
Capitalised interest – 1
Finance costs (12) (16)
Cash and cash equivalents 6 15
Net interest income on defined benefit pension schemes 2 –
Kesa demerger French tax case – repayment supplement income (note 9) 27 –
Finance income 35 15
Net finance income/(costs) 23 (1)
Medium Term Notes and other fixed term debt interest includes net interest income accrued on derivatives of £12m (2012/13:
£15m income) and amortisation of issue costs of borrowings of £1m (2012/13: £1m).
Capitalised interest relates to central borrowings and is calculated by applying a capitalisation rate of 1.2% (2012/13: 1.6%) to
expenditure on qualifying assets.
Financing fair value remeasurements comprise a net loss on derivatives, excluding accrued interest, of £41m (2012/13: £10m gain),
offset by a net gain from fair value adjustments to the carrying value of borrowings and cash of £39m (2012/13: £8m loss).
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Accounts
Notes to the consolidated financial statements continued
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92
7 Profit before taxation
The following items of revenue have been credited in arriving at profit before taxation:
£ millions 2013/14 2012/13
Sales 11,125 10,573
Other income 39 36
Finance income 35 15
Revenue 11,199 10,624
The following items of expense/(income) have been charged/(credited) in arriving at profit before taxation:
£ millions 2013/14 2012/13
Operating lease rentals
Minimum lease payments – Property 440 435
Minimum lease payments – Equipment 42 35
Sublease income (16) (17)
466 453
Rental income received on investment property (7) (6)
Amortisation of other intangible assets
(1)
31 27
Depreciation of property, plant and equipment and investment property
Owned assets 220 212
Under finance leases 10 9
Impairment of property, plant and equipment and investment property 2 8
Impairment of investment in Hornbach (note 17) 45 –
(Gain)/loss on disposal
Land and buildings and investment property (2) –
Fixtures, fittings and equipment 3 4
Other intangible assets – 1
Inventories: write down to net realisable value 32 16
Trade and other receivables: write down of bad and doubtful debts 4 4
(1) Of the amortisation of other intangible assets charge, £2m (2012/13: £1m) and £29m (2012/13: £26m) are included in selling and distribution expenses and
administrative expenses respectively.
Auditor’s remuneration
£ millions 2013/14 2012/13
Fees payable for the audit of the Company and consolidated financial statements 0.3 0.3
Fees payable to the Company’s auditor and their associates for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation 1.5 1.3
Audit fees 1.8 1.6
Audit-related assurance services 0.1 0.1
Other taxation advisory services 0.1 0.1
Other assurance services 0.1 0.1
Other services 0.1 0.1
Non-audit fees 0.4 0.4
Auditor’s remuneration 2.2 2.0
Details of the Group’s policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than
another supplier and how the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report
on page 44. No services were provided pursuant to contingent fee arrangements.
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8 Employees and directors
£ millions 2013/14 2012/13
Wages and salaries 1,279 1,276
Social security costs 265 258
Post-employment benefits
Defined contribution 27 17
Defined benefit (service cost only) 9 17
Share-based compensation 7 9
Employee benefit expenses 1,587 1,577
Number thousands 2013/14 2012/13
Stores 71 72
Administration 5 5
Average number of persons employed 76 77
The average number of persons employed excludes employees in the Group’s joint ventures and associates.
Remuneration of key management personnel
£ millions 2013/14 2012/13
Short-term employee benefits 6.6 5.2
Post-employment benefits 1.0 1.4
Share-based compensation 0.1 1.3
7.7 7.9
Key management consists of the Board of Directors and the Group Executive.
Further detail with respect to the Directors’ remuneration is set out in the Directors’ Remuneration Report on pages 47 to 68.
Other than as set out in the Directors’ Remuneration Report, there have been no transactions with key management during the
year (2012/13: £nil).
9 Income tax expense
£ millions 2013/14 2012/13
UK corporation tax
Current tax on profits for the year 47 47
Adjustments in respect of prior years (7) (13)
40 34
Overseas tax
Current tax on profits for the year 131 128
Kesa demerger French tax case (118) –
Other adjustments in respect of prior years (11) (54)
2 74
Deferred tax
Current year 16 18
Adjustments in respect of prior years – 5
Adjustments in respect of changes in tax rates (9) (4)
7 19
Income tax expense 49 127
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Accounts
Notes to the consolidated financial statements continued
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9 Income tax expense continued
Factors affecting tax charge for the year
The tax charge for the year differs from the standard rate of corporation tax in the UK of 23% (2012/13: 24%). The differences are
explained below:
£ millions 2013/14 2012/13
Profit before taxation 759 691
Profit multiplied by the standard rate of corporation tax in the UK of 23% (2012/13: 24%) 175 166
Share of post-tax results of joint ventures and associates (2) (5)
Net (income)/expenses not (chargeable)/deductible for tax purposes (16) 6
Temporary differences:
– Net gains on property (3) (3)
– Losses not recognised 9 11
Foreign tax rate differences 31 18
Adjustments in respect of prior years (136) (62)
Adjustments in respect of changes in tax rates (9) (4)
Income tax expense 49 127
The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes
in tax rates on deferred tax is 26% (2012/13: 27%). Tax on exceptional items for the year is a credit of £114m, £118m of which
relates to prior year items. In 2012/13 tax on exceptional items was a credit of £1m, with no amount relating to prior year items.
The effective tax rate calculation is set out in the Financial Review on page 23.
The overall tax rate for the year is 6% (2012/13: 18%) reflecting the release of a £118m exceptional tax provision following the
successful resolution of the Kesa demerger French tax case.
Kingfisher paid €138m tax to the French tax authorities in the year ended 31 January 2004 as a consequence of the Kesa Electricals
demerger and recorded this as an exceptional tax charge. Kingfisher appealed successfully against this tax liability and as a result
received €169m from the French tax authorities in September 2009, representing a refund of the €138m and €31m of repayment
supplement. The French tax authorities appealed this decision and the hearing took place in May 2011 with the Court of Appeal
finding in Kingfisher’s favour. In July 2013 the Conseil d’Etat, France’s ultimate court, found in favour of Kingfisher regarding the
Kesa demerger tax case, which concluded the matter. Whilst a refund was received from the French tax authorities following the
first positive decision in 2009, the Group continued to provide against the risk while litigation was ongoing. A £27m repayment
supplement provision and £118m taxation provision related to the case have subsequently been released and treated as exceptional.
In addition to the amounts charged to the income statement, tax of £67m has been credited directly to equity (2012/13: £14m
charge), of which a £19m credit (2012/13: £6m credit) is included in current tax and a £48m credit (2012/13: £20m charge) is
included in deferred tax.
Impact of changes in tax rates
The UK corporation tax rate fell from 24% to 23% from 1 April 2013 and will fall to 21% from 1 April 2014 and then to 20% from
1 April 2015. As all these rates have been enacted by the balance sheet date, their impact has been fully reflected in this Annual
Report and Accounts.
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10 Earnings per share
2013/14 2012/13
Earnings
£ millions
Weighted
average
number of
shares
millions
Earnings
per share
pence
Earnings
£ millions
Weighted
average
number of
shares
millions
Earnings
per share
pence
Basic earnings per share 709 2,363 30.0 564 2,339 24.1
Effect of dilutive share options 19 (0.3) 34 (0.3)
Diluted earnings per share 709 2,382 29.7 564 2,373 23.8
Basic earnings per share 709 2,363 30.0 564 2,339 24.1
Exceptional items before tax (17) (0.7) 26 1.1
Tax on exceptional and prior year items (141) (6.0) (67) (2.8)
Financing fair value remeasurements 2 0.1 (2) (0.1)
Tax on financing fair value remeasurements (1) – 1 –
Adjusted basic earnings per share 552 2,363 23.4 522 2,339 22.3
Diluted earnings per share 709 2,382 29.7 564 2,373 23.8
Exceptional items before tax (17) (0.7) 26 1.1
Tax on exceptional and prior year items (141) (5.9) (67) (2.8)
Financing fair value remeasurements 2 0.1 (2) (0.1)
Tax on financing fair value remeasurements (1) – 1 –
Adjusted diluted earnings per share 552 2,382 23.2 522 2,373 22.0
Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders of the Company by the
weighted average number of shares in issue during the year, excluding those held in the Employee Share Ownership Plan Trust
(‘ESOP’) which for the purpose of this calculation are treated as cancelled.
For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential
ordinary shares. These represent share options granted to employees where both the exercise price is less than the average market
price of the Company’s shares during the year and any related performance conditions have been met.
11 Dividends
£ millions 2013/14 2012/13
Dividends to equity shareholders of the Company
Final dividend for the year ended 2 February 2013 of 6.37p per share (28 January 2012: 6.37p per share) 150 148
Interim dividend for the year ended 1 February 2014 of 3.12p per share (2 February 2013: 3.09p per share) 74 73
224 221
The proposed final dividend for the year ended 1 February 2014 of 6.78p per share is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in these financial statements.
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Accounts
Notes to the consolidated financial statements continued
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12 Goodwill
£ millions
Cost
At 3 February 2013 2,524
Additions 18
Exchange differences (1)
At 1 February 2014 2,541
Impairment
At 3 February 2013 (125)
Exchange differences 1
At 1 February 2014 (124)
Net carrying amount
At 1 February 2014 2,417
Cost
At 29 January 2012 2,521
Exchange differences 3
At 2 February 2013 2,524
Impairment
At 29 January 2012 (124)
Exchange differences (1)
At 2 February 2013 (125)
Net carrying amount
At 2 February 2013 2,399
During the year the Group acquired the Bricostore Romania companies resulting in additions to goodwill of £18m. Refer to note 33.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to groups of cash generating units (‘CGUs’) as follows:
£ millions UK France Poland China Romania Total
At 1 February 2014
Cost 1,798 520 81 124 18 2,541
Impairment – – – (124) – (124)
Net carrying amount 1,798 520 81 – 18 2,417
At 2 February 2013
Cost 1,798 520 81 125 – 2,524
Impairment – – – (125) – (125)
Net carrying amount 1,798 520 81 – – 2,399
The recoverable amounts of these groups of CGUs have been determined based on value-in-use calculations. The groups of
CGUs for which the carrying amount of goodwill is deemed significant are the UK, France, Poland and Romania.
All CGU value-in-use calculations are considered to have been valued using level 3 inputs as defined by the fair value hierarchy
of IFRS 13, ‘Fair value measurement’.
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12 Goodwill continued
The Board has reviewed a sensitivity analysis, including the use of prior year discount and growth rates, and does not consider
that a reasonably possible change in the assumptions used in the value-in-use calculations would cause the carrying amounts
of the CGUs to exceed their recoverable amounts. The key assumptions used for value-in-use calculations are set out below.
Assumptions
• The cash flow projections are based on approved financial budgets and strategic plans covering a three year period. These are
based on both past performance and expectations for future market development.
• Key drivers in the plans are like-for-like (‘LFL’) sales, margin and operating profit percentage. LFL sales projections take into
consideration both external factors such as market expectations, and internal factors such as trading plans.
• Cash flows beyond this three year period are calculated using a growth rate which does not exceed the long-term average growth
rate for retail businesses operating in the same countries as the CGUs.
• The weighted average cost of capital, used to discount future cash flows, is calculated using a combination of the cost of debt,
leases and equity, weighted according to an estimate of the CGU’s capital gearing. A risk adjustment is also made for the country
in which the CGU operates.
The pre-tax risk adjusted discount rates and long-term growth rates used are as follows:
2013/14
Annual % rate UK France Poland Romania
Discount rate 8.9 10.5 10.2 12.7
Long-term growth rate 3.0 2.6 3.3 3.7
2012/13
Annual % rate UK France Poland Romania
Discount rate 8.9 9.6 10.5 n/a
Long-term growth rate 2.8 2.3 3.5 n/a
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
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13 Other intangible assets
£ millions
Computer
software Other Total
Cost
At 3 February 2013 414 9 423
Acquisition of subsidiaries – 1 1
Additions 86 2 88
Disposals (7) – (7)
Exchange differences (3) – (3)
At 1 February 2014 490 12 502
Amortisation
At 3 February 2013 (253) (4) (257)
Charge for the year (30) (1) (31)
Disposals 5 – 5
Exchange differences 3 – 3
At 1 February 2014 (275) (5) (280)
Net carrying amount
At 1 February 2014 215 7 222
Cost
At 29 January 2012 343 9 352
Additions 72 – 72
Disposals (3) – (3)
Exchange differences 2 – 2
At 2 February 2013 414 9 423
Amortisation
At 29 January 2012 (226) (3) (229)
Charge for the year (26) (1) (27)
Disposals 1 – 1
Exchange differences (2) – (2)
At 2 February 2013 (253) (4) (257)
Net carrying amount
At 2 February 2013 161 5 166
None of the Group’s other intangible assets have indefinite useful lives.
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14 Property, plant and equipment
£ millions
Land and
buildings
Fixtures,
fittings and
equipment Total
Cost
At 3 February 2013 3,180 2,540 5,720
Additions 85 135 220
Acquisition of subsidiaries 55 5 60
Disposals (12) (29) (41)
Exchange differences (148) (64) (212)
At 1 February 2014 3,160 2,587 5,747
Depreciation
At 3 February 2013 (396) (1,576) (1,972)
Charge for the year (51) (178) (229)
Impairment losses (1) (1) (2)
Disposals 3 29 32
Exchange differences 16 33 49
At 1 February 2014 (429) (1,693) (2,122)
Net carrying amount
At 1 February 2014 2,731 894 3,625
Cost
At 29 January 2012 3,049 2,375 5,424
Additions 88 171 259
Disposals (19) (42) (61)
Transfers to investment property (12) – (12)
Exchange differences 74 36 110
At 2 February 2013 3,180 2,540 5,720
Depreciation
At 29 January 2012 (345) (1,412) (1,757)
Charge for the year (46) (174) (220)
Impairment losses (1) (7) (8)
Disposals 5 37 42
Exchange differences (9) (20) (29)
At 2 February 2013 (396) (1,576) (1,972)
Net carrying amount
At 2 February 2013 2,784 964 3,748
Assets in the course of construction included above at net carrying amount
At 1 February 2014 44 34 78
At 2 February 2013 81 46 127
Assets held under finance leases included above at net carrying amount
At 1 February 2014 18 33 51
At 2 February 2013 19 34 53
The amount of borrowing costs capitalised in property, plant and equipment in the year has been £nil (2012/13: £1m).
The cumulative total of borrowing costs included at the balance sheet date, net of depreciation, is £27m (2012/13: £27m).
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Accounts
Notes to the consolidated financial statements continued
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14 Property, plant and equipment continued
Land and buildings are analysed as follows:
2013/14 2012/13
£ millions Freehold
Long
leasehold
Short
leasehold Total Total
Cost 2,436 134 590 3,160 3,180
Depreciation (152) (6) (271) (429) (396)
Net carrying amount 2,284 128 319 2,731 2,784
Included in land and buildings is leasehold land that is in effect a prepayment for the use of land and is accordingly being
amortised on a straight line basis over the estimated useful life of the assets. The net carrying amount of leasehold land included
in land and buildings at 1 February 2014 is £254m (2012/13: £240m).
The Group does not revalue properties within its financial statements. A valuation exercise is performed for internal purposes annually
in November by independent external valuers. Based on this exercise the value of property is £3.4bn (2012/13: £3.5bn). The key
assumption used in calculating this is the estimated yields.
All the property, plant and equipment market valuations are considered to have been determined by level 2 inputs as defined by the
fair value hierarchy of IFRS 13, ‘Fair value measurement’.
15 Investment property
£ millions
Cost
At 3 February 2013 79
Disposals (3)
Transfers to assets held for sale (10)
Exchange differences (6)
At 1 February 2014 60
Depreciation
At 3 February 2013 (13)
Charge for the year (1)
Disposals 1
Exchange differences 3
At 1 February 2014 (10)
Net carrying amount
At 1 February 2014 50
Cost
At 29 January 2012 67
Additions 3
Transfers from property, plant and equipment 12
Exchange differences (3)
At 2 February 2013 79
Depreciation
At 29 January 2012 (12)
Charge for the year (1)
At 2 February 2013 (13)
Net carrying amount
At 2 February 2013 66
A property valuation exercise is performed for internal purposes annually as described in note 14. Based on this exercise the
fair value of investment property is £77m (2012/13: £121m). All the investment properties held by the Group at fair value are
considered to have fair values determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, ‘Fair value
measurement’.
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16 Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest
is given in note 4 of the Company’s separate financial statements.
17 Investments in joint ventures and associates
£ millions
At 3 February 2013 289
Share of post-tax results – before impairment 22
Share of post-tax results – exceptional impairment (45)
Dividends (11)
Transfers to assets held for sale (198)
Exchange differences (25)
At 1 February 2014 32
At 29 January 2012 271
Share of post-tax results 20
Dividends (10)
Exchange differences 8
At 2 February 2013 289
In 2013/14 Kingfisher acquired Bricostore in Romania and announced its intention to pilot four Screwfix outlets in Germany in
2014. At the same time Kingfisher undertook a review of its strategic investment in Hornbach, which has operations in both of these
markets. On 31 January 2014 the Group decided to divest its equity stake in Hornbach and also waive its right to appoint directors
to the Hornbach board.
Following this decision, the Group concluded it had lost the ability to exercise significant influence over the Hornbach businesses,
despite maintaining a 21% equity interest at the balance sheet date. This conclusion was reached based on the Group ceasing to
participate in the significant financial and operating policy decisions made by Hornbach. On 31 January 2014 the Group’s investment
was written down to its fair value of £198m, resulting in an exceptional impairment loss of £45m being recognised in the consolidated
income statement. The impairment loss is included within the Group’s share of post-tax results, however this excludes an exceptional
transfer from reserves of cumulative foreign exchange gains since transition to IFRS of £31m.
The Hornbach investment and retail profit contribution is included in the Other International reporting segment. In 2013/14 the Group
recorded a £14m pre-exceptional profit in relation to its share of Hornbach’s post-tax results, comprising £26m of retail profit less
£12m share of interest and tax.
Due to active marketing of the shares at the balance sheet date, the investment was reclassified as an asset held for sale – refer
to note 34. Following the end of the 2013/14 financial year, on 24 March 2014 Kingfisher agreed to sell all the shares it holds in
Hornbach Holding AG and Hornbach-Baumarkt AG which together formed its 21.2% stake in Hornbach for approximately £195m.
No goodwill is included in the carrying amount of investments in joint ventures and associates (2012/13: £nil).
Details of the remaining significant joint ventures and associates are shown below:
Country of
incorporation % interest held
Class of
shares owned Main activity
Principal joint ventures
Koçtas¸ Yapi Marketleri Ticaret A.S.
(1)
Turkey 50% Ordinary Retailing
Principal associates
Crealfi S.A.
(1)
France 49% Ordinary Finance
(1) Owing to local conditions, this company prepares its financial statements to 31 December.
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Accounts
Notes to the consolidated financial statements continued
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102
17 Investments in joint ventures and associates continued
Aggregate amounts relating to joint ventures and associates:
2013/14 2012/13
£ millions Joint ventures Associates Total Joint ventures Associates Total
Non-current assets 21 2 23 28 269 297
Current assets 47 81 128 56 303 359
Current liabilities (35) (69) (104) (47) (211) (258)
Non-current liabilities (13) (2) (15) (8) (101) (109)
Share of net assets 20 12 32 29 260 289
Sales 166 631 797 165 605 770
Operating expenses (155) (603) (758) (156) (576) (732)
Operating profit 11 28 39 9 29 38
Net finance costs (3) (6) (9) (3) (7) (10)
Profit before taxation 8 22 30 6 22 28
Income tax (1) (7) (8) (1) (7) (8)
Share of post-tax results before impairment 7 15 22 5 15 20
Exceptional impairment – (45) (45) – – –
Share of post-tax results 7 (30) (23) 5 15 20
18 Inventories
£ millions 2013/14 2012/13
Finished goods for resale 2,054 2,083
The cost of inventories recognised as an expense and included in cost of sales for the year ended 1 February 2014 is £6,461m
(2012/13: £6,093m).
19 Trade and other receivables
£ millions 2013/14 2012/13
Non-current
Prepayments 11 13
Property receivables 2 2
Other receivables 2 3
15 18
Current
Trade receivables 64 50
Provision for bad and doubtful debts (9) (11)
Net trade receivables 55 39
Property receivables 3 3
Prepayments 137 135
Other receivables 395 368
590 545
Trade and other receivables 605 563
Other receivables principally comprise rebates due from suppliers.
The fair values of trade and other receivables approximate to their carrying amounts. Refer to note 24 for information on the credit
risk associated with trade and other receivables.
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20 Cash and cash equivalents
£ millions 2013/14 2012/13
Cash at bank and in hand 238 268
Short-term deposits 297 130
535 398
Short-term deposits comprise bank deposits and investments in money market funds, fixed for periods of up to three months.
The fair values of cash and cash equivalents approximate to their carrying amounts.
The Group enters into multi-currency net overdraft facilities and cash pooling agreements with its banks. These agreements and
similar arrangements generally enable the counterparties to offset overdraft balances against available cash in the ordinary course
of business and/or in the event that the counterparty is unable to fulfil its contractual obligations.
21 Trade and other payables
£ millions 2013/14 2012/13
Current
Trade payables 1,403 1,370
Other taxation and social security 227 227
Deferred income 220 168
Accruals and other payables 636 665
2,486 2,430
Non-current
Accruals and other payables 86 115
Trade and other payables 2,572 2,545
Accruals include allowance for customer returns, representing the estimate of future sales returns at the year end.
The fair values of trade and other payables approximate to their carrying amounts.
22 Borrowings
£ millions 2013/14 2012/13
Current
Bank overdrafts 1 –
Bank loans 3 54
Medium Term Notes and other fixed term debt 75 32
Finance leases 15 13
94 99
Non-current
Bank loans 11 14
Medium Term Notes and other fixed term debt 172 266
Finance leases 47 52
230 332
Borrowings 324 431
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Accounts
Notes to the consolidated financial statements continued
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104
22 Borrowings continued
Bank overdrafts and loans
Bank overdrafts are repayable on demand. Current bank loans mature within the next 12 months. Both are arranged at floating rates
of interest.
Non-current bank loans have an average maturity of three years (2012/13: three years) and are arranged at fixed rates of interest
with an effective interest rate of 2.8% (2012/13: 3.8%).
At the year end, there were no drawn amounts under Chinese Renminbi committed facilities and therefore a nil effective borrowing
rate (2012/13: 6.2%). These facilities are unsecured (2012/13: assets worth RMB 1.6 billion (£163m) secured a bank facility in
China, which matured in 2013).
Medium Term Notes and other fixed term debt
Medium Term Notes (‘MTNs’) were issued in prior years under the Group’s €2,500m MTN programme and further notes issued as a
US Private Placement (‘USPP’).
2013/14 2012/13
£ millions
Principal
outstanding Maturity date Coupon
Effective
interest rate
Carrying
amount
Carrying
amount
US Dollar USPP – 24/05/13
(1)
6.14% 6.1% – 32
Sterling MTN £73m 15/12/14
(2)
5.63% 5.8% 75 78
US Dollar USPP $68m 24/05/16
(1)
6.30% 6.3% 45 49
US Dollar USPP $179m 24/05/18
(1)
6.40% 6.4% 127 139
247 298
(1) $247m swapped to floating rate Sterling based on 6 month LIBOR plus a margin using a cross-currency interest rate swap. $50m was repaid at maturity in May 2013.
(2) Swapped to floating rate Euro based on 3 month EURIBOR plus a margin using a cross-currency interest rate swap.
The Group values its MTNs and USPP on an amortised cost basis, adjusted for fair value gains and losses (based on observable
market inputs) attributable to the risk being hedged in designated and effective fair value hedge relationships.
The carrying amounts of the MTNs and USPP have been impacted both by exchange rate movements and fair value adjustments
for interest rate risk. At 1 February 2014, the cumulative effect of interest rate fair value adjustments is to increase the Group’s MTNs
and USPP carrying amounts by £25m (2012/13: £38m increase).
The USPP contains a covenant requiring that, as at the end of each semi-annual and annual financial reporting period, the ratio of
operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding 12 month period.
The Group has complied with this covenant for the year ended 1 February 2014.
Finance leases
The Group leases certain of its buildings and fixtures and equipment under finance leases. The average lease term maturity for
buildings is seven years (2012/13: seven years) and for fixtures and equipment is two years (2012/13: two years). Certain building
leases include a clause to enable upward revision of the rental charge to prevailing market conditions.
Future minimum lease payments under finance leases, together with the present value of minimum lease payments, are as follows:
2013/14 2012/13
£ millions
Present value
of payments
Minimum
payments
Present value
of payments
Minimum
payments
Less than one year 15 17 13 15
One to five years 28 39 30 42
More than five years 19 26 22 31
Total 62 82 65 88
Less amounts representing finance charges (20) (23)
Present value of minimum lease payments 62 65
The interest rates inherent in the finance leases are fixed at the contract date for the lease term. The weighted average effective
interest rate on the Group’s finance leases is 8.4% (2012/13: 8.5%).
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22 Borrowings continued
Fair value
£ millions 2013/14 2012/13
Bank overdrafts 1 –
Bank loans 16 69
Medium Term Notes and other fixed term debt 254 307
Finance leases 79 86
Borrowings 350 462
Where available, market values have been used to determine the fair values of borrowings. Where market values are not available
or are not reliable, fair values have been calculated by discounting cash flows at prevailing interest and foreign exchange rates.
This has resulted in a mix of Level 1 and Level 2 inputs as defined by IFRS 13 ‘Fair value measurements’ being used to value the
borrowings of the Group.
23 Derivatives
The net fair value of derivatives by hedge designation at the balance sheet date is:
£ millions 2013/14 2012/13
Fair value hedges 33 69
Cash flow hedges (8) (14)
Net investment hedges – (18)
Non-designated hedges (7) 22
18 59
Non-current assets 40 55
Current assets 5 33
Current liabilities (27) (17)
Non-current liabilities – (12)
18 59
The Group holds the following financial instruments at fair value:
£ millions 2013/14 2012/13
Cross currency interest rate swaps 42 63
Foreign exchange contracts 3 25
Derivative assets 45 88
£ millions 2013/14 2012/13
Cross currency interest rate swaps (9) (12)
Foreign exchange contracts (18) (17)
Derivative liabilities (27) (29)
The fair values are calculated by discounting future cash flows arising from the instruments and adjusted for credit risk. These fair
value measurements are all made using observable market rates of interest, foreign exchange and credit risk.
All the derivatives held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined by the fair
value hierarchy of IFRS 13, ‘Fair value measurement’. There are no non-recurring fair value measurements nor have there been any
transfers of assets or liabilities between levels of the fair value hierarchy.
At 1 February 2014 net derivative assets included in net cash amount to £27m (2012/13: £71m net derivative assets).
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Accounts
Notes to the consolidated financial statements continued
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106
23 Derivatives continued
Fair value hedges
Fair value hedges comprise interest rate swap contracts that convert fixed rate debt issued under the Group’s Medium Term Note
programme and the US Private Placement to floating rate liabilities, along with certain cross-currency swaps. At 1 February 2014 the
Sterling equivalent amount of such contracts is £307m (2012/13: £261m). During the year, cross-currency interest rate swaps have
expired to coincide with repayments of underlying debt. The Sterling equivalent amount of those expired swaps (at year end exchange
rates) was £31m.
Cash flow hedges
Forward foreign exchange contracts hedge currency exposures of forecast inventory purchases. At 1 February 2014 the Sterling
equivalent amount of such contracts is £419m (2012/13: £441m). The associated fair value gains and losses will be transferred to
inventories when the purchases occur during the next 12 months. Losses of £9m (2012/13: £8m gains) have been transferred to
inventories for contracts which matured during the year.
Net investment hedges
Cross-currency interest rate swaps hedge currency exposures of overseas investments. At 1 February 2014 the Sterling equivalent
amount of such contracts is £nil (2012/13: £90m).
Non-designated hedges
The Group has entered into certain derivatives to provide a hedge against fluctuations in the income statement arising from balance
sheet positions. At 1 February 2014 the Sterling equivalent amount of such contracts is £813m (2012/13: £1,062m). These have not
been accounted for as hedges, since the fair value movements of the derivatives in the income statement offset the retranslation of
the balance sheet positions. These include short-term foreign exchange contracts.
The Group has reviewed all significant contracts for embedded derivatives and none of these contracts has any embedded derivatives
which are not closely related to the host contract and therefore the Group is not required to account for these separately.
Kingfisher enters into netting agreements with counterparties to manage the credit and settlement risks associated with over-the-
counter derivatives. These netting agreements and similar arrangements generally enable the Group and its counterparties to
settle cashflows on a net basis and set-off liabilities against available assets in the event that either party is unable to fulfill its
contractual obligations.
Offsetting of derivative assets:
£ millions
Gross amounts of
recognised
derivative assets
Gross amounts
offset in the
consolidated
balance sheet
Net amounts of
derivative assets
presented in the
consolidated
balance sheet
Gross amounts of
derivatives not
offset in the
consolidated
balance sheet Net amount
At 1 February 2014 45 – 45 (27) 18
At 2 February 2013 88 – 88 (29) 59
Offsetting of derivative liabilities:
£ millions
Gross amounts of
recognised
derivative liabilities
Gross amounts
offset in the
consolidated
balance sheet
Net amounts of
derivative
liabilities
presented in the
consolidated
balance sheet
Gross amounts of
derivatives not
offset in the
consolidated
balance sheet Net amount
At 1 February 2014 (27) – (27) 27 –
At 2 February 2013 (29) – (29) 29 –
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24 Financial risk management
Kingfisher’s treasury function has primary responsibility for managing certain financial risks to which the Group is exposed.
The Board reviews the levels of exposure regularly and approves treasury policies covering the use of financial instruments required
to manage these risks. Kingfisher’s treasury function is not run as a profit centre and does not enter into any transactions for
speculative purposes.
In the normal course of business the Group uses financial instruments including derivatives. The main types of financial instruments
used are Medium Term Notes and other fixed term debt, bank loans and deposits, money market funds, interest rate swaps,
commodity swaps and foreign exchange contracts.
Interest rate risk
Borrowings arranged at floating rates of interest expose the Group to cash flow interest rate risk, whereas those arranged at fixed
rates of interest expose the Group to fair value interest rate risk. The Group manages its interest rate risk by entering into certain
interest rate derivative contracts which modify the interest rate payable on the Group’s underlying debt instruments, principally the
Medium Term Notes and other fixed term debt.
Currency risk
The Group’s principal currency exposures are to the Euro, US Dollar and Polish Zloty. The Euro and Polish Zloty exposures are
operational and arise through the ownership of retail businesses in France, Spain, Ireland and Poland. In particular, the Group
generates a substantial part of its profit from the Eurozone, and as such is exposed to the economic uncertainty of its member
states. The Group continues to monitor potential exposures and risks, and consider effective risk management solutions.
Balance sheet Euro translation exposure is currently hedged by maintaining a proportion of the Group’s debt in Euro. It is the Group’s
policy not to hedge the translation of overseas earnings into Sterling. In addition, the Group has significant transactional exposure
arising on the purchase of inventories denominated in US Dollars, which it hedges using forward foreign exchange contracts. Under
Group policies, the Group companies are required to hedge committed inventory purchases and a proportion of forecast inventory
purchases arising in the next 12 months, and this is monitored on an ongoing basis.
Kingfisher’s policy is to manage the interest rate and currency profile of its issued debt using derivative contracts. The effect of these
contracts on the Group’s net debt/cash is as follows:
Sterling Euro US Dollar Other
£ millions Fixed Floating Fixed Floating Fixed Floating Fixed Floating Total
At 1 February 2014
Net cash before fair value
adjustments and financing
derivatives (111) 175 (28) 99 (150) 78 – 173 236
Fair value adjustments to net cash (3) – – – (22) – – – (25)
Financing derivatives 75 (763) – 201 173 233 – 108 27
Net cash (39) (588) (28) 300 1 311 – 281 238
At 2 February 2013
Net cash before fair value
adjustments and financing
derivatives (114) 91 (39) 135 (188) 3 103 14 5
Fair value adjustments to net cash (6) – – – (32) – – – (38)
Financing derivatives 78 (1,064) – 192 222 315 – 328 71
Net cash (42) (973) (39) 327 2 318 103 342 38
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
108
24 Financial risk management continued
Financial instruments principally affected by interest rate and currency risks, being the significant market risks impacting Kingfisher,
are borrowings, deposits and derivatives. The following analysis illustrates the sensitivity of net finance costs (reflecting the impact on
profit) and derivative cash flow hedges (reflecting the impact on other comprehensive income) to changes in interest rates and foreign
exchange rates.
2013/14 2012/13
£ millions
Net finance
costs
Income/
(costs)
Net finance
costs
Income/
(costs)
Effect of 1% rise in interest rates on net finance costs
Sterling (6) (10)
Euro 3 3
US Dollar 3 3
Polish Zloty 2 3
Due to the Group’s hedging arrangements and offsetting foreign currency assets and liabilities, there is no significant impact on
profit from the retranslation of financial instruments.
2013/14 2012/13
£ millions
Derivative
cash flow
hedges
Increase
Derivative
cash flow
hedges
Increase
Effect of 10% appreciation in foreign exchange rates on derivative cash flow hedges
US Dollar against Sterling 17 18
US Dollar against Euro 20 21
The impact of changes in foreign exchange rates on cash flow hedges results from retranslation of forward purchases of US Dollars
used to hedge forecast US Dollar purchases of inventories. The associated fair value gains and losses are deferred in equity until
the purchases occur. See note 23 for further details. The retranslation of foreign currency borrowings and derivatives designated as
hedges of net investments in foreign operations is reported in equity and offset by the retranslation of the hedged net investments.
The sensitivity analysis excludes the impact of movements in market variables on the carrying amount of trade and other payables
and receivables, due to the low associated sensitivity, and are before the effect of tax. It has been prepared on the basis that the
Group’s debt, hedging activities, hedge accounting designations, and foreign currency proportion of debt and derivative contracts
remain constant, reflecting the positions at 1 February 2014 and 2 February 2013 respectively. As a consequence, the analysis
relates to the position at those dates and is not necessarily representative of the years then ended. In preparing the sensitivity
analysis it is assumed that all hedges are fully effective.
The effects shown above would be reversed in the event of an equal and opposite change in interest rates and foreign
exchange rates.
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24 Financial risk management continued
Liquidity risk
The Group regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash
flow forecast for the next three years, determining the level of debt facilities required to fund the business, planning for repayments
of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows.
The following table analyses the Group’s non-derivative financial liabilities and derivative assets and liabilities into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. It excludes trade and other
payables due to the low associated liquidity risk. The amounts disclosed in the table are the contractual undiscounted cash flows
(including interest) and as such may differ from the amounts disclosed on the balance sheet.
£ millions
Less than
1 year 1-2 years 2-3 years 3-4 years 4-5 years
More than
5 years Total
At 1 February 2014
Bank overdrafts (1) – – – – – (1)
Bank loans (3) (2) (3) (4) (2) – (14)
Medium Term Notes and other fixed term debt (86) (10) (49) (7) (112) – (264)
Finance leases (17) (15) (11) (7) (6) (26) (82)
Derivatives – receipts 86 10 49 7 112 – 264
Derivatives – payments (87) (2) (39) (3) (99) – (230)
At 2 February 2013
Bank loans (55) (4) (2) (4) (5) – (70)
Medium Term Notes and other fixed term debt (47) (87) (10) (52) (7) (117) (320)
Finance leases (15) (16) (12) (8) (6) (31) (88)
Derivatives – receipts 47 87 10 52 7 117 320
Derivatives – payments (30) (93) (2) (39) (2) (98) (264)
At 1 February 2014 the Group has an undrawn revolving committed facility of £200m which matures in August 2016. The
£200m facility contains a covenant requiring that, as at the end of each annual and semi-annual financial reporting period, the
ratio of operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding
12 month period. The Group has complied with this covenant for the year ended 1 February 2014.
Credit risk
The Group deposits surplus cash with a number of banks with the strongest short-term credit ratings and with money market funds
which have AAA credit ratings and offer same day liquidity. A credit limit for each counterparty is agreed by the Board covering the
full value of deposits and the fair value of derivative contracts. The credit risk is reduced further by spreading the investments and
derivative contracts across several counterparties. At 1 February 2014, the highest total cash investment with a single counterparty
was £50m (2012/13: £39m).
The Group’s exposure to credit risk at the reporting date is the carrying value of cash at bank and short-term deposits and the fair
value of derivative assets.
No further credit risk provision is required in excess of the normal provision for bad and doubtful debts as the Group has a low
concentration of credit risk in respect of trade receivables. Concentration of risk is limited as a result of low individual balances with
short maturity spread across a large number of unrelated customers.
At 1 February 2014, trade and other receivables that are past due but not provided against amount to £50m (2012/13: £41m),
of which £4m (2012/13: £3m) are over 120 days past due.
Refer to note 36 for details on guarantees provided by the Group.
Capital risk
Capital risk management disclosures are provided in the Financial Review on page 27.
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
110
25 Deferred tax
£ millions 2013/14 2012/13
Deferred tax assets 12 17
Deferred tax liabilities (251) (303)
(239) (286)
Deferred tax assets and liabilities are offset against each other when they relate to income taxes levied by the same tax jurisdiction
and when the Group intends to settle its current tax assets and liabilities on a net basis.
£ millions
Accelerated tax
depreciation
Gains on
property Provisions Tax losses
Post-
employment
benefits Other Total
At 3 February 2013 (136) (132) 20 8 (57) 11 (286)
Acquisition of subsidiaries – (3) – – – – (3)
(Charge)/credit to income statement (24) 17 2 – 2 (4) (7)
(Charge)/credit to equity – – (1) – 51 (2) 48
Exchange differences 9 4 (2) (1) (1) – 9
At 1 February 2014 (151) (114) 19 7 (5) 5 (239)
At 29 January 2012 (115) (144) 33 7 (30) 3 (246)
(Charge)/credit to income statement (17) 14 (15) 1 (2) – (19)
(Charge)/credit to equity – – – – (27) 7 (20)
Exchange differences (4) (2) 2 – 2 1 (1)
At 2 February 2013 (136) (132) 20 8 (57) 11 (286)
At the balance sheet date, the Group has unused tax losses of £221m (2012/13: £243m) available for offset against future profits.
A deferred tax asset has been recognised in respect of £22m (2012/13: £24m) of such losses. No deferred tax asset has been
recognised in respect of the remaining £199m (2012/13: £219m) due to the unpredictability of future profit streams. Included in
unrecognised tax losses are tax losses arising in China of £181m (2012/13: £187m) which can be carried forward only in the next
one to five years.
No deferred tax liability is recognised on temporary differences of £3,331m (2012/13: £2,980m) relating to the unremitted earnings
of overseas subsidiaries and joint ventures. This is because the earnings are continually reinvested by the Group and therefore no tax
is expected to be payable on them in the foreseeable future.
26 Provisions
£ millions
Onerous
property
contracts Restructuring Total
At 3 February 2013 21 52 73
Acquisition of subsidiaries 11 – 11
Charge/(credit) to income statement 2 (5) (3)
Utilised in the year (4) (22) (26)
Exchange differences (1) – (1)
At 1 February 2014 29 25 54
Current liabilities 4 4 8
Non-current liabilities 25 21 46
29 25 54
Within the onerous property contracts provisions, Kingfisher has provided against future liabilities for properties sublet at a shortfall
and long-term idle properties, along with properties acquired on acquisition of subsidiaries at above-market rents. Such provisions
exclude those related to restructuring programmes which are included in the restructuring provisions. The provisions are based on
the present value of future cash outflows relating to rent, rates and service charges.
Restructuring provisions include the estimated costs of the UK, Ireland and China restructuring programmes. The provisions have
been discounted to reflect the time value of money and the risks associated with the specific liabilities.
The ultimate costs and timing of cash flows related to the above provisions are largely dependent on exiting the property lease
contracts and subletting surplus space.
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27 Post-employment benefits
The Group operates a variety of post-employment benefit arrangements covering both funded and unfunded defined benefit
schemes and defined contribution schemes. The most significant defined benefit and defined contribution schemes are in the
UK. The principal overseas defined benefit schemes are in France, where they are mainly retirement indemnity in nature, and
the principal overseas defined contribution scheme is in China. The overseas schemes are not material in relation to the Group
as a whole.
Defined contribution schemes
Costs for the Group’s defined contribution pension schemes, at rates specified in the individual schemes’ rules, are as follows:
£ millions 2013/14 2012/13
Charge to operating profit 27 17
From July 2012 an enhanced defined contribution pension scheme was offered to all UK employees. Eligible UK employees have
been automatically enrolled into the scheme from 31 March 2013.
Defined benefit schemes
The Group’s principal defined benefit arrangement is its funded, final salary pension scheme in the UK. This scheme was closed
to new entrants from April 2004 and was closed to future benefit accrual from July 2012.
The scheme operates under trust law and is managed and administered by the Trustee on behalf of members in accordance with
the terms of the Trust Deed and Rules and relevant legislation. The Trustee Board consists of ten Trustee directors, made up of
five employer appointed directors, one independent director and four member nominated directors. The Trustee Board delegates
day-to-day administration of the scheme to the Group Pensions Department of Kingfisher plc.
The main risk to the Group is that additional contributions are required if investment returns and demographic experience is worse
than expected. The scheme therefore exposes the Group to actuarial risks, such as longevity risk, currency risk, inflation risk,
interest rate risk and market (investment) risk. The Trustee Board regularly reviews such risks and mitigating controls, with a risk
register being formally approved on an annual basis. The assets of the scheme are held separately from the Group and the Trustee’s
investment strategy includes a planned medium-term de-risking of assets, switching from return-seeking to liability-matching assets.
Other de-risking activities have included the scheme acquiring an interest in a property partnership, as set out further below.
A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee and the last full
valuation was carried out as at 31 March 2013.
Following this valuation and in accordance with the scheme’s Statement of Funding Principles, the Trustee and Kingfisher have
agreed annual employer contributions of £36m from April 2014. The contribution schedule has been derived with reference to a
funding objective that targets a longer-term, low risk funding position in excess of the minimum statutory funding requirements. This
longer-term objective is based on the principle of the scheme reaching a point where it can provide benefits to members with a high
level of security, thereby limiting its reliance on the employer for future support. The Company monitors the scheme funding level on
a regular basis and will review with the scheme Trustee at future valuations the continued appropriateness of the repayment schedule
currently in place.
The Trust Deed provides Kingfisher with an unconditional right to a refund of surplus assets assuming the full settlement of plan
liabilities in the event of a plan wind-up.
UK scheme interest in property partnership
In 2010/11, the Group established a partnership, Kingfisher Scottish Limited Partnership (‘Kingfisher SLP’), as part of an arrangement
with the UK scheme Trustee to address an element of the scheme deficit and provide greater security to the Trustee. The partnership
interests are held by the Group and by the scheme, the latter resulting from investments of £78m and £106m made by the Trustee
in January and June 2011 respectively. These investments followed Group contributions of the same amounts into the scheme.
In accordance with IAS 19, ‘Employee benefits’, the investments held by the scheme in Kingfisher SLP do not represent plan
assets for the purposes of the Group’s consolidated financial statements. Accordingly the reported pension position does not
reflect these investments.
UK property assets with market values of £83m and £119m were transferred, in January 2011 and June 2011 respectively, into
the partnership and leased back to B&Q plc. The Group retains control over these properties, including the flexibility to substitute
alternative properties. The Trustee has a first charge over the properties in the event that Kingfisher plc becomes insolvent. The
scheme’s partnership interest entitles it to the majority of the income of the partnership over the 20 year period of the arrangement.
The payments to the scheme by Kingfisher SLP over this term are reflected as Group pension contributions on a cash basis. At the
end of this term, Kingfisher plc has the option to acquire the Trustee’s partnership interest in Kingfisher SLP.
The Group has control over the partnership and therefore it is consolidated in these Group financial statements. Accordingly,
advantage has been taken of the exemptions provided by Regulation 7 of the Partnerships (Accounts) Regulations 2008 from the
requirements for preparation, delivery and publication of the partnership’s accounts.
Annual Report and Accounts 2013/14
112
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
112
27 Post-employment benefits continued
Income statement
2013/14 2012/13 (Restated)
£ millions UK Overseas Total UK Overseas Total
Amounts charged/(credited) to operating profit
Current service cost 2 7 9 13 4 17
Administration costs 3 – 3 3 – 3
Exceptional curtailment gain – – – (27) – (27)
5 7 12 (11) 4 (7)
Amounts charged/(credited) to net finance costs
Net interest (income)/expense (4) 2 (2) (2) 2 –
Total charged/(credited) to income statement 1 9 10 (13) 6 (7)
Of the net charge to operating profit, a £8m charge (2012/13: £14m charge restated) and £4m charge (2012/13: £21m credit
restated) are included in selling and distribution expenses and administrative expenses respectively. Actuarial gains and losses
have been reported in the statement of comprehensive income.
In the prior year, the closure to future accrual resulted in an exceptional non-cash curtailment gain of £27m, representing the
one-off reduction in accounting liabilities as benefits were no longer linked to future salary increases other than in line with inflation.
Balance sheet
2013/14 2012/13
£ millions UK Overseas Total UK Overseas Total
Present value of defined benefit obligations (2,135) (92) (2,227) (1,994) (93) (2,087)
Fair value of scheme assets 2,106 21 2,127 2,065 22 2,087
(Deficit)/surplus in scheme (29) (71) (100) 71 (71) –
Movements in the surplus or deficit are as follows:
2013/14 2012/13 (Restated)
£ millions UK Overseas Total UK Overseas Total
Surplus/(deficit) in scheme at beginning of year 71 (71) – 25 (40) (15)
Current service cost (2) (7) (9) (13) (4) (17)
Administration costs (3) – (3) (3) – (3)
Curtailment gain – – – 27 – 27
Net interest income/(expense) 4 (2) 2 2 (2) –
Net actuarial (losses)/gains (131) 4 (127) (7) (22) (29)
Contributions paid by employer 32 1 33 40 1 41
Exchange differences – 4 4 – (4) (4)
(Deficit)/surplus in scheme at end of year (29) (71) (100) 71 (71) –
Movements in the present value of defined benefit obligations are as follows:
2013/14 2012/13
£ millions UK Overseas Total UK Overseas Total
Present value of defined benefit obligations at beginning
of year (1,994) (93) (2,087) (1,902) (60) (1,962)
Current service cost (2) (7) (9) (13) (4) (17)
Curtailment gain – – – 27 – 27
Interest expense (90) (3) (93) (84) (3) (87)
Actuarial (losses)/gains – changes in financial assumptions (8) 5 (3) (80) (18) (98)
Actuarial gains – changes in demographic assumptions 16 – 16 – – –
Actuarial losses– experience adjustments (120) (1) (121) – (4) (4)
Contributions paid by employees – – – (5) – (5)
Benefits paid 63 1 64 63 1 64
Exchange differences – 6 6 – (5) (5)
Present value of defined benefit obligations at end of year (2,135) (92) (2,227) (1,994) (93) (2,087)
The calculation of the current year UK defined benefit obligation allows for the detailed membership data provided for the funding
valuation as at 31 March 2013. It therefore incorporates a number of experience adjustments since the previous valuation as at
31 March 2010.
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27 Post-employment benefits continued
The present value of UK scheme defined benefit obligation is 62% (2012/13: 62%) in respect of deferred members and 38%
(2012/13: 38%) in respect of current pensioners.
The weighted average duration of the UK scheme obligations at the end of the year is 21 years (2012/13: 20 years).
Movements in the fair value of scheme assets are as follows:
2013/14 2012/13 (Restated)
£ millions UK Overseas Total UK Overseas Total
Fair value of scheme assets at beginning of year 2,065 22 2,087 1,927 20 1,947
Administration costs (3) – (3) (3) – (3)
Interest income 94 1 95 86 1 87
Actuarial (losses)/gains – actual return less interest income (19) – (19) 73 – 73
Contributions paid by employer 32 1 33 40 1 41
Contributions paid by employees – – – 5 – 5
Benefits paid (63) (1) (64) (63) (1) (64)
Exchange differences – (2) (2) – 1 1
Fair value of scheme assets at end of year 2,106 21 2,127 2,065 22 2,087
The fair value of scheme assets is analysed as follows:
2013/14 2012/13
£ millions UK Overseas Total % of total UK Overseas Total % of total
Government bonds 741 – 741 35% 722 – 722 35%
Corporate bonds 650 – 650 31% 645 – 645 31%
UK equities 73 – 73 3% 158 – 158 7%
Overseas equities 443 – 443 20% 394 – 394 19%
Property 32 – 32 2% 70 – 70 3%
Cash and other 167 21 188 9% 76 22 98 5%
Total fair value of scheme assets 2,106 21 2,127 100% 2,065 22 2,087 100%
All UK scheme assets have quoted prices in active markets, except for £157m (2012/13: £92m) of property and other assets.
Interest rate and inflation rate swaps are employed in the UK scheme to complement the use of fixed and index-linked bonds
for liability risk management purposes and are included in the Corporate bonds category above.
The estimated amount of total contributions to be paid to the UK and overseas pension schemes by the Group during the next
financial year is £36m.
Principal actuarial valuation assumptions
The assumptions used in calculating the costs and obligations of the Group’s defined benefit pension schemes are set by the
Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at
the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the
sensitivity analysis.
The UK scheme discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for
the difference in term between iBoxx and scheme liabilities.
2013/14 2012/13
Annual % rate UK Overseas UK Overseas
Discount rate 4.4 3.2 4.6 2.8
Price inflation 3.3 2.0 3.3 2.0
Rate of pension increases 3.1 – 3.3 –
Salary escalation n/a 2.3 n/a 2.5
For the UK scheme, the mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics
and experience of the membership of the scheme from 2010 to 2013. The base mortality assumptions have been derived by
adjusting standard mortality tables (SAPS tables) projected forward to 2013 using the ‘CMI 2013’ core projection improvement
factors, as published by the UK actuarial profession. In addition, allowance has been made for future increases in life expectancy.
The allowance is in line with CMI 2013 improvements subject to a long-term rate of 1.25% pa for males and 1.0% pa for females.
These improvements take into account trends observed within the scheme over the past decade and general population trends.
Annual Report and Accounts 2013/14
114
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
114
27 Post-employment benefits continued
The assumptions for life expectancy of UK scheme members are as follows:
Years 2013/14 2012/13
2010
funding
valuation
Age to which current pensioners are expected to live (60 now)
– Male 86.7 86.7 86.4
– Female 87.3 87.4 87.1
Age to which future pensioners are expected to live (60 in 15 years’ time)
– Male 87.4 87.4 87.1
– Female 88.6 89.0 88.7
The following sensitivity analysis for the UK scheme shows the estimated impact on the obligation resulting from changes to key
actuarial assumptions, whilst holding all other assumptions constant.
Assumption Change in assumption Impact on defined benefit obligation
Discount rate Increase/decrease by 0.1% Decrease/increase by £43m
Price inflation Increase/decrease by 0.1% Increase/decrease by £38m
Rate of pension increases Increase/decrease by 0.1% Increase/decrease by £38m
Mortality Increase in life expectancy by one year Increase by £68m
Due to the asset-liability matching investment strategy, the above impacts on the obligations of changes in discount rate and price
inflation would be significantly offset by movements in the fair value of the scheme assets.
28 Share capital
Number of
ordinary
shares
millions
Ordinary
share capital
£ millions
At 3 February 2013 2,372 373
New shares issued under share schemes 4 –
At 1 February 2014 2,376 373
At 29 January 2012 2,369 372
New shares issued under share schemes 3 1
At 2 February 2013 2,372 373
Ordinary shares have a par value of 15
5
/7 pence per share.
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29 Other reserves
£ millions
Cash flow hedge
reserve
Translation
reserve Other Total
At 3 February 2013 (8) 374 159 525
Currency translation differences
Group – (210) – (210)
Joint ventures and associates – (25) – (25)
Transferred to income statement – (31) – (31)
Cash flow hedges
Fair value losses (4) – – (4)
Losses transferred to inventories 9 – – 9
Tax on other comprehensive income (2) 4 – 2
Other comprehensive income for the year 3 (262) – (259)
At 1 February 2014 (5) 112 159 266
At 29 January 2012 7 247 159 413
Currency translation differences
Group – 122 – 122
Joint ventures and associates – 8 – 8
Cash flow hedges
Fair value losses (14) – – (14)
Gains transferred to inventories (8) – – (8)
Tax on other comprehensive income 7 (3) – 4
Other comprehensive income for the year (15) 127 – 112
At 2 February 2013 (8) 374 159 525
The ‘other’ category of reserve represents the premium on the issue of convertible loan stock in 1993 and the merger reserve
relating to the acquisition of Darty in 1993.
30 Share-based payments
2013/14 2012/13
Options
Number
Weighted
average
exercise
price
£
Options
Number
Weighted
average
exercise
price
£
Outstanding at beginning of year 62,167,023 0.39 89,247,441 0.33
Granted during the year
(1),(2)
6,279,763 1.37 12,292,718 0.50
Forfeited during the year (9,569,630) 0.27 (12,013,719) 0.31
Exercised during the year (20,753,532) 0.33 (27,359,417) 0.27
Outstanding at end of year 38,123,624 0.61 62,167,023 0.39
Exercisable at end of year 2,731,735 0.41 6,253,122 0.29
(1) The charge to the income statement for the years ended 1 February 2014 and 2 February 2013 in respect of share-based payments includes the first year’s charge of
the 2014 and 2013 Kingfisher Incentive Share Scheme (‘KISS’) grants respectively, based on the bonus for the year. Since grants under the KISS are made following the
year end to which the first year of charge relates, it is not possible to give the number of options granted until after the year end.
(2) The weighted average exercise price for options granted during the year represents a blend of nil price KISS, Performance Share Plan and discounted Sharesave options
(see below).
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116
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
116
30 Share-based payments continued
Information on the share schemes is given in note 14 of the Company’s separate financial statements.
Options have been exercised on a regular basis throughout the year. On that basis, the weighted average share price during the year,
rather than at the date of exercise, is £3.53 (2012/13: £2.81). The options outstanding at the end of the year have exercise prices
ranging from £nil to £3.15 and a weighted average remaining contractual life of 2.9 years (2012/13: 3.1 years).
The Group recognised a total expense of £7m in the year ended 1 February 2014 (2012/13: £9m) relating to equity-settled share-
based payment transactions.
The fair value of share options and deferred shares is determined by independent valuers using Black-Scholes and stochastic option
pricing models. The inputs of the principal schemes into these models are as follows:
Date of
grant
Share price
at grant
£
Exercise
price
£
Expected
life
(2)
years
Expected
volatility
(3)
%
Dividend
yield
%
Risk free
rate
%
Fair
value
(4)
£
Kingfisher Incentive Share Scheme
(1)
12/04/11 2.60 – 7.0 – – – 2.60
06/05/11 2.80 – 7.0 – – – 2.80
25/04/12 2.96 – 7.0 – – – 2.96
11/04/13 2.97 – 7.0 – – – 2.97
Performance Share Plan 05/05/10 2.33 – 7.0 – – – 2.33
05/05/10 2.33 – 7.0 46.7% – 1.5% 1.30
21/10/10 2.47 – 7.0 – – – 2.47
12/04/11 2.60 – 7.0 – – – 2.60
17/06/11 2.65 – 7.0 – – – 2.65
21/10/11 2.63 – 7.0 – – – 2.63
03/05/12 2.91 – 7.0 – – – 2.91
16/10/12 2.81 – 7.0 – – – 2.81
25/04/13 3.10 – 7.0 – – – 3.10
22/10/13 3.74 – 7.0 – – – 3.74
UK and International 29/10/08 1.09 1.09 5.5 30.8% 4.9% 3.8% 0.10
Sharesave 03/11/09 2.24 1.72 5.5 36.4% 2.4% 2.9% 0.38
28/10/10 2.39 1.87 3.5 44.3% 2.3% 1.1% 0.53
28/10/10 2.39 1.87 5.5 37.3% 2.3% 1.9% 0.39
26/10/11 2.64 1.99 3.5 39.1% 2.9% 0.9% 0.54
26/10/11 2.64 1.99 5.5 37.6% 2.9% 1.4% 0.42
19/10/12 2.85 2.17 3.5 25.9% 3.3% 0.4% 0.45
19/10/12 2.85 2.17 5.5 37.6% 3.3% 0.9% 0.49
22/10/13 3.74 3.15 3.5 23.3% 2.5% 0.9% 0.49
22/10/13 3.74 3.15 5.5 33.6% 2.5% 1.6% 0.59
(1) The Kingfisher Incentive Share Scheme includes the Company Share Option Plan (‘CSOP’) element of the KISS awards. Details of the CSOP element of the award are set
out in the Director’s Remuneration Report.
(2) Expected life is disclosed based on the UK schemes. For the KISS and PSP schemes in the UK, the expiry date is 7 years from the date of grant. Expiry of overseas KISS
schemes and CSOP is 6 months from the date of vesting. Expiry of overseas PSP schemes is 1 year from the date of vesting.
(3) Expected volatility was determined for each individual award, by calculating the historical volatility of the Group’s share price (plus reinvested dividends) immediately prior
to the grant of the award, over the same period as the vesting period of each award, adjusted by expectations of future volatility.
(4) The fair values of UK and International Sharesave awards granted on or before 1 January 2009 have been restated to reflect the 17 January 2008 amendment to IFRS 2
on vesting conditions and cancellations.
31 Cash generated by operations
£ millions 2013/14
2012/13
(Restated)
Operating profit 736 692
Share of post-tax results of joint ventures and associates (8) (20)
Depreciation and amortisation 261 248
Impairment losses 2 8
Loss on disposal of property, plant and equipment, investment property and intangible assets 1 5
Share-based compensation charge 7 9
Increase in inventories (31) (191)
Increase in trade and other receivables (60) (6)
Increase in trade and other payables 118 19
Movement in provisions (29) 14
Movement in post-employment benefits (21) (48)
Cash generated by operations 976 730
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32 Net cash
£ millions 2013/14 2012/13
Cash and cash equivalents 535 398
Bank overdrafts (1) –
Cash and cash equivalents and bank overdrafts 534 398
Bank loans (14) (68)
Medium Term Notes and other fixed term debt (247) (298)
Financing derivatives 27 71
Finance leases (62) (65)
Net cash 238 38
£ millions 2013/14 2012/13
Net cash/(debt) at beginning of year 38 (88)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts 153 (106)
Repayment of bank loans 89 31
Repayment of Medium Term Notes and other fixed term debt 33 162
Receipt on financing derivatives (6) –
Capital element of finance lease rental payments 13 12
Cash flow movement in net cash 282 99
Borrowings acquired (35) –
Exchange differences and other non-cash movements (47) 27
Net cash at end of year 238 38
33 Acquisitions
On 31 May 2013, the Group acquired 100% of the share capital of the Bricostore Romania companies from Group Bresson, a
French retail company. Consideration of £51m comprised £35m cash and a further £16m non-cash element, representing the
obligation to assume a liability of the vendor.
Goodwill of £18m has been recognised on provisional net assets of £33m, representing a strategic premium to strengthen the
Group’s position in Eastern Europe and anticipated synergies that will arise from the acquisition.
£ millions
Provisional fair value amounts recognised of identifiable assets acquired and liabilities assumed
Other intangible assets 1
Property, plant and equipment 60
Inventories 29
Trade and other receivables 22
Cash and cash equivalents 7
Trade and other payables (34)
Current tax liabilities (3)
Deferred tax assets 1
Deferred tax liabilities (4)
Borrowings (35)
Provisions (11)
Total identifiable net assets acquired 33
Goodwill 18
Total consideration 51
The acquisition amounts recorded in the consolidated cash flow statement for the year are:
£ millions
Cash consideration (35)
Cash acquired 7
Purchase of businesses, net of cash acquired (28)
Immediately following the acquisition, Kingfisher settled Bricostore Romania’s borrowings of £35m (included within repayment of
loans in the cash flow statement).
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118
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
118
33 Acquisitions continued
Acquisition related fees of £2m have been charged in the consolidated income statement in the year.
Owing to local conditions, Bricostore Romania prepares its financial statements to 31 December. In the period from 31 May 2013 to
31 December 2013, it contributed sales of £72m and a retail profit of £1m. If the acquisition had occurred at the start of the financial
year, the Group’s sales would have been £11,163m and Group operating profit, after exceptional items, would have been £734m for
the year ended 1 February 2014.
34 Assets held for sale
£ millions 2013/14 2012/13
Assets held for sale 208 –
Assets held for sale include the Group’s investment in Hornbach of £198m, which was subsequently agreed to be sold on
24 March 2014 for approximately £195m (see note 17). It also includes a UK freehold property asset of £10m, which was
subsequently sold on 4 February 2014 for £32m.
The investment in Hornbach is measured based on the 31 January 2014 market price of the shares of Hornbach Holding AG and
Hornbach-Baumarkt AG which are listed on the German Stock Exchange, along with the sale price agreed after the balance sheet
date for the unlisted shares in Hornbach Holding AG.
The fair value of the investment in Hornbach has been determined using a mixture of level 1 and level 2 inputs as defined by the
fair value hierarchy of IFRS 13, ‘Fair value measurement’.
35 Commitments
Operating lease commitments
The Group is a lessee of various retail stores, offices, warehouses and plant and equipment under lease agreements with varying
terms, escalation clauses and renewal rights.
The Group is also a lessor and sub-lessor of space with freehold and leasehold properties respectively. Lease arrangements under
which rental payments are contingent upon sales, other performance or usage are not significant for the Group.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
£ millions 2013/14 2012/13
Less than one year 460 461
One to five years 1,571 1,589
More than five years 2,347 2,637
4,378 4,687
Undiscounted total future minimum rentals receivable under non-cancellable operating leases are as follows:
£ millions 2013/14 2012/13
Less than one year 31 32
One to five years 101 100
More than five years 104 118
236 250
The total of future minimum operating sublease receipts expected to be received is £197m (2012/13: £203m).
Capital commitments
Capital commitments contracted but not provided for by the Group amount to £31m (2012/13: £36m).
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36 Contingent liabilities
The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees,
only £1m (2012/13: £1m) would crystallise due to possible future events not wholly within the Group’s control.
The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are
considered likely to arise on the basis of current information and legal advice.
37 Related party transactions
During the year, the Company and its subsidiaries carried out a number of transactions with related parties in the normal course of
business and on an arm’s length basis. The names of the related parties, the nature of these transactions and their total value are
shown below:
2013/14 2012/13
£ millions
Income/
(expense)
Receivable/
(payable)
Income/
(expense)
Receivable/
(payable)
Transactions with Koçtas¸ Yapi Marketleri Ticaret A.S. in which the Group
holds a 50% interest
Provision of employee services (0.1) – (0.2) (0.1)
Commission and other income 1.2 0.6 0.8 0.4
Transactions with Hornbach Holding A.G. in which the Group holds a 21% interest
Commission and other income 0.3 – 0.9 0.1
Transactions with Crealfi S.A. in which the Group holds a 49% interest
Provision of employee services 0.1 – 0.1 –
Commission and other income 7.1 0.4 4.3 0.3
Transactions with Kingfisher Pension Scheme
Provision of administrative services 0.8 0.1 1.4 0.1
Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists in
force with non-related parties.
The remuneration of key management personnel is given in note 8.
Other transactions with the Kingfisher Pension Scheme are detailed in note 27.
38 Post balance sheet events
Certain assets classified as held for sale were disposed of subsequent to the balance sheet date, refer to note 34 for further detail.
Annual Report and Accounts 2013/14
120
Accounts
Company balance sheet
At 1 February 2014
Annual Report and Accounts 2013/14
120
£ millions Notes 2013/14 2012/13
Fixed assets
Tangible fixed assets 3 – –
Investments 4 7,101 6,978
7,101 6,978
Current assets
Debtors due within one year 5 3,259 3,414
Debtors due after more than one year 5 44 62
Cash at bank and in hand 153 124
3,456 3,600
Current liabilities
Creditors: amounts falling due within one year 6 (5,539) (5,669)
Net current liabilities (2,083) (2,069)
Total assets less current liabilities 5,018 4,909
Non-current liabilities
Creditors: amounts falling due after more than one year 7 (172) (278)
Provisions for liabilities 8 (7) (7)
(179) (285)
Net assets excluding net pension asset 4,839 4,624
Net pension asset 9 – –
Net assets 4,839 4,624
Capital and reserves
Called up share capital 11 373 373
Share premium account 12 2,209 2,204
Other reserves 12 711 711
Profit and loss account 12 1,546 1,336
Equity shareholders’ funds 13 4,839 4,624
The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:
Sir Ian Cheshire
Group Chief Executive
Karen Witts
Group Finance Director
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Notes to the Company financial statements
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1 Principal accounting policies
The financial statements of Kingfisher plc (‘the Company’)
are made up to the nearest Saturday to 31 January each year.
The directors of Kingfisher plc, having made appropriate
enquiries, consider that adequate resources exist for the
Company to continue in operational existence for the foreseeable
future and that, therefore, it is appropriate to adopt the going
concern basis in preparing the financial statements for the year
ended 1 February 2014. Refer to the Directors’ statement of
responsibility on page 71.
The financial statements have been prepared under the historical
cost convention, as modified by the use of valuations for certain
financial instruments, share-based payments and pensions,
and are prepared in accordance with applicable accounting
standards in the United Kingdom and the Companies Act 2006.
The Company’s financial statements are included in the
consolidated financial statements of Kingfisher plc. As permitted
by section 408 of the Companies Act 2006, the profit and loss
account and statement of total recognised gains and losses are
not presented. The Company has taken advantage of the
exemption from preparing a cash flow statement under the terms
of FRS 1, ‘Cash flow statements’. The Company is exempt under
the terms of FRS 8, ‘Related party disclosures’, from disclosing
related party transactions with wholly owned subsidiaries of
Kingfisher plc. The Company has taken advantage of the
exemption to provide financial instrument disclosures under
the terms of FRS 29, ‘Financial instruments: Disclosures’.
The principal accounting policies applied in the preparation
of these financial statements are set out below. These policies
have been consistently applied to the years presented, unless
otherwise stated.
a. Foreign currencies
Monetary assets and liabilities denominated in foreign currencies
are translated into Sterling at the rates of exchange at the
balance sheet date. Exchange differences on monetary items
are taken to the profit and loss account.
Principal rate of exchange against Sterling:
Euro 2013/14 2012/13
Year end rate 1.22 1.15
b. Tangible fixed assets
Tangible fixed assets are carried in the balance sheet at
cost less accumulated depreciation and any provisions for
impairment. Depreciation is provided to reflect a straight line
reduction from cost to estimated residual value over the
estimated useful life of the asset as follows:
Fixtures and fittings – between 4 and 20 years
Computers and electronic equipment – between 3 and 5 years
Motor cars – 4 years
Tangible fixed assets are reviewed for impairment if events or
changes in circumstances indicate that the carrying amount
may not be recoverable. When a review for impairment is
conducted, the recoverable amount is assessed by reference
to the higher of value-in-use and net realisable value. Any
impairment in value is charged to the profit and loss account
in the period in which it occurs.
c. Investments
Investments in subsidiaries and associates are included in the
balance sheet at cost, less any provisions for impairment.
d. Operating leases
Rentals under operating leases are charged to the profit
and loss account in the period to which the payments relate.
Incentives received or paid to enter into lease agreements are
released to the profit and loss account on a straight line basis
over the lease term or, if shorter, the period to the date on
which the rent is first expected to be adjusted to the prevailing
market rate.
e. Employee benefits
(i) Pensions
The Company operates defined benefit and defined contribution
pension schemes for its employees. A defined benefit scheme
is a pension scheme that defines an amount of pension
benefit that an employee will receive on retirement. A defined
contribution scheme is a pension scheme under which the
Company usually pays fixed contributions into a separate entity.
In all cases a separate fund is being accumulated to meet the
accruing liabilities. The assets of each of these funds are either
held under trusts or managed by insurance companies and
are entirely separate from the Company’s assets.
The asset or liability recognised in the balance sheet in respect
of defined benefit pension schemes is the fair value of scheme
assets less the present value of the defined benefit obligation at
the balance sheet date, together with an adjustment for any past
service costs not yet recognised. The defined benefit obligation is
calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high quality corporate
bonds which are denominated in the currency in which the
benefits will be paid and which have terms to maturity
approximating to the terms of the related pension liability.
A net pension asset is only recognised to the extent that it is
recoverable either through reduced future contributions or
through agreed refunds from the scheme.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are credited or charged
directly to the profit and loss reserve as they arise.
Past service costs are recognised immediately in the profit
and loss account, unless the changes to the pension scheme
are conditional on the employees remaining in service for a
specified period of time (the vesting period). In this case, the
past service costs are amortised on a straight line basis over the
vesting period.
For defined contribution schemes, the Company has no further
payment obligations once the contributions have been paid.
The contributions are recognised as an employee benefit
expense when they are due.
(ii) Share-based compensation
The Group operates several equity-settled, share-based
compensation schemes for the employees of the Company
and its subsidiaries using the Company’s equity instruments.
Annual Report and Accounts 2013/14
122
Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
122
1 Principal accounting policies continued
The fair value of the Company’s employees’ services received
in exchange for the grant of options or deferred shares is
recognised as an expense and is calculated using Black-Scholes
and stochastic models. The total amount to be expensed over
the vesting period is determined by reference to the fair value of
the options or deferred shares granted, excluding the impact of
any non-market vesting conditions. The value of the charge is
adjusted to reflect expected and actual levels of options vesting
due to non-market vesting conditions.
The fair value of the compensation given to subsidiaries in
respect of share-based compensation schemes is recognised
as a capital contribution over the vesting period. The capital
contribution is reduced by any payments received from
subsidiaries in respect of these schemes.
(iii) Employee Share Ownership Plan Trust (‘ESOP’)
The ESOP is a separately administered discretionary trust.
Liabilities of the ESOP are guaranteed by the Company and the
assets of the ESOP mainly comprise shares in the Company.
Own shares held by the ESOP are deducted from equity
shareholders’ funds and the shares are held at historical cost
until they are sold. The assets, liabilities, income and costs
of the ESOP are included in both the Company’s and the
consolidated financial statements.
f. Deferred tax
Provision is made for deferred tax using the incremental
provision approach and is measured on an undiscounted
basis at the tax rates that are expected to apply in the periods
in which timing differences reverse, based on tax rates and
laws substantively enacted at the balance sheet date.
Deferred tax is recognised in respect of timing differences
that have originated but not reversed by the balance sheet
date subject to the following:
• deferred tax is not recognised on the revaluation of non-
monetary assets such as property unless a binding sale
agreement exists at the balance sheet date. Where rollover
relief is available on an asset, deferred tax is not recognised;
• deferred tax is recognised on unremitted earnings of overseas
subsidiaries and associates only where dividends are accrued
as receivable or there is an intention to remit these in the
foreseeable future;
• deferred tax assets are recognised to the extent that they are
regarded as recoverable. Assets are regarded as recoverable
when it is regarded as more likely than not that there will be
suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted; and
• deferred tax is not recognised on permanent differences.
g. Provisions
Provisions are recognised when the Company has a present
legal or constructive obligation as a result of past events, it
is more likely than not that an outflow of resources will be
required to settle the obligation and the amount can be
reliably estimated. Provisions are not recognised for future
operating losses.
h. Financial instruments
Financial assets and financial liabilities are recognised on the
Company’s balance sheet when the Company becomes a party
to the contractual provisions of the instrument. Financial assets
are derecognised when the contractual rights to the cash flows
from the financial asset expire or the Company has substantially
transferred the risks and rewards of ownership. Financial
liabilities (or a part of a financial liability) are derecognised
when the obligation specified in the contract is discharged
or cancelled or expires.
(i) Borrowings
Interest bearing borrowings are recorded at the proceeds
received, net of direct issue costs and subsequently measured at
amortised cost. Where borrowings are in designated and effective
fair value hedge relationships, adjustments are made to their
carrying amounts to reflect the hedged risks. Finance charges,
including premiums payable on settlement or redemption and
direct issue costs, are amortised to the profit and loss account
using the effective interest method.
(ii) Trade creditors
Trade creditors are initially recognised at fair value and are
subsequently measured at amortised cost.
(iii) Derivatives and hedge accounting
Where hedge accounting is not applied, or to the extent to which
it is not effective, changes in the fair value of derivatives are
recognised in the profit and loss account as they arise.
Derivatives are initially recorded at fair value on the date a
derivative contract is entered into and subsequently carried at
fair value. The accounting treatment of derivatives classified as
hedges depends on their designation, which occurs at the start
of the hedge relationship. The Company designates certain
derivatives as a hedge of the fair value of an asset or liability
(‘fair value hedge’).
For an effective hedge of an exposure to changes in fair value,
the hedged item is adjusted for changes in fair value attributable
to the risk being hedged with the corresponding entry being
recorded in the profit and loss account. Gains or losses from
remeasuring the corresponding hedging instrument are also
recognised in the profit and loss account.
In order to qualify for hedge accounting, the Company
documents in advance the relationship between the item
being hedged and the hedging instrument. The Company
also documents and demonstrates an assessment of the
relationship between the hedged item and the hedging
instrument, which shows that the hedge has been and will be
highly effective on an ongoing basis. The effectiveness testing
is re-performed at each period end to ensure that the hedge
remains highly effective.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting.
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of
host contracts, and the host contracts are not carried at fair
value with unrealised gains or losses reported in the profit
and loss account.
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2 Profit and loss account disclosures
The audit fee for the Company and the consolidated financial statements is disclosed in note 7 of the Kingfisher plc consolidated
financial statements. Fees payable to Deloitte LLP and their associates for audit and non-audit services to the Company are not
required to be disclosed because the Group financial statements disclose such fees on a consolidated basis. Details of the Company’s
policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than another supplier and how
the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report on page 44.
Dividend disclosures are provided in note 11 of the Kingfisher plc consolidated financial statements.
£ millions 2013/14 2012/13
Wages and salaries 20 21
Social security costs 3 3
Pensions
Defined contribution 2 2
Defined benefit (service cost only) – 1
Share-based compensation 1 7
Employee benefit expenses 26 34
Number 2013/14 2012/13
Average number of persons employed
Administration 157 172
Directors’ remuneration and details of share option exercises are disclosed in the Directors’ remuneration report on pages 47 to 68.
Total Directors’ remuneration for the year is £6m (2012/13: £4.6m).
3 Tangible fixed assets
£ millions
Fixtures,
fittings and
equipment
Cost
At 3 February 2013 4
At 1 February 2014 4
Depreciation
At 3 February 2013 (4)
At 1 February 2014 (4)
Net carrying amount
At 2 February 2013 –
At 1 February 2014 –
Annual Report and Accounts 2013/14
124
Accounts
Notes to the Company financial statements continued
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124
4 Investments
£ millions
Investments
in Group
undertakings
At 3 February 2013 6,978
Additions 135
Capital contributions given relating to share-based payments 10
Contributions received relating to share-based payments (22)
At 1 February 2014 7,101
Additions to investments in Group undertakings represent £135m (2012/13: £nil) of capital injections into a subsidiary undertaking
as part of Group restructuring activities undertaken.
The Directors consider that to give the full particulars of all subsidiary undertakings would lead to a statement of excessive length.
In accordance with Section 410(2)(a) of the Companies Act 2006, the information below relates to those Group undertakings at the
financial year end whose results or financial position, in the opinion of the Directors, principally affect the figures of the consolidated
financial statements of Kingfisher plc. Details of all subsidiary undertakings will be annexed to the next Annual Return of Kingfisher
plc to be filed at Companies House.
Country of
incorporation and
operation
% interest held and
voting rights
Class of
share owned Main activity
B&Q plc Great Britain 100%
Ordinary &
special
(1)
Retailing
B&Q Properties Limited Great Britain 100% Ordinary Property investment
Halcyon Finance Ltd
(2)
Great Britain 100% Ordinary Finance
Kingfisher Information Technology Services (UK) Limited
(2)
Great Britain 100% Ordinary IT services
Screwfix Direct Limited Great Britain 100% Ordinary Retailing
Sheldon Holdings Limited
(2)
Great Britain 100% Ordinary Holding company
Zeus Land Investments Limited Great Britain 100% Ordinary Holding company
B&Q Ireland Limited Ireland 100% Ordinary Retailing
Brico Dépôt S.A.S.
(3)
France 100% Ordinary Retailing
Castorama Dubois Investissements S.C.A.
(3),(4)
France 100% Ordinary Holding company
Castorama France S.A.S.
(3)
France 100% Ordinary Retailing
Eurodépôt Immobilier S.A.S.
(3)
France 100% Ordinary Property investment
Immobilière Castorama S.A.S.
(3)
France 100% Ordinary Property investment
Kingfisher France S.A.S.
(3)
France 100% Ordinary Holding company
B&Q Asia Holdings Ltd
(5)
Hong Kong 100% Ordinary Holding company
Kingfisher Asia Limited Hong Kong 100% Ordinary Sourcing
B&Q (China) B.V.
(5)
Netherlands 100% Ordinary Holding company
Castim Sp.z.o.o.
(3)
Poland 100% Ordinary Property investment
Castorama Polska Sp.z.o.o.
(3)
Poland 100% Ordinary Retailing
Castorama RUS LLC
(6)
Russia 100% Ordinary Retailing
Bricostore Romania S.A.
(6)
Romania 100% Ordinary Retailing
Euro Dépôt España S.A.U.
(3)
Spain 100% Ordinary Retailing
(1) The special shares in B&Q plc are owned 100% by Kingfisher plc and are non-voting.
(2) Held directly by Kingfisher plc.
(3) Owing to local conditions, these companies prepare their financial statements to 31 January.
(4) Castorama Dubois Investissements S.C.A. is 100% owned, of which 46% is held directly by Kingfisher plc.
(5) Holding companies for the Group’s Chinese retailing operations, which have a 31 December year end.
(6) Owing to local conditions, this company prepares its financial statements to 31 December.
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5 Debtors
£ millions 2013/14 2012/13
Amounts falling due within one year
Owed by Group undertakings 3,178 3,314
Corporation tax 76 71
Derivatives 3 28
Other debtors 2 1
3,259 3,414
Amounts falling due after more than one year
Derivatives 40 55
Deferred tax assets 4 7
44 62
6 Creditors: amounts falling due within one year
£ millions 2013/14 2012/13
Medium Term Notes and other fixed term debt 75 32
Derivatives 14 1
Owed to Group undertakings 5,413 5,600
Other taxation and social security 1 1
Accruals and other payables 36 35
5,539 5,669
7 Creditors: amounts falling due after more than one year
£ millions 2013/14 2012/13
Borrowings
Medium Term Notes and other fixed term debt 172 266
172 266
Derivatives – 12
172 278
Borrowings fall due for repayment as follows:
One to two years – 78
Two to five years 172 49
More than five years – 139
172 266
8 Provisions for liabilities
£ millions
Onerous
property
contracts
At 3 February 2013 7
Charge to income statement 1
Utilised in the year (1)
At 1 February 2014 7
Within the onerous property contracts provision, the Company has provided against future liabilities for all properties sublet at a
shortfall and long-term idle properties. The provision is based on the present value of future cash outflows relating to rent, rates
and service charges.
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
126
9 Net pension asset
The Company participates in both a funded defined benefit scheme and a funded defined contribution scheme.
Defined contribution scheme
Pension costs for the defined contribution scheme, at rates specified in the scheme’s rules, are as follows:
£ millions 2013/14 2012/13
Charge to operating profit 2 2
From July 2012 an enhanced defined contribution scheme has been offered to all Company employees. Eligible Company
employees have been automatically enrolled into the defined contribution scheme from 31 March 2013.
Defined benefit scheme
Kingfisher plc is one of a number of Group companies that participate in the Kingfisher Pension Scheme, and therefore the
Company has accounted for its share of the scheme assets and liabilities. The valuation of the scheme has been based on the
most recent actuarial valuation as at 31 March 2013 and has been updated to 1 February 2014.
In the prior year the UK final salary pension scheme was closed to future benefit accrual with effect from July 2012. The closure to
future accrual resulted in an exceptional non-cash curtailment gain of £1m, representing the one-off reduction in accounting liabilities
as benefits are no longer linked to future salary increases other than in line with inflation. Furthermore, it resulted in a full provision
against the net surplus being recognised at the curtailment date. This exceptional non-cash asset restriction loss of £6m reflected the
requirements under UK accounting standards, which restrict the amount of surplus that can be recognised following the closure to
future accrual of benefits.
In 2010/11 and 2011/12 the Company entered into two phases of a property partnership arrangement with the scheme Trustee
to address an element of the scheme deficit. Further details on this arrangement are given in note 27 of the consolidated financial
statements. The reported pension position, before provision for asset restriction, reflects the Company’s share of the resulting
scheme asset.
Profit and loss account
£ millions 2013/14 2012/13
Amounts charged/(credited) to operating profit
Current service cost – 1
Curtailment gain – (1)
Asset restriction loss – 6
– 6
Amounts charged/(credited) to net finance costs
Interest on defined benefit obligation 3 3
Expected return on pension scheme assets (3) (3)
– –
Total charged to profit and loss account – 6
Balance sheet
£ millions 2013/14 2012/13
Present value of defined benefit obligation (63) (59)
Fair value of scheme assets 68 67
Net pension asset before provision for asset restriction 5 8
Provision for asset restriction (5) (8)
Net pension asset – –
Movements in the net pension asset are as follows:
£ millions
Defined
benefit
obligation
Scheme
assets Total
Provision for
asset
restriction Net
At 3 February 2013 (59) 67 8 (8) –
Interest on defined benefit obligation (3) – (3) – (3)
Expected return on pension scheme assets – 3 3 – 3
Actuarial (losses)/gains (3) (1) (4) 3 (1)
Contributions paid by employer – 1 1 – 1
Benefits paid 2 (2) – – –
At 1 February 2014 (63) 68 5 (5) –
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9 Net pension asset continued
£ millions
Defined benefit
obligation
Scheme
assets Total
Provision
for asset
restriction Net
At 29 January 2012 (55) 62 7 – 7
Current service cost (1) – (1) – (1)
Curtailment gain 1 – 1 – 1
Asset restriction loss – – – (6) (6)
Interest on defined benefit obligation (3) – (3) – (3)
Expected return on pension scheme assets – 3 3 – 3
Actuarial (losses)/gains (3) 3 – (2) (2)
Contributions paid by employer – 1 1 – 1
Benefits paid 2 (2) – – –
At 2 February 2013 (59) 67 8 (8) –
The fair value of scheme assets is analysed as follows:
2013/14 2012/13
£ millions % of total £ millions % of total
Equities 15 22% 16 24%
Bonds 41 61% 40 60%
Property 1 1% 2 3%
Other 11 16% 9 13%
Total fair value of scheme assets 68 100% 67 100%
The actual return on pension scheme assets is as follows:
£ millions 2013/14 2012/13
Actual return on pension scheme assets 2 6
The estimated amount of contributions expected to be paid to the pension scheme by the Company during the next financial year
is £1m.
Amounts for current and previous four years
£ millions 2013/14 2012/13 2011/12 2010/11 2009/10
Present value of defined benefit obligation (63) (59) (55) (45) (49)
Fair value of scheme assets 68 67 62 47 44
Net pension asset/(liability) before provision for asset restriction 5 8 7 2 (5)
Provision for asset restriction (5) (8) – – –
Net pension asset/(liability) – – 7 2 (5)
Changes in assumptions underlying present value of defined benefit obligation – (3) (8) 2 (6)
Percentage of defined benefit obligation
– 5%
15% (4%) 12%
Experience (losses)/gains arising on defined benefit obligations (3) – – 2 –
Percentage of defined benefit obligation
5% – –
(4%)
–
Actual return less expected return on pension scheme assets (1) 3 9 – 1
Percentage of scheme assets
(1%) 4%
15% – 2%
Provision for asset restriction – movement recognised in the profit and loss reserve 3 (2) – – –
Total (losses)/gains recognised in the profit and loss reserve in the year (1) (2) 1 4 (5)
Cumulative losses recognised in the profit and loss reserve (16) (15)
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
128
9 Net pension asset continued
Principal actuarial valuation assumptions
The assumptions used in calculating the costs and obligation of the defined benefit pension scheme are set by the Directors after
consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and
changes in these assumptions can lead to significant movements in the estimated obligation.
The discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference
in term between iBoxx and scheme liabilities. The overall expected rate of return on scheme assets reflects market expectations at
the valuation date of long-term asset returns and the mix of assets in the scheme.
Annual % rate 2013/14 2012/13
Discount rate 4.4 4.6
Price inflation 3.3 3.3
Rate of pension increases 3.1 3.3
% rate of return 2013/14 2012/13
Equities 7.2 7.6
Bonds 3.7 3.5
Property 6.5 5.9
Other 4.5 4.7
Overall expected rate of return 4.7 4.7
The mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics and experience
of the membership of the scheme from 2010 to 2013. The base mortality assumptions have been derived by adjusting standard
mortality tables (SAPS tables) projected forward to 2013 using the ‘CMI 2013’ core projection improvement factors, as published
by the UK actuarial profession. In addition, allowance has been made for future increases in life expectancy. The allowance is in
line with CMI 2013 improvements subject to a long-term rate of 1.25% pa for males and 1.0% pa for females. These improvements
take into account trends observed within the scheme over the past decade and general population trends.
The assumptions for life expectancy of the scheme members are as follows:
Years 2013/14 2012/13
2010
funding
valuation
Age to which current pensioners are expected to live (60 now)
– Male 86.7 86.7 86.4
– Female 87.3 87.4 87.1
Age to which future pensioners are expected to live (60 in 15 years’ time)
– Male 87.4 87.4 87.1
– Female 88.6 89.0 88.7
10 Commitments
Operating lease commitments
The Company is a lessee of offices under lease agreements with varying terms, escalation clauses and renewal rights.
Annual commitments under non-cancellable operating leases are as follows:
£ millions 2013/14 2012/13
Less than one year – –
One to five years – –
More than five years 3 3
3 3
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11 Called up share capital
Number of
ordinary
shares
millions
Ordinary
share
capital
£ millions
At 3 February 2013 2,372 373
New shares issued under share schemes 4 –
At 1 February 2014 2,376 373
At 29 January 2012 2,369 372
New shares issued under share schemes 3 1
At 2 February 2013 2,372 373
Ordinary shares have a par value of 15
5
/7 pence per share.
12 Reserves
£ millions
Share
premium
account
Other
reserves
Profit and
loss account Total
At 3 February 2013 2,204 711 1,336 4,251
Profit for the year – – 440 440
Actuarial losses on defined benefit pension scheme – – (1) (1)
Share-based compensation – – 1 1
Capital contributions given relating to share-based payments – – 10 10
New shares issued under share schemes 5 – – 5
Own shares issued under share schemes – – 8 8
Own shares purchased – – (24) (24)
Dividends – – (224) (224)
At 1 February 2014 2,209 711 1,546 4,466
The other reserves represent the premium on the issue of convertible loan stock in 1993 and the merger reserve relating to the
acquisition of Darty.
The value of own shares deducted from the profit and loss reserve at 1 February 2014 is £35m (2012/13: £60m).
13 Reconciliation of movement in equity shareholders’ funds
£ millions 2013/14 2012/13
Profit for the year 440 8
Dividends (224) (221)
216 (213)
Actuarial losses on defined benefit pension scheme (1) (2)
Share-based compensation 1 7
Capital contributions given relating to share-based payments 10 71
New shares issued under share schemes 5 6
Own shares issued under share schemes 8 6
Own shares purchased (24) –
Net increase/(decrease) in equity shareholders’ funds 215 (125)
Equity shareholders’ funds at beginning of year 4,624 4,749
Equity shareholders’ funds at end of year 4,839 4,624
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
130
14 Share options
The Company operates a number of share incentive plans including the Kingfisher Incentive Share Scheme (‘KISS’), Kingfisher
Retention Share Scheme, Kingfisher Performance Share Plan, Store Management Incentive Share Scheme and Sharesave plans
in the UK, Ireland and overseas.
A summary of options is detailed below.
2013/14 2012/13
Options
Number
Weighted
average
exercise
price
£
Options
Number
Weighted
average
exercise
price
£
Outstanding at beginning of year 21,815,585 0.04
30,966,831 0.08
Granted during the year
(1),(2)
1,213,771 0.18
3,013,615 0.09
Forfeited during the year (4,061,019) 0.05
(1,988,084) 0.11
Exercised during the year (6,368,940) 0.02
(10,176,777) 0.15
Outstanding at end of year 12,599,397 0.07
21,815,585 0.04
Exercisable at end of year 1,581,128 0.02
4,756,463 0.02
(1) The charge to the profit and loss account for the years ended 1 February 2014 and 2 February 2013 in respect of share-based payments includes the first year’s charge
of the 2014 and 2013 Kingfisher Incentive Share Scheme.
(2) The weighted average exercise price for options granted during the year represents a blend of nil price KISS, Performance Share Plan and discounted Sharesave options.
Options have been exercised on a regular basis throughout the year. On that basis, the weighted average share price during the
year, rather than at the date of exercise, is £3.53 (2012/13: £2.81). The options outstanding at the end of the year have exercise
prices ranging from nil to £3.15 and a weighted average remaining contractual life of 3.9 years (2012/13: 4.3 years).
A full list of outstanding options granted by the Company to the Group employees, which includes those held by the Executive
Directors, is shown below. The Executive Directors’ awards are disclosed in the Directors’ Remuneration Report on pages 47 to 68.
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14 Share options continued
2013/14 2012/13
Date of grant
Exercisable
from
Exercise
price
£
Shares under
option
number
Shares under
option
number
Kingfisher Incentive Share Scheme 21/04/09 21/04/12 – 61,967 207,009
06/04/10 06/04/13 – 281,952 2,198,684
05/05/10 05/05/13 – 22,305 5,126,662
12/04/11 12/04/14 – 3,355,824 3,763,341
06/05/11 06/05/14 – 492,244 646,141
25/04/12 25/04/15 – 3,865,650 4,388,519
11/04/13 11/04/16 – 1,863,737 –
9,943,679 16,330,356
Restricted Awards (granted under the Kingfisher Incentive Share Scheme) 06/04/10 21/04/11 – – 42,190
06/04/10 21/04/12 – – 65,835
06/04/10 21/04/13 – – 19,762
24/08/10 24/08/13 – – 23,095
18/01/11 09/06/13 – – 6,815
21/02/11 01/06/12 – – 12,533
21/02/11 01/06/13 – – 21,268
21/02/11 01/06/14 – 4,557 4,557
21/02/11 01/06/15 – 1,709 1,709
26/04/11 21/04/12 – – 25,569
03/01/12 21/05/13 – – 6,344
03/01/12 31/05/14 – 10,300 10,300
16/10/12 16/01/14 – 5,975 5,975
22/10/13 22/10/14 – 32,834 –
55,375 245,952
Kingfisher Performance Share Plan 01/02/08 01/02/12 – – 1,299,709
21/04/08 21/04/12 – 106,417 867,504
01/10/08 01/10/11 – 89,652 745,856
01/10/08 01/02/12 – 760,642 745,856
01/10/08 01/10/12 – – 303,212
21/04/09 21/04/12 – 76,490 412,486
30/10/09 21/04/12 – 2,579 2,509
05/05/10 05/05/13 – 313,741 8,240,710
21/10/10 21/04/12 – 12,944 28,586
21/10/10 05/05/13 – 42,456 72,128
12/04/11 05/05/13 – – 164,945
17/06/11 17/06/14 – 7,061,836 8,264,108
17/06/11 17/06/15 – 6,927,122 8,242,011
21/10/11 05/05/13 – – 22,095
21/10/11 17/06/14 – 103,016 142,346
21/10/11 17/06/15 – 103,021 142,351
03/05/12 17/06/14 – 360,056 424,398
03/05/12 17/06/15 – 380,601 424,407
16/10/12 17/06/14 – 526,995 583,611
16/10/12 17/06/15 – 527,002 583,619
25/04/13 17/06/14 – 65,820 –
25/04/13 17/06/15 – 65,264 –
22/10/13 22/10/16 – 105,069 –
17,630,723 31,712,447
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
132
14 Share options continued
2013/14 2012/13
Date of grant
Exercisable
from
Exercise
price
£
Shares under
option
number
Shares under
option
number
Kingfisher Retention Share Scheme 21/04/08 21/04/12 – – 145,000
– 145,000
Store Management Incentive Share Scheme 21/04/09 21/04/12 – 88,000 231,000
88,000 231,000
UK, Ireland and International Sharesave 01/11/07 01/12/12 1.55 – 139,052
29/10/08 01/12/13 1.09 631,044 3,116,385
03/11/09 01/12/12 1.72 – 371,226
03/11/09 01/12/14 1.72 1,009,170 1,087,075
28/10/10 01/12/13 1.87 235,571 1,285,330
28/10/10 01/12/15 1.87 536,050 599,082
26/10/11 01/12/14 1.99 2,475,062 2,862,161
26/10/11 01/12/16 1.99 471,008 530,998
19/10/12 01/12/15 2.17 1,978,663 2,275,239
19/10/12 01/12/17 2.17 419,519 467,618
22/10/13 01/12/16 3.15 2,067,578 –
22/10/13 01/12/18 3.15 582,182 –
10,405,847 12,734,166
Executive, International Executive
and Phantom Share Option Schemes
17/04/03 17/04/06 2.38 – 436,215
17/04/03 17/04/07 2.38 – 331,890
– 768,105
Total 38,123,624 62,167,026
The Kingfisher Incentive Share Scheme (‘KISS’) and Performance Share Plan are described as part of the Directors’ Remuneration
Report on pages 47 to 68.
Restricted Awards are granted as one-off compensatory awards granted under the rules of the KISS. They are granted as nil
cost options, as with the KISS, but do not accrue dividends until after they are exercised. Vesting dates may vary according to
individual grants.
Certain employees, excluding directors, have been granted contingent share awards under the Kingfisher Retention Share Scheme.
The last awards granted under this scheme vested in 2012. These awards do not accrue dividends during the vesting period.
The Store Management Incentive Share Scheme provided awards to store managers in 2009 with vesting dates of April 2011 and
April 2012. There were performance conditions based on store standards and awards lapsed if not maintained throughout the
performance period. These awards do not accrue dividends during the vesting period.
Under the UK Sharesave scheme, eligible UK employees have been invited to enter into HMRC approved savings contracts for a
period of three or five years, whereby shares may be acquired with savings under the contract. The option price is the average market
price over three days shortly before the invitation to subscribe, discounted by 20%. Options are exercisable within a six month period
from the conclusion of a three or five year period. The Irish and International Sharesave plans, which operate along similar lines to the
UK Sharesave scheme, include eligible employees in Ireland and certain overseas locations.
The last grant of options under the Executive, International Executive and Phantom Share Option Scheme were in April 2003. Under
these schemes, participants received a bi-annual grant of options based on their position in the Group. These options are normally
exercisable from the third anniversary of the date of the grant (up to the tenth anniversary), except where the performance conditions
have not been met. The performance conditions for all options have now been met. On the exercise of Phantom Share Options,
participants receive in cash the increase in value of the allocated number of shares in the Company. All options granted under these
schemes have either now been exercised or have lapsed.
The rules of all schemes include provision for the early exercise of options in certain circumstances.
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14 Share options continued
The Employee Share Ownership Plan Trust (‘ESOP Trust’)
The ESOP Trust is funded by an interest free loan from the Company of £82m (2012/13: £95m) to enable it to acquire shares
in Kingfisher plc. The shares are used to satisfy options awarded under the KISS, Performance Share Plan, Kingfisher Retention
Share Scheme and Store Management Incentive Share Scheme.
The ESOP Trust’s shareholding at 1 February 2014 is 10 million shares (2012/13: 21 million shares) with a nominal value of
£2m (2012/13: £3m) and a market value of £37m (2012/13: £57m). Dividends on these shares were waived for the interim and
final dividends.
15 Related party transactions
During the year, the Company carried out a number of transactions with related parties in the normal course of business and on
an arm’s length basis. The names of the related parties, the nature of these transactions and their total value are shown below:
2013/14 2012/13
£ millions
Income/
(expense)
Receivable/
(payable)
Income/
(expense)
Receivable/
(payable)
Transactions with Koçtas¸ Yapi Marketleri Ticaret A.S. in which the Group holds
a 50% interest
Provision of employee services (0.1) – (0.1) –
Commission and other income 0.6 0.4 0.3 0.2
Transactions with Kingfisher Pension Scheme
Provision of administrative services 0.8 0.1 1.4 0.1
Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists
in force with non-related parties.
Directors’ remuneration and details of share option exercises are disclosed in the Directors’ Remuneration Report on pages 47 to 68.
Other transactions with the Kingfisher Pension Scheme are detailed in note 9.
Annual Report and Accounts 2013/14
134
Accounts
Group five year financial summary
Annual Report and Accounts 2013/14
134
£ millions
2009/10
52 weeks
2010/11
52 weeks
2011/12
52 weeks
2012/13
53 weeks
(1)(2)
2013/14
52 weeks
(1)
Income statement
Sales 10,503 10,450 10,831 10,573 11,125
Retail profit 664 762 882 778 805
Central costs (41) (41) (43) (42) (42)
Share of interest and tax of joint ventures and associates (17) (17) (20) (18) (17)
Operating profit before exceptional items 606 704 819 718 746
Net finance costs before financing fair value remeasurements and
exceptional items (59) (34) (12) (3) (2)
Adjusted pre-tax profit 547 670 807 715 744
Exceptional items 17 (6) (12) (26) 17
Financing fair value remeasurements 2 7 2 2 (2)
Profit before taxation 566 671 797 691 759
Income tax expense (181) (180) (158) (127) (49)
Profit for the year 385 491 639 564 710
Balance sheet
Goodwill and other intangible assets 2,465 2,481 2,520 2,565 2,639
Property, plant and equipment and investment property 3,636 3,664 3,722 3,814 3,675
Assets held for sale – – – – 208
Investments in joint ventures and associates 234 259 271 289 32
Other net current liabilities
(3)
(648) (576) (290) (128) (19)
Post-employment benefits (198) (58) (15) – (100)
Other net non-current liabilities
(3)
(284) (324) (393) (422) (356)
Capital employed 5,205 5,446 5,815 6,118 6,079
Equity shareholders’ funds 4,945 5,452 5,719 6,148 6,308
Non-controlling interests 10 8 8 8 9
Net debt/(cash) 250 (14) 88 (38) (238)
Capital employed 5,205 5,446 5,815 6,118 6,079
Other financial data
Like-for-like sales growth (1.5%) (0.9%) 1.3% (2.9%) 0.7%
Effective tax rate 30% 29% 28% 27% 26%
Basic earnings per share (pence) 16.5 21.0 27.5 24.1 30.0
Adjusted basic earnings per share (pence) 16.4 20.5 25.1 22.3 23.4
Dividend per share (pence) 5.5 7.07 8.84 9.46 9.9
Gross capital expenditure
(4)
256 310 450 316 304
Number of stores 831 856 955 1,025 1,124
(1) Like-for-like sales growth in 2012/13 was calculated by comparing 53 weeks against the equivalent 53 weeks of the prior year. Like-for-like sales growth in 2013/14
is calculated by comparing 52 weeks against the equivalent 52 weeks of the prior year. This only impacts the UK & Ireland businesses with all of the other businesses
reporting on a calendar basis. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional £72m sales and an immaterial
benefit to retail profit.
(2) 2012/13 has been restated for IAS 19 (revised), ‘Employee benefits’, resulting in the reclassification of £3m of pension administration costs from net finance costs to
retail profit.
(3) Other net current liabilities and other net non-current liabilities reported above exclude any components of net debt/(cash).
(4) Excluding business acquisitions.
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Shareholder information
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Annual General Meeting
The Annual General Meeting of Kingfisher plc will be held
on Thursday, 12 June 2014 at 11.00am at the Paddington
London Hilton Hotel, 146 Praed Street, London W2 1EE.
Financial calendar
The proposed financial calendar for 2014/15 is as follows:
First quarter results 29 May 2014
Pre-close first half trading results 24 July 2014
Interim results to 2 August 2014 10 September 2014
Third quarter results 25 November 2014
Preliminary results to 31 January 2015 March 2015
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0870 702 0129
Website:http://www.investorcentre.co.uk
Shareholder enquiries
Any queries that shareholders have regarding their shareholdings,
such as a change of name or address, transfer of shares, lost
share certificates or dividend cheques, should be referred to the
Registrar using the contact details above. A Shareholder Helpline
is available on UK business days between 8.30am and 5.30pm
and contains an automated self-service functionality which is
available 24 hours a day.
Share dealing facilities
Shareholders have the opportunity to buy or sell Kingfisher plc
shares using a share dealing facility operated by the Registrar.
• Telephone share dealing: Commission is 1%, plus £35; stamp
duty at 0.5% is payable on purchases. The service is available
from 8.00am to 4.30pm Monday to Friday excluding bank
holidays. Telephone: 0870 703 0084.
• Internet share dealing: Commission is 1%, subject to a
minimum charge of £30; stamp duty at 0.5% is payable
on purchases. The service is available to place orders out of
market hours. Simply log ontohttp://www.investorcentre.co.uk.
Terms and conditions of both of these services can be
obtained by calling 0870 702 0129.
Unauthorised brokers (boiler room scams)
Kingfisher plc is legally obliged to make its share register
available to the general public. Consequently some shareholders
may receive unsolicited mail, including correspondence from
unauthorised investment companies. We are aware that
some shareholders have received unsolicited phone calls or
correspondence concerning investment matters. These are
typically from overseas based brokers who target UK
shareholders offering to sell what often turn out to be worthless
or high risk shares in US or UK investments. They can be very
persistent and extremely persuasive. Shareholders are advised
to be very wary of any unsolicited advice, offers to buy shares at
a discount or offers of free company reports. Details of any share
dealing facilities that the Company endorses will be included in
Company mailings.
Share price history
£ per ordinary share* Dollars per ADR**
Financial year High Low High Low
2013/14 4.20 2.71 9.34 8.40
2012/13 3.14 2.54 9.98 7.81
2011/12 2.87 2.17 9.34 6.91
2010/11 2.72 1.96 8.16 5.93
2009/10 2.47 1.18 8.24 3.15
* Based on the daily closing price of Kingfisher plc shares on the London
Stock Exchange.
** Based on the daily closing price of Kingfisher plc ADRs in the Over-the-Counter
(OTC) market.
Dividend
The interim dividend for the financial year ended 1 February
2014 of 3.12p per share was paid on 15 November 2013.
The table below provides the payment information for the final
dividend of 6.78p per share, subject to shareholder approval
at the Annual General Meeting on 12 June 2014:
Ex-dividend date 14 May 2014
Record date 16 May 2014
Final date for return of DRIP mandate
forms/currency elections 23 May 2014
Euro exchange rate notification 27 May 2014
Payment date and DRIP purchase 16 June 2014
Payment methods
Shareholders can elect to receive their dividends in a number
of ways:
• Cheque: Dividends will automatically be paid to shareholders
by cheque, which will be sent by post to the shareholder's
registered address;
• BACS: Dividends can be paid by mandate directly to a
UK bank or building society account through the BACS
system. This method of payment reduces the risk of your
cheque being intercepted or lost in the post. Shareholders
wishing to receive their dividends in this way can update
their mandate instructions at www.investorcentre.co.uk or
should complete a dividend mandate form and return it to
the Registrars;
• Dividend Reinvestment Plan (DRIP): The Company also offers
shareholders a DRIP, whereby shareholders can use their
cash dividend to buy additional shares in the Company.
Shareholders can apply online at www.investorcentre.co.uk or
complete a mandate form and return it to the address shown
above; and
• Global Payments Service: This service, provided by the
Registrar enables shareholders to have dividend payments
paid directly into their bank account in their chosen
local currency. To view terms and register, please visit
www.computershare.com/uk/investor/GPS.
Annual Report and Accounts 2013/14
136
Accounts
Shareholder information continued
Annual Report and Accounts 2013/14
136
American Depositary Receipt (ADR)
The Company has a Sponsored Level 1 ADR programme in
the United States. Each ADR represents two Kingfisher shares.
Electronic communication
Shareholders who have not yet elected to receive shareholder
documentation in electronic form can sign up by visiting
www.investorcentre.co.uk/ecomms and registering their details.
When registering for electronic communications, shareholders
will be sent an email each time the Company publishes statutory
documents, providing a link to the information.
Electing for electronic communications does not mean that
shareholders cannot obtain hard copy documents. Should
shareholders require a paper copy of any of the Company’s
shareholder documentation, they should contact the Registrar
at the address stated under the section headed ‘Registrar’.
Corporate website
Shareholders are encouraged to visit Kingfisher’s corporate
website (www.kingfisher.com). The website includes information
about the Company, its strategy and business performance,
latest news and press releases and approach to corporate
governance. The Investor Relations section is a key tool for
shareholders, with information about Kingfisher’s share price,
financial results, shareholders meetings and dividends. This
section also contains frequently asked questions and copies of
the current and past annual reports.
Kingfisher has an Investor Relations app for the iPad. The app
provides access to the latest share price information, corporate
news, financial reports, presentations, corporate videos and
earnings webcasts both online and offline. It is updated with the
latest financial information at the same time as the corporate
website. To discover more, download it free from the App store.
Document viewing
Shareholders will have the opportunity to view certain
documentation as outlined in the Notice of Annual General
Meeting from at least 15 minutes prior to the meeting, until
its conclusion. The rules of the Kingfisher Incentive Share
plans and the Articles of Association of the Company and
other documentation referred to in this Annual Report can be
viewed at the registered office during normal business hours.
Company Secretary and Registered Office
Kathryn Hudson
Kingfisher plc
3 Sheldon Square
Paddington
London W2 6PX
Telephone: +44 (0)20 7372 8008
Fax: +44 (0)20 7644 1001
www.kingfisher.com
Registered in England and Wales
Registered Number 01664812
Forward-looking statements
Certain statements included in this Annual Report and Accounts
are forward-looking and should be considered, amongst other
statutory provisions, in light of the safe harbour provisions of the
United States Private Securities Litigation Reform Act of 1995.
All statements other than historical facts may be forward-looking
statements. Such statements are therefore subject to risks,
assumptions and uncertainties that could cause actual results
to differ materially from those expressed or implied because
they relate to future events. These forward-looking statements
include, but are not limited to, statements relating to the
Company’s expectations around the Company’s programme
known as Creating the Leader and its associated eight steps.
Forward-looking statements can be identified by the use of
relevant terminology including the words: ‘believes’, ‘estimates’,
‘anticipates’, ‘expects’, ‘intends’, ‘plans’, ‘goal’, ‘target’, ‘aim’,
‘may’, ‘will’, ‘would’, ‘could’ or ‘should’ or, in each case, their
negative or other variations or comparable terminology and
include all matters that are not historical facts. They appear in a
number of places throughout this Annual Report and Accounts
and include statements regarding our intentions, beliefs or
current expectations and those of our officers, directors and
employees concerning, amongst other things, our results of
operations, financial condition, changes in tax rates, liquidity,
prospects, growth, strategies and the businesses we operate.
Other factors that could cause actual results to differ materially
from those estimated by the forward-looking statements include,
but are not limited to, global economic business conditions,
monetary and interest rate policies, foreign currency exchange
rates, equity and property prices, the impact of competition,
inflation and deflation, changes to regulations, taxes and
legislation, changes to consumer saving and spending habits;
and our success in managing these factors.
Consequently, our actual future financial condition, performance
and results could differ materially from the plans, goals and
expectations set out in our forward-looking statements. Reliance
should not be placed on any forward-looking statement.
The forward-looking statements contained herein speak
only as of the date of this Annual Report and the Company
undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events
or otherwise.
King?sher is included in two socially responsible indices, the
FTSE4Good and Dow Jones Sustainability Indexes. We also
achieved Business in the Community’s Corporate Responsibility
Index Platinum Big Tick in the 2013 survey.
This document is printed on UPM Fine Offset, a paper
containing virgin ?bre sourced from well-managed,
responsible, FSC
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certi?ed forests.
100% of the inks used are vegetable oil based, 95% of press
chemicals are recycled for further use and, on average 99%
of any waste associated with this production will be recycled.
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Park is an EMAS certi?ed company and its Environmental
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Designed and produced by Black Sun Plc www.blacksunplc.com
Glossary
Adjusted measures are before exceptional items, financing fair
value remeasurements, amortisation of acquisition intangibles,
related tax items and tax on prior year items including the impact
of rate changes on deferred tax. A reconciliation to statutory
amounts is set out in the Financial Review (pages 20 to 27).
Banque de France data includes relocated and extended stores.
Brico Dépôt comparable market is a rolling 12 month average of
Banque de France (60%) and I+C (www.iplusc.com) trade data
(40%) February 2013 – January 2014.
Common means two or more operating companies selling the
same product or a similar product but from the same supplier
where the same product is not possible due to market / legal
reasons (e.g. electrical extension cable which is the same
supplier but with different electrical sockets).
Constant currency 13 week basis In the UK & Ireland Kingfisher
reports each financial year up to the nearest Saturday to 31
January. In 2012/13 this resulted in a 14 week fourth quarter.
Constant currency change 52 week basis In the UK & Ireland
Kingfisher reports each financial year up to the nearest Saturday
to 31 January. In 2012/13 this resulted in a 53 week year.
EBITDA (earnings before interest, tax, depreciation and
amortisation) which is calculated as Retail profit less central
costs and before depreciation and amortisation.
EBITDAR (earnings before interest, tax, depreciation,
amortisation and property operating lease rentals) which is
calculated as Retail profit less central costs, before depreciation
and amortisation and property operating lease rentals.
France consists of Castorama France and Brico Dépôt France.
Free cash flow represents cash generated from operations less
the amount spent on tax, interest and capital expenditure during
the year (excluding acquisitions). A reconciliation from operating
profit (before exceptional items) is set out in the Financial
Review (pages 20 to 27).
FFVR (financing fair value remeasurements) represents
changes in the fair value of financing derivatives, excluding
interest accruals, offset by fair value adjustments to the carrying
value of borrowings and other hedged items under fair value
hedge relationships.
KEP (Kingfisher Economic Profit) represents earnings after a
charge for the annual cost of capital employed in the business.
A definition is provided in the Financial Review (pages 20 to 27).
LFL stands for like-for-like sales growth which represents the
constant currency, year-on-year sales growth for stores that
have been open for more than a year.
LME is the legislative change shortening payment terms in
France, implemented over the three years to 2012.
Market for the UK’s leading home improvement retailers
Kingfisher estimate for the UK RMI (Repairs, Maintenance &
Improvement) market incorporates GfK data, which includes
new space but which excludes B&Q Ireland and private retailers
e.g. IKEA and other smaller independents. It is on a cash sales
basis and is adjusted for discounts.
Net cash comprises borrowings and financing derivatives
(excluding accrued interest), less cash and cash equivalents
and current other investments.
Omnichannel – allowing customers to shop with us in any way
they prefer (via shops, the internet or catalogues).
Other International consists of China, Poland, Romania,
Russia, Spain, Turkey (Koçtas¸ JV) and Hornbach in Germany.
Retail profit is operating profit stated before central costs,
exceptional items, amortisation of acquisition intangibles and
the Group’s share of interest and tax of JVs and associates.
2012/13 Group and UK retail profit comparatives restated by
£3 million to reflect reclassification of pension administrative
expenses from finance costs to retail profit in the UK, as per
the amended IAS 19.
Sales Joint Venture (Koçtas¸ JV) and Associate (Hornbach) sales
are not consolidated.
Smaller tradesman market Kingfisher estimate for the UK
smaller tradesman market is a weighted average incorporating
70% trade (using the most recent public data available for the
big trade merchants as a proxy) and 30% DIY (using the UK
RMI (Repairs, Maintenance & Improvement) GfK large chain
(shed) data).
TradePoint B&Q UK & Ireland’s trade-only offer.
UK & Ireland consists of B&Q in the UK & Ireland and Screwfix.
King?sher plc, 3 Sheldon Square, Paddington, London W2 6PX Telephone: +44 (0)20 7372 8008 www.king?sher.com
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doc_903636781.pdf
In the broadest sense our business
creates value for society in a number
of ways. We help people to have better
homes for themselves and their families
and we have a long heritage of helping
them do this in a more sustainable
way. We operate in the heart of local
communities, supporting local projects,
positively impacting the environment and
importantly providing local employment.
Over 79,000 people work in our
businesses and many more work for
our suppliers. And we contributed
£1.71 billion in 2013/14 to the economies
in which we operate through taxes borneand collected. We aim to do more than
minimise our impact; instead we aspire
to have a positive impact on the world.
We call this approach Net Positive
and we believe this gives us a ‘licence
to operate’ for the long-term.
H
el ping
people have bet ter hom
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Annual Report and Accounts 2013/14
Progress report on our Creating the Leader strategy
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Contents
Strategic Report
01 Key highlights
02 Kingfisher at a glance
04 Chairman’s statement
05 Group Chief Executive’s statement
06 Our business model
08 Our strategy – Creating the Leader &
Key Performance Indicators (KPIs)
18 Sustainability: Becoming Net Positive
20 Financial Review
28 Risks
Governance
32 Board of directors
34 Senior management
35 Corporate governance
47 Directors’ remuneration report
69 Directors’ report
71 Directors’ statement of responsibility
Accounts
72 Independent auditors’ report to the members
of Kingfisher plc
76 Consolidated income statement
77 Consolidated statement of comprehensive income
78 Consolidated statement of changes in equity
79 Consolidated balance sheet
80 Consolidated cash flow statement
81 Notes to the consolidated financial statements
120 Company balance sheet
121 Notes to the Company financial statements
134 Group five year financial summary
135 Shareholder information
IBC Glossary
Our online reporting
Increasing numbers of our shareholders are choosing to receive
their annual report online, which helps us reduce the impact on
the environment through lower paper usage. The online version,
available at www.kingfisher.com, enables you to download the
report to your computer desktop and access supplementary
content, such as video interviews with the Group Chief Executive
and Group Finance Director.
If you have a smartphone or tablet device, use the links
and QR codes in this printed copy to take you to that part
of the online report or Kingfisher’s corporate website.
For the online report homepage go to
http://annualreport.kingfisher.com/2013-14
Kingfisher plc is Europe’s leading home improvement retail group and
the third largest in the world, with over 1,120 stores in nine countries in
Europe and Asia. Its main retail brands are B&Q, Castorama, Brico Dépôt
and Screwfix. Kingfisher also operates the Koçtas¸ brand, a 50% joint
venture, in Turkey with the Koç Group.
www.kingfisher.com
1
Strategic Report Governance Accounts
Strategic Report
Key highlights
www.kingfisher.com
1
* See the Financial Review on pages 20 to 27.
** Excludes Turkey.
† On a sale and leaseback basis with Kingfisher in occupancy.
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23.4p
+4.9%
Adjusted basic earnings
per share* (p)
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£710m
+25.9%
Pro?t for the year (£m)
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£744m
+4.1%
Adjusted pre-tax pro?t* (£m)
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£759m
+9.8%
Pro?t before taxation (£m)
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+4.7%
Full year dividend (p)
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30.0p
+24.5%
Basic earnings per share (p)
Contribution to Group sales (£bn) Contribution to Group retail
pro?t (£m)
Property (at market value
†
) (£bn)
£11.1bn £805m £3.5bn
UK & Ireland
France
Other International**
40%
40%
£4.4bn
£4.4bn
20% £2.3bn
UK & Ireland
France
Other International
30%
49%
£238m
£396m
21% £171m
UK & Ireland
France
Other International**
26%
40%
£0.9bn
£1.4bn
34% £1.2bn
Statutory reporting
Annual Report and Accounts 2013/14
2
Strategic Report
Kingfisher at a glance
Annual Report and Accounts 2013/14
2
Our purpose
Our purpose is to make it easier
for customers to have better
and more sustainable homes.
This approach will unlock more customer demand and grow
our business to the benefit of all our shareholders – Kingfisher
will be a more valuable business for our shareholders and a
better partner for our suppliers; we will provide a more secure,
and brighter, future for our colleagues and a more sustainable
business for our local communities.
Key figures
*
Total sales
£11.1bn
Employees
79,000
* All figures as at 1 February 2014.
Adjusted pre-tax profit
£744m
Stores
1,124
Our brands
B&Q is the largest
home improvement and
garden centre retailer
in the UK and Ireland
offering around
40,000 products for the
homemaker, occasional
to serious DIYers, and
trade professionals. In
China, the business is
adapted to the local
preference for a
‘Do-it-for-Me’, model. It
specialises in the fitting
out and decoration of
new apartments.
With up to 50,000
products under one
roof, Castorama France
is one of the leading
home improvement
retailers in France.
Like B&Q, Castorama
targets retail customers
and DIYers and has an
emphasis on style
and inspiration for
homemakers. In Poland
and Russia there is a
bigger emphasis on
projects, as the home
improvement market
is at an earlier stage of
its development.
In both France and
Spain, Brico Dépôt
is primarily aimed at
serious DIYers and
professional builders.
It operates a low-price
format which offers
customers a choice
of 10,000 products
available in larger
product quantities.
The same format is
now being introduced
into Romania.
Screwfix is the UK’s
largest omnichannel
supplier of trade
tools, accessories
and hardware to trade
professionals and
serious DIY enthusiasts.
In addition to its
catalogue and website,
Screwfix operates stores
across the UK.
Koçtas¸, Kingfisher’s
joint venture in Turkey,
is now the number one
home improvement
retailer in the country.
Its stores are aimed
at mainstream
consumers,
homemakers
and occasional
to serious DIYers.
Kingfisher Group Executive
Kingfisher’s Group Executive team meets monthly and is responsible for the overall strategic decision-making of the Group.
It is supported by the One Team Board, more information about which can be found on page 34.
Sir Ian Cheshire
Group Chief
Executive
Guy Colleau
CEO Kingfisher
Sourcing & Offer
Kevin O’Byrne
CEO B&Q UK
& Ireland
Philippe Tible
CEO Castorama
& Brico Dépôt
brands
Steve Willett
CEO Group
Productivity &
Development
Karen Witts
Group Finance
Director
www.kingfisher.com
3
Strategic Report Governance Accounts
www.kingfisher.com
3
Our operating countries
Kingfisher is Europe’s
largest home improvement
retailer with over 1,120
stores in nine countries.
A snapshot of our businesses and our markets
is set out in the table below.
Our markets
France
Country
Population
(m)*
Households
(m)*
Market
position**
GDP growth
2014 estimated
(%)
§
Market
brand
Store
numbers
Selling space
(‘000s m
2
)
Employees
(full time
equivalent)
France 63 27 2 0.9 105
1,118
11,322
109
608
6,875
UK & Ireland
Country
Population
(m)*
Households
(m)*
Market
position**
GDP growth
2014 estimated
(%)
§
Market
brand
Store
numbers
Selling space
(‘000s m
2
)
Employees
(full time
equivalent)
UK 62 28 1 2.4 360
†
2,570
†
21,146
‡
335
23
4,375
Ireland 4.5 2 – 1.8
Other International
Country
Population
(m)*
Households
(m)*
Market
position**
GDP growth
2014 estimated
(%)
§
Market
brand
Store
numbers
Selling space
(‘000s m
2
)
Employees
(full time
equivalent)
Poland 38 15 1 2.4 72
529
10,197
China 1,348 427.5 – 7.5 39
319
3,997
Spain 46.5 18 2 0.6 24
142
1,371
Russia 143 53 3 2.0 20
185
2,648
Romania 21 7.5 3 2.2 15
156
1,037
Turkey 74 19 1 3.5 45
216
3,333
Total 1,124
5,866
66,301
Store numbers, selling space and employee data as at 1 February 2014.
* Source: The Economist Pocket World in Figures 2014.
** Source: Kingfisher estimates.
§ Source: International Monetary Fund.
† Including Ireland.
‡ Including Ireland and Kingfisher Future Homes.
2014/15 new
market entries
Joint Venture
Annual Report and Accounts 2013/14
4
Strategic Report
Chairman’s statement
Annual Report and Accounts 2013/14
4
It has been another difficult year for
retailers, due to the challenging economic
environment which has affected several of
the markets in which Kingfisher operates.
In France, our biggest market, high levels
of unemployment and higher taxes
have led to consumer uncertainty, with
customers opting to save more rather than
spend more. In the UK, we saw a tough
start to the year but an improvement as
the year progressed, helped by falling
unemployment and positive signs in the
housing market.
Despite this weak economic backdrop,
Kingfisher was able to deliver some
growth, with adjusted pre-tax profits
increasing by 4.1% on the previous
year to £744 million. We generated
£559 million of free cash flow and
strengthened our balance sheet, finishing
the year with net cash of £238 million.
As a result, the Board recommended
an increase in the full year dividend of
4.7%, making a total of 9.9p. I am also
delighted to announce the start of a
programme to return surplus capital to
our shareholders, in addition to the annual
dividend, the first such programme in
Kingfisher’s 32-year history.
Highlights of the year included another
very strong performance from Screwfix
in the UK, which continued to expand
fast, opening its 300
th
outlet during the
year. B&Q had a more difficult year and
so the B&Q management team was
strengthened in order to better position
the business for the opportunities that any
improvement in the economy should
provide. In France, Castorama grew its
share of a market that was slightly down
during the year, and we continued to
expand the Brico Dépôt brand, with new
stores in France and Spain, as well as
the acquisition of 15 stores in Romania,
Kingfisher’s first new market since 2006.
We continued to make good progress
with our strategic agenda, Creating the
Leader, which aims to position Kingfisher
as a clear leader in home improvement
retailing. Many of the short-term benefits
of this programme have been used to
support our results in a weaker than
anticipated economic environment,
including improving prices for customers
in our major markets of France, the UK
and Poland.
Further progress was made on our
sustainability agenda through Kingfisher’s
Net Positive plan, with achievements in
responsibly sourced timber, energy usage
and community projects. You can read
more about these initiatives in the Chief
Executive’s statement on page 5 and
the Net Positive section on pages
18 to 19.
We are committed to diversity among our
workforce and there is further information
on our diversity policies and metrics on
pages 18 to 19, 37 and 69.
As always, I would like to thank our
79,000 staff for their hard work during
the year. In a people business such as
retailing their contribution is vital, and
it is through them that we can achieve
Kingfisher’s purpose of helping our
customers have better homes and
better lives.
Daniel Bernard
Chairman
“I am delighted to announce
the start of a programme to
return surplus capital to our
shareholders, in addition
to the annual dividend, the
first such programme in
Kingfisher’s 32-year history.”
Daniel Bernard
Chairman
Key highlights
Adjusted pre-tax profit
£744m
+4.1%
Profit before taxation
£759m
+9.8%
Adjusted basic
earnings per share
23.4p
+4.9%
Basic earnings
per share
30.0p
+24.5%
Full year dividend
9.9p
+4.7%
www.kingfisher.com
5
Strategic Report Governance Accounts
Group Chief Executive’s statement
www.kingfisher.com
5
Although the economic environment was
difficult, Kingfisher made good progress
during the year. After an extremely difficult
first quarter, which was affected by poor
spring weather, the environment improved
as the year progressed. The economic
backdrop was generally soft across
Europe for much of the year, particularly
in France, our most significant market.
However, our self-help programme
enabled us to grow profits and improve
our balance sheet strength, whilst also
investing in lower prices and improved
convenience for our customers. We
therefore finished the year in good shape.
We have continued to make good
progress with our Creating the Leader
strategy, which has supported short-term
trading results whilst also building
Kingfisher’s longer-term future. As well as
emphasising our affordability credentials
through price initiatives, we have
continued to make home improvement
easier for customers through an improved
online offer at B&Q in the UK & Ireland
and upgraded websites in Turkey, China,
Brico Dépôt France and Spain.
Further progress was made in sharing
our best ranges across more of our
businesses, with particular progress in
own brand paint. In October we held our
inaugural One Team Product Show in Lille
where 10,000 of our new product ranges
were unveiled to 6,000 store colleagues
from around the Group. Expansion
continued with more than 80 new stores
opened across Kingfisher, including 60 at
our Screwfix business. Screwfix had
another excellent year, growing sales by
more than 17% (on a 52 week basis) and
creating nearly 900 jobs, whilst continuing
to develop its industry-leading online
operations. Kingfisher continues to work
more closely as a networked organisation,
with further investment in our One Team
Academy, which provides training
modules for senior management.
At Kingfisher we are also committed to
making a positive contribution to society
and the planet as we grow our business.
Through our Net Positive programme
we help our customers to create more
sustainable homes, while improving
efficiency and opening up new sources
of revenue for our companies. We made
good progress this year towards many
of our ambitious targets in timber,
energy use and new community
engagement projects. See pages
18 to 19 for more details.
Looking ahead, we will continue to drive
our Creating the Leader programme this
year. Our key priorities will include
starting the roll-out of our omnichannel
programmes across the Group (allowing
customers to shop with us in any way
they prefer – via shops, the internet or
catalogues). In addition we will extend
our sourcing programmes and initiate
a four-year Group-wide IT change
programme. This will involve replacing
our physical infrastructure and software
to enable a step change in our customers’
shopping experience.
We are also seeking organic growth in
our selling space of 2% (71 new stores),
including two new country entries,
Brico Dépôt into Portugal and Screwfix
into Germany.
Importantly, we will focus our portfolio to
maximise our economic returns, including
the disposal of our stake in the Hornbach
business following our decision to expand
into the Romanian and German markets
where Hornbach operates. In China, our
B&Q business is now stable and so we are
now looking for a strategic partner to
help grow the business and replicate the
successful partner approach in Turkey.
B&Q UK & Ireland has performed resiliently
during the economic downturn, growing
profits in a declining market. Looking
ahead, with its customers and market
evolving very quickly B&Q has set about
redoubling its efforts to achieve future
growth and continued success. Following
the strengthening of the B&Q management
team in October 2013 under the direct
leadership of Kevin O’Byrne, B&Q is
working towards simplifying its business
to make it more agile in the marketplace.
The business aims to grow sales and
economic profit, for example by delivering
an improved omnichannel experience for
customers, an optimised store footprint
and driving footfall with better targeted
marketing and more competitive pricing.
Given the success of the last six years in
improving our balance sheet and cash
generation, and having successfully
resolved an outstanding French tax case, I
am delighted that we are able to announce
a multi-year programme of additional
capital returns. This will be in addition to
the annual dividend and will start during
2014/15 with around £200 million. At this
level Kingfisher would have the flexibility to
continue reinvesting in the business, pay
a healthy dividend and capitalise on value-
enhancing consolidation opportunities.
As we start the new financial year,
we are well placed to benefit from a
pick-up in consumer spending as
Europe’s economies return to growth.
Our prospects remain bright, giving us
confidence to invest in the business and
actively manage our portfolio, including
expanding into new markets, whilst also
commencing a programme to return
surplus capital to our shareholders.
Sir Ian Cheshire
Group Chief Executive
“Our prospects remain bright,
giving us confidence to invest
in the business and expand
into new markets, whilst also
commencing a programme
to return surplus capital
to shareholders.”
Sir Ian Cheshire
Group Chief Executive
To watch a video interview with Sir Ian Cheshire go to
http://annualreport.kingfisher.com/2013-14/strategic-
report/ceo-statement.html
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Annual Report and Accounts 2013/14
6
Strategic Report
Our business model
Annual Report and Accounts 2013/14
6
What we do
Kingfisher is a retailer of home
improvement products and services.
The vast majority of our sales take place
through our 1,124 stores in nine countries
across Europe and in China. Increasingly
we are also selling via the internet.
How we do it – our Net
Positive ambitions
In the broadest sense our business
creates value for society in a number
of ways. We help people to have better
homes for themselves and their families
and we have a long heritage of helping
them do this in a more sustainable
way. We operate in the heart of local
communities, supporting local projects,
positively impacting the environment and
importantly providing local employment.
Over 79,000 people work in our
businesses and many more work for
our suppliers. And we contributed
£1.71 billion in 2013/14 to the economies
in which we operate through taxes borne
and collected. We aim to do more than
minimise our impact; instead we aspire
to have a positive impact on the world.
We call this approach Net Positive
and we believe this gives us a ‘licence
to operate’ for the long-term (see pages
18 to 19 for more information).
Financial value
This section concentrates on the financial
value that we create – that is, the cash
we generate. Cash is the life-blood of any
business as it can be reinvested to keep a
business healthy and growing, and is also
used to reward the owners who bear all
the investment risk. For Kingfisher
maximising our cash generation in a
responsible way means maximising sales
and minimising costs whilst observing
key behaviours – responsibility, honesty,
passion, openness and adaptability.
The better we are at this the more cash
we generate and the more value we
create for our people, our shareholders
and society at large.
Maximising sales
We believe home improvement is
an attractive retail sector as spending
on the home is a key priority
for householders.
As a specialist in this area we aim to
provide a wide product choice and
expert advice while using our international
strength and capability to bring new, more
sustainable and more affordable products
to market. There are four key areas we
focus on in order to maximise sales:
Customers
We aim to have mass appeal with a
compelling choice of products and
services so that we can capture a large
share of the home improvement market.
We recognise that ‘one size does not fit all’
and so we have adapted our customer
offer to best suit the different needs of
the Do-it-Yourself (DIY) customer, the
Do-it-for-Me (DFM) customer and the
professional tradesman.
People
Retail is a people business and it
is particularly true in our sector as
customers often need help and
advice when shopping for home
improvement products and services.
We aim to recruit and retain diverse
and talented teams to serve our
customers and we prioritise investment
in their training and development.
Products
We use our scale and international
reach to find the world’s best products
and make them available to customers in
their local market. The rate of innovation
in home improvement tends to be slower
than in other retail sectors, such as
electricals or clothing, and so we are
increasingly deploying our international
scale and experience to work with
suppliers to stimulate innovation and
create better, more sustainable and
affordable products.
Channels
We want to make home improvement
as easy as possible for our customers and
this includes giving them as wide a choice
as possible of ways to shop with us.
As well as having local stores with
extended opening hours we increasingly
offer home delivery and ‘click & collect’
via the internet. This type of retailing
is called omnichannel and our most
advanced business in this area is
Screwfix in the UK.
Minimising costs
The biggest cost in our business
is buying the products that we sell
to our customers.
Our suppliers benefit from the huge
scale that we can offer them as one of
the largest buyers of home improvement
products in the world. The certainty of
large scale orders means they can operate
their businesses more efficiently and
these benefits are shared between the
manufacturer and Kingfisher – helping
to minimise our costs.
The next major cost is selling and
distribution, principally the cost of running
our stores, the cost of getting products
to our stores and the cost of our people.
We are constantly working on a rolling
programme of cost efficiencies and
productivity initiatives to minimise these
costs sustainably.
Cash generated
The net result of maximising our sales
whilst minimising our costs is the
optimisation of the cash we generate
each year. Over the last six years we
have generated £5.5 billion of operating
cash flow from our business model.
We have strengthened our balance sheet
by eliminating our financial net debt
and we have reinvested £1.7 billion in
modernising and expanding our store
network and upgrading our IT and
supply chain infrastructure to underpin
our future prospects. And we have
returned £1.0 billion to our shareholders
as annual dividends. Over the same
period our market value has grown
from £3.4 billion to £8.8 billion.
Our strategy for delivering this, known
as Creating the Leader, is on pages
8 to 17, including Key Performance
Indicators (KPIs) and progress to date.
Our unique contribution as a business is to harness our home
improvement experience, our heritage as a leader in sustainability and
our scale and sourcing capability to bring new, more sustainable and
more affordable products to market. This means our customers can
have better homes, the planet’s resources can be protected and we
generate value for our people, communities and shareholders.
Maximising
sales
Minimising
costs
Sourcing,
cost productivity
Value
Better Homes,
Better Lives
Value for shareholders:
Healthy annual dividend &
commitment to return surplus
capital when appropriate
Value for society:
Creating employment and a brighter
future for our people, the environment
and wider communities
Creating a ‘licence to operate’
long-term
To view and download the business model go tohttp://annualreport.kingfisher.com/2013-14/strategic-report/our-business-model.html
Value for customers:
Relevant, better, sustainable and
affordable products and services
Creating brand preference
Strategy: Creating the Leader
Improve, modernise & expand for
long-term success and to become
net positive
Value for the business:
Brand preference
Cash retained for a strong balance sheet
‘Licence to operate’ long-term
Customers
DIY, DFM, Trade
professionals
Products
Innovation,
affordability,
quality, own
brands, sourcing,
sustainability
People
Recruitment,
retention, training,
development,
diversity
Channels
Stores,
online, mobile,
call centres,
catalogues, direct
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www.kingfisher.com
7
Strategic Report Governance Accounts
Strategic Report
Annual Report and Accounts 2013/14
8
Our markets
We currently operate in nine
countries, spanning nearly 600
million households.
Our research shows that spending on home improvement
is a key priority for householders, making this an attractive
sector for retailers. It is also attractive because of the relatively
small number of well-known manufacturer brands. This means
a specialist home improvement retailer provides a vital role for
the consumer by offering a wide product choice and expert
advice. We can offer a high proportion of own brand product,
achieve economies of scale and have a more defensible position
against online or generalist operators when compared with
other retail segments. Read more about our business model
on pages 6 to 7.
Our strategy
Our unique contribution as a
business to our customers is
that we can harness our home
improvement experience, our
heritage as a leader in sustainability
and our international scale and
sourcing capability to bring new,
more sustainable and more
affordable products to market.
This means our customers can have better homes, the
planet’s resources can be protected and we generate value
for our people, communities and shareholders.
By also providing our customers with project advice and new
shopping channels to complement our stores, we will make
it easier for them to adapt their homes to their evolving needs.
Our shorthand for describing this purpose is Better Homes,
Better Lives.
The next phase of our development towards this vision –
Creating the Leader – builds on the success of the previous
phase known as Delivering Value, which has repositioned
Kingfisher as a stronger business in the attractive home
improvement market.
Strategic Report
Page Heading
EAS IER
COMMON
EXPAND
Strategic Report
CREATING
THE
LEADER
Annual Report and Accounts 2013/14
8
Strategic Report
Annual Report and Accounts 2013/14
8
Our markets
We currently operate in nine
countries, spanning nearly 600
million households.
Our research shows that spending on home improvement
is a key priority for householders, making this an attractive
sector for retailers. It is also attractive because of the relatively
small number of well-known manufacturer brands. This means
a specialist home improvement retailer provides a vital role for
the consumer by offering a wide product choice and expert
advice. We can offer a high proportion of own brand product,
achieve economies of scale and have a more defensible position
against online or generalist operators when compared with
other retail segments. Read more about our business model
on pages 6 to 7.
Our strategy
Our unique contribution as a
business to our customers is
that we can harness our home
improvement experience, our
heritage as a leader in sustainability
and our international scale and
sourcing capability to bring new,
more sustainable and more
affordable products to market.
This means our customers can have better homes, the
planet’s resources can be protected and we generate value
for our people, communities and shareholders.
By also providing our customers with project advice and new
shopping channels to complement our stores, we will make
it easier for them to adapt their homes to their evolving needs.
Our shorthand for describing this purpose is Better Homes,
Better Lives.
The next phase of our development towards this vision –
Creating the Leader – builds on the success of the previous
phase known as Delivering Value, which has repositioned
Kingfisher as a stronger business in the attractive home
improvement market.
www.kingfisher.com
9
Creating the Leader: Self-help initiatives
Four Themes Eight Steps Key Performance Indicators (KPIs)
EASIER 1. Making it easier for customers to improve their home
2. Giving our customers more ways to shop
For more information see pages 10 to 11.
• Like-for-like sales growth (LFL)
• Unique web users
COMMON 3. Building innovative common brands
4. Driving efficiency and effectiveness everywhere
For more information see pages 12 to 13.
• % of Group sales direct sourced
• % of Group sales that are common
• Retail profit margin
EXPAND 5. Growing our presence in existing markets
6. Expanding in new and developing markets
For more information see pages 14 to 15.
• Kingfisher Economic Profit (KEP)*
* A measure of profit after a charge for the capital used
by the business. (See page 24.)
ONE TEAM 7. Developing leaders and connecting people
8. Sustainability: becoming Net Positive
For more information see pages 16 to 17.
• Group employee engagement scores
• Net Positive sustainability dashboard
Financial benefits
Predicting the potential retail profit benefits from this programme
today, when we don’t know the economic conditions or
competitive landscape we will face in the future, is very difficult.
However, whatever the conditions, we believe our efforts will
drive higher LFL sales, higher gross margin and more cost
efficiencies than would have been delivered without this
programme. In total we estimate that this would create an
additional £300 million of annualised retail profit in the fifth
year (2016/17), net of price reinvestment and based on the
size of the business and market conditions in 2011/12.
EAS IER
COMMON
EXPAND
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www.kingfisher.com
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Accounts Governance Strategic Report
www.kingfisher.com
9
Creating the Leader: Self-help initiatives
Four Themes Eight Steps Key Performance Indicators (KPIs)
EASIER 1. Making it easier for customers to improve their home
2. Giving our customers more ways to shop
For more information see pages 10 to 11.
• Like-for-like sales growth (LFL)
• Unique web users
COMMON 3. Building innovative common brands
4. Driving efficiency and effectiveness everywhere
For more information see pages 12 to 13.
• % of Group sales direct sourced
• % of Group sales that are common
• Retail profit margin
EXPAND 5. Growing our presence in existing markets
6. Expanding in new and developing markets
For more information see pages 14 to 15.
• Kingfisher Economic Profit (KEP)*
* A measure of profit after a charge for the capital used
by the business. (See page 24.)
ONE TEAM 7. Developing leaders and connecting people
8. Sustainability: becoming Net Positive
For more information see pages 16 to 17.
• Group employee engagement scores
• Net Positive sustainability dashboard
Financial benefits
Predicting the potential retail profit benefits from this programme
today, when we don’t know the economic conditions or
competitive landscape we will face in the future, is very difficult.
However, whatever the conditions, we believe our efforts will
drive higher LFL sales, higher gross margin and more cost
efficiencies than would have been delivered without this
programme. In total we estimate that this would create an
additional £300 million of annualised retail profit in the fifth
year (2016/17), net of price reinvestment and based on the
size of the business and market conditions in 2011/12.
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
10
Our key steps
1. Making it easier for
customers to improve
their home
2. Giving our customers
more ways to shop
What we did in 2013/14
Emphasised our affordability credentials:
• Launched ‘handy prices’ marketing campaign in B&Q
• Invested in pricing in Castorama France and Poland
• Rolled out Brico Dépôt ‘back to basics’ marketing campaign
• Extended Brico Dépôt France and Spain programme
of ‘arrivages’ (one-off special buys) to Turkey and Poland
• Launched UK Enterprise Finance Guarantee scheme
for tradesmen
Extended our omnichannel offer:
• Upgraded B&Q online offer (www.diy.com), including
20,000 extra products for home delivery (using Screwfix
omnichannel infrastructure)
• Preparatory work to extend TradePoint (B&Q’s trade-only
offer) website to main shop floor categories – e.g.
kitchens – continues
• Launched upgraded websites in Turkey, China,
Brico Dépôt France and Spain. Work to upgrade Poland’s
website continues
• Trialled ‘click & collect’ in Castorama France and in Turkey
EASIER
Strategic Report
Creating the Leader
AFFORDABLE
INSPIRATION
CONFIDENCE
TECHNOLOGY
RANGE
HELPFUL
ADVICE
AVAILABILITY
EDUCATION
CHOICE
Annual Report and Accounts 2013/14
10
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
10
Our key steps
1. Making it easier for
customers to improve
their home
2. Giving our customers
more ways to shop
What we did in 2013/14
Emphasised our affordability credentials:
• Launched ‘handy prices’ marketing campaign in B&Q
• Invested in pricing in Castorama France and Poland
• Rolled out Brico Dépôt ‘back to basics’ marketing campaign
• Extended Brico Dépôt France and Spain programme
of ‘arrivages’ (one-off special buys) to Turkey and Poland
• Launched UK Enterprise Finance Guarantee scheme
for tradesmen
Extended our omnichannel offer:
• Upgraded B&Q online offer (www.diy.com), including
20,000 extra products for home delivery (using Screwfix
omnichannel infrastructure)
• Preparatory work to extend TradePoint (B&Q’s trade-only
offer) website to main shop floor categories – e.g.
kitchens – continues
• Launched upgraded websites in Turkey, China,
Brico Dépôt France and Spain. Work to upgrade Poland’s
website continues
• Trialled ‘click & collect’ in Castorama France and in Turkey
Strategic Report Governance Accounts
www.kingfisher.com
11
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priority in 2014/15 is to:
• Extend omnichannel capabilities
across the Group
CONFIDENCE
CONVENIENT
RESEARCH
AVAILABILITY
EDUCATION
CHOICE
OMNICHANNEL
ACCESSIBLE
12/13
13/14
11/12 15
19
24
Unique web users (m)
Monthly Moving Annual Average
+0.7%
-2.9%
12/13
+1.3%
11/12
Like-for-like sales
13/14
www.kingfisher.com
11
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priority in 2014/15 is to:
• Extend omnichannel capabilities
across the Group
www.kingfisher.com
11
12/13
13/14
11/12 15
19
24
Unique web users (m)
Monthly Moving Annual Average
+0.7%
-2.9%
12/13
+1.3%
11/12
Like-for-like sales
13/14
TradePoint’s updated website is now
transactional on 14,000 products.
Further updates will include main shop
floor categories
B&Q’s improved online offer includes
20,000 extra products for home delivery
Accounts Governance Strategic Report
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
12
Our key steps
3. Building innovative
common brands
4. Driving efficiency
and effectiveness
everywhere
What we did in 2013/14
Product:
• Launched energy-efficient ‘iQE’ Group brand
• Extended common paint ranges
? Rolled out ‘Colours’ Group own-brand paint into Russia and Spain
? Commenced roll out of new ‘Colours’ own-brand emulsion paint
range across B&Q UK & Ireland (in 120 stores) and Castorama
France (all 105 stores completed)
? Launched exclusive ‘Valspar’ mixing desk paint into B&Q UK
& Ireland (now in 120 stores) and China
• Launch of ‘Site’ workwear into Brico Dépôt France now planned during
2014/15 following ‘arrivages’ (one-off special buys) trial during 2013/14
• Held inaugural European product show, attended by 6,000 store and
buying colleagues from the UK and France
• Achieved 9% common (up from 8% in 2012/13) and 20% direct
sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality
over quantity
• Extended French common supplier contracts to the wider Castorama
and Brico Dépôt brands division
Efficiency:
• Upweighted distribution centre and cross-docking capability in
Poland, Spain and Turkey
• SG&A
(1)
optimisation from media buying programmes across the
UK and France. Achieved c.£40m total savings from Group SG&A
initiatives since the start of Creating the Leader
• Extended Brico Dépôt shelf-ready packaging from 20% to 32%
• Rolled out France and Spain all-staff bonus programmes to Poland
(linked to individual store sales and profit growth)
• Undertook IT process mapping analysis at Castorama France in
readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.
COMMON
WORLD’S BEST PRODUCTS
LOCAL MARKETS
SCALE
EXCLUSIVE BRANDS
CUSTOMER
CHOICE
UNIQUE
EFFICIENCY
INNOVATION
INTERNATIONAL
Annual Report and Accounts 2013/14
12
Strategic Report
Creating the Leader
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
12
Our key steps
3. Building innovative
common brands
4. Driving efficiency
and effectiveness
everywhere
What we did in 2013/14
Product:
• Launched energy-efficient ‘iQE’ Group brand
• Extended common paint ranges
? Rolled out ‘Colours’ Group own-brand paint into Russia and Spain
? Commenced roll out of new ‘Colours’ own-brand emulsion paint
range across B&Q UK & Ireland (in 120 stores) and Castorama
France (all 105 stores completed)
? Launched exclusive ‘Valspar’ mixing desk paint into B&Q UK
& Ireland (now in 120 stores) and China
• Launch of ‘Site’ workwear into Brico Dépôt France now planned during
2014/15 following ‘arrivages’ (one-off special buys) trial during 2013/14
• Held inaugural European product show, attended by 6,000 store and
buying colleagues from the UK and France
• Achieved 9% common (up from 8% in 2012/13) and 20% direct
sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality
over quantity
• Extended French common supplier contracts to the wider Castorama
and Brico Dépôt brands division
Efficiency:
• Upweighted distribution centre and cross-docking capability in
Poland, Spain and Turkey
• SG&A
(1)
optimisation from media buying programmes across the
UK and France. Achieved c.£40m total savings from Group SG&A
initiatives since the start of Creating the Leader
• Extended Brico Dépôt shelf-ready packaging from 20% to 32%
• Rolled out France and Spain all-staff bonus programmes to Poland
(linked to individual store sales and profit growth)
• Undertook IT process mapping analysis at Castorama France in
readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.
www.kingfisher.com
13
Key Performance
Indicators (KPIs)
* The reduction in retail profit margin reflects difficult
economic conditions in Europe and our decision to
improve prices for customers in our major markets.
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are to:
• Extend sourcing programmes
(e.g. new cross-Group MacAllister
power and hand tools and
Blooma BBQs)
• Start four-year Group-wide IT
programme, consistent with our
ongoing capital expenditure plans
SCALE
CUSTOMER
CHOICE
EFFICIENCY
LOCAL TASTE
DIRECT SOURCING
INTERNATIONAL
EXCLUSIVE
STRONGER TOGETHER
DIVERSE
PRODUCTIVITY
www.kingfisher.com
13
www.kingfisher.com
13
Key Performance
Indicators (KPIs)
* The reduction in retail profit margin reflects difficult
economic conditions in Europe and our decision to
improve prices for customers in our major markets.
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are to:
• Extend sourcing programmes
(e.g. new cross-Group MacAllister
power and hand tools and
Blooma BBQs)
• Start four-year Group-wide IT
programme, consistent with our
ongoing capital expenditure plans
Kingfisher’s inaugural European product
show was held in October 2013 involving
6,000 colleagues from the UK and France
Blooma BBQs, one of our Group own brands,
feature dishwasher safe and reversible grills
Group own-brand MacAllister has developed
a new drill with a light for easy use in
confined spaces
Accounts Governance Strategic Report
12/13
13/14
11/12 2
8
9
8.1
7.4
7.2*
Common product sales
% of total sales
15
19
20
12/13
13/14
11/12
Products direct sourced
% of total sales
12/13
13/14
11/12
Retail pro?t margin
%
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
EXPAND
GROWTH
HIGHER RETURNS
TRADE
FLEXIBILITY
AMBITION
INFILL
CONSUMER REACH
BIG BOX
INTERNATIONAL CAPABILITY
LOCAL EXPERTISE
Annual Report and Accounts 2013/14
14
Strategic Report
Creating the Leader
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
www.kingfisher.com
15
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are:
• Organic growth of 2% (71 net new
stores, of which 54 are Screwfix outlets)
including entering two new markets
• To actively manage the portfolio
including completing the disposal of
Hornbach and looking for a strategic
partner for B&Q China (see the Group
CEO’s statement on page 5)
• To continue to capitalise on
consolidation opportunities (as we
did in Romania)
* See page 24.
HIGHER RETURNS
KINGFISHER ECONOMIC PROFIT
AMBITION
SMALL BOX
OMNICHANNEL
NEW TERRITORIES
INTERNATIONAL CAPABILITY
LOCAL EXPERTISE
www.kingfisher.com
15
www.kingfisher.com
15
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priorities in 2014/15 are:
• Organic growth of 2% (71 net new
stores, of which 54 are Screwfix outlets)
including entering two new markets
• To actively manage the portfolio
including completing the disposal of
Hornbach and looking for a strategic
partner for B&Q China (see the Group
CEO’s statement on page 5)
• To continue to capitalise on
consolidation opportunities (as we
did in Romania)
* See page 24.
Kingfisher acquired Bricostores’ 15 stores in
Romania in 2013/14. They will be rebranded
under the Brico Dépôt banner
Castorama France revamped two of its stores,
including this one in Dunkerque
Screwfix opened 60 new stores in the year,
taking the total to 335
Accounts Governance Strategic Report
12/13
13/14
11/12 131
44
74
King?sher Economic Pro?t (KEP)*(£m)
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
16
Our key steps
7. Developing leaders
and connecting people
8. Sustainability:
becoming Net Positive
What we did in 2013/14
People:
• Continued to extend the Kingfisher One Academy
Net Positive:
• Published first Net Positive report and appointed Richard
Gillies from Marks and Spencer Group plc as Group
Sustainability Director, to lead the Net Positive agenda
(see www.kingfisher.com/netpositive)
• Over 1,400 Kingfisher employees shared an estimated
gain of £10 million following the maturity of the ShareSave
scheme in December 2013
ONE TEAM
DEVELOPING LEADERS
FORCE FOR GOOD
NET POSITIVE
DIVERSITY
RECRUITMENT
AMBITION
COLLABORATION
ACADEMY
HARNESS
ENGAGEMENT
TALENT
Annual Report and Accounts 2013/14
16
Strategic Report
Creating the Leader
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
16
Our key steps
7. Developing leaders
and connecting people
8. Sustainability:
becoming Net Positive
What we did in 2013/14
People:
• Continued to extend the Kingfisher One Academy
Net Positive:
• Published first Net Positive report and appointed Richard
Gillies from Marks and Spencer Group plc as Group
Sustainability Director, to lead the Net Positive agenda
(see www.kingfisher.com/netpositive)
• Over 1,400 Kingfisher employees shared an estimated
gain of £10 million following the maturity of the ShareSave
scheme in December 2013
www.kingfisher.com
17
Key Performance
Indicators (KPIs)
* Based on a wider sample of employees with over
70,000 staff invited to participate in 2013/14. The
2012/13 figure of 4.11 for the leadership group rose
to 4.25 in 2013/14.
** For full information go to
www.kingfisher.com/netpositive/reporting
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the Creating
the Leader framework.
Our key priorities in 2014/15 are to:
People:
• Increase focus on talent management
• Continue to develop Kingfisher One
Academy with new programmes
Net Positive:
• Establish processes to accelerate
Net Positive innovation and to apply
what we learn across the Group
• Further integrate Net Positive into our
Operating Company business plans
DEVELOPING LEADERS
FORCE FOR GOOD
AMBITION
ACADEMY
CONNECTING PEOPLE
ENGAGEMENT
SKILLS
MOBILITY
TALENT
RETENTION
POSITIVE IMPACT
www.kingfisher.com
17
www.kingfisher.com
17
Key Performance
Indicators (KPIs)
* Based on a wider sample of employees with over
70,000 staff invited to participate in 2013/14. The
2012/13 figure of 4.11 for the leadership group rose
to 4.25 in 2013/14.
** For full information go to
www.kingfisher.com/netpositive/reporting
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the Creating
the Leader framework.
Our key priorities in 2014/15 are to:
People:
• Increase focus on talent management
• Continue to develop Kingfisher One
Academy with new programmes
Net Positive:
• Establish processes to accelerate
Net Positive innovation and to apply
what we learn across the Group
• Further integrate Net Positive into our
Operating Company business plans
The Kingfisher One Academy ran 10
programmes for the Group’s top 200 leaders
in 2013/14
The first report covering our performance
against our Net Positive targets was
published in June 2013
Kingfisher achieved Business in the Community’s
Corporate Responsibility Index Platinum Big Tick
in the 2013 survey. We are also included in two
socially responsible indices, the FTSE4Good and
Dow Jones Sustainability Index.
Accounts Governance Strategic Report
Engagement scores
Gallup Q12 survey (out of 5)*
13/14 £2.3bn (eco-product sales)
12/13 £2.1bn (eco-product sales)
11/12 £2.2bn (eco-product sales)
12/13
13/14
11/12 3.96
3.91
3.95
Sales of products with eco-credentials
% of total sales**
12/13
13/14
11/12 20
20
21
Annual Report and Accounts 2013/14
18
Strategic Report
Sustainability
Annual Report and Accounts 2013/14
18
Our Net Positive Approach
By becoming Net Positive we are making
it easier for our customers to enjoy homes
that are better and more sustainable. By
operating in a Net Positive way we aim to
become carbon positive, waste nothing,
be restorative to the environment, and
have a positive impact on people and
communities. This will enable us to create
sustained value for our business and
stakeholders. It is making our business
stronger, generating new streams of
revenue and reducing our costs. For
example, we have saved at least £30
million over three years through improved
recycling and energy efficiency at our
stores and operations.
We have 50 ambitious targets. Our
Group-level priorities – timber, energy,
innovation and communities – are areas
where we believe we can have the most
significant impact.
Our Net Positive priorities:
Timber
Timber is an essential raw material for
our business. Through responsible
sourcing, we aim to safeguard future
supplies at an affordable price while
protecting and enhancing forests.
This makes it easier for customers to
make more sustainable choices.
In 2013/14, 87% of the timber (by volume)
used in our products was responsibly
sourced (89% 2012/13). This decrease
reflects our work during 2013/14 to
improve the quality and scope of our
data, which identified a number of
products not previously included in the
data scope. B&Q UK achieved 100%
responsibly sourced timber in its
products in 2011.
During 2013 B&Q developed a responsibly
sourced sandpaper range, which will bring
it to 100% responsible sourcing for both
timber and paper products. Screwfix, Brico
Dépôt Spain and Brico Dépôt France have
all achieved over 90% responsible timber
and paper sourcing.
We have launched forest projects that are
enhancing biodiversity and safeguarding
forests or woodlands by getting local
communities involved. Brico Dépôt Spain,
for example, launched two projects during
2013 that support reforestation and
enable school children and employees to
take part in forest conservation. Protecting
and improving forests helps to ensure a
resilient and sustainable timber supply
chain for the future.
Energy
Our energy saving products and services
help customers to reduce their bills and
create more comfortable homes. Our
customers are now saving almost 7 TWh
(terawatt-hours*) every year through the
energy saving products they’ve purchased
from us since 2011/12. We estimate
this could save our customers over
£450 million every year (based on the
average UK household energy bill).
We reduced the energy intensity
(kWh/m
2
) of our property portfolio by
8% from our 2010/11 baseline through
measures such as the introduction of
energy efficient LED lighting in stores and
distribution centres. New stores built to
eco-design principles opened at several
Operating Companies including Moulins
(Brico Dépôt France) and Marseille
(Castorama France).
We reduced total Greenhouse Gas (GHG)
emissions by 5% from our 2010/11
baseline (see table on page 19).
Innovation
Sales of products with eco-credentials
(those with a lower environmental impact)
totalled 21% of total sales revenue,
against our 2020 target of 50%. ‘Best-in-
class’ eco-products (our most innovative
eco-products) accounted for 5% of sales.
We have an ambition to develop ‘closed
loop’ products and supply chains, so that
the raw materials used in our ranges can
be continually reused, repurposed and
recycled. This will enable us to reduce
costs and waste, and access new, more
sustainable sources of materials.
We launched our own closed loop
calculator in 2013. This practical tool
enables us to assess and improve the
closed loop credentials of our products.
Using the calculator we have identified
products in our ranges with ‘closed
loop credentials’. These include the
‘Infinite’ kitchen worktop developed
by Castorama France from waste
wood, which is lighter and more water
resistant than traditional worktops (see
www.kingfisher.com/netpositive/infinite).
Communities
It is important to us that we invest in
projects that help people to acquire
practical home improvement skills and
that improve the lives of those living in
the communities near to our stores and
within our supply chain.
A number of our community projects
address this ambition. For example,
to inspire the next generation of home
improvers, Castorama Poland runs free
DIY classes for school children, reaching
47,000 young people since 2012/13,
while B&Q UK supported projects to
help Scouts get their DIY badge.
Becoming Net Positive
Net Positive is how we make a positive contribution to society
while creating a more successful business.
Key highlights
Timber
87%
Responsibly sourced timber
in our products in 2013/14
Energy
7 TWh
Energy saved for
customers since 2011/12
Innovation
£2.3bn
Eco-product sales
in 2013/14
Communities
530
Community projects
since 2012/13
* Terawatt-hours (TWh) is a standard unit of energy measurement. 1 TWh is the equivalent of 1 billion kilowatt hours (kWh), the measure which is used in home energy
consumption calculations.
www.kingfisher.com
19
Strategic Report Governance Accounts
www.kingfisher.com
19
We have supported 530 community
projects since 2012/13. Many Operating
Companies also have company-wide
programmes. Screwfix, for example,
has launched the Screwfix Foundation,
a new charity that will raise funds to fix,
repair, maintain and improve properties
and community facilities for those in need.
Other issues
We work on improving our performance
in three important areas: Employees,
including creating a diverse workforce and
improving health and safety performance;
Suppliers, including the standards we set
through our Code of Conduct for Factory
Working Conditions; and the Environment,
including reducing waste and water use,
protecting biodiversity and phasing out
harmful chemicals. Areas of focus during
2013/14 included:
Human Rights
We take steps to protect the human rights
of people affected by our business, in
line with the UN Universal Declaration
of Human Rights and the UN Guiding
Principles on Business and Human
Rights. This commitment applies to all
our interactions with our stakeholders,
including employees, suppliers and
communities. During 2013, we
commissioned a specialist consultancy
to assess how well our business practices
align with the Guiding Principles in the
areas of supply chain, communities,
human resources and partners. We are
using the feedback and the results of
a wider Net Positive policy review to
further strengthen our policies relating
to human rights. Our Code of Conduct
for Factory Working Conditions (see
www.kingfisher.com/netpositive/code) sets
out the human rights standards we expect
supplier factories to meet. We monitor the
compliance of key suppliers with our Code
and in 2013/14 we audited over 500
suppliers and factories.
Diversity
By creating an inclusive culture and
diverse workforce we benefit from
a wide range of skills, experience and
perspectives. This improves customer
insight, widens our talent pool and
enables better decision-making. We
encourage diversity in all its forms.
During 2013/14, women made up
27% of the Kingfisher Board, 18% of
senior managers
(1)
and 39% of our total
workforce (see the Directors’ Report on
page 69 for more information).
How we manage sustainability
Net Positive is a core part of our Creating
the Leader corporate strategy, with the
Group Sustainability Director reporting
directly to the Group Chief Executive. Our
Operating Companies are taking the lead
in implementing Net Positive. Each has a
three-year plan for how they will
contribute to our Net Positive goals, with
targets for their business. By making Net
Positive part of how our companies work,
we will ensure that our activities are
relevant and meaningful in each of our
markets and that our companies are able
to maximise the benefits for their
customers and their businesses.
We launched our One Academy Net
Positive executive education module
during 2013/14, designed to further
improve understanding of Net Positive
among our most senior leaders.
We established the Net Positive Advisory
Council in 2013, a group of senior
external experts in different aspects of
sustainability, who will provide advice,
insight and challenge to help us progress
towards Net Positive.
Further information
Our Net Positive Report is published annually at
www.kingfisher.com/netpositive. The 2013/14
report will be published in June 2014.
(1) Includes the One Team Leadership Group and
directors of the Group’s subsidiary companies.
The figure rises to 20% when excluding
subsidiary directors.
Greenhouse Gas Emissions (tonnes of CO
2
e)
*
Baseline
10/11 12/13 13/14
Progress towards
target / Change
GHG emissions from the combustion of fuel and operation of facilities 154,953 150,244 160,223 na
GHG emission from the purchase of electricity, heat and steam 305,082 295,084 278,665 na
Total GHG emissions (2020 target = 25% reduction) 460,035 445,328 438,888 (5%)
‡
GHG emissions per m
2
of floor space 66.6 60.3 59.0 na
Methodology: Our GHG emissions have been calculated using UK government (DEFRA) emissions factors. Our data covers our material impacts: emissions from property
energy use, dedicated delivery fleets and business travel by road. Our Net Positive Report contains further details of our GHG emissions, including data on scope 3 emissions.
Our target is set against a baseline year of 2010/11. The 2013/14 Net Positive report will be published in June 2014.
* Our Net Positive data, including our Greenhouse Gas data, covers all our Operating Companies and 50% of our Koçtas¸ Joint Venture.
‡
Reductions are measured against our baseline year 2010/11.
Board
Gender split
Female 27%
Male 73%
Senior Management
Female 18%
Male 82%
Total workforce (FTE)
Female 39%
Male 61%
11
242
66,301
Annual Report and Accounts 2013/14
20
Strategic Report
Financial Review
Annual Report and Accounts 2013/14
20
A summary of the reported financial results for the year ended
1 February 2014 is set out below:
2013/14 2012/13 Increase
Sales £11,125m £10,573m +5.2%
Adjusted pre-tax profit £744m £715m +4.1%
Profit before taxation after
exceptional items £759m £691m +9.8%
Adjusted basic earnings
per share 23.4p 22.3p +4.9%
Dividends 9.9p 9.46p +4.7%
A reconciliation of statutory profit to adjusted profit is set
out below:
2013/14
£m
2012/13
£m Increase
Profit before taxation 759 691 +9.8%
Exceptional items (17) 26
Profit before exceptional
items and taxation 742 717 +3.5%
Financing fair value
remeasurements (FFVR) 2 (2)
Adjusted pre-tax profit 744 715 +4.1%
Profit and EPS including all exceptional items for the year
ended 1 February 2014 are set out below:
2013/14 2012/13 Increase
Profit after tax £710m £564m +25.9%
Basic EPS 30.0p 24.1p +24.5%
For glossary of terms used in the Financial Review see the
inside back cover.
Overview
Statutory profit after tax increased by 25.9% in the year to
£710 million. The statutory results for the year have benefited
significantly from exceptional items which add £17 million to
profit before tax, £131 million to profit after tax and 5.5p to
basic earnings per share. For comparative purposes adjusted
measures are therefore presented. The exceptional items are
detailed further below.
The Group’s financial reporting year ends on the nearest
Saturday to 31 January. The current year is for the 52 weeks
ended 1 February 2014 with the comparative financial year
being for the 53 weeks ended 2 February 2013. This only
impacts the UK & Ireland businesses with all of the other
businesses reporting on a calendar basis as a result of local
requirements. The effect of the 53rd week on the prior
year results of the Group is the inclusion of an additional
£72 million sales and an immaterial benefit to retail profit.
Total sales grew by 3.5% on a constant currency 52 week basis
and increased by 5.2% to £11.1 billion (2012/13: £10.6 billion)
on a reported rate basis. On a like-for-like basis, Group sales
were up 0.7%. During the year, a net additional 91 new stores
were opened, including 60 Screwfix outlets and 15 acquired
stores in Romania, taking the store network to 1,079 stores
(excluding 45 Turkey JV stores).
Retail profit before exceptional items increased by £27 million to
£805 million (2012/13 restated: £778 million), including a £24
million favourable foreign exchange movement representing a
0.7% increase on a constant currency basis.
Karen Witts
Group Finance Director
To watch a video interview with Karen Witts, go to
http://annualreport.kingfisher.com/2013-14/strategic-report/financial-review.html
www.kingfisher.com
21
Strategic Report Governance Accounts
www.kingfisher.com
21
Trading Review by Major Geography
France
Sales £m 2013/14 2012/13
% Total
Change
Reported
% Total
Change
Constant
currency
% LFL
Change
France 4,423 4,194 +5.5% +0.8% (1.2)%
Retail
profit £m 2013/14 2012/13
% Change
Reported
% Change
Constant
currency
France 396 397 (0.4)% (4.7)%
All trading commentary below is in constant currencies.
Kingfisher France
Kingfisher France sales grew by 0.8% (-1.2% LFL) to £4,423
million in soft markets impacted by weak consumer confidence.
Across the two businesses, seven net new stores were opened
and four were revamped, adding around 4% new space.
Gross margins were down 30 basis points, with ongoing self-
help initiatives offset by higher price promotional activity across
both businesses. Continued focus on cost control, including
lower levels of variable pay, resulted in retail profit down
4.7% compared to last year.
Castorama total sales grew by 2.3% (+0.5% LFL) to £2,469
million. According to Banque de France data, sales for the home
improvement market were down 1.4%. Castorama benefited
from its innovative ‘Do-it-Smart’ approach aimed at making
home improvement projects easier for customers. LFL sales of
indoor products were up around 1% with sales of new kitchen,
bathroom and storage ranges performing particularly well.
Sales of outdoor seasonal products were down around 1%.
Brico Dépôt total sales declined by 1.0% (-3.0% LFL) to
£1,954 million. According to Kingfisher estimates, sales for
the comparable market, which more specifically targets trade
professionals and heavy DIYers, were down around 2%. Brico
Dépôt benefited from self-help initiatives which continued to
progress well. These included new ranges introduced last
year (e.g. kitchen, bathroom and power tool ranges) and
more ‘arrivages’ (rolling one-off special buys), reinforcing
Brico Dépôt’s value credentials.
UK & Ireland
Sales £m 2013/14 2012/13
% Total
Change
Reported
% Total
Change
Constant
currency 52
week basis
% LFL
Change
UK &
Ireland 4,363 4,316 +1.0% +2.7% +1.1%
Retail
profit £m 2013/14 2012/13
% Change
Reported
% Change
Constant
currency
UK &
Ireland 238 231 +3.3% +3.4%
All trading commentary below is in constant currencies and % movements on
a 52 week basis.
Note: 2012/13 retail profit comparatives restated by £3 million to reflect
reclassification of pension administrative expenses from finance costs to retail
profit, as per the amended IAS 19.
Kingfisher UK & Ireland
Kingfisher UK & Ireland total sales were up 2.7% (+1.1% LFL)
to £4,363 million supported by a strong performance from
Screwfix and encouraging early signs in the smaller tradesman
market, offset by a slower underlying retail market.
Kingfisher UK & Ireland delivered retail profit growth of 3.4%
to £238 million. Gross margins were up 10 basis points with the
benefits from ongoing self-help initiatives offset by investment
in pricing across both businesses. A strong focus on operating
cost efficiencies continued.
B&Q UK & Ireland’s total sales were up 0.4% (+0.1% LFL) to
£3,698 million. Sales of outdoor products were up around 2%.
Sales of indoor products were down around 1%. TradePoint
continues to progress with sales up around 7% compared
to last year.
In Ireland, following the conclusion of the Examinership process
in May 2013, one store was closed and significant rent reductions
achieved across the remaining stores. The business returned to
break even in the second half of the year.
The market for the UK’s leading home improvement retailers was
up 3.8%, including seasonal ranges up 5.0%, following record
adverse weather last year. On a comparable basis, B&Q UK &
Ireland sales were up 1.7% and including Screwfix, up 4.1%.
Strengthened management team
B&Q is a strong brand with the market leading position in
the attractive UK home improvement market. Despite a very
challenging housing and economic backdrop for the last six
years, during which its market declined around 12% (as per
Kingfisher estimates – BCG commissioned report), Kingfisher
UK & Ireland delivered broadly flat sales and achieved profit
growth of 50% by exploiting the UK trade market opportunity,
delivering a number of self-help initiatives whilst continuing to
invest in B&Q’s stores and infrastructure. Looking ahead, its
customers and market are evolving very quickly and B&Q UK
& Ireland has set about redoubling its efforts to achieve future
growth and continued success.
In October 2013, Kevin O’Byrne, an executive director of
Kingfisher plc, assumed direct leadership of B&Q UK & Ireland.
He subsequently further strengthened the B&Q UK & Ireland
board with the appointment of three executives from the fast
growing, highly successful Screwfix business (Steve Willett,
previously Screwfix CEO; David Lowther, Supply Chain; and Guy
Eccles, HR) and the appointment of two senior executives from
outside Kingfisher (Chris Moss as Marketing Director, formerly
Virgin, Orange and 118 118; and more recently Darren Blackhurst
as Commercial Director, formerly Tesco, ASDA and Matalan).
This significantly strengthened management team has made
an encouraging early start, working towards two key aims:
1. Re-energising the business. Examples of priorities include
improving store navigation and customer communication,
and driving footfall with better targeted marketing.
2. Simplifying the business and growing sales and economic
profit to make it more agile in the market place and more
efficient. Examples of priorities include delivering a seamless
and efficient omnichannel experience for customers,
optimising the store footprint, reducing complexity in the
end-to-end supply chain, thereby reducing costs to support
lower prices, and undertaking a detailed review of all the
19 categories across our stores, focusing on customer needs
and business models.
Annual Report and Accounts 2013/14
22
Strategic Report
Financial Review continued
Annual Report and Accounts 2013/14
22
Screwfix grew total sales by 17.6% (+7.3% LFL) to £665 million,
benefiting from a strong promotional programme, extended
opening hours, the continued roll out of new outlets and the
successful introduction of a mobile ‘Click, Pay & Collect’ offer
last year. Sixty outlets were opened, taking the total to 335.
The market for the smaller tradesman was up around 2%.
Other International
Sales £m 2013/14 2012/13
% Total
Change
Reported
% Total
Change
Constant
currency
% LFL
Change
Other
International 2,339 2,063 +13.3% +10.5% +3.4%
Retail profit £m 2013/14 2012/13
% Change
Reported
% Change
Constant
currency
Other
International 171 150 +14.2% +11.4%
All trading commentary below is in constant currencies.
Other International total sales increased by 10.5% (+3.4% LFL)
to £2,339 million driven by the acquisition of Romania, LFL
growth in Poland, Russia and China and new store openings.
Retail profit increased by 11.4% to £171 million primarily
driven by Poland.
During the year 15 net new stores were opened, two in Poland,
one in Russia, four in Spain and eight in Turkey
(1)
. Including the
acquisition of 15 additional stores in Romania in Q2, 17% net
new space was added compared to last year.
Sales in Poland were up 3.9% (+1.2% LFL) to £1,109 million
reflecting new store openings. Gross margins were up 60 basis
points with self-help initiatives more than offsetting investment
in pricing which annualised during Q2. Productivity initiatives
largely offset cost inflation resulting in a 10.9% increase in retail
profit to £123 million.
In Russia sales grew by 9.2% (+8.0% LFL) to £453 million
benefiting from new store openings. LFL sales were up 10.5%
in H1 though slower in H2 (+5.8% LFL). Retail profit was
£15 million (2012/13: £16 million reported retail profit) reflecting
higher pre-opening and advertising costs compared to last year.
In Turkey, Kingfisher’s 50% JV, Koçtas¸, grew sales by 8.0%
(+5.0% LFL) to £332 million reflecting new store openings.
Retail profit contribution was up 24.4% to £11 million.
Brico Dépôt Spain sales grew by 16.4% (-3.1% LFL) to £284
million reflecting new store openings offset by a difficult market.
Retail profit was £1 million (2012/13: £1 million reported retail
profit). Bricostore Romania, acquired in Q2, contributed sales
of £72 million and retail profit of £1 million.
Hornbach, in which Kingfisher had a 21% economic interest
(2)
,
contributed £26 million to retail profit (2012/13: £26 million
reported retail profit).
B&Q China sales increased by 8.0% (+8.7% LFL) to £421
million benefiting from additional promotional activity. The retail
loss was £6 million (2012/13: £9 million reported loss) largely
relating to costs on the new format store trial which opened in
March 2013.
(1) Including four Koçtas¸ ‘Fix’ outlets.
(2) Following the disposal of the Group’s unlisted shares in Hornbach, going forward
the Group will no longer record its share of Hornbach’s results within retail profit.
Interest
The net interest income for the year was £23 million, compared
with a restated prior year charge of £1 million. A breakdown of
this is shown below.
2013/14
£m
2012/13
(restated)
£m
Underlying net interest (2) (3)
FFVR (2) 2
Exceptional items 27 –
Statutory net interest 23 (1)
The principal movement in net interest is driven by the release of
a £27 million exceptional repayment supplement provision on the
Kesa demerger French tax case (see exceptional items below).
Profit before tax increased by 9.8% to £759 million. After
removing the impact of exceptional items and fair value
remeasurements, adjusted pre-tax profit grew by 4.1% to
£744 million.
Profit after tax for the year was £710 million (2012/13: £564
million). This resulted in the Group recording a basic EPS of
30.0p in the year (2012/13: 24.1p).
Taxation
The effective corporation tax rate, excluding exceptional and prior
year items is 26% this year compared with 27% in 2012/13. The
overall rate of tax includes the impact of exceptional items and
prior year adjustments. The impact of such items reduced the
rate from 26% to 6% (2012/13: 18%) reflecting the positive
decision in the Kesa demerger French tax case (see exceptional
items below), the impact on deferred taxes of the further 3% fall
in the UK rate and the release of prior year provisions either
reassessed or time expired.
Kingfisher’s effective tax rate is sensitive to the blend of tax rates
and profits in the Group’s various jurisdictions. The adjusted
effective rate of tax, calculated on profit before exceptional items,
prior year tax adjustments and the impact of rate changes, is
26% (2012/13: 27%). This is higher than the UK statutory rate
because of the amount of Group profit that is earned in higher
tax jurisdictions and because no future benefit is assumed for
losses incurred in overseas jurisdictions such as China.
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Strategic Report Governance Accounts
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23
Effective tax rate
calculation
Profit
£m
Tax
£m
2013/14
%
2012/13
%
Profit before tax
and tax thereon 759 49 6 18
Exceptional items (17) 114
Prior year items
and rate changes – 27
Total – adjusted 742 190 26 27
The effective rate of tax is lower than in 2012/13 as a result of
the mix of profits and tax rate changes in some of the countries
in which we operate. The most significant rate changes in
2013/14 were the UK statutory tax rate falling from 24% to
23% regarding current year profits and from 23% to 20%
regarding deferred tax, offset by an increase in the French
tax rate from 36% to 38%.
The tax rates for this financial year and the expected rates for
next year are as follows:
Jurisdiction
Statutory tax rate
2014/15
Statutory tax rate
2013/14
UK 21% 23%
France 34.4% – 38.0% 34.4% – 38.0%
Poland 19% 19%
Rest of Europe 0% – 34% 0% – 34%
Asia 16.5% – 25% 16.5% – 25%
Tax contribution
Kingfisher makes a significant economic contribution to the
countries in which it operates. In 2013/14 it contributed £1.71
billion in taxes it both pays and collects for these governments.
The Group pays tax on its profits, its properties, in employing
79,000 people, in environmental levies, in customs duties and
levies as well as other local taxes. The most significant taxes it
collects for governments are the sales taxes charged to its
customers on their purchases (VAT) and employee payroll
related taxes. Taxes paid and collected together represent
Kingfisher’s total tax contribution which is shown below:
Total taxes paid as a result of Group operations
2013/14
£bn
2012/13
£bn
Taxes borne 0.74 0.70
Taxes collected 0.97 0.90
Total tax contribution 1.71 1.60
Kingfisher participates in the Total Tax Contribution survey
that PwC perform for the Hundred Group of Finance Directors.
The 2013 survey ranked Kingfisher 31st for its Total Tax
Contribution in the UK. In 2013, 101 companies contributed
to the survey.
Taxation governance and risk management
The Kingfisher Code of Conduct applies high standards of
professionalism and integrity which underpin the Group’s
approach to tax policy, strategy and governance, which is Board
approved. Our core tax objective is to pay the right amount of tax
at the right time and to comply with all relevant tax legislation in
all Group entities. The Kingfisher Group undertakes its activities,
and pays tax in the countries in which it operates, in compliance
with the local and worldwide tax rules. In all countries where it
has activities, it has the staff, premises and other assets required
to run its business there. The responsibility for tax policy and
management of tax risks lies with the Group Finance Director
and the Group Tax Director who engage regularly with the main
Board and the Audit Committee on all tax matters.
We manage the tax that we pay and the risks that arise having
regard to the interests of all stakeholders including our investors,
our customers, our staff and the governments and communities
in the countries in which we operate. Tax risks can arise from
changes in law, differences in interpretation of law and the failure
to comply with the applicable rules and procedures. We manage
and control these risks through local management, the tax
professionals we employ and using advice from reputable
professional firms. Where disputes arise with the authorities
these are dealt with promptly in a professional open and
constructive manner.
Exceptional items
2013/14
£m Gain/
(charge)
2012/13
£m Gain/
(charge)
Kesa demerger French tax case –
repayment supplement 27 –
Net impairment of investment
in Hornbach (14) –
Acquisition and integration costs (5) –
Ireland restructuring 7 (21)
UK restructuring – (16)
Net pension gain – 11
Gain on disposal of properties 2 –
17 (26)
Tax on exceptional items (4) 1
Kesa demerger French tax case 118 –
Net exceptional items 131 (25)
In the year the Group booked net post-tax exceptional income
of £131 million (2012/13: £25 million charge).
Total value of taxes borne
Business rates
Employers social
security
Corporation tax
Other taxes
£0.7bn
Annual Report and Accounts 2013/14
24
Strategic Report
Financial Review continued
Annual Report and Accounts 2013/14
24
Kingfisher paid €138 million tax to the French tax authorities
in the year ended 31 January 2004 as a consequence of the
Kesa Electricals demerger and recorded this as an exceptional
tax charge. Following a successful appeal Kingfisher received
a refund totalling €169 million from the French tax authorities
in September 2009. The French tax authorities appealed this
decision with the final level of court finding in Kingfisher’s favour
in July 2013. This decision removed any uncertainty over the
position and resulted in an exceptional credit of £145 million
(€169 million), of which £27 million has been recognised in
interest and £118 million in taxation.
In 2013/14 Kingfisher acquired Bricostore in Romania
and announced its intention to pilot four Screwfix outlets in
Germany in 2014. At the same time Kingfisher undertook
a review of its strategic investment in Hornbach, which has
operations in both of these markets. On 31 January 2014 the
Group decided to divest its equity stake in Hornbach and also
waive its right to appoint directors to the Hornbach board.
This decision has impacted the 2013/14 financial statements
by changing the basis on which the Group accounts for its
shareholding, resulting in a net £14 million exceptional loss with
the investment being impaired to its market value of £198 million
and reclassified as an asset held for sale. In 2013/14 the Group
recorded a £14 million pre-exceptional profit in relation to its
share of Hornbach’s results, comprising £26 million of retail
profit less £12 million share of interest and tax.
Following the end of the 2013/14 financial year, on 24 March
2014 Kingfisher agreed to sell all the shares it holds in Hornbach
Holding AG and Hornbach-Baumarkt AG which together
formed its 21.2% stake in Hornbach, for approximately £195
million. The stakes in the listed Hornbach Holding preference
shares and Hornbach Baumarkt have been sold to international
institutional investors in an ‘accelerated bookbuilding’ by
Berenberg Bank. The Hornbach family have agreed to buy
the non-listed ordinary shares in Hornbach Holding AG.
Acquisition and integration costs of £5 million principally
comprise costs of acquiring and integrating the Bricostore
Romania business.
The current year also includes an exceptional credit of £7 million
for Ireland restructuring, reflecting the release of provisions
recorded in January 2013 when B&Q Ireland entered into an
Examinership process. Following the conclusion of this process
in May 2013, only one store was closed rather than the potential
of five, with over 600 jobs saved.
Earnings per share
Basic earnings per share (EPS) have increased by 24.5%
to 30.0p (2012/13: 24.1p). On a more comparable basis,
removing the impact of exceptional items, financing fair value
remeasurements and the effect of prior year tax adjustments,
adjusted basic earnings per share increased by 4.9% to
23.4p (2012/13: 22.3p).
Earnings
£m 2013/14
Earnings
£m 2012/13
Basic earnings per share 709 30.0p 564 24.1p
Net exceptional items (131) (5.5)p 25 1.1p
Prior year tax items
and rate changes (27) (1.1)p (66) (2.8)p
FFVR (net of tax) 1 – (1) (0.1)p
Adjusted earnings
per share 552 23.4p 522 22.3p
Dividends
The Board has proposed a final dividend of 6.78p which
results in a full year dividend of 9.9p, an increase of 4.7%
(2012/13: 9.46p). The final dividend maintains full year dividend
cover on adjusted earnings at 2.4 times (2012/13: 2.4 times).
Going forward, the Group continues to aim to move towards a
medium-term annual dividend cover of around 2.5 times.
At this level, the Board believes the dividend will continue to
be prudently covered by earnings and free cash flow and remain
consistent with the capital needs of the business.
The final dividend for the year ended 1 February 2014 will be
paid on 16 June 2014 to shareholders on the register at close
of business on 16 May 2014, subject to approval of shareholders
at the Annual General Meeting, to be held on 12 June 2014.
A dividend reinvestment plan (DRIP) is available to shareholders
who would prefer to invest their dividends in the shares of the
Company. The shares will go ex-dividend on 14 May 2014. For
those shareholders electing to receive the DRIP the last date for
receipt of electing is 23 May 2014.
Economic returns
Management are focused on Kingfisher Economic Profit (KEP)
as a main measure of return on capital. It is used in the capital
investment process, to assess performance and drive returns in
strategic plans. KEP is derived from the concept of Economic
Value Added representing earnings after a charge for the annual
cost of capital employed in the business. Earnings are defined as
adjusted post-tax profit, excluding interest, property lease costs
and exceptional items. A charge is then deducted by applying
the weighted average cost of capital (WACC) to capital employed.
For the purposes of consistency both WACC and capital
employed are lease adjusted. Leases are capitalised based on
an estimate of their long-term property yields. In order to focus
on controllable factors both WACC and long-term property yields
are based on those in place when KEP was introduced.
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Strategic Report Governance Accounts
www.kingfisher.com
25
2013/14
£m
2012/13
£m
Increase
£m
Kingfisher Economic
Profit (KEP) 74 44 30
For comparison purposes, WACC rates and long-term yields
are based on rates that existed when the measure was
introduced in 2011.
Geographic divisional return
Kingfisher’s underlying KEP by geographic division is set out
below. The divisional invested capital excludes central goodwill
of £2.4 billion.
Sales
£bn
Proportion
of Group
sales %
Invested
Capital
(IC) £bn
Proportion
of Group
IC %
Returns £m KEP
2013/14 2012/13
UK 4.4 40% 5.9 48% 17 (5)
France 4.4 40% 2.4 20% 137 150
Other
International 2.3 20% 1.5 12% 46 37
Goodwill &
Central 2.4 20% (126) (138)
Total 11.1 12.2 74 44
Free cash flow
A reconciliation of free cash flow is set out below:
2013/14
£m
2012/13
£m
(restated)
Operating profit (before exceptional items) 746 718
Other non-cash items
(1)
265 264
Change in working capital 27 (178)
Pensions and provisions (before
exceptional items) (37) (42)
Operating cash flow 1,001 762
Net interest paid (8) (4)
Tax paid (142) (129)
Gross capital expenditure (304) (316)
Disposal of assets 12 17
Free cash flow 559 330
Dividends paid (224) (221)
Acquisition of Bricostore Romania
(including debt) (63) –
Other
(2)
(1) (10)
Share purchase for employee incentive
schemes (24) –
Net cash flow 247 99
Opening net cash/(debt) 38 (88)
Other movement including foreign
exchange (47) 27
Closing net cash 238 38
(1) Other non-cash items includes depreciation and amortisation, impairment
losses, share-based compensation charge, share of post-tax results of JVs
and associates, pension operating cost and profit/loss on retail disposals.
(2) Includes dividends received from JVs and associates, issue of shares and
exceptional items (excluding property disposals).
Net cash at the end of the year was £238 million (2012/13:
£38 million net cash).
Free cash flow of £559 million was generated in the year,
an increase of £229 million year on year primarily due to the
movement in working capital. This is a combination of LME and
week 53 impacts in the prior year, the reversal of a higher stock
position last year ahead of an early Easter and Chinese New
Year, and a higher level of showroom deposits at the year end,
following a solid kitchens, bedrooms & bathrooms trading
strategy for B&Q UK in Q4.
During the year free cash flow generated was utilised by the
dividend being increased to £224 million, the acquisition of
Bricostore Romania and an additional £24 million to acquire
6 million shares to cover existing share incentive schemes,
thereby avoiding dilution of current shareholders.
Capital expenditure
Gross capital expenditure for the year was £304 million
(2012/13: £316 million) with a further £63 million invested
on Bricostore Romania. A total of £12 million of proceeds from
disposals was received during the year (2012/13: £17 million).
The Group has a rigorous approach to capital allocation and
authorisation. The process includes:
• An annual strategic planning process based on detailed
medium-term plans for all businesses for the next three
years. This process drives the key strategic capital allocation
decisions and the output is reviewed by the Board;
• A capital approval process through a capital expenditure
committee, attended by the Group Chief Executive, Group
Finance Director, CEO Group Productivity and Development,
Group Property Director and Group General Counsel.
The committee is delegated to review all projects above
£0.75 million and to sign-off the projects between £0.75
million and £15.0 million (including the capitalised value of
lease commitments);
• Projects above £15.0 million are required to be approved
by the Board. All projects above £0.75 million are notified
to the Board;
• Clear investment criteria including KEP and NPV (Net Present
Value) and challenging hurdle rates for IRR (Internal Rate of
Return) and DPB (Discounted PayBack);
• An annual post-investment review process to undertake a
full assessment of all projects above £0.75 million which
were completed in the last 2 to 4 years. The findings of this
exercise are considered by both the capital expenditure
committee and the Board and used to inform the
assumptions for similar project proposals going forward;
• An annual review of KEP by store is performed which
drives plans to improve the returns of weaker stores, and
develop lessons from higher returning stores.
Annual Report and Accounts 2013/14
26
Strategic Report
Financial Review continued
Annual Report and Accounts 2013/14
26
Financial risk management
Kingfisher’s treasury function has primary responsibility
for managing certain financial risks to which the Group is
exposed, details of which are provided in note 24 of the
Group Financial Statements.
Management of balance sheet and liquidity
risk and financing
The Group finished the year with £238 million of net cash
on the balance sheet. However, the Group’s overall leverage is
more significant when including capitalised lease debt that in
accordance with accounting standards does not appear on the
balance sheet. The ratio of the Group’s lease adjusted net debt
(capitalising leases at 8 times annual rent) to EBITDAR is 2.3
times as at the year end. At this level the Group has financial
flexibility whilst retaining an efficient cost of capital.
A reconciliation of lease adjusted net debt to EBITDAR is set
out below:
2013/14
£m
2012/13
(restated)
£m
EBITDA 1,024 984
Property operating lease rentals 440 435
EBITDAR 1,464 1,419
Financial (net cash) (238) (38)
Pension position 100 –
Property operating lease rentals (8x)
(1)
3,520 3,480
Lease adjusted net debt 3,382 3,442
Lease adjusted net debt to EBITDAR 2.3x 2.4x
(1) Kingfisher believes 8x is a reasonable industry standard for estimating the
economic value of its leased assets.
Kingfisher aims to maintain its solid investment grade credit
rating whilst investing in the business where economic returns
are attractive and paying a healthy annual dividend to
shareholders. After satisfying these key aims and taking into
account the economic and trading outlook, any surplus capital
would be returned to shareholders.
Taking all these factors into account, in addition to increasing the
annual dividend by 5% (to an estimated £234 million) the Board
has approved a multi-year programme of additional capital
returns to shareholders, starting with around £200 million during
the financial year 2014/15. At this level we will retain flexibility to
continue reinvesting in the business, paying a healthy dividend
and capitalising on value enhancing consolidation opportunities
(as we did in Romania).
The timing and mechanism for this capital return will be kept
under review to ensure we maximise value creation for our
shareholders. Updates will be given with our interim and full
year results.
Kingfisher regularly reviews the level of cash and debt facilities
required to fund its activities. This involves preparing a prudent
cash flow forecast for the next three years, determining the
level of debt facilities required to fund the business, planning
for repayments of debt at its maturity and identifying an
appropriate amount of headroom to provide a reserve
against unexpected outflows.
Kingfisher has a £200 million committed bank facility maturing
in August 2016, which remained undrawn at the year end.
The terms of the US Private Placement note agreement and
the committed bank facility require only that the ratio of Group
operating profit, excluding exceptional items, to net interest
payable must be no less than 3:1 for the preceding 12 months
at half year and full year ends. At the year end the Group’s ratio
was significantly higher than this requirement.
The maturity profile of Kingfisher’s debt is illustrated at:
www.kingfisher.com/debtmaturity
Kingfisher deposits surplus cash with a number of banks with the
strongest short-term credit ratings and with money market funds
which have the strongest, AAA, credit rating and offer same day
liquidity. A credit limit for each bank or fund is agreed by the
Board covering the full value of deposits and the fair value of
derivative contracts. The credit risk is reduced further by
spreading the investments and derivative contracts across
several counterparties. At the year end, the Group had a total
of around £500 million of cash deposited with banks and in
money market funds. The highest cash deposit with a single
counterparty was £50 million.
The Group has entered into interest rate derivative contracts
to convert the fixed rate payable on its bonds and US Private
Placement notes to a floating rate of interest. The floating interest
rates paid by the Group under its financing arrangements are
based on LIBOR and EURIBOR plus a margin. The margins
were not changed during the year.
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Strategic Report Governance Accounts
www.kingfisher.com
27
Capital risk management
The Group’s objectives when managing capital are:
• To safeguard the Group’s ability to continue as a going
concern and retain financial flexibility in order to continue
to provide returns for shareholders and benefits for other
stakeholders; and
• To maintain a solid investment grade credit rating of BBB.
The Group manages its capital by:
• Continued focus on free cash flow generation;
• Setting the level of capital expenditure and dividend in the
context of current year and forecast free cash flow generation;
• Rigorous review of capital investments and post investment
reviews to drive better returns; and
• Monitoring the level of the Group’s financial and leasehold
debt in the context of Group performance and its credit rating.
Kingfisher Insurance Limited, a wholly owned subsidiary, is
subject to minimum capital requirements as a consequence of
its insurance activities. The Group complied with the externally
imposed capital requirements during the year.
Acquisitions
On 31 May 2013, the Group acquired 100% of Bricostore
Romania, a home improvement business operating 15 stores
including eight freeholds. Kingfisher paid £35 million of cash
consideration and acquired £7 million of cash with Bricostore
Romania. In addition, debt of £35 million was acquired with the
business, which was immediately settled, resulting in a total
amount invested of £63 million. Goodwill of £18 million has
been recognised on acquisition.
The year end results include seven months’ trading of Bricostore
Romania, in which it contributed sales of £72 million and a retail
profit of £1 million. Since acquisition, Romania traded under its
acquired brand Bricostore. In March 2014, two stores were
converted into the Brico Dépôt format.
Property
The Group owns a significant property portfolio, most of which is
used for trading purposes. A valuation was performed for internal
purposes in November 2013 with the portfolio valued by external
professional valuers. Based on this exercise, on a sale and
leaseback basis with Kingfisher in occupancy, the value of
property is £3.5 billion at year end (2012/13: £3.6 billion).
This is compared to the net book value of £2.8 billion
(2012/13: £2.9 billion) recorded in the financial statements.
Pensions
At the year end, the Group had a net deficit of £100 million
(2012/13: £nil) in relation to defined benefit pension
arrangements of which a £29 million deficit (2012/13: £71
million surplus) is in relation to the UK Scheme. The adverse
movement is driven by UK scheme actuarial losses following the
inclusion of updated membership data from the 2013 triennial
funding valuation, partially offset by employer contributions
in the year.
The approach used to prepare the pension valuation is in line with
current market practice and international accounting standards,
and has been applied consistently. This accounting valuation
is very sensitive to a number of assumptions and market rates
which are likely to fluctuate in the future. To aid understanding
of the impact that changes to the assumptions could have on the
reported UK pension position, we have included sensitivity analysis
as part of the pension disclosure in note 27 of the Group Financial
Statements. Further details of key assumptions are also contained
within the note (see page 111).
The Group has adopted a revised pensions accounting standard
in the year. This has resulted in a reclassification of £3 million
of administrative costs of running the UK scheme from interest
to retail profit in both the current and prior years.
In the prior year, and following consultation with the active
members, the UK final salary pension scheme was closed
to future benefit accrual and replaced by an enhanced
defined contribution scheme offered to all UK employees.
Auto-enrolment of eligible employees into this scheme
commenced in the year, with around two-thirds of all
UK employees now participating.
Strategic Report Approval
The Strategic Report, including the Risk report on pages
28 to 31, is approved for and on behalf of the Board by:
Sir Ian Cheshire
Group Chief Executive
24 March 2014
Annual Report and Accounts 2013/14
28
www.kingfisher.com
11
Key Performance
Indicators (KPIs)
Key future priorities
Going forward from 2014/15, we are
replacing the longer list of detailed
milestones in favour of a summarised
version that better highlights the key
wider Group priorities within the
Creating the Leader framework.
Our key priority in 2014/15 is to:
• Extend omnichannel capabilities
across the Group
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
10
Our key steps
1. Making it easier for
customers to improve
their home
2. Giving our customers
more ways to shop
What we did in 2013/14
Emphasised our affordability credentials:
• Launched ‘handy prices’ marketing campaign in B&Q
• Invested in pricing in Castorama France and Poland
• Rolled out Brico Dépôt ‘back to basics’ marketing campaign
• Extended Brico Dépôt France and Spain programme
of ‘arrivages’ (one-off special buys) to Turkey and Poland
• Launched UK Enterprise Finance Guarantee scheme
for tradesmen
Extended our omnichannel offer:
• Upgraded B&Q online offer (www.diy.com), including
20,000 extra products for home delivery (using Screwfix
omnichannel infrastructure)
• Preparatory work to extend TradePoint (B&Q’s trade-only
offer) website to main shop floor categories – e.g.
kitchens – continues
• Launched upgraded websites in Turkey, China,
Brico Dépôt France and Spain. Work to upgrade Poland’s
website continues
• Trialled ‘click & collect’ in Castorama France and in Turkey
Strategic Report
Risks
Annual Report and Account 2013/14
28
Given the scale of our businesses, the Board of directors recognises that the nature, scope and potential impact of our key business
and strategic risks are subject to constant change. As such, the Board has implemented the necessary framework to ensure that it
has sufficient visibility of the Group’s key risks and the opportunity to regularly review the adequacy and effectiveness of our mitigating
controls and strategies.
During the year the Board has also considered the nature and level of risk that we are prepared to accept in order to deliver our
business strategies and has reviewed and approved our internal statement of risk appetite. This describes both the current and
desired levels of acceptable risk, supported by high level qualitative risk statements, ensuring that risks are proactively managed
to the level desired by the Board.
The Corporate governance report on page 45 describes the systems and processes through which the directors manage and mitigate
risks. The Board considers that the principal risks to achieving its strategic aims are set out below.
Easier
Strategic aim Group risks Mitigation
Making it easier
for our customers
to improve
their home
Our ‘Easier’ initiatives fail to
deliver demand and value
due to a lack of rigorous
change management
disciplines, capabilities
and resources.
Across our markets we are committed to ensuring that our stores and online
fulfilment channels are aligned with our desire to optimise our customers’ retail
experience. To support this we continue to evolve and innovate across our
product ranges, formats and customer offer.
However, changes are only implemented once we have completed an appropriate
level of planning and testing, relative to the risk. In addition, we ensure for any
such changes that the assumptions and insight that support the introduction
of new products or services will deliver the benefits to both our customers and
our shareholders.
Giving our
customers more
ways to shop
Our investment in systems
and supply chain
platforms fails to deliver
the anticipated benefits.
We continue to invest in new systems and technologies to support the
business including:
• Warehouse management, forecasting and replenishment technologies to
ensure we maximise operational agility and optimise the flow of product in order
to meet customer demand;
• Optimising distribution and logistics platforms to ensure we can deliver products
via the most efficient routes to market;
• The delivery of leading edge web architectures and platforms to provide a
compelling online offer, including the options to deliver enhanced ‘click, pay and
collect’ functionality, across smartphone and tablet-based applications; and
• We are investing in our financial and operational systems to develop a Group-
wide IT solution across our Operating Companies.
All investments are evaluated and monitored via the project management
methodologies in place across the Operating Companies. Post investment reviews
are performed on all investments over £0.75 million after 12 months to assess the
benefits achieved (see the Financial Review on page 25 for more information).
As customers change
the way they shop we fail to
adapt our business model
to these changes.
Across our businesses we recognise both the threats and opportunities presented
by omnichannel retailing and are taking the necessary steps to ensure we remain
competitive in our respective markets.
We continue to invest in omnichannel technologies and take learnings from our
businesses which have well developed models e.g. Screwfix.
Within B&Q we are developing a platform which will be rolled out to the rest of the
Group to offer alternative channels for customers.
Our investment in the IT strategy project should provide systems and capabilities
to respond to the changing ways in which customers shop.
We are developing plans for each Operating Company to address how the business
model needs to be adapted to cope with changes in consumer behaviour in each
of our markets.
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29
Strategic Report Governance Accounts
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
12
Our key steps
3. Building innovative
common brands
4. Driving efficiency
and effectiveness
everywhere
What we did in 2013/14
Product:
• Launched energy-efficient ‘iQE’ Group brand
• Extended common paint ranges
? Rolled out ‘Colours’ Group own-brand paint into Russia and Spain
? Commenced roll out of new ‘Colours’ own-brand emulsion paint
range across B&Q UK & Ireland (in 120 stores) and Castorama
France (all 105 stores completed)
? Launched exclusive ‘Valspar’ mixing desk paint into B&Q UK
& Ireland (now in 120 stores) and China
• Launch of ‘Site’ workwear into Brico Dépôt France now planned during
2014/15 following ‘arrivages’ (one-off special buys) trial during 2013/14
• Held inaugural European product show, attended by 6,000 store and
buying colleagues from the UK and France
• Achieved 9% common (up from 8% in 2012/13) and 20% direct
sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality
over quantity
• Extended French common supplier contracts to the wider Castorama
and Brico Dépôt brands division
Efficiency:
• Upweighted distribution centre and cross-docking capability in
Poland, Spain and Turkey
• SG&A
(1)
optimisation from media buying programmes across the
UK and France. Achieved c.£40m total savings from Group SG&A
initiatives since the start of Creating the Leader
• Extended Brico Dépôt shelf-ready packaging from 20% to 32%
• Rolled out France and Spain all-staff bonus programmes to Poland
(linked to individual store sales and profit growth)
• Undertook IT process mapping analysis at Castorama France in
readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
www.kingfisher.com
29
Common
Strategic aim Group risks Mitigation
Building
innovative
common brands
We fail to unlock the
potential to generate
further shareholder value
through the optimisation
of combined purchasing
and commercial
synergies, while retaining
accountability at our
Operating Companies.
The development of common brands and synergies remains a priority across the
organisation. We aim to offer customers a product range which is differentiated
from that of our competitors through innovation and exclusivity. To increase and
maximise scale efficiencies we:
• Are carrying out customer insight research to ensure that we understand
customer buying behaviours, habits and our product insight across all of our
businesses. In addition, we are ensuring that we are able to identify specific
opportunities to drive the optimal, and most profitable, outcomes from our
common buying decisions;
• Are implementing common range reviews across our larger Operating
Companies. Performance of the ranges and brands is tracked and strategies
updated accordingly;
• Have four sourcing offices focused on selected ranges; and
• Are working with our vendors to ensure we achieve the best value for
our customers.
We fail to create enough
innovation opportunities
to sufficiently differentiate
our product offer.
We view innovation as an area of future growth. We have an innovation team
that is working with our suppliers to ensure that we develop and deliver innovative
products to our customers. We recognise that this is an area where we need to do
further work to maximise the opportunities and we are working with our Operating
Companies to put plans in place.
Expand
Strategic aim Group risks Mitigation
Growing our
presence in
existing markets
Our investments in new
store formats, customer
markets and customer
proposition strategies fail
to stimulate increased
consumer spend and do
not deliver the desired
like-for-like sales growth
in our mature markets.
Despite the ongoing challenges of global austerity programmes and their impact
on consumer confidence, we are committed to re-investing in our mature markets
to maintain market share and to ensure market leadership.
We continue to invest in our existing store portfolio while seeking to minimise its
cost base and optimise sales densities. Where there are opportunities to expand
and innovate we will do so using a combination of existing and new formats. We
will pursue low risk market entry and new flexible store format strategies based
on the utilisation of current Operating Company skills and resources. We take the
learnings from trials and ensure these are adopted across the Group in future
projects. We continue to invest in our omnichannel strategy.
Uncertainty surrounding
the resilience of the global
economy and volatility in
the eurozone continues
to impact both consumer
confidence and the
long-term sustainability
and capabilities of our
supplier base.
With continuing market volatility and uncertainty across all of the economies in
which we operate, particularly within the eurozone, we continue to monitor
potential exposures and risks and provide effective risk management solutions
to both our businesses and our strategic suppliers. These include:
• The provision of supply chain finance programmes to support strategic suppliers;
• Support from a strong portfolio of international banking partners that provide
flexibility, access to funding and reliable local retail cash and card payment
processing services;
• Diversification of cash holdings across a number of financial institutions with the
strongest short-term credit rating; and
• An appropriate and prudent mix of hedging policies, cash deposits and debt
financing to minimise the impact of foreign exchange currency volatility on
the Group.
We have also assessed a number of alternative scenarios in relation to the volatility
and uncertainty within the eurozone.
Annual Report and Accounts 2013/14
30
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
16
Our key steps
7. Developing leaders
and connecting people
8. Sustainability:
becoming Net Positive
What we did in 2013/14
People:
• Continued to extend the Kingfisher One Academy
Net Positive:
• Published first Net Positive report and appointed Richard
Gillies from Marks and Spencer Group plc as Group
Sustainability Director, to lead the Net Positive agenda
(see www.kingfisher.com/netpositive)
• Over 1,400 Kingfisher employees shared an estimated
gain of £10 million following the maturity of the ShareSave
scheme in December 2013
Strategic Report
Creating the leader
Annual Report and Accounts 2013/14
14
Our key steps
5. Growing our presence
in existing markets
6. Expanding in new and
developing markets
What we did in 2013/14
Existing markets:
• Opened 84 net new stores ahead of original target of 68
stores including UK 62 (principally Screwfix outlets), France 7,
Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
‘Koçtas¸ Fix’ outlets), representing 3% space growth
• Revamped and extended four Castorama France stores
• B&Q UK store rightsizing update
? First freehold store deal completed with a grocer last year
? Store reduced in size by 50%; sales density
improvement of 75%
? Non-operational space sold to grocer in February
2014 at a good return for £32 million
? An additional store has received planning permission
and seeking planning permission for another 16
New and developing markets:
• Bought 15 stores in Romania, which contributed an additional
2% space growth. In total, Group space growth was 5%
• Evaluated Screwfix international opportunities – announcing
a four-store pilot in Germany in summer 2014 and the launch
of a country-wide website with next-day delivery
Strategic Report
Risks continued
Annual Report and Account 2013/14
30
Expand continued
Strategic aim Group risks Mitigation
Expanding in new
and developing
markets
Our investments in
overseas expansion fail
to deliver sufficient sales
and profits.
We continually review and assess opportunities for expansion, in terms of both
online and bricks and mortar retail, across all of the territories and regions in
which we operate.
Country and market entry strategies are based on the application of a proven
operating model and supported by the Operating Company with the most relevant
experience, capabilities and capacity to successfully lead a market entry strategy.
We also ensure that any proposed acquisition or market entry strategy is subject to
an appropriate level of challenge and due diligence from both the Group Executive
and specialist Group functions which may include the Tax, Treasury, Legal, Group
Finance and Group Risk and Internal Audit functions. This due diligence is also
supported by external and independent advisers when necessary.
Following an acquisition, integration plans are prepared and monitored at
divisional and Group levels. Existing management teams are supplemented
with Group resources to monitor and assist with the integration.
We monitor the political and economic risks of operating in new and
developing markets.
One Team
Strategic aim Group risks Mitigation
Developing
leaders and
connecting
people
We do not make the
necessary investment in
our people to ensure that
we have the appropriate
calibre of staff, skills
and experience.
Across our businesses we are developing our talent, building our leadership
capability and connecting our people through intelligent networks. Specific
examples of this include:
• The continued investment in the development of our senior leaders through the
Kingfisher One Academy, including the 2020 Leadership Programme and the
development of networks across our businesses;
• Focused development activities for our store-based colleagues, including the roll
out of national apprenticeship schemes across our UK and French businesses,
and an increased focus on how we support and recognise the role of our
customer advisers across the organisation; and
• Recognition of the importance of ensuring a constant flow of developing talent
through structured graduate and management trainee programmes, providing
sustainable career development paths supported by new and innovative reward
and bonus frameworks (see www.kingfisher.com/people).
Sustainability:
Becoming
Net Positive
We fail to deliver our
sustainability targets
due to not integrating our
sustainability plan into the
day to day operations of
the business.
• Our commitment to sustainability remains one of Kingfisher’s key values and
across the organisation we continue to ensure that we engage and take advice
from our expert partners (WWF, BioRegional and Forum for the Future);
• As part of our business planning process we set and annually review
sustainability plans for each Operating Company;
• Monthly Board reports monitor the progress of our largest Operating Companies
in achieving their sustainability targets;
• Data is reported annually to the Group and signed off by the local Boards;
• Within each Operating Company responsibility has been assigned to a team or
individual for the delivery of the sustainability targets. Meetings of the Corporate
Social Responsibility teams are held twice a year to exchange best practice and
progress common projects;
• Our Net Positive Advisory Council provides an external review of our processes
as well as technical support and advice (see page 19).
www.kingfisher.com
31
Strategic Report Governance Accounts
Strategic Report
Annual Report and Accounts 2013/14
8
Our markets
We currently operate in nine
countries, spanning nearly 600
million households.
Our research shows that spending on home improvement
is a key priority for householders, making this an attractive
sector for retailers. It is also attractive because of the relatively
small number of well-known manufacturer brands. This means
a specialist home improvement retailer provides a vital role for
the consumer by offering a wide product choice and expert
advice. We can offer a high proportion of own brand product,
achieve economies of scale and have a more defensible position
against online or generalist operators when compared with
other retail segments. Read more about our business model
on pages 6 to 7.
Our strategy
Our unique contribution as a
business to our customers is
that we can harness our home
improvement experience, our
heritage as a leader in sustainability
and our international scale and
sourcing capability to bring new,
more sustainable and more
affordable products to market.
This means our customers can have better homes, the
planet’s resources can be protected and we generate value
for our people, communities and shareholders.
By also providing our customers with project advice and new
shopping channels to complement our stores, we will make
it easier for them to adapt their homes to their evolving needs.
Our shorthand for describing this purpose is Better Homes,
Better Lives.
The next phase of our development towards this vision –
Creating the Leader – builds on the success of the previous
phase known as Delivering Value, which has repositioned
Kingfisher as a stronger business in the attractive home
improvement market.
www.kingfisher.com
31
Operational Risks
Strategic aim Risk Mitigation
Pricing A lack of perceived
price competitiveness,
particularly when
compared to more
discount based or online
competitors, would affect
our ability to maintain
or grow market share.
Significant investment in pricing to reinforce and communicate our value
credentials. This is supported by:
• The use of improved customer insight and analytical tools to optimise product
ranging and pricing strategies;
• Increased margin flexibility through partnerships with strategic vendors and
the leveraging of Group buying opportunities; and
• More targeted use of online and mass media tools to communicate and
reinforce price perception (for example, price comparison websites, such as
www.kitchen-compare.com and www.bathroomcompare.com in the UK).
Key supplier
resilience
and continuity
Key product suppliers lack
the necessary resilience
or disaster recovery
capabilities to manage the
impact of ongoing global
economic volatility or the
increasing impacts of
extreme weather cycles
and patterns on their
operations and extended
supply chains.
We continue to support our strategic suppliers through a combination of
relationship management, and ongoing supplier vulnerability assessments,
supported by supplier financing programmes where appropriate.
We also seek to ensure continuity of supply through the expansion of our own
brand programmes and dual sourcing strategies where possible and commercially
viable. Ongoing investment in our sourcing offices outside of Asia, notably in
Poland and Turkey, also provides increased flexibility for our sourcing strategies.
Health & safety We fail to maintain a
safe environment for
our customers and store
colleagues, which results
in a major incident or
fatality that is directly
attributable to a failure
in our health and safety
management systems.
With 79,000 employees and millions of customers visiting our stores each week,
robust health and safety systems are a priority. The Board is committed to creating
and sustaining a safe environment for both our staff and customers and regularly
reviews and challenges health and safety performance, standards and targets
across our businesses.
As regulatory requirements vary from country to country, each Operating Company
is required to designate a director with specific responsibility for health and safety.
This person is then responsible for ensuring that a written health and safety policy
is communicated and that appropriate health and safety arrangements are in
place to protect our employees and customers and that we comply with local
regulatory requirements.
The Group Health and Safety Committee sets the policy and standards for the Group.
Compliance is monitored across our businesses through a programme of self-
certification and health and safety audits, with issues reported through local Audit
Committees and escalated to the Group Executive, Group Audit Committee or
Board where necessary (see the Governance report on page 36).
Environmental or
ethical failure
Kingfisher’s reputation
and brand are affected
by a major environmental
or ethical failure, a
significant corporate
fraud or material non-
compliance with legislative
or regulatory requirements
resulting in punitive or
custodial procedures.
Both employees and suppliers working for or with Kingfisher must conduct
themselves according to our minimum standards of ethics and behaviours as
defined by our Code of Conduct. Responsibility for compliance with our Code
of Conduct rests with each Group Operating Company Chief Executive and
appropriate resources are available to our businesses to ensure that both staff
and suppliers are aware of, and comply with, the Code and that our businesses
can manage the legislative or regulatory challenges presented by their
respective jurisdictions (see www.kingfisher.com/netpositive/code).
Annual Report and Accounts 2013/14
32
Governance
Board of directors
The Board is made up of a non-executive Chairman, four executive
directors and six non-executive directors who have overall collective
responsibility for the direction of the Company. The role and composition
of the Board is set out on page 36 of the Governance section.
Annual Report and Accounts 2013/14
32
Daniel Bernard
Chairman
Current directorships: Joined the Board as Deputy
Chairman in May 2006 before being appointed
Chairman on 3 June 2009. He is President of
Provestis, his own investment company, and since
January 2010, has been Chairman of MAF Retail
Group, Dubai. He has also been Senior Advisor of
TowerBrook Capital Partners since October 2010.
He is a non-executive director of Alcatel Lucent and
Capgemini and Phase Eight Ltd. He is also President
a member of the Advisory Board of HEC.
Expertise and experience: Daniel provides considerable
retailing experience and expertise to the Kingfisher
Board. He was Chairman and Chief Executive of
Carrefour, the Paris-based retail group and world’s
second largest retailer, from 1992 to 2005. Prior to
Carrefour, he was Chief Operating Officer of METRO,
Germany’s leading international retailer. He was
previously a non-executive director of Compagnie
de St Gobain until June 2006.
Sir Ian Cheshire
Group Chief Executive
Current directorships: Appointed to the Board in June
2000 and as Group Chief Executive in January 2008.
He is also Senior Independent Director of Whitbread
plc, lead non-executive member on the Department
for Work and Pensions Board, Chair of the Prince of
Wales’ Corporate Leaders Group on Climate Change,
and President of the Business Disability Forum. In
October 2012, Ian became the Chairman of the British
Retail Consortium.
Expertise and experience: Ian was previously
Chief Executive, B&Q UK from June 2005. He
was appointed Chief Executive International and
Development in September 2002, Chief Executive of
e-Kingfisher in May 2000 and was Group Director of
Strategy & Development. Before joining Kingfisher he
worked for a number of retail businesses including
Sears plc where he was Group Commercial Director.
Karen Witts
Group Finance Director
Current directorships: Appointed to the Board in
October 2012. She is a non-executive director
of Imperial Tobacco Group PLC.
Expertise and experience: Karen provides additional
recent relevant finance expertise to the Board. She was
previously Chief Financial Officer, Africa, Middle East,
Asia and Asia Pacific for Vodafone plc. From 1999 to
2010 she worked at BT plc, most recently as Chief
Financial Officer, BT Retail and Managing Director
Enterprises and before that as Managing Director
Operations, Openreach. She is a chartered accountant
and has experience in finance and management
roles at companies such as Paribas, Diageo, Mars
Electronics, The Observer Newspaper and Ernst
& Whinney.
Andrew Bonfield
Non-Executive Director
Current directorships: Appointed to the Board in
February 2010. He is Finance Director of National Grid
plc. He is also a committee member of the Hundred
Group of Finance Directors.
Expertise and experience: Andrew brings significant
current finance experience to the Kingfisher Board.
He was previously Chief Financial Officer of Cadbury
plc and prior to that he was Chief Financial Officer of
Bristol-Myers Squibb from 2002 to 2007, Finance
Director of BG Group plc from 2001 to 2002 and
Chief Financial Officer of SmithKline Beecham Plc
from 1999 to 2000 during an 11 year period with the
pharmaceuticals group.
Pascal Cagni
Non-Executive Director
Current directorships: Appointed to the Board in
November 2010. He is an independent director of the
supervisory board of Vivendi.
Expertise and experience: Pascal provides the Board
with expertise in the field of digital and online retailing.
He was formerly Vice President and General Manager
of Apple Europe, Middle-East, India and Africa, and
was with Apple for ten years in a variety of roles. His
previous experience includes roles at NEC, Compaq
and Booz Allen Hamilton. He has also held the position
of non-executive director on the board of Egg Banking
plc, the online banking arm of Prudential plc, from
2002 to 2006 and on the board of Atari, the computer
games company.
Clare Chapman
Non-Executive Director
Current directorships: Appointed to the Board in
December 2010. She is currently Group People
Director of BT.
Expertise and experience: Clare brings significant
human resources expertise to the Kingfisher Board.
She was previously the Director General of Workforce,
for the NHS and Social Care and was also a non-
executive director of TUI Travel plc and Chairman
of its Remuneration Committee. Her previous
experience also includes Group HR Director of Tesco
plc from 1999 to 2006 and HR Vice President of Pepsi
Cola’s West and Central European operations from
1994 to 1999.
of the HEC Business School Foundation in Paris and
Governance
Board of directors
The Board is made up of a non-executive Chairman, four executive
directors and six non-executive directors who have overall collective
responsibility for the direction of the Company. The role and composition
of the Board is set out on page 36 of the Governance section.
Annual Report and Accounts 2013/14
32
Daniel Bernard
Chairman
Current directorships: Joined the Board as Deputy
Chairman in May 2006 before being appointed
Chairman on 3 June 2009. He is President of
Provestis, his own investment company, and since
January 2010, has been Chairman of MAF Retail
Group, Dubai. He has also been Senior Advisor of
TowerBrook Capital Partners since October 2010.
He is a non-executive director of Alcatel Lucent and
Capgemini and Phase Eight Ltd. He is also President
a member of the Advisory Board of HEC.
Expertise and experience: Daniel provides considerable
retailing experience and expertise to the Kingfisher
Board. He was Chairman and Chief Executive of
Carrefour, the Paris-based retail group and world’s
second largest retailer, from 1992 to 2005. Prior to
Carrefour, he was Chief Operating Officer of METRO,
Germany’s leading international retailer. He was
previously a non-executive director of Compagnie
de St Gobain until June 2006.
Sir Ian Cheshire
Group Chief Executive
Current directorships: Appointed to the Board in June
2000 and as Group Chief Executive in January 2008.
He is also Senior Independent Director of Whitbread
plc, lead non-executive member on the Department
for Work and Pensions Board, Chair of the Prince of
Wales’ Corporate Leaders Group on Climate Change,
and President of the Business Disability Forum. In
October 2012, Ian became the Chairman of the British
Retail Consortium.
Expertise and experience: Ian was previously
Chief Executive, B&Q UK from June 2005. He
was appointed Chief Executive International and
Development in September 2002, Chief Executive of
e-Kingfisher in May 2000 and was Group Director of
Strategy & Development. Before joining Kingfisher he
worked for a number of retail businesses including
Sears plc where he was Group Commercial Director.
Karen Witts
Group Finance Director
Current directorships: Appointed to the Board in
October 2012. She is a non-executive director
of Imperial Tobacco Group PLC.
Expertise and experience: Karen provides additional
recent relevant finance expertise to the Board. She was
previously Chief Financial Officer, Africa, Middle East,
Asia and Asia Pacific for Vodafone plc. From 1999 to
2010 she worked at BT plc, most recently as Chief
Financial Officer, BT Retail and Managing Director
Enterprises and before that as Managing Director
Operations, Openreach. She is a chartered accountant
and has experience in finance and management
roles at companies such as Paribas, Diageo, Mars
Electronics, The Observer Newspaper and Ernst
& Whinney.
Andrew Bonfield
Non-Executive Director
Current directorships: Appointed to the Board in
February 2010. He is Finance Director of National Grid
plc. He is also a committee member of the Hundred
Group of Finance Directors.
Expertise and experience: Andrew brings significant
current finance experience to the Kingfisher Board.
He was previously Chief Financial Officer of Cadbury
plc and prior to that he was Chief Financial Officer of
Bristol-Myers Squibb from 2002 to 2007, Finance
Director of BG Group plc from 2001 to 2002 and
Chief Financial Officer of SmithKline Beecham Plc
from 1999 to 2000 during an 11 year period with the
pharmaceuticals group.
Pascal Cagni
Non-Executive Director
Current directorships: Appointed to the Board in
November 2010. He is an independent director of the
supervisory board of Vivendi.
Expertise and experience: Pascal provides the Board
with expertise in the field of digital and online retailing.
He was formerly Vice President and General Manager
of Apple Europe, Middle-East, India and Africa, and
was with Apple for ten years in a variety of roles. His
previous experience includes roles at NEC, Compaq
and Booz Allen Hamilton. He has also held the position
of non-executive director on the board of Egg Banking
plc, the online banking arm of Prudential plc, from
2002 to 2006 and on the board of Atari, the computer
games company.
Clare Chapman
Non-Executive Director
Current directorships: Appointed to the Board in
December 2010. She is currently Group People
Director of BT.
Expertise and experience: Clare brings significant
human resources expertise to the Kingfisher Board.
She was previously the Director General of Workforce,
for the NHS and Social Care and was also a non-
executive director of TUI Travel plc and Chairman
of its Remuneration Committee. Her previous
experience also includes Group HR Director of Tesco
plc from 1999 to 2006 and HR Vice President of Pepsi
Cola’s West and Central European operations from
1994 to 1999.
of the HEC Business School Foundation in Paris and
Strategic Report Governance Accounts
www.kingfisher.com
33
www.kingfisher.com
33
Kevin O’Byrne
CEO B&Q UK & Ireland
Current directorships: Appointed to the Board as
Group Finance Director in October 2008, and
became CEO, B&Q and Koçta s¸ brands in October
2012 responsible for the Group’s businesses in China,
Turkey, the UK and investment in Germany. He
assumed direct leadership of B&Q UK & Ireland in
October 2013, and is Deputy Chairman of Kingfisher’s
joint venture in Turkey, Koçta s¸. He was also a
director of Hornbach Holdings AG. He is the Senior
Independent Director and Chairman of the Audit
Committee of Land Securities Group plc.
Expertise and experience: Previously he was Group
Finance Director, a role he held from 2008 to 2012.
He previously worked for Dixons Retail plc from 2002
to 2008 where he was Group Finance Director. Before
this he was European Finance Director at Quaker
Oats Limited.
Philippe Tible
CEO Castorama &
Brico Dépôt brands
Current directorships: Appointed to the Board in
October 2012.
Expertise and experience: Philippe was appointed
CEO Castorama & Brico Dépôt brands after nine years
with the Group. He previously spent four years as Chief
Executive of Kingfisher France. Prior to this he spent
five years as CEO of Castorama France. He holds
responsibility for the Castorama and Brico Dépôt
businesses in France, Poland, Romania, Russia and
Spain. He previously held senior roles at DIY retailer
Leroy Merlin and furniture retailer Conforama.
Audit Committee
Remuneration Committee
Nomination Committee
See pages 35 to 68 for further details.
Anders Dahlvig
Non-Executive Director
Current directorships: Appointed to the Board in
December 2009. He is a director of Oriflame
Cosmetics AB, H&M Hennes & Mauritz AB and
Axel Johnson AB; and is Chairman of The New Wave
Group and a member of the Advisory Board of Lund
University Business School. He is also a director of
Resurs Bank AB and Pret a Manger Limited.
Expertise and experience: Anders brings extensive
commercial retailing expertise to the Board. He was
previously Chief Executive and President of The IKEA
Group from 1999 to 2009, having spent 26 years with
the company. Prior to becoming Chief Executive, he
was Vice President of IKEA Europe from 1997 to 1999
and Managing Director of IKEA UK from 1993 to 1997.
Janis Kong
Non-Executive Director
Current directorships: Appointed to the Board in
December 2006. She is a non-executive director
of Portmeirion Group PLC, NetworkRail and TUI
Travel plc. She is also a non-executive director of
Copenhagen Airports A/S.
Expertise and experience: Janis provides important
experience to the Kingfisher Board. She was previously
a non-executive director of The Royal Bank of Scotland
Group Plc and, until her retirement in March 2006,
was a director of BAA plc and Chairman of Heathrow
Airport Ltd for five years as well as being Chairman of
Heathrow Express. Prior to that she was Managing
Director of Gatwick Airport and has held a number of
operational roles within BAA during her 33-year career
with the company.
Mark Seligman
Senior Independent Director
Current directorships: Appointed to the Board in
January 2012. He is a non-executive director of BG
Group plc, where he is also Chairman of the Audit
Committee. He serves as an alternate member of the
Panel on Takeovers and Mergers, is a member of the
Regional Growth Fund advisory panel and non-
executive deputy Chairman of G4S, where he is also
Chairman of the Audit Committee.
Expertise and experience: Mark provides substantial
expertise to the Kingfisher Board in the field of finance.
He was a senior adviser at Credit Suisse. He began his
career at Price Waterhouse and spent over 30 years in
the City, including senior roles at SG Warburg, BZW
and Credit Suisse First Boston. At Credit Suisse he was
Deputy Chairman Europe from 1999 to 2005 and later
Chairman UK Investment Banking from 2003 to 2005.
Annual Report and Accounts 2013/14
34
Governance
Senior management
Annual Report and Accounts 2013/14
34
In addition to the Kingfisher plc Board, the Group Executive is
responsible for the overall strategic decision-making of the Group.
The One Team Board, made up of Operating Company CEOs
and senior directors at Group level, is responsible for implementing
the strategy and fulfilling our Better Homes, Better Lives mission.
Alp Özpamukçu
CEO, Koçtas¸
Clare Wardle
Group General Counsel
Benedikt Benenati
Group Internal
Communications Director
Tanguy Dewavrin
CEO, Castorama Poland
Ian Harding
Group Communications
Director
Pascal Gil
CEO, Brico Dépôt Spain
Christophe Mistou
Group Commercial
Sourcing Director
Andrew Livingston
CEO, Screwfix
Jacques Hayaux du Tilly
CEO, B&Q China
Sir Ian Cheshire
Group Chief Executive
Kevin O’Byrne
CEO, B&Q UK
and Ireland
Philippe Tible
CEO, Castorama
and Brico Dépôt brands
Steve Willett
CEO, Group Productivity
and Development
Guy Colleau
CEO, Group
Sourcing and Offer
Karen Witts
Group Finance Director
Group Executive
One Team Board
Richard Gillies
Group Sustainability
Director
Vincent Guffroy
CEO, Castorama Russia
Véronique Laury
CEO, Castorama France
Evelyn Gardiner
Group Human
Resources Director
Alexandre Falck
CEO, Brico Dépôt
France
Alain Souillard
CEO, Brico Dépôt
brand, International
Marc Ténart
Finance Director, Castorama
and Brico Dépôt brands
Ian Playford
Group Property Director
Strategic Report Governance Accounts
www.kingfisher.com
35
Corporate governance
www.kingfisher.com
35
Dear Shareholder
I am pleased to present the Company’s Corporate Governance
report for the year ended 1 February 2014.
Over a number of years, the Board of Kingfisher plc has put in
place a robust, efficient and effective governance framework and
associated systems by which the whole Group is governed and
reviewed. This report aims to provide a clear explanation of those
arrangements which we consider to be essential for the long-
term success of the Company and the continued promotion
of the highest standards of Corporate Governance across the
Kingfisher Group.
It is the role of the Board to support, advise and where necessary
provide appropriate challenge to the executive team. I believe
that the Kingfisher Board, with its vast experience and diversity
of expertise, assists the Company in delivering its strategy and
maximising shareholders’ long-term interests, whilst conducting
itself in line with the Group’s Code of Conduct, which mandates
minimum standards of behaviour for employees and suppliers of
the Group. Our Code of Conduct can be found within the Net
Positive section of our website www.kingfisher.com.
The Company is required to review its operations annually by
reference to the UK Corporate Governance Code (‘the Code’).
Last year I advised that the Company was confident of reporting
compliance with the revised September 2012 edition of the Code
and a statement of compliance with the Code is set out on
page 36.
During the year, we have enhanced and formalised elements
of our governance framework to ensure compliance with the
Code and also the Large and Medium-sized Companies and
Groups (Accounts and Reports) (amendment) Regulations 2013
(‘the Regulations’) which requires us to report in a different way to
previous years. The most significant reporting changes have
occurred within the Directors’ Remuneration Report and are fully
detailed within that report which can be found on pages 47 to 68.
An additional change to reporting requires a statement from the
Company’s directors that we consider the Annual Report and
Accounts, when taken as a whole, to be fair, balanced and
understandable. During the year, the Board requested that the
Audit Committee advise on the statement and conduct such
activities to support the directors in reaching that conclusion.
A fuller description of the activities of the Audit Committee in this
area can be found on pages 42 to 45, along with other additional
disclosures required in respect of how the Committee addressed
the key issues it considered during the year.
The Board constantly reviews its governance framework, adjusting
where necessary the roles, structure and accountabilities of its
mechanisms of governance. During the year, the governance
structure below the Board and primary committee level was again
reviewed to ensure the correct and accurate flow of information
and responsibility. The review included a full review of the terms
of reference of the Group Executive Committee, the Kingfisher
Capital Expenditure Committee and the Financial Initiatives,
Tax and Treasury Committee, and, where necessary, these
were amended to reflect the operations of those committees and
the authorities delegated to them. As part of the review, in order
to make the governance structure below primary committee
level more relevant and agile, the focus on trading and operational
matters was transferred to the Group Executive Committee and
the implementation of strategy is now the focus of the One Team
Board. In addition, a Health and Safety Committee, with the remit
to review health and safety matters across the Group as a whole
and better enable the sharing of best practice, was established.
A Disclosure Committee was also established to formalise the
review and verification of the Group’s full, half-year and quarterly
announcements of results.
The revised Group governance structure, together with an overview
of each of these Committees, is set out on pages 40 to 46.
Maintaining and promoting the highest standards of corporate
governance remains central to my role as Chairman and I believe
the changes implemented during the year have enhanced the
framework governing the Group’s operations. I am pleased to
endorse this Report, which I believe demonstrates how, through
its actions, the Board and its Committees fulfil their governance
responsibilities and how the Board works proactively to embed
good governance practices across the Group on an ongoing basis.
Daniel Bernard
Chairman
24 March 2014
“Maintaining and promoting the
highest standards of corporate
governance remains central to my
role as Chairman and I believe the
changes implemented during the
year have enhanced the framework
governing the Group’s operations.”
Daniel Bernard
Chairman
Annual Report and Accounts 2013/14
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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Compliance with the UK Corporate
Governance Code
Kingfisher is subject to, and has reviewed, its operations and
governance framework to ensure that it reflects the principles
of the UK Corporate Governance Code, published by the
Financial Reporting Council (the FRC) and available on their
website, www.frc.org.uk. The edition of the Code, published in
September 2012, applied throughout the financial year ended
1 February 2014. In accordance with the Listing Rules of the
UK Listing Authority, the Board confirms that, throughout the
year ended 1 February 2014, and as at the date of this report,
the Company has complied with the provisions set out in
Section 1 of the Code, save for as set out below.
Provision D.1.1 provides that grants under long-term incentive
schemes should normally be phased rather than awarded in
one large block.
As reported in our 2011/12 annual report, the Company set
stretching long-term targets for management as part of the
Creating the Leader phase of Kingfisher’s strategy. The
Remuneration Committee approved awards under the
Performance Share Plan (the ‘Plan’) of up to 500% of
base salary.
The award was higher than the normal award of 200% but
in making it the Committee took into account the fact that
no further awards would be made under the Plan until the
financial year 2014/15, and felt that it created a better focus
on a single performance period aligned to the next phase of
the Group’s strategy, rather than the more commonly used
overlapping performance periods.
Leadership
The role of the Board
The Board’s primary responsibility is to promote the long-term
success of the Company and deliver sustainable shareholder
value. The Board has ultimate responsibility for the management,
direction and performance of the Group, and leads and controls
the Group’s business. The Board is also responsible for ensuring
appropriate resources are in place to achieve its strategy and
deliver sustainable performance. Through authorities delegated
to its Committees, the Board directs and reviews the Group’s
operations within an agreed framework of controls, allowing risk
to be assessed and managed within agreed parameters. The
Board is collectively accountable to the Company’s shareholders
for the proper conduct and success of the business.
The Board’s powers are set out in the Company’s Articles of
Association, which are available to view on its website, and
may be amended by a special resolution of its members. The
Board may exercise all powers conferred on it by the Articles,
in accordance with the Companies Act 2006 and other
applicable legislation.
The Board has established a formal schedule of matters reserved
for its approval, and has delegated other specific responsibilities
to its principal committees: the Audit, Remuneration and
Nomination Committees. These are clearly defined within
the written terms of reference of the respective committees.
Information on the responsibilities and work of each of the
Board’s committees is set out on pages 42 to 68.
During the year, as part of its annual review process, the
matters reserved for the Board were reviewed, and where
necessary amended to reflect best practice. The schedule
of matters reserved for the Board includes the consideration
and approval of:
• the Group’s overall strategy, medium-term plans and
annual budgets;
• financial statements and Group dividend policy, including
recommendation of the final dividend;
• major acquisitions, disposals and capital expenditure;
• major changes to the capital structure including tax and
treasury management;
• major changes to accounting policies or practices;
• the Group’s corporate governance and compliance
arrangements;
• the system of internal control and risk management policy;
• the Group’s risk appetite statements; and
• review of management development strategy.
Composition of the Board
The Board is made up of the non-executive Chairman, four
executive directors and six non-executive directors. The
current balance of the Board’s skills, experience and knowledge,
together with regular briefings by executives below Board level,
ensures that views, perceptions and discussions are not
dominated by any one specific view. The structure, size and
composition of the Board is continually reviewed to ensure it
remains suitable for the needs of the business.
There is an established, formal, rigorous and transparent
procedure for the selection and appointment of new directors
to the Board, and this is described in the Nomination Committee
Report on page 46. At the Annual General Meeting to be held on
12 June 2014, shareholders will be asked, in accordance with
Principle B.7.1 of the Code, to re-appoint all their directors.
Role of the non-executive directors
Non-executive directors provide a strong, independent and
external insight to the Board and its Committees, and have a
wealth of experience and business knowledge from other sectors
and industries. The terms and conditions of appointment of each
of the non-executive directors are available for inspection at the
Company’s registered office and will also be available for
inspection at the Annual General Meeting.
At its meeting in January 2014, the Board considered the
independence of each of the non-executive directors (other than
the Chairman, who was deemed independent by the Board at
the date of his appointment) against the criteria specified in the
Code, and concluded that each remained fully independent of
management and free from any relationship that could interfere
with the exercise of their independent judgement.
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Role of the Senior Independent Director
Since his appointment in January 2012, Mark Seligman has
acted as Senior Independent Director (SID), supporting the
Chairman, and is available for approach or representation from
significant shareholders who feel they are unable to raise issues
with the Chairman, Group Chief Executive or Group Finance
Director. In accordance with the FRC guidelines, the role of
the SID is formally set out in writing, and available on the
Company’s website.
Roles of the Chairman and Group Chief Executive
The roles and responsibilities of the Chairman and Group
Chief Executive are separate and clearly defined. As part of
the annual review process, the written roles of the Chairman
and Group Chief Executive were reviewed to ensure they
remained compliant with, and took account of, best practice
developments, and were in line with FRC guidance. The written
roles for both are available to view on the Company’s website.
In accordance with best practice, the Chairman is responsible for
the overall operation, leadership and governance of the Board,
setting the tone and style of Board discussions, and creating the
conditions for overall Board and individual director effectiveness.
He is also responsible for ensuring that all members of the Board
develop an understanding of the views of major shareholders,
that there is an open dialogue with shareholders, and that the
Chairmen of the Board’s principal committees are available to
answer shareholder questions at the Annual General Meeting.
The Group Chief Executive is responsible for executive
management of the Group’s business, consistent with the
strategy and commercial objectives agreed by the Board.
He leads the Group Executive team in effecting decisions
of the Board and its Committees, and is responsible for the
maintenance and protection of the reputation of the Company
and its subsidiaries. The Group Chief Executive is also
responsible for promoting and conducting the affairs of the
Group with the highest standards of integrity, probity and
corporate governance.
Company Secretary
The Company Secretary acts as Secretary to the Board and its
committees and, with the consent of the Board, may delegate
responsibility for the management of the committees to other
suitably qualified staff. The Company Secretary is responsible
for ensuring that good quality information flows from executive
management to the Board and its committees and that correct
Board procedures are followed. She advises the Board on
corporate governance matters and facilitates the inductions of
new directors and assists in providing professional development
as required. All directors have access to the advice and services
of the Company Secretary, and her appointment and removal
is one of the matters reserved to the Board. The Board also
has access to the Group General Counsel for legal and
compliance advice.
Diversity on the Board
In September 2011, the Board announced its approach to
diversity. The statement, which is available on the Company’s
website, confirmed that the Board is committed to ensuring
directors of the Company possess and demonstrate a broad
balance of skills, experience, independence, knowledge and
diversity, including gender diversity. In order to maintain the
appropriate balance of skills, experience and knowledge on the
Board, the Nomination Committee considers each prospective
candidate on their individual merits, regardless of gender, age,
race, nationality, religion or disability, in the belief that balanced
and diverse Boards are effective. The Board is committed to
maximising the benefits of a diverse workforce to deliver real
sustainable benefits for the Group and its shareholders. The
Board remains committed to this statement.
Charts demonstrating the gender split at Board level, Senior
Management level, and for the workforce as a whole can be
found on page 19.
Effectiveness
Board meetings
The Board holds regular scheduled meetings throughout
the year and unscheduled supplementary meetings as
and when necessary. These meetings are structured to allow
open discussion. At each meeting the Board receives certain
regular reports which include an update from the Group Chief
Executive, current trading/finance (including liquidity) reports
from the Group Finance Director, capital expenditure approvals
and reports from the Company Secretary (including governance,
legal, insurance and risk updates), people-related updates
from the Group Human Resources Director and Net Positive
progress updates and public affairs updates from the Group
Sustainability Director.
All directors participate in discussing strategy, trading and
financial performance, and risk management of the Group.
Comprehensive briefing papers are circulated to all directors
approximately one week before each meeting in digital format.
Should a director be unable to attend a particular meeting, they
are provided with all relevant briefing papers and are given the
opportunity to discuss any issues with the Chairman or the Group
Chief Executive and, where possible, participate by telephone
for critical discussions and approvals on specific matters.
The Board generally meets at the Group’s head office in London
but holds at least one meeting each year overseas. During the
year under review, the Board held a meeting in Marseille, France
where it reviewed the Brico Dépôt and Castorama brands and
visited a number of stores in the area. It is the Board’s intention
to hold one off-site meeting within the UK in the coming year,
to receive presentations from the UK Executive team, and also
conduct at least one meeting outside the UK in a country in
which the Group operates.
The Chairman and the non-executive directors meet regularly
without executive directors being present.
The Chairman maintains regular contact with the SID.
Annual Report and Accounts 2013/14
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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Activities during the year
During the year, in addition to its regular business, the Board:
• received a progress update on the Group’s Net
Positive strategy;
• reviewed and approved the Group’s renewed IT
programme and processes;
• reviewed the Group’s risk profile and reviewed the Group
risk appetite statement;
• considered the Group’s capital structure and cash position;
• considered post-investment reviews of capital expenditure
projects over three years;
• reviewed and approved the Group’s Health and Safety
action plan for 2014;
• reviewed the Group’s anti-bribery and corruption policies
and procedures to ensure continued compliance with
the UK Bribery Act; and
• received regular strategic presentations from management and
held ‘deep dive’ discussions with management of the Group’s
Operating Companies, information technology and Group
sourcing management.
Board evaluation
To ensure that they continue to be effective and each director
remains committed to their role and has sufficient time to
manage their commitment to their roles, the Board and its
committees conduct a review of their performance each year.
In accordance with provision B.6.2. of the Code, the Board
commissioned an externally facilitated evaluation during the
year under review. The evaluation was conducted by Geoffrey
Shepheard of ICSA Board Evaluation (‘ICSA’). Mr Shepheard and
ICSA are both completely independent and, other than having
conducted a similar evaluation in 2010, have no connection with
the Company.
The evaluation was carried out in November and December
2013 and Mr Shepheard conducted one-to-one interviews with
each member of the Board, the Group Executive Committee and
the Company Secretary. Each interview lasted approximately two
hours and covered topics agreed in advance of the process with
the Chairman and Company Secretary. The topics were as
follows:
• Board responsibilities;
• Oversight;
• Board meetings;
• Support for the Board;
• Board composition;
• Working together; and
• Outcome and achievements.
As part of the interview process, interviewees were also
encouraged to raise any issues which they considered were
pertinent to the process, and following each meeting, the
interviewee was provided with a short synopsis of the facilitator’s
understanding of the interview and an opportunity for further
comment was provided.
A report on the findings of the evaluation process was
prepared by ICSA and presented to the Board at its meeting
in January 2014.
The report concluded that the review had been extensive
and the Board was assessed as being in the upper quartile
of FTSE companies on governance. The report was positive
about the overall performance of the Board and recognised
continued improvement since the last external review
conducted in 2010. No significant issues were highlighted
and the evaluation indicated that the Board continued to
work efficiently and effectively, that the contribution of each
director and their interaction with each other was good and
that the non-executive directors offered robust challenge
where appropriate.
As a result of the evaluation, a number of actions were agreed
and will be implemented in the 2014/15 financial year:
• review of format and timing of strategy days;
• review of annual standing agenda schedule for meetings of
the Nomination Committee; and
• continuing improvement of the quality of information and
papers submitted to the Board.
As part of the evaluation process, the Group Chief Executive
carried out a performance review of the executive directors.
The non-executive directors, led by the SID, conducted a
performance review of the Chairman in respect of the
financial year.
The Board has confirmed that the contribution of each of
the directors continues to be effective and that shareholders
should be supportive of their re-appointment to the Board.
The Board will continue to review its procedures, effectiveness
and development in the year ahead, and the Chairman will use
the output of the ICSA evaluation in his individual meetings with
directors during the year.
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Board and Committee meeting attendance
The following table shows the number of years each director has served on the Board as at the financial year end, and their
attendance at the scheduled Board and Committee meetings:
Tenure
in years Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Daniel Bernard 7 8/8 – 5/5 1/1
Andrew Bonfield 4 8/8 4/4 5/5 1/1
Pascal Cagni 3 8/8 – – 1/1
(1)
Clare Chapman 3 8/8 – 5/5 1/1
(1)
Ian Cheshire 13 8/8 – – –
Anders Dahlvig 4 8/8 3/4 – 1/1
Janis Kong 7 8/8 4/4 5/5 1/1
Kevin O’Byrne 5 8/8 – – –
Mark Seligman 2 8/8 4/4 – 1/1
Philippe Tible 1 8/8 – – –
Karen Witts 1 8/8 – – –
(1) Directors were not present during the part of the meeting where their own reappointment was considered.
Induction, information and professional development
All new directors appointed to the Board receive an induction
pack as part of their comprehensive induction programme
tailored to their experience, background and particular areas
of focus. The induction programme is designed to develop
directors’ knowledge and understanding of the Group’s
operations and culture.
The induction programme includes:
• individual one-to-one meetings with the Chairman, the
Group Chief Executive, the Group Finance Director and
other directors;
• site visits to the Group’s stores and those of its competitors;
• meetings with management of the Group’s Operating
Companies and other senior management; and
• if required, external training courses at the Group’s expense.
In accordance with best practice, the Chairman considers and
addresses the development needs of the Board as a whole, if
any, and ensures that each director updates their individual
skills, knowledge and expertise.
During the year, the Company Secretary arranged for the Group’s
corporate lawyers to provide an update session on the duties and
responsibilities of directors of a UK listed company. Amongst
other topics, the training covered Listing Rules compliance and
the control and release of inside information, and provided case
studies and practical situations for the directors to consider.
Detailed updates have also been provided on the new reporting
requirements contained within this year’s Annual Report and
Accounts, and, in particular, the new remuneration regulations
and the fair, balanced and understandable statement directors
have been required to make.
Subsequent training in specific aspects of the Group’s
businesses is provided to directors, when requested, or regularly
as part of site visits. Directors are briefed on issues at Board and
Committee meetings and have full and timely access to relevant
information ahead of each meeting.
The Board also receives regular reports and feedback from
discussions with the Company’s institutional shareholders and
are informed of any issues or concerns raised by them. This
process allows directors to develop necessary understanding of
the views of these shareholders and also enables the Board to
judge whether investors have a sufficient understanding of the
Group’s objectives. In addition to planned development and
briefings, each director is expected to take responsibility for
identifying their own individual needs and to take necessary
steps to ensure that they are adequately informed about the
Group and their responsibilities as a director. The Board is
confident that all its members have the requisite knowledge,
ability and experience to perform the functions required
of the directors of a listed company. There is also an agreed
procedure whereby directors may take independent professional
advice at the Group’s expense in the furtherance of their duties.
Conflicts of interest
Each director has a duty under the Companies Act 2006 to avoid
a situation where he or she may have a direct or indirect interest
that conflicts with the interests of the Company. The Company
has robust procedures in place to identify, authorise and manage
such conflicts of interest, and these procedures have operated
effectively during the year.
A register of directors’ situational and transactional conflicts is
maintained by the Company Secretary and reviewed by the
Board on a regular basis and directors have a continuing duty
to update the Board with any changes to their conflicts of
interest. Following review, the Board confirmed that there
were no situations of which they were aware which would, or
potentially could, give rise to conflicts with the interests of the
Company, other than those that might arise from directors’
other appointments, which are set out in the directors’
biographies on pages 32 to 33.
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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Relations with shareholders
The Company is committed to communicating its strategy
and activities clearly to its shareholders and, to that end,
maintains an active dialogue with investors through a planned
programme of investor relations activities. The investor relations
programme includes:
• formal presentations of preliminary and interim results;
• Q1, Q2 pre-close and Q3 trading statements with conference
calls at Q2 and Q3;
• regular meetings between institutional investors and senior
management to ensure that the investor community receives
a balanced and complete view of the Group’s performance
and the issues faced by the Group;
• hosting investors’ and analysts’ sessions at which senior
managers from relevant Operating Companies deliver
presentations which provide an overview of their individual
businesses;
• responding to enquiries from shareholders through the
Company’s investor relations team;
• regular meetings between institutional investors and
analysts and the Group Chief Executive and Group
Finance Director to discuss business performance; and
• a comprehensive investor relations section on the
Company’s website.
The Chairman, the Senior Independent Director and the
chairmen of the Board’s committees are available to meet major
investors on request. The Senior Independent Director has a
specific responsibility to be available to shareholders who have
concerns, and for whom contact with the Chairman, Group Chief
Executive or Group Finance Director has either failed to resolve
their concerns, or for whom such contact is inappropriate.
The Chairman of the Remuneration Committee consulted with
major shareholders on the comprehensive review of the
Company’s remuneration arrangements and took on board their
views when proposing the design and policy changes detailed
within the Directors’ Remuneration Report on pages 47 to 68.
Annual General Meeting
The principal means of communication with private investors is
by electronic communications and through the Annual General
Meeting, which is attended by all the Company’s directors, and
allows all shareholders present the opportunity to question the
Chairman and the directors, as well as the chairmen of the
Board’s Committees. After the Annual General Meeting,
shareholders have the opportunity to meet informally with
directors. A summary business presentation is given at the
Annual General Meeting before the Chairman deals with the
formal business of the meeting. At the Annual General Meeting
in June 2014, the Chairman will use his discretion to call for
a poll on all resolutions. The results of the poll in relation to
all resolutions will be disclosed to those in attendance at the
meeting, published on the Company’s website and announced
to the London Stock Exchange shortly after the conclusion of
the Annual General Meeting.
Committees
The Board has delegated authority to its principal committees to
carry out certain tasks as defined in each committee’s respective
terms of reference. The written terms of reference in respect of
the Audit, Remuneration and Nomination Committees are
available on the Company’s website. The Board is satisfied that
the terms of reference for each of these committees satisfy the
requirements of the Code. The terms of reference of the principal
committees are reviewed on an ongoing basis.
The minutes of committee meetings are made available to all
directors on a timely basis. In addition, at each Board meeting,
the chairmen of the principal committees provide the Board with
a brief synopsis of the work carried out by their committee, if any,
between Board meetings.
In addition to the principal committees, the Board is supported
by the work of the Group Executive Committee and its
subcommittees. Together these committees form a fundamental
element of the Company’s corporate governance framework.
The Group’s governance structure and a brief explanation of the
work of the Group Executive Committee and the other
management committees is set out below:
Group Executive
Committee
Organisation and Governance Structure
Board
Group Health and
Safety Committee
One Team
Board
Audit
Committee
Disclosure
Committee
Remuneration
Committee
Nomination
Committee
King?sher Capital
Expenditure
Committee
Financial Initiatives,
Tax & Treasury
Committee
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Group Executive Committee
The responsibilities, structure and composition of the Group
Executive Committee were reviewed during the year. The
Committee consists of the executive directors, the CEO Group
Productivity and Development, and the CEO Group Sourcing and
Offer. The Committee meets formally ten times a year under the
chairmanship of the Group Chief Executive. The members’
details are set out on page 34.
The Committee’s primary focus is the strategic direction of the
Group. In addition, the Committee monitors top talent within the
business and reviews key items requiring formal Board approval,
including dividend planning, key projects and strategic capital
expenditure decisions.
In accordance with its formal terms of reference, the Group
Executive Committee is also responsible for reviewing and
making recommendations to the Board on:
• strategic and business plans of individual businesses;
• the Group’s capital structure and funding;
• strategic capital expenditure proposals, major acquisitions or
disposals of businesses;
• the Group’s key risks;
• management development and senior executive succession
plans; and
• the Group’s Net Positive programme.
During the year, the Committee met ten times and, in addition
to its standing agenda, reviewed:
• the Group’s branding strategies and Group procurement
and sourcing arrangements;
• operating budgets and monthly trading performance;
• the Group’s IT strategy and planning;
• the strategy for embedding sustainability into Group
behaviours; and
• HR proposals for management development and
succession planning.
One Team Board
The One Team Board consists of the Group Executive
Committee, the CEOs of each of the Group’s Operating
Companies and other senior Group employees who report
directly to members of the Group Executive Committee. The
primary purpose of the Board, which meets four times a year, is
the implementation of Group Strategy and the day to day
management of the Group’s businesses. At its meetings, the One
Team Board considers performance against strategy and budget
and reviews Group-wide people-related activities.
Kingfisher Capital Expenditure Committee
The Capital Expenditure Committee is responsible for reviewing
and approving all capital expenditure projects relating to property
and non-property proposals in excess of an agreed threshold of
£0.75m, which is reviewed periodically.
The decisions of the Committee are reported to the Board
following each meeting, and the Committee will review and make
recommendations to the Board regarding all projects exceeding
its agreed approval threshold of £15m. The Committee
comprises the Group Chief Executive, Group Finance Director,
Group Property Director, CEO Group Productivity and
Development, the Group General Counsel, and the Head of
Property Finance.
Financial Initiatives, Tax and Treasury Committee
The primary purpose of the Committee is to monitor compliance
with policies and control issues relating to Group Finance, and
to review key proposals from Group Finance, Treasury, Tax
and Secretariat functions, and, where appropriate, recommend
certain initiatives for approval of the Board. The Committee
comprises the Group Finance Director, Group Finance and
Planning Director, Group Treasurer, Group Tax Director,
Head of Group Pensions, Group General Counsel, Company
Secretary and Group Audit and Risk Management Director.
Disclosure Committee
The primary purpose of the Committee is to ensure that
information to be disclosed by the Company in its reports is
properly identified, recorded, processed, summarised and
reported to senior management of the Company and to the Audit
Committee. The Committee assists in ensuring that disclosures
fairly represent the financial position of the Company and the
Group and, in the case of the Annual Report and Accounts,
ensure that when taken as a whole, they are fair, balanced and
understandable and provide shareholders with the information
needed to assess performance, business model and strategy.
The Committee comprises the Group Finance Director, Group
Finance and Planning Director, Group Company Secretary,
Group Chief Accountant, Group Communications Director
and Group General Counsel.
Group Health and Safety Committee
The Committee’s primary purpose is to review the management
of health and safety risks across the Group and monitor
performance on, and compliance with, Group policies,
procedures and practices in relation to all aspects of health
and safety with the aim of providing safe environments for
employees, customers, suppliers and contractors and driving
continuous improvements. The Committee comprises the Group
General Counsel, the Director of Risk & Compliance, a regional
representative of each of Kingfisher’s Divisions and the Group
Property Services Director. The Group Finance Director has Board
responsibility for health and safety and attends meetings of the
Committee on a regular basis and delegates day to day oversight
to the Group General Counsel as Chairman of the Committee.
Details of each of the Board’s principal committees, including
membership, are set out in the following reports.
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
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Audit Committee Report
Andrew Bonfield
Dear Shareholder
I am pleased to present the report of the Audit Committee for
2013/14.
During the year under review, the Committee was required
to carry out its duties in line with the revised UK Corporate
Governance Code (‘the Code’). The Committee reviewed its
operations in relation to the Code and where necessary amended
its actions and terms of reference to reflect any changes.
Last year, in anticipation of the changes to the Code, this report
included enhanced disclosure in a number of areas, including
the assessment of the effectiveness of the external auditors
and the external audit process. In this report the Committee
is required to include a description of those significant issues
considered by it during the year and, as such, further detail is
provided later in this report.
The Board has asked the Committee to oversee the process for
determining whether the Annual Report and Accounts, when
taken as a whole, is fair, balanced and understandable, and
further description of this process is also contained later in
the report.
The Committee is appointed by the Board from amongst its
non-executive directors, and its principal duties are to provide
effective oversight and governance of the internal control and
risk management processes of the Company, to review the
financial statements and related accounting policies, review the
effectiveness of the internal and external audit functions and
provide updates and recommendations to the Board.
In addition to the activities outlined above, during the year, the
Committee continued the analysis of the Company’s risks and
associated mitigating controls and focused on compliance,
financial governance and internal audit functions. It maintained
its good working relationship with the Group Audit and Risk
Management Director, the Group Finance and Planning Director,
the Company Secretary and the Group’s external auditor, Deloitte
LLP. The Committee maintained, reviewed and where necessary
amended its standing agenda, which is linked to the Group’s
financial calendars.
In order to improve the understanding of their operations, during
the year the Committee received in-depth presentations from
management of the Group’s Operating Companies, including
the key strategic risks impacting each business. The Committee
considered and reviewed the Group’s adequate procedures
in relation to bribery and corruption, the provision of a
whistleblowing service and approved accounting judgements
in relation to the Group’s investment in Hornbach.
A fuller description of the operations of the Committee is set
out below. I will be available at the Annual General Meeting to
answer any questions about the work of the Committee.
For and on behalf of the Committee
Andrew Bonfield
Chairman of the Audit Committee
24 March 2014
Committee composition
The Audit Committee comprises four non-executive directors:
• Andrew Bonfield (Chairman)
• Anders Dahlvig
• Janis Kong
• Mark Seligman
All Committee members are considered independent in
accordance with provision B.1.1 of the UK Corporate
Governance Code.
Audit Committee meeting attendance
From Attendance
Andrew Bonfield (Chairman) 11/02/2010 4 of 4
Anders Dahlvig 16/12/2009 3 of 4
Janis Kong 11/02/2011 4 of 4
Mark Seligman 01/01/2012 4 of 4
Duties
In accordance with its terms of reference, the Audit Committee
is required, amongst other things, to:
• monitor the integrity of the financial statements of the Group;
• review, understand and evaluate the Group’s internal financial
risk, and other internal controls and their associated systems;
• monitor and review the effectiveness of the Group’s internal
audit function on an annual basis;
• oversee the relationship with the external auditor,
making recommendations to the Board in relation to their
appointment, remuneration and terms of engagement;
• agree the scope of both the external and internal auditor’s
annual audit programme and review the output; and
• monitor and review the external auditor’s independence,
objectivity and effectiveness and to approve the policy
on the engagement of the external auditor to supply
non-audit services.
The Committee’s terms of reference were reviewed during the
year and following amendment to reflect the changes to the
Code, in particular in relation to oversight of the fair, balanced
and understandable nature of content in the Annual Report
and Accounts, are considered fit for purpose and reflect best
practice. The terms of reference are available on the Company’s
website (www.kingfisher.com).
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43
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43
Governance
In accordance with the requirements of provision C.3.1 of the
UK Corporate Governance Code, Andrew Bonfield is designated
as the Committee member with recent and relevant financial
experience. All other members of the Audit Committee are
deemed to have the necessary ability and experience
to understand financial statements. The attendance by
members at Committee meetings is set out on page 42.
All members of the Committee receive appropriate induction,
in addition to the induction which all new directors receive.
The induction programme includes an overview of the business,
its financial dynamics and risks. New Committee members
also obtain access to the Group’s operations and staff, and
all members of the Committee undertake ongoing training
as required.
The Committee is required, under its terms of reference, to
meet at least three times a year. During the year, the Committee
met four times. The Committee has a standing agenda linked to
events in the Group’s financial calendar for consideration at each
meeting, and within the annual audit cycle, to ensure that its
work is in line with the requirements of the Code. At the invitation
of the Committee, the Chairman of the Board and the Group
Chief Executive attended all meetings, as did the Group Finance
Director, Group Audit and Risk Management Director, Group
Finance and Planning Director and the external auditor. Private
meetings were also held with the external and internal auditors
at which management were not present.
The effectiveness of the Audit Committee was considered as
part of the external Board evaluation detailed on page 38.
At its meeting in January 2014, the Committee considered the
contents of the review and concluded that the evaluation had
found the Committee to operate effectively and provide robust
challenge to the business. It was agreed that no specific actions
were required by the Committee as a result of the review.
Detailed below is the key work undertaken by the Committee
during the year under review and up to the date of this
Annual Report.
Activities of the Audit Committee during the year
Internal controls and risk
The Committee received and considered reports during the
year from the Group’s external auditor, Deloitte LLP, and the
Group’s internal audit function on the work they had undertaken
in reviewing and auditing the Group, in order to assess the
quality and effectiveness of the internal control system.
The Committee considered reports on the output from the
Group-wide process used to identify, evaluate and mitigate
risks and reviewed the annual report on the Group’s systems of
internal control and their effectiveness, and reported the results
of the review to the Board. Further information on the Group’s
risk management and internal control procedures can be found
on page 45.
As part of the Committee’s continuing programme to increase
its awareness of the Group’s operations and to understand the
implementation of Operating Company control processes,
the Committee met with, and received presentations from,
the senior management of Operating Companies in the UK
(B&Q and Screwfix), China, Russia, Turkey, Poland and
Romania. The significant matters the Committee considered
in the year included:
• Internal audit perform store audits in each of our Operating
Companies. As part of this work, control issues relating to
health and safety processes were identified across the Group.
The issues have been isolated instances of non-compliance
with our health and safety procedures. Action plans have
been put in place to address these issues. An initiative has
also been launched by the Group Chief Executive to raise
awareness of the importance of health and safety and how
non-compliance will not be tolerated. This is supported by
the Group Health and Safety Committee. The Committee
was satisfied that the necessary steps were being taken to
improve the standards of health and safety across the Group.
• several control issues were raised in B&Q China during the
year in relation to non-compliance with health and safety
policies, compliance with new social payment regulations and
store operational controls. The Committee considered papers
detailing the steps being taken locally and at Group level to
improve the situation. Project teams have been established
to address these issues and these are supported by Group
resources. The Committee concluded that the issues would be
rectified by rigorous control of process management and the
monitoring of the projects by fortnightly governance meetings.
Progress is reported to the Committee regularly.
In addition, the Committee continued to monitor the progress
on the standardisation and improvement of the Group’s internal
control processes, in a number of key areas.
The Committee reviewed the operation of the Group
whistleblowing helpline which allows employees within the
Group and its suppliers to make disclosures about alleged
financial and operational improprieties. The ‘SpeakUp’
service was reviewed along with arrangements to acknowledge,
investigate and close down reports at the Committee’s meeting
in January 2014 and, having considered the output from the
service, and the number, location and type of incidents reported,
the Committee concluded that the Group continued to maintain
adequate mechanisms for recording disclosures.
Financial reporting and significant financial issues
During the year, the Committee formally reviewed the
Company’s annual and interim financial statements and
associated announcements. The reviews considered significant
accounting principles, policies and practices and their
appropriateness, financial reporting issues and significant
judgements made. The Committee also considered whether
the 2013/14 Annual Report and Accounts are fair, balanced
and understandable, having received input and guidance from
the Disclosure Committee.
Annual Report and Accounts 2013/14
44
Governance
Corporate governance continued
Annual Report and Accounts 2013/14
44
In conducting these reviews, the Committee considered the
work and recommendations of the Group finance function
and received reports from the Group’s external auditor on their
findings, including any control observations relevant to their
audit work. The significant reporting matters the Committee
considered in the year are detailed below:
• the Committee considered the carrying value of goodwill to
determine whether any impairment had been suffered. The
Committee reviewed the significant financial assumptions
used, including validity of cash flow projections and the
selection of appropriate discount and long-term growth rates;
• the Committee considered the treatment of exceptional items,
which are presented as exceptional to help provide an
indication of the Group’s underlying business performance;
• the Committee reviewed significant judgemental provisions
and accruals held, including those in respect of tax, legal,
property and inventory risks; and
• the Committee considered the judgements made by
management in concluding that the Group ceased to have
the ability to exercise significant influence over the Hornbach
businesses. The Committee was satisfied that this conclusion,
the balance sheet classification and measurement, and the
resulting net exceptional loss were appropriate.
Group Internal Audit
The Committee considered and reviewed updates from the
internal audit programme at each of its meetings during the
year. Reports from the internal audit function to the Committee
included updates on the Group’s risk management systems,
findings from reviews, and reviews of the remit, organisation,
annual plan and resources of the internal audit function. During
the year, the Committee reviewed the effectiveness of the internal
audit function. The review was conducted using an internal
questionnaire with input from the function’s key stakeholders
within the Group, in addition to the Committee. No significant
issues were highlighted by the review.
External Audit
During the year, the Committee agreed the approach and
scope of the audit work to be undertaken by the external auditor,
Deloitte LLP, and undertook an assessment of their qualification,
expertise and resources, independence and the effectiveness of
the external audit process. The Committee also reviewed and
agreed the terms of engagement, the fees, and areas of
responsibility and the work to be undertaken by the external
auditor, and agreed the fees payable in respect of the 2013/14
audit work. Details of the amounts paid to the external auditor
for their audit services are given in note 7 to the accounts on
page 92. In addition, the external auditor provided the
Committee with a schedule of each matter on which there was
an initial difference between them and management in relation
to the accounting treatment, and with the final decisions on
these issues.
During the year, the Committee considered the effectiveness
and independence of the external auditor. In consideration
of its effectiveness, the Committee reviewed the experience
and expertise of the audit team, the fulfilment of the agreed
audit plan and any variations to it, feedback from the Group’s
businesses and the contents of the external audit report.
In considering the independence of the external auditor, the
Committee received a statement of independence from the
auditor, a report describing their arrangements to identify,
report and manage any conflicts of interest, and reviewed
the extent of non-audit services provided to the Group. The
Committee concluded that it is satisfied with the effectiveness
and independence of the external auditor.
In addition to their statutory duties, the services of Deloitte LLP
are also engaged where, as a result of their position as external
auditor, they either must, or are best placed to, perform the work
in question. This is primarily work in relation to matters such as
shareholder circulars, Group borrowings, tax advice, regulatory
filings and certain business acquisitions and disposals. Other
work is awarded on the basis of competitive tendering.
The Committee reviewed and approved the scope of non-audit
services provided and proposed by the external auditor to ensure
that there was no impairment of independence and objectivity,
and subsequently monitored the non-audit work performed to
ensure it was within policy guidelines.
The Group has a policy on the use of its external auditor for
non-audit work and this is regularly reviewed. The external
auditor is precluded from engaging in non-audit services that
would compromise their independence or violate any laws or
regulations affecting their appointment as external auditor.
The approval of the Chairman of the Committee is required
prior to awarding contracts for non-audit services to the external
auditor, where in excess of specified amounts. The Group’s
policy on the use of the external auditor for non-audit work
can be found on the Group’s website.
During the year, Deloitte LLP charged the Group £1.8m
(2012/13: £1.6m) for audit and audit-related services and a
further £0.4m (2012/13: £0.4m) for non-audit services.
The Committee reviews and makes recommendations to the
Board with regard to the reappointment of the external auditor.
In doing so, the Committee takes into account auditor
independence and audit partner rotation. Deloitte LLP were
appointed as external auditor in 2009/10 following a formal
tender process. Panos Kakoullis was appointed lead audit
partner at that time and will step down following the conclusion
of the 2013/14 audit process, when he will be replaced by
Richard Muschamp. Richard will serve as lead audit partner
until the external audit contract is put out to tender, which will
be in 2019 at the latest. During the year under review, Deloitte
also replaced the lead audit partner for B&Q UK. The Committee
noted provision C.3.7 of the Code in relation to audit tendering
and has taken into account the UK Competition Commission’s
recent decision to introduce mandatory audit tendering at
ten-year intervals, in making the decision to tender the external
audit contract by 2019 at the latest.
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The Committee has recommended to the Board that Deloitte
LLP be proposed for re-appointment by shareholders as the
Company’s external auditor at the forthcoming Annual General
Meeting. As a result of its work during the year, the Committee
has concluded that it acted in accordance with its terms of
reference and has ensured the independence and objectivity
of the external auditor.
Accountability, Risk Management and Internal Control
Internal control
The Board has overall responsibility for the Group’s system of
internal control, which is designed to safeguard the assets of the
Group and ensure the reliability of the financial information for
both internal use and external publication, and to comply with
the Turnbull guidance and the Code.
The Board confirms that it has reviewed the effectiveness of
the internal control system, including financial, operational and
compliance controls and risk management in accordance with
the Code, for the period from 2 February 2013 to the date of
approval of this Annual Report and Accounts 2013/14.
If significant losses were to be incurred during the year as a
result of a failure of controls, a detailed report would be provided
to the Audit Committee and the Board. The Board confirms that
no significant weaknesses were identified in relation to the review
carried out during the year and therefore, no remedial action
was required.
The Board has approved a set of policies, procedures and
frameworks for effective internal control. The Group has
procedures for the delegation of authorities for significant
matters, to ensure approval is sought at the appropriate level.
These procedures are subject to regular review and provide an
ongoing process for identifying, evaluating and managing the
significant risks faced by the Group. Such a system is designed
to manage rather than eliminate the risk of failure to achieve
business objectives and can provide only reasonable and not
absolute assurance against material misstatement or loss.
The responsibility for designing, operating and monitoring the
system and the maintenance of effective control is delegated to
the management of each of the Group’s Operating Companies.
The Group’s risk management and reporting process helps
Group management to identify, assess, prioritise and mitigate
risk. Management at each Operating Company has responsibility
for the identification and evaluation of the significant risks
applicable to their business and any mitigating actions to be
taken. The Group Executive Committee reviews, identifies and
evaluates the risks that are significant at a Group level, as well
as the mitigating actions against those risks. These are then
considered by the Board. The types of risks identified included
both strategic and material operational risks and are detailed on
pages 28 to 31 of the report.
Management is required to apply judgement in evaluating the
risks facing the Group in achieving its objectives, in determining
the risks that are considered acceptable to bear, in assessing the
likelihood of those risks materialising, in identifying the Group’s
ability to reduce the incidence and impact on the business of
risks that do materialise, and in ensuring the costs of operating
particular controls are proportionate to the benefit provided.
Monitoring
There are clear processes for controlling and monitoring the
system of internal control and reporting any significant control
failings or weaknesses together with details of corrective action.
These include:
• an annual planning process and regular financial reporting,
comparing results with plan and the previous year on a
monthly and cumulative basis;
• written reports from the Group Chief Executive and Group
Finance Director submitted at each Board meeting;
• Operating Company management report formally to the
Audit Committee on a regular basis on the control environment
in their business and actions taken to maintain or improve
the environment as appropriate; and
• reports and presentations to the Board on certain areas
of specialist risk. These include treasury, insurance, tax
and pensions.
A formal bi-annual certification is provided by the CEO and
Finance Director of each Operating Company stating that
appropriate internal controls were in operation and confirming
compliance with Group policies and procedures. Any
weaknesses are highlighted and the results are reviewed by
Operating Company management, the Group Audit and Risk
Management Director, the Group Finance and Planning Director,
the Audit Committee and the Board. The internal audit function
monitors and selectively checks the results of this exercise,
ensuring that representations made are consistent with the
results of its work during the year.
The internal audit function follows a planned programme of
reviews that are aligned to the Group’s risks. The function:
• works with the Operating Companies to develop, improve
and embed risk management tools and processes into their
business operations;
• reports directly to the Audit Committee and has the authority
to review any relevant part of the Group;
• oversees the operation of the individual Operating Companies’
audit committees; and
• provides the Audit Committee and the Board with objective
assurance on the control environment across the Group.
Risk appetite
During the year, the Board also considered the nature and level
of risk that it was prepared to accept in order to deliver business
strategies, and has reviewed and approved the Group’s internal
statement of risk appetite. This describes both the current
and desired levels of acceptable risk, supported by high level
qualitative risk statements, ensuring that risks are proactively
managed to the level desired by the Board.
Annual Report and Accounts 2013/14
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Governance
Corporate governance continued
Annual Report and Accounts 2013/14
46
Nomination Committee Report
Daniel Bernard
Committee composition
The Committee comprises the Chairman and all the non-
executive directors and meets periodically as required. External
advisers may be invited to attend meetings when particular
issues are to be considered. During the year the Committee
met once. The members of the Nomination Committee are:
• Daniel Bernard (Chairman)
• Andrew Bonfield
• Pascal Cagni
• Clare Chapman
• Anders Dahlvig
• Janis Kong
• Mark Seligman
Nomination Committee meeting attendance
From Attendance
Daniel Bernard (Chairman) 24/05/2006 1/1
Andrew Bonfield 11/02/2010 1/1
Pascal Cagni 17/11/2010 1/1
Clare Chapman 02/12/2010 1/1
Anders Dahlvig 19/12/2009 1/1
Janis Kong 08/12/2006 1/1
Mark Seligman 01/01/2012 1/1
Directors did not attend those parts of the meeting where their own reappointment
was considered.
Duties
The primary objective of the Nomination Committee is to review
the composition of the Board and plan for its refreshment as
applicable with regard to composition, balance and structure.
The Committee is also asked to lead, on behalf of the Board,
the selection process for new Board appointments and to
make recommendations in respect of such appointments
while maintaining an appropriate balance of diversity and
skills. In accordance with its terms of reference, the Nomination
Committee is required to:
• review the structure, size and composition of the Board
and make recommendations to the Board, as appropriate;
• identify the balance of skills, knowledge, diversity
and experience on the Board and nominate candidates
to fill Board vacancies;
• review the time commitment required from the
non-executive directors;
• consider succession planning, taking into account the
challenges and opportunities facing the Group and the
future skills and expertise needed on the Board; and
• review the leadership needs of the organisation, both
executive and non-executive, with a view to ensuring the
continued ability of the organisation to compete effectively
in the marketplace.
The Committee’s terms of reference were reviewed during
the year and were amended in line with best practice and are
available on the Company’s website (www.kingfisher.com).
Activities during the year
During the year, the Committee considered the reappointment
of Clare Chapman and Pascal Cagni, following the expiry of
their initial three-year terms of appointment as directors. The
Committee concluded that both directors continued to provide
the necessary balance of skills and experience to the Board,
including considerable Human Resources and Remuneration
experience, and in-depth IT and ecommerce knowledge. The
Committee therefore recommended to the Board that each be
reappointed as a director of the Company for an additional
three-year term.
At its meeting in October 2013, the Committee considered
a talent and succession review presented by the Group HR
Director, which outlined succession planning and talent pipeline
considerations across the entire Kingfisher Group in support
of the Group’s Creating the Leader strategy.
Following the reappointment of Ms Chapman and Mr Cagni,
and a review of the Board and its Committees, the Committee
firmly believes that the current composition represents a strong,
well balanced and diverse Board. The Board membership
is made up of specialists in retail, technology, finance and
human resources, and possesses considerable knowledge,
experience and skills to meet the current and future
requirements of the Group. The Chairman will be available
at the Annual General Meeting to answer any questions about
the work of the Committee.
Daniel Bernard
Chairman of the Nomination Committee
24 March 2014
Strategic Report Governance Accounts
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Directors’ Remuneration Report
www.kingfisher.com
47
Annual Statement from the Chairman
of the Remuneration Committee
Dear Shareholder
I am pleased to present the 2013/14 Directors’ Remuneration
Report on behalf of the Board.
As required by the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations
2013, the rest of this remuneration report is split into two sections:
• The directors’ remuneration policy which sets out the
Company’s proposed policy on directors’ remuneration for
the three years from the 2014 Annual General Meeting (the
‘Remuneration Policy’). The Remuneration Policy will be
subject to a binding shareholder vote at this year’s AGM
and thereafter at least every three years.
• The annual report on remuneration sets out the payments
made to directors and details the link between Group
performance and remuneration for the 2013/14 financial
year (the ‘Annual Remuneration Report’). The Annual
Remuneration Report together with this letter will be
subject to an advisory shareholder vote at this year’s AGM.
Changes to the layout of the Directors’ Remuneration Report
are intended to improve transparency and demonstrate how the
remuneration arrangements are aligned with the Group’s strategy.
Outcome 2013/14
2013/14 proved to be another challenging year for retailers but
although the economic environment was difficult, Kingfisher
made solid progress, with profit increased and like-for-like sales
growth delivered. Further information regarding the Group’s
performance during the year can be found in the Strategic
Report on pages 1 to 31. This results in bonus payments being
awarded for performance between threshold and on-target
levels. As a result, bonuses in respect of performance were
between 24% and 36% of maximum which were similar to the
previous year.
The 2011 Performance Share Plan vesting percentage is
determined by the 2013/14 EPS result and the 2011/12 to
2013/14 cumulative KEP result. EPS was below the required
threshold but KEP was within the target range, resulting in an
overall award of 31% of maximum. The awards will vest in
two equal tranches in June 2014 and June 2015.
2013/14 Remuneration Review
During the year, the Committee conducted a thorough and
comprehensive review of the Group’s executive remuneration
arrangements. The focus of this review was to ensure that the
overall executive remuneration structure supports the Creating
the Leader strategy and is aligned to long-term shareholder
value creation. The review also considered the structure of a
new long-term incentive plan to replace the Kingfisher Incentive
Share Scheme and the Performance Share Plan. The rules of
the new plan will be submitted to shareholders for approval at
the AGM in 2014.
Our major shareholders were consulted as part of this review
to ensure that we took on board their views on the proposed
changes to our remuneration structure.
Following this thorough review, the Committee is satisfied
that the Group’s executive remuneration arrangements create
a strong link between competitive pay and performance. The
Committee agreed to propose a number of changes to the
Group’s executive remuneration policy to strengthen alignment
with long-term sustainable performance by increasing deferral,
extending malus provisions and raising shareholding
requirements. The specific changes are:
• Annual bonus deferral for executive directors to be increased
to 50% (from 33%);
• Reverting to annual grants under the proposed new
long-term incentive plan, at the level of 200% of salary, with
the flexibility in future to award up to 250% for the Group
Chief Executive, subject to stretching performance targets;
• Increased shareholding requirements – to 300% of salary
for the Group Chief Executive and 200% of salary for other
executive directors; and
• Extension of malus provisions to include instances of
reputational damage linked to executive actions.
The full proposed Remuneration Policy is set out on pages 49 to 58.
At our 2013 AGM, 98% of shareholders voted in favour of our
Directors’ Remuneration Report. I very much hope you will
support the Remuneration Policy and 2013/14 Annual
Remuneration Report at our forthcoming meeting. I will be
available at the AGM in June to answer any questions about
the work of the Committee.
“During the year the Committee
conducted a comprehensive review of
executive remuneration arrangements
to ensure they are aligned to long-term
shareholder value creation.”
Clare Chapman
Chairman of the Remuneration Committee
To download the Remuneration Report go tohttp://annualreport.kingfisher.com/2013-14/governance.html
Clare Chapman
Chairman of the Remuneration Committee
24 March 2014
Annual Report and Accounts 2013/14
48
Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
48
At a Glance
In this section, we summarise the purpose of our Remuneration Policy and its linkage to
our strategic objectives, and we highlight the performance and remuneration outcomes
for 2013/14. More detail can be found in the Remuneration Policy and Annual
Remuneration Report.
How has the structure changed year-on-year?
Proposed changes to Remuneration Policy
Component
value Operation of the component Maximum potential
Performance metrics
used, weighting and time
period applicable
Base salary no difference no difference n/a
Benefits no difference no difference n/a
Annual bonus 33% of 2013/14 annual
bonus will be deferred
for three years.
50% of the 2014/15 annual
bonus will be deferred for
three years under the
new plan.
no difference, maximum
opportunity remains at 200%
of base salary.
In 2013/14 the annual
bonus was based on the
following metrics:
• Profit 30%
• Relative LFL sales 30%
• Sourcing &
Productivity 20%
• Personal
performance 20%
LTIP Following the one-off award
of 500% of base salary made
in 2011 under the PSP, no
awards were made in 2012
or 2013. Annual awards will
be made in future.
No awards were made in
2013/14. In future awards will
be granted on an annual basis
at a maximum of 200% of base
salary (with flexibility to award up
to 250% of salary for the Group
Chief Executive).
No award was made
in 2013/14
How have we performed against our performance objectives?
Outcomes achieved as a % of Maximum
Performance Measure Target Actual
Sir Ian
Cheshire
Kevin
O’Byrne
Philippe
Tible Karen Witts
Profit before tax £765m £744m 0% – – 0%
Retail operating profit – – – 5% 0% –
Like for like sales 3.3% 0.7% 15% – – 15%
Divisional like for like sales – – – 10% 15% –
Sourcing and productivity – – 58% 71% 17% 58%
Personal objectives – – 80% 85% 78% 85%
Totals 32% 36% 24% 33%
Bonus receivable £’000 532.7 453.9 239.4 319.8
Performance Measure
Threshold –
15 %
vesting
Maximum –
100%
vesting Actual
% of
maximum
achieved.
Earnings per share (EPS) 25.8p 31.2p 23.4p 0%
Kingfisher Economic Profit (KEP) £229m £386m £288.4m 62.2%
Total 31.1%
Single total figure of remuneration for executive directors 2013/14
Executive Directors
Salary
£’000
Taxable
benefits
£’000
Bonus
£’000
LTIP
£’000
Pension
£’000
Total
£’000
Ian Cheshire 832.3 30.6 532.7 1,909.5 260.4 3,565.5
Kevin O’Byrne 627.0 24.3 453.9 1,404.0 123.1 2,632.3
Philippe Tible 509.3 11.7 297.6 1,072.5 320.0 2,211.1
Karen Witts 484.5 26.3 319.8 607.2 103.1 1,540.9
Total 2,453.1 92.9 1,604.0 4,993.2 806.6 9,949.8
The key principles of our
Remuneration Policy are to:
• provide executive directors with a
remuneration package that recognises
the experience of the individual
concerned and the value created;
• ensure performance-related
remuneration constitutes a
substantial proportion of the
remuneration package;
• ensure executive directors’ interests
are aligned with shareholders’ by
delivering rewards in shares, and
requiring a significant personal holding
in Kingfisher shares in accordance
with the Group’s ownership policy;
• be competitive in the talent markets
in which the Group operates;
• be fair, transparent and straightforward
to understand; and
• ensure remuneration principles apply
consistently throughout the Group,
and where practical are translated
into local practice at the appropriate
organisational level.
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www.kingfisher.com
49
Remuneration Policy
The Remuneration Policy set out in this section is intended to
apply for three years from the date of the 2014 AGM, subject to
shareholder approval. Where the forward-looking policy differs
from the policy that was in operation in 2013/14, we have
provided explanations of these differences. The Remuneration
Committee (the ‘Committee’) will review the Remuneration Policy
on an annual basis to ensure that it remains aligned to the
Creating the Leader strategy and is appropriately positioned
relative to the market. There is no current intention to revise the
policy more frequently than every three years. Where a material
change to policy is considered, the Group will consult with its
major shareholders prior to submitting the revised policy to all
shareholders for approval.
The Remuneration Policy will be displayed on the Group’s
website www.kingfisher.com immediately after the 2014 AGM.
The Remuneration Policy is designed to attract, retain and
motivate executives of the highest quality, incentivising them
to deliver exceptional business performance aligned with the
interests of shareholders, and to deliver the Group’s Creating the
Leader strategy. The Remuneration Policy continues to ensure
that a significant element of executive directors’ remuneration
remains ‘at risk’.
The key principles of the Remuneration Policy are to:
• provide executive directors with a remuneration package
that recognises the experience of the individual concerned
and the value created;
• ensure that performance-related remuneration constitutes
a substantial proportion of the remuneration package;
• ensure that executive directors’ interests are aligned with
shareholders by delivering rewards in shares and requiring
a significant personal holding in Kingfisher shares in
accordance with the Group’s share ownership policy;
• be competitive in the talent markets in which the
Group operates;
• be fair, transparent and straightforward to understand; and
• ensure remuneration principles apply consistently throughout
the Group, and where practical are translated into local
practice at the appropriate organisational level.
The Committee is satisfied that this Remuneration Policy strikes
an appropriate balance between the fixed and variable elements
of remuneration, and between promoting short and long-term
business objectives.
Future Remuneration Policy
Element and purpose Operation Maximum opportunity Assessment of performance
Base salary
Base salary reflects the
individual’s role, experience
and contribution to the
Group and is set at levels
that support the recruitment
and retention of executive
directors of the calibre
required by the Group.
Base salaries are set with reference to two primary
comparator groups; i) FTSE 25-75 excluding
financial services organisations, and ii) FTSE100
retailers and privately held retailers which are
considered to be of a similar size and market
capitalisation to the Group. The Committee also
takes account of pay levels in other large European
retailers. Alternative peer groups may need to be
referenced depending on the domicile of
individual executive directors outside the UK.
The Committee does not apply a strict
mathematical approach to the market data,
which it considers to be only one relevant input.
Instead, the Committee has regard to its overall
assessment of appropriate levels of salary, within
the benchmark range taking into account the
market, economic conditions, affordability, the
level of increases awarded to employees generally
and the individual’s performance, contribution
and experience.
Salaries are reviewed, but not necessarily
adjusted, annually. Out of cycle reviews may
be conducted in exceptional circumstances if
determined appropriate by the Committee.
Base salaries are paid monthly in cash.
Whilst there is no prescribed or
formulaic maximum, the annual
increase will normally not exceed
the level awarded to the general
workforce. Higher increases may
be made where there have
been significant changes in the
responsibility and accountability
in a role, or where there are large
variances to the market, for
example in the case of a recently
appointed executive director
appointed on a salary below the
market median. Any significant
increases will be fully explained.
Individual performance is an
important factor considered by the
Committee when reviewing base
salary each year.
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Future remuneration policy continued
Element and purpose Operation Maximum opportunity Assessment of performance
Benefits
Benefits are provided to
assist executive directors
in the performance of their
roles and are designed
to be competitive and
cost effective.
The Group may provide pension contributions
(set out below), a company car or cash alternative,
allowance for financial planning, medical
insurance, and life assurance cover. Other benefits
may be provided from time to time if considered
reasonable and appropriate by the Committee,
to include items such as relocation allowances,
and will be explained in the next Annual
Remuneration Report.
The Group pays the cost of providing benefits on
a monthly basis or as required for one-off events
such as financial planning advice.
Store discount may be offered to all directors
on the same basis as offered to other
Group employees.
Maximum levels of benefit
provision are:
• Car allowance £25,000 per annum
• Private medical insurance
on a family basis
• Life assurance cover of 4x
base salary
• Financial planning at
£2,500 per annum
There are a number of variables
and unknowns impacting the
maximum payable in the event of
relocation; however, the Committee
would pay no more than is necessary
in such situations.
Store discount of up to 20%
is offered.
By exception, death in service cover
for Kevin O’Byrne is provided at 7x
base salary. The additional 3x cover is
funded by him through an equivalent
0.25% reduction in his pension
cash allowance.
None
All-employee share plans
To enable investment in
shares in Kingfisher on the
same terms as other UK-
based employees.
UK-based executive directors may participate in
a tax approved all-employee scheme (Sharesave)
under which they make monthly savings over a
period of three or five years, that may be used to
buy Kingfisher shares at a discounted price when
the scheme matures. They may also choose to
withdraw their savings at the end of the savings
period or at any time during the savings contract.
UK-based executive directors may also participate
in the Share Incentive Plan (SIP). Designed to
promote employee share ownership, the SIP
enables participants to make monthly investments
in Kingfisher shares.
The maximum monthly limit for
the Sharesave plan is currently
£250 per month.
The maximum monthly amount an
individual may invest in partnership
shares is currently £125 per month.
The SIP also allows the award of free
and matching shares up to the limits
set by the Government.
The Group may increase the amounts
that can be saved or invested under
the Sharesave and SIP plans in line
with any increases authorised by the
UK Government for approved plans.
None
Pension
To provide retirement
benefits and support
retirement planning in a
tax efficient way through
a competitive scheme.
Pension provision for executive directors (with
the exception of Philippe Tible) is by way of
contributions to a defined contribution scheme.
A cash allowance is available to those who choose
not to participate in the defined contribution
scheme as a result of having applied for protection
upon exceeding or getting close to Lifetime
Allowance limits. For executive directors who
choose to remain in the scheme, to avoid total
member and employer contributions exceeding
the Annual Allowance (£40,000 for the tax year
2014/15), employer contributions can be paid as a
taxable cash allowance on a cost neutral basis to
the Company.
A French non-contributory defined benefit
arrangement is in operation for Philippe Tible
as divisional CEO of Castorama and Brico Dépôt.
For the defined contribution scheme
or cash allowance, the maximum
annual pension contribution is 30%
of base salary for the Group Chief
Executive and 20% of base salary for
other UK-based executive directors.
For the defined benefit arrangement
in which the divisional CEO of
Castorama and Brico Dépôt, Philippe
Tible participates, the pension
notionally accrues at a value of 1.5%
of final pensionable pay for each year
of service, with crystallisation of the
pension being conditional upon him
retiring from the Company.
None
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Element and purpose Operation Maximum opportunity Assessment of performance
Annual bonus
To incentivise executive
directors to achieve or
exceed annual financial,
strategic and personal
objectives set by the
Committee at the start of
each financial year. The
deferred element of the
annual bonus is intended
to support longer-term
shareholder alignment
and retention.
Annual bonuses are paid after the end of the
financial year to which they relate.
50% of the annual bonus is paid in cash shortly
after the financial year end. The remaining 50%
of the annual bonus is deferred for three years in
Kingfisher shares. Vesting of these shares is not
subject to performance conditions and no match
is applied. Shares delivered on the exercise of an
award attract additional dividend shares calculated
on the basis of the re-investment back into shares
of the dividend that would have been received
had the shares been beneficially held.
The Committee has the discretion to adjust the
bonus outcome if the pure application of a formula
is not felt to produce an appropriate result in light
of overall underlying performance. In particular the
Committee has the discretion to adjust payments
downwards if profits have fallen. Any adjustment
made using this discretion will be explained.
Malus may be applied whereby part or all of an
unvested deferred bonus award may be reduced
(including, if appropriate, reduction to zero) in the
event of financial misstatement, serious
reputational damage, or material misconduct in
individual cases.
Deferred bonus awards will vest in full in the event
of a change of control of the Company.
The on-target and maximum
annual bonus payable are
100% and 200% of base
salary respectively.
The level of payment at threshold
is set on an annual basis but will
not exceed 25%.
The specific measures, targets and
weighting may vary from year to year in
order to align with the Group’s strategy,
but always with a substantial proportion
based on key financial metrics. For the
2014/15 financial year, 60% of the
annual bonus is linked to key financial
metrics, 20% is related to KPIs for which
there is a particular focus during the year
in question; examples would include
Group sourcing and productivity. 20%
is for personal performance based on
achievement of personal objectives and
contribution to the One Team strategy,
including behaviours.
Where executive directors have specific
management accountability for the
results of one or more Operating
Companies they may, in addition to, or
as a substitute for Group targets, also
have targets related to the performance
of those businesses.
The actual performance targets set are
not disclosed at the start of the financial
year, as they are considered to be
commercially sensitive.
Long-term incentive plan
To incentivise executive
directors to achieve
superior returns for
shareholders and drive
shareholder alignment and
retention of executives over
the performance period
of the awards.
Performance conditions
are aligned with
shareholder interests
and the Group’s
strategic objectives.
Awards will be granted annually under the
Kingfisher Incentive Share Plan, subject to
a three-year vesting period and stretching
performance conditions.
Shares delivered on the exercise of an award
attract additional dividend shares calculated on
the basis of the re-investment back into shares of
the dividend that would have been received had
the shares been beneficially held.
The Committee has the discretion to adjust the
LTIP outcome if the pure application of a formula
is not felt to produce an appropriate result in
light of overall underlying performance.
Malus may be applied whereby part or all of an
unvested long-term incentive award may be
reduced (including, if appropriate, reduction
to zero) in the event of financial misstatement,
serious reputational damage, or material
misconduct in individual cases.
In the event of a change of control of the
Company, awards will vest subject to assessment
of performance up to the date of change of control
and will be reduced on a time pro-rated basis
unless the Committee considers that such a
reduction is inappropriate.
The maximum annual award is
200% for executive directors, with
the flexibility to award up to 250%
for the Group Chief Executive. The
Group Chief Executive’s award in
2014/5 will be 200%.
25% of the award vests for
threshold performance.
Awards vest based on performance
over three years against performance
measures chosen by the Committee
to align with business and strategic
priorities. For the 2014/5 financial year
the measures for executive directors are:
50% EPS
50% Kingfisher Economic Profit (KEP)
The Committee may adjust the
performance measures attaching to
awards and the weighting of these
measures if it feels this will create
greater alignment with business and
strategic priorities.
A significant change to the measures
used would only be adopted following
consultation with major shareholders.
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Future remuneration policy continued
Element and purpose Operation Maximum opportunity Assessment of performance
Profit sharing arrangements
Participation Scheme
To enable French
employees to share in the
financial success of the
French businesses
Philippe Tible participates in this scheme as an
employee of a French company on the same
terms as all French employees.
The Participation scheme is a mandatory scheme
based on a legal requirement for a proportion of
the Castorama and Brico Dépôt France profits
to be distributed to employees. It is paid in cash
shortly after the financial year end, although the
scheme provides the option to defer the payment
for a period of five years to receive certain
taxation exemptions.
Under the Participation Scheme
the maximum opportunity is set by
the French government. There are
two limits set which are based on a
multiple of the Annual Social
Security ceiling (PASS). This is
updated each year but for 2014
stands at €37,548.
These limits are:
The maximum salary that the
award level as a % of salary is
applied to is 4x PASS (€150,192)
The maximum possible payment is
0.75x PASS (€28,161)
The award level is determined
as a proportion of profits as set with
reference to the minimum required
by the French government and a
more favourable formula that
has been agreed with the French
Works Council.
Over the last five years the award
level as a % of salary (up to the salary
cap) has remained within the 5% –
7% range. On Philippe Tible’s actual
salary the award levels have been less
than 2% of salary.
Interessement Scheme
To enable French employees
to share in the financial
success of growth in the
French businesses
Philippe Tible participates in this scheme as an
employee of a French company on the same
terms as all French employees.
This scheme creates a profit pool which is divided
by the cost of wages and salaries to determine
an award level as a % of salary.
Payments are made in cash on a quarterly basis
although the scheme provides the option to defer
the payment for a period of five years to receive
certain taxation exceptions.
Since the design is in the form of
a profit pool, there is no set cap as
such. However, the award level for
Philippe Tible has not exceeded
20% of salary historically.
The profit pool is based on a formula
which is linked to a proportion of
the sales and profit growth.
Shareholding requirements
To ensure alignment of
interests of executive
directors and shareholders
over the long-term.
Executive directors are required to build a
significant shareholding in the Company before
the fifth anniversary of the date of their first award
under a qualifying share plan. Consideration will
be given to extending the five-year time frame in
the event that share awards vesting from deferred
bonus shares or the LTIP alone do not provide
enough shares to meet the shareholding
requirement. Unvested deferred bonus awards are
not included in the assessment of the holding
requirement until the transfer of beneficial
ownership to the executive director at the end of
the three-year deferral period. Nil-cost options
which have vested but the executive has yet
to exercise are considered to count towards
the shareholding.
Group Chief Executive:
shareholding of 300% of
base salary.
Other executive directors:
shareholding of 200% of
base salary.
None
Legacy Awards
Performance Share
Plan (‘PSP’)
A one-off exceptional award of 500% of base
salary was granted under the PSP in 2011.
This award was granted to create focus on a
single three-year period of the Creating the
Leader strategy. The awards vest in two equal
tranches in June 2014 and June 2015.
On exercise, additional dividend shares are
added to the award, with a value equivalent to
the value of dividends reinvested into shares from
the date of grant to the date of transfer.
Malus may be applied to unvested awards, if the
Committee determines that the grant of awards
was not justified.
Certain awards granted prior to 2011 have vested
but have not been exercised and therefore
remain outstanding.
500% of base salary for all
executive directors.
Awards are subject to stretching
performance targets, 50% based
on EPS and 50% on KEP.
Following completion of the financial
year, the vesting percentage has
been determined by the Committee
at 31% of the maximum award level,
subject to continued employment.
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Element and purpose Operation Maximum opportunity Assessment of performance
Kingfisher Incentive
Share Scheme (‘KISS’)
Under the KISS, executive directors defer 33% of their
Annual Bonus into Kingfisher shares. Awards are deferred
for three years and are subject to forfeiture should the
executive leave the Group before the vesting date. Malus
may be applied to unvested awards, if the Committee
determines that the grant of awards was not justified.
On exercise, additional dividend shares are added to the
award, with a value equivalent to the value of dividends
reinvested into shares from the date of grant to the date
of transfer.
Awards were granted annually under the KISS and will be
granted in 2014 in respect of the 2013/14 annual bonus.
Awards will vest in full in the event of a change of control
of the Company.
33% of the Annual Bonus at the
time of award, plus additional
dividend shares accrued from the
date of grant to the date of transfer.
None
Company Share Option
Plan (‘CSOP’)
An HMRC approved share option plan was used to grant
awards with a value up to a limit of £30,000. The option
price was determined at the time of grant by reference to
the market price immediately before the date of grant.
The options are linked to an underpinning KISS Award
and the two awards must be exercised simultaneously. On
exercise, the proceeds of the underpinning KISS Award
are used to fund the exercise price of the CSOP Award.
Up to £30,000 None
Chairman and non-
executive director fees
To attract and retain a
Chairman and non-executive
directors of the calibre
required by the Group.
The fees paid to the Chairman are determined by
the Committee, while the fees of the non-executive
directors are determined by the Board with affected
persons absenting themselves from the discussions
as appropriate.
The Committee reviews the Chairman’s fees annually.
The Chairman’s fees are determined with reference to
time commitment and relevant benchmark market data.
Contributions may be made towards the cost of running
the Chairman’s office.
The Board determines non-executive directors’ fees under
a policy which seeks to recognise the time commitment,
responsibility and technical skills required to make a
valuable contribution to an effective Board.
A base fee is paid to all non-executive directors
and additional fees are also paid to the Senior
Independent Director and the Chairmen of the Audit
and Remuneration Committees.
The Board annually reviews fees paid to non-executive
directors against those in similar companies and taking
into account the time commitment expected of them.
Fees are paid monthly.
The Chairman and the non-executive directors do not
participate in any of the Company’s performance-related
pay programmes and do not receive pension benefits.
The Chairman and the non-executive directors are not
entitled to any compensation for loss of office.
The Chairman and the non-executive directors do not
receive any other benefits with the exception of store
discount of up to 20%.
Aggregate annual fees paid to
the Chairman and non-executive
directors are limited by the
Company’s Articles of Association,
which may be varied by special
resolution of the shareholders. The
current limit contained within the
Articles of Association is £1 million
and it is proposed that this be
increased to £1.75 million at the
AGM in 2014, to allow sufficient
headroom for future increases.
Contributions towards the cost of
running the Chairman’s office will
not exceed £60,000 per annum
and are included within the
aggregate fees set out above.
None
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Future remuneration policy continued
Element and purpose Operation Maximum opportunity Assessment of performance
Approach to recruitment
remuneration
When hiring a new executive director, or making internal
promotions to the Board, the Committee will in principle
apply the same policy as for existing executive directors,
as detailed in the Remuneration Policy. The rationale for
the package offered will be explained in the next Annual
Remuneration Report.
Base salary would be set at an appropriate level to recruit
the best candidate based on their skills, experience and
current remuneration.
Benefits would be in line with normal policy and may
include, where appropriate, relocation benefits or other
benefits reflective of normal market practice in the
territory in which the executive director is employed.
Normal incentive awards would be made under the
annual bonus plan and long-term incentive plan in
line with the Remuneration Policy.
For internal promotions any commitments made prior
to appointment may continue to be honoured as the
executive is transitioned to the new remuneration
arrangements.
The Committee would be mindful of best practice
guidelines in considering whether any enhanced LTIP or
other award was necessary on recruitment in order to
secure the preferred candidate (e.g. to buy out awards
forgone from the incoming executive’s previous employer).
The Committee’s policy is to seek to avoid buying out
awards forgone. Normally the Committee would seek only
to make performance-related awards under the long-term
incentive plan, for example by pro-rating them into
recently awarded plan cycles to ensure alignment with
existing executive directors. However, each case will
need to be considered on its own facts at the particular
time such awards are made. If a buy-out award would
be required, the Committee would aim to reflect the
nature, timing and value of an award forgone in any
replacement award which may be in the form of a
restricted stock or performance-related award as
appropriate. The Committee would aim to minimise
the cost to the Company.
Normal Awards
The normal maximum incentive
opportunity on recruitment will be
in line with the Remuneration
Policy for executive directors.
Additional LTIP Award
Under the plan rules, the
Committee may, on the
recruitment of an executive
director, make an additional one-
off performance linked award
under the long-term incentive plan
of up to an equal face value to the
normal policy award (i.e. up to
250% of base salary for the Group
Chief Executive and 200% of base
salary for the other executive
directors). This provision is
normally used to pro-rate incoming
executives into recently awarded
long-term incentive plan cycles.
Buy-out Award
The Committee normally seeks to
avoid explicitly buying out awards
forgone at a previous employer,
preferring instead to make long-
term incentive plan awards as set
out above.
Where, in exceptional
circumstances, buy-out awards are
made, they are not subject to a
formal maximum, although would
be designed to reflect only
the value forgone or less. In
establishing the appropriate value
of any buy-out the Committee
would also take into account the
value of any additional long-term
incentive plan award made
on joining.
None
The Committee will operate the Kingfisher Incentive Share Plan (which will be subject to shareholder approval at the AGM in
June 2014) and the Group’s legacy plans (the Performance Share Plan, Kingfisher Incentive Share Scheme and Company Share
Option Plan) (together the ‘Plans’) in accordance with the rules of those Plans and where relevant with the UKLA Listing Rules.
In addition to the discretions set out as part of this Remuneration Policy, the rules provide the Committee with discretion in certain
matters regarding the administration and operation of these Plans, including, but not limited to the following:
• the impact of a change of control or restructuring;
• any adjustments to performance conditions or awards required as a result of a corporate event (such as a transaction, corporate
restructuring event, special dividend or rights issue);
• the operation of malus provisions; and
• minor administrative matters to improve the efficiency of operation of the plans or to comply with local tax law or regulation.
The Committee retains certain discretions in relation to the Annual Bonus Plan, which include but are not limited to:
• the determination of and timing of any bonus payment;
• the impact of a change of control or restructuring;
• any adjustments required as a result of a corporate event (such as a transaction, corporate restructuring event, special dividend
or rights issue)
In relation to the Plans and the Annual Bonus Plan, the Committee retains the ability to amend the performance conditions and/or
measures in respect of any award or payment if one or more event(s) have occurred which would lead the Committee to consider
that it would be appropriate to do so, provided that such an amendment would not be materially less difficult to meet.
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If the Committee used any of the discretions set out above these would, where relevant, be disclosed in the next Annual
Remuneration Report and the views of major shareholders may also be sought.
Discretion in relation to the Group’s All-Employee Share Plans (Sharesave and Share Incentive Plan) would be exercised within
the parameters of the HMRC and the UKLA Listing Rules.
Notes to the future remuneration policy table
Annual bonus
The performance conditions are set annually based on the metrics the Committee feels are most appropriate for the business.
Like-for-like sales is a key metric in the Creating the Leader strategy, and Profit Before Tax ensures that this sales growth is delivered
in a way that creates value for shareholders. Other strategic KPIs are chosen to support particular objectives for the year, and the
individual component enables outstanding contributions to be incentivised and rewarded.
Annual bonus targets are set with reference to internal budgets and analyst consensus forecasts, with maximum pay-out requiring
performance well ahead of budget.
Long-term incentive plan
The Committee believes that long-term incentive plan measures should be aligned to shareholder value while providing line of sight
to management, so that they are meaningful and incentivising. EPS growth is a key measure of our success in growing value for
shareholders over time, while KEP balances profit growth with efficient use of our balance sheet.
The setting of LTIP targets takes into account analyst consensus forecasts, internal projections, and the levels of performance
required over the long-term to deliver absolute value appreciation for shareholders.
Differences in remuneration policy for all employees
All employees are entitled to base salary and benefits and may also receive bonus, pension, profit share and share awards which
vary according to local jurisdiction and market practice. The maximum provision and incentive opportunity available are determined
by the seniority and responsibility of the role.
Service contracts and policy on payment for loss of office
Provision Policy
Notice period
12 months’ notice by either the director or the Company for Sir Ian Cheshire, Kevin O’Byrne and Karen Witts. Three months’
notice for Philippe Tible.
Remuneration
As described in this report.
Cash benefits
Car allowance (as an alternative to a company car) and pension benefit.
Non-cash benefits
The Company provides a range of additional benefits, including private medical insurance on a family basis, death in service
cover equal to four times base salary, a subsidised staff canteen, a staff discount card, allowance for financial planning and
30 working days’ holiday per year.
Expenses
Reimbursement of reasonably incurred costs in accordance with their duties.
Non-compete
During employment and for 12 months after leaving. In respect of Philippe Tible, an amount equal to 50% of annual salary
and car benefit must be paid to him on a monthly basis if his employment is terminated by the Company. This amount is
standard under French law in order to ensure that the non-compete provision is enforceable.
Contractual
termination payment
Executive directors
In the case of resignation, no payments on departure will be made on termination, even if by mutual agreement the notice
period is cut short. If notice is served by the Company in full, no other payments should be due on departure. For any period
of notice period not served, the payment takes the form of liquidated damages, which pays the departing executive 8.3% of
salary per month for the remainder of their notice period. These monthly payments are subject to mitigation. The maximum
payment post departure would be one times base salary.
If notice is served by either party, the executive director may continue to receive base salary, benefits and pension for the
duration of their notice period, during which time the executive director may continue their duties or be assigned a period of
garden leave. The Group’s policy is that payments for termination will not exceed 12 months’ base salary.
The terms of the phased payment clauses in the service contracts of Sir Ian Cheshire and Kevin O’Byrne were consistent with
the governance guidelines at the time the contracts were put in place. In circumstances where the Company terminates their
agreements, they will receive phased payments of 15% and 12% of base salary respectively for a maximum of 12 months
from the date of termination subject to mitigation.
The termination clause in Philippe Tible’s contract is determined by the collective convention which applies to all French
employees. A termination payment would be made up of two parts (i) the dismissal indemnity which is 3% of annual
remuneration per year of service and (ii) a payment for any unpaid notice which would be a maximum of three months’
remuneration. The current combination cost based on years of service to date is approximately one times base salary.
Remuneration for this purpose consists of base salary, car benefit and cash bonus award.
In the event of a settlement agreement, the Committee may agree payments it considers reasonable in settlement of legal
claims. This may include an entitlement to compensation in respect of their statutory rights under employment protection
legislation in the UK or in other jurisdictions. The Committee may also include in such payments reasonable reimbursement
of professional fees in connection with such agreements.
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Service contracts and policy on payment for loss of office continued
Provision Policy
Contractual
Termination payment
continued
Chairman and
non-executive directors
Non-executive directors are appointed under letters of engagement. Appointments have historically been for an initial period of
three years and invitations to act for subsequent three-year terms are subject to a review of performance, and taking into account
the need to progressively refresh the Board.
The appointment may be terminated by either party giving the other not less than three months’ prior written notice, unless
terminated earlier in accordance with the Company’s Articles of Association, and the Company has no obligation to pay
compensation when their appointment terminates.
Leaver provisions for
annual bonus
If notice is served by either party, the executive director may receive bonus payments in cash on a pro-rated basis from the start of
the financial year up to the date of termination of employment, based on the determination of the results at the year-end against
targets set.
In the event that an executive director ceases to be employed during or shortly after the financial year and before the date of the
annual bonus award, the Committee has the discretion to make a bonus payment and determine the basis upon which it is made
and its value taking into account the individual circumstances of the departure. If the executive ceases employment as a result
of a reason defined as a good leaver (which includes ill-heath or retirement), then the normal approach would be to award a time
pro-rated bonus in cash based on the actual results against the performance measures set once they have been determined
following the end of the financial year. In the case of resignation, no bonus award will be made.
Leaver provisions for
share incentives
The rules of the Kingfisher Incentive Share Plan (which will be subject to shareholder approval at the AGM in June 2014) and
the Group’s legacy plans (the Performance Share Plan, Kingfisher Incentive Share Scheme and Company Share Option Plan)
(together the ‘Plans’) set out the treatment that will be applied to awards and options if a participant leaves the Group before the
end of the vesting period. A summary of the treatment is set out below:
Long-Term Incentive Awards (granted under the Kingfisher Incentive Share Plan (‘KISP’) from 2014 onwards and the Performance
Share Plan (‘PSP’))
Awards will normally lapse upon cessation of employment (with the exception of unvested awards granted under the KISP, which
lapse on the date of notice of termination of employment), except in certain circumstances as described below. In determining the
extent to which awards should vest when an executive departs, the Committee will consider all the facts of the executives
departure, including their performance and the extent to which the departure is at the instigation of the Company.
If an executive director ceases to be employed as a result of a reason defined as a good leaver within the rules of the KISP or the
PSP, which includes ill-health, retirement or any other reason at the discretion of the Committee, then the awards will vest on the
normal vesting date, but will be adjusted on a time pro-rated basis (unless the Committee decides, acting fairly and reasonably,
that such an adjustment would be inappropriate). The Committee retains the discretion to reduce further awards granted under
the KISP to reflect any personal performance issues. If the award is structured as a nil-cost option, it will normally be exercisable
for a period of six months from the normal vesting date (unless the Committee determines that it may vest on the date of
cessation). In circumstances where the participant ceases to be employed as a result of death, then the award will vest on the
date the Company is notified and, if the award is structured as a nil-cost option, then it will be exercisable for a period of twelve
months from the date of notification. The Committee will determine the vesting of the award based upon the performance
conditions attached to the awards and a reduction in the number of shares on a time pro-rated basis (unless the Committee
decides, acting fairly and reasonably, that such an adjustment would be inappropriate).
In the event of a takeover or other corporate event (such as the winding-up of the Company), awards will vest on the date of
notification, but will be adjusted on a time pro-rated basis (unless the Committee decides, in its absolute discretion, that such an
adjustment would be inappropriate) and in the case of an award structured as a nil-cost option, will be exercisable for a period of
one month from the date of notification.
Deferred Bonus Awards (granted under the KISP from 2015 onwards and the KISS up to 2014)
Awards granted under the KISS lapse if the executive director resigns or is dismissed for cause. In all other circumstances, the
award will vest in full on the date of cessation of employment and will remain exercisable for a period of six months (12 months in
the case of death).
Deferred Bonus Awards which will be granted under the KISP from 2015 onwards will lapse if the executive director resigns or is
dismissed for cause. If an executive director ceases to be employed as a result of a reason defined as a good leaver which
includes ill-health, disability or any other reason at the discretion of the Committee, then the awards will vest on the normal vesting
date. If the award is structured as a nil-cost option, it will be exercisable for a period of six months from the normal vesting date. In
circumstances where the participant ceases to be employed as a result of death, then the award will vest in full on the date the
Company is notified and, if the award is structured as a nil-cost option, then it will be exercisable for a period of twelve months
from the date of notification.
In the event of a takeover or other corporate event (such as the winding-up of the Company), awards will vest on the date of
notification and in the case of an award structured as a nil-cost option, will be exercisable for a period of one month from the date
of notification.
Company Share Option Plan (‘CSOP’)
The CSOP is an HMRC approved share option plan. Options granted under the CSOP are linked to an underpinning deferred
bonus award granted under the KISS and the two must be exercised simultaneously. Options granted under the CSOP will
normally lapse upon cessation of employment. If an executive director ceases to be employed as a result of a reason defined as
a good leaver within the rules of the CSOP, which include injury, disability or the sale or transfer of the business or company
that employs them the option will vest on the cessation of employment and will be exercisable for a period of six months. If the
executive director leaves due to retirement, the award will vest on the normal vesting date or if the cessation of employment is
within six months of the normal vesting date it will vest on the date of cessation.
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Statement of Implementation of Remuneration Policy in 2013/14
The differences between the Remuneration Policy for 2013/14 and the policy on which shareholders will vote at the 2014 AGM
are set out below.
Component value Operation of the component Maximum potential
Performance metrics used, weighting and
time period applicable
Base salary no difference no difference n/a
Benefits no difference no difference no difference
Annual bonus 33% of 2013/14 annual bonus
will be deferred for three years.
50% of the 2014/15 annual
bonus will be deferred for three
years under the new plan.
no difference, maximum
opportunity remains at 200%
of base salary.
In 2013/14 the annual bonus was
based on the following metrics:
• Profit 30%
• Relative LFL sales 30%
• Sourcing & Productivity 20%
• Personal performance 20%
LTIP Following the one-off award of
500% of base salary made in
2011 under the PSP, no awards
were made in 2012 or 2013.
Annual awards will be made
in future.
No awards were made in
2013/14. In future awards will be
granted on an annual basis at a
maximum of 200% of base salary
(with flexibility to award up to
250% of salary for the Group
Chief Executive).
No award was made in 2013/14
Statement of consideration of employment conditions elsewhere in the Group
The Committee invites the Group HR Director to present at its meeting the proposals for salary increases for the employee population
generally and on any other changes to remuneration policy within the Group. The Group HR Director consults with the Committee on
the KPIs for the executive directors’ bonuses and the extent to which these should be cascaded to other employees. The Committee
has oversight of all LTIP awards across the Group.
The Committee is provided with data on the remuneration structure for all One Team Board members, approves the policy on share
award levels for all employees and uses this information to ensure that there is consistency of approach throughout the Group.
The Company did not consult with employees when drafting the Directors’ Remuneration Policy.
Directors’ service contracts/letters of appointment
Current directors
Date of service contract /
letter of appointment Expiry of current term
Length of service
at 1 February 2014
Daniel Bernard 24/05/2006 30/06/2015 7 years
Andrew Bonfield 11/02/2010 15/12/2015 4 years
Pascal Cagni 17/11/2010 16/11/2016 3 years
Clare Chapman 02/12/2010 01/12/2016 3 years
Sir Ian Cheshire 28/01/2008 Rolling 13 years
Anders Dahlvig 16/12/2009 15/12/2015 4 years
Janis Kong 08/12/2006 06/12/2015 7 years
Kevin O’Byrne 01/10/2008 Rolling 5 years
Mark Seligman 01/01/2012 31/12/2014 2 years
Philippe Tible 01/10/2012 Rolling 1 year
Karen Witts 01/10/2012 Rolling 1 year
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Illustrations of the application of the Remuneration Policy
The tables and charts below provide estimates of the potential total future remuneration for each executive director in respect of the
remuneration opportunity granted to them in 2014/15. Potential outcomes based on different performance scenarios are provided
for each executive director. The scenarios do not take into account share price appreciation or dividends.
The total remuneration for each of the executive directors that could result from the Remuneration Policy in 2014/15 under three
different performance levels is shown below.
Notes
Base salary as at 1 February 2014.
Benefits: Estimate based upon benefits received during 2013/14 and recorded in the single figure table of remuneration.
Pension: based upon pension of 30% of base salary for Sir Ian Cheshire and of 20% of base salary for Kevin O’Byrne and Karen Witts. Philippe Tible’s pension is based
on that for 2013/14.
Below threshold performance would result in the payment of the fixed elements of pay only.
On-target performance is the level of performance required to deliver 50% of the maximum annual bonus and 50% of the full LTIP award.
On-target for the Participation Scheme £8,500, maximum £23,900.
On-target for the Interessement Scheme 10% of salary, maximum 20% of salary.
Maximum performance would result in the maximum bonus payment and 100% vesting of the LTIP award.
Performance scenarios
Below threshold On-target Maximum
• Only the fixed pay elements
(base salary, benefits and pension)
of the package are earned.
• Minimum performance targets for
the Annual Bonus and LTIP are not
achieved, therefore no payments will
be made and LTIP awards will lapse.
• Fixed pay elements plus on-target
Annual Bonus plus on-target
LTIP vesting.
• Annual Bonus on-target performance is
achieved, resulting in a bonus of 50%
of maximum – 100% of base salary.
• For the LTIP, the on-target vesting level is
50% of maximum – 100% of base salary.
• Fixed pay elements plus maximum
Annual Bonus plus maximum LTIP
award vesting.
• Annual Bonus at maximum, resulting
in a bonus of 100% of maximum –
200% of base salary.
• LTIP maximum is 200% of base salary.
Sir Ian Cheshire
Value of package (£m)
Total Remuneration Performance Charts
Maximum
£4,530,291
Target £2,832,291
Below
Threshold
£1,134,291
Kevin O’Byrne
Value of package (£m)
Maximum
Target
Below
Threshold
£791,737
Philippe Tible
Value of package (£m)
Maximum
Target
Below
Threshold
£3,056,504
£1,950,211
£813,355
Karen Witts
Value of package (£m)
Maximum
Target
Below
Threshold
£2,756,325
£1,706,325
£656,325
£3,349,897
£2,070,817
+ Salary Salary Bene?ts Bene?ts + + +
Total
Remuneration
Bonus Bonus LTIP =
Pensions Pensions
19% 37% 37% 1% 6%
19% 38% 38% 1% 4%
30% 30% 30% 1% 9%
31% 31% 31% 1% 6%
75% 3%
17% 38% 34% 1% 10%
26% 30% 27% 1% 16%
61% 1% 22%
81% 3% 16%
38%
19% 38% 38% 1% 4%
31% 31% 31% 1% 6%
80% 4% 16%
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Annual Remuneration Report
Single total figure of remuneration for each director (Audited)
The following table shows a single figure of remuneration in respect of directors’ qualifying services for the financial years 2013/14
and 2012/13.
Base salary and fees
£’000
Taxable benefits
£’000
Bonus
£’000
(5)
LTIP
£’000
(6)
Pension
£’000
Total
£’000
2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13 2013/14 2012/13
Executive Directors
Sir Ian Cheshire 832.3 816.0 30.6 30.8 532.7 502.7 1,909.5 1,157.6 260.4 310.1
(8)
3,565.5 2,817.2
(7)
Kevin O’Byrne 627.0 600.0 24.3 24.9 453.9 345.6 1,404.0 832.0 123.1 117.9 2,632.3 1,920.4
Philippe Tible
(2)
509.3 436.1 11.7 11.2 297.6
(3)
398.6
(3)
1,072.5 862.8 320.0 306.0 2,211.1 2,014.7
Karen Witts
(1)
484.5 158.3 26.3 8.7 319.8 97.5 607.2 – 103.1 31.7 1,540.9 296.2
Total 2,453.1 2,010.4 92.9 75.6 1,604.0 1,344.4
4,993.2 2,852.4 806.6 765.7 9,949.8 7,048.5
Chairman and non-
executive directors
Daniel Bernard
(2)(4)
472.4 443.7 472.4 443.7
Andrew Bonfield 81.2 80.0 81.2 80.0
Pascal Cagni 61.2 60.0 61.2 60.0
Clare Chapman 76.2 75.0 76.2 75.0
Anders Dahlvig 61.2 60.0 61.2 60.0
Janis Kong 61.2 60.0 61.2 60.0
Mark Seligman 78.6 77.4 78.6 77.4
Total 892.0 856.1 892.0 856.1
(1) Karen Witts joined the Group on 1 October 2012 and her remuneration for 2012/13 was prorated accordingly.
(2) Philippe Tible’s remuneration and the fees paid to Provestis in respect of the provision of Daniel Bernard as Chairman, are paid in euros and are converted to sterling
for the purpose of the table at the average exchange rate over the course of the relevant year (2013/14: £1:€1 1782).
(3) Includes payments in relation to Interessement and Participation schemes in France (£58,190). The 2012/13 figure has been restated to include Interessement and
Participation schemes payments not included within prior year disclosure (£51,846).
(4) Fees for the provision of Daniel Bernard as Chairman are paid to a service company, Provestis, which also receives a contribution towards the cost of running the
Chairman’s office in Paris of €61,800 (£52,456). The 2012/13 figure has been restated to include the contribution for office costs in 2012/13 (£50,144).
(5) The annual bonus will be paid in April 2014 for the financial year 2013/14. One third of the bonus awarded will be deferred under the KISS into Kingfisher shares for
three years and will be available to vest in April 2017.
(6) The LTIP value is based upon the 2011 PSP awards which are due to vest in June 2014 and June 2015, based upon performance over the three financial years ending
1 February 2014. The award has been valued using the average Kingfisher share price over the three months to 31 January 2014 (380.31p).
(7) Excludes £8,888, included in the 2012/13 report which represented the net equivalent gain following the exercise of phantom options awarded in April 2002 and
exercised in 2012.
(8) The prior year comparison for Sir Ian Cheshire’s pension contribution has been restated to include the increase in transfer value (net of director’s contributions) on the
defined benefit pension scheme.
.
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60
Notes to the single total figure of remuneration for each director (Audited)
Base salary and fees
Executive directors’ salaries were increased with effect from 31 January 2013. Base salaries for 2013/14 and 2012/13 are shown below.
Base salary
£’000
% increase
As at 3
Feb 2013
As at 29
Jan 2012
Sir Ian Cheshire 832.3 816.0 2.0%
Kevin O’Byrne
(1)
627.0 600.0 4.5%
Philippe Tible
(2)
509.3 436.1 9.0%
(3)
Karen Witts 484.5 475.0 2.0%
(1) The increase in Kevin O’Byrne’s base salary reflected the broadening of his role as CEO of the B&Q division and responsibility for the Group’s joint ventures.
(2) The increase in Philippe Tible’s base salary was in recognition of the expansion of his role as executive director of the Company. His remuneration is paid in euros
and is converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant year.
(3) The percentage increase is depicted in constant currency and reflects the increase in Philippe Tible’s base salary from €550,000 to €600,000.
The Chairman and non-executive directors’ fees were increased with effect from 1 February 2013. Fee rates for 2013/14 and
2012/13 are shown below.
Fees £’000
% increase
As at 3
Feb 2013
As at 29
Jan 2012
Chairman
(1)
472.4 443.7 2%
Non-executive director fee 61.2 60.0 2%
Senior Independent Director 17.4 17.4 0%
Chairman of Audit Committee 20.0 20.0 0%
Chairman of Remuneration Committee 15.0 15.0 0%
(1) Fees for the provision of the Chairman are paid in euros and converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant
year. The percentage increase for the Chairman is depicted in constant currency.
Taxable benefits
The benefits provided to executive directors for both 2013/14 and 2012/13 included car benefit (or cash allowance), private medical
insurance, death in service cover and financial advice.
Annual bonus
The executive directors’ targets for the 2013/14 bonus were based on both financial targets and individual objectives as set out in
the tables below, with annual bonus payments determined by reference to performance over the financial year ending 1 February
2014. For the financial targets achievement is calculated on a straight-line basis between start to earn and target and between target
and maximum.
Group profit before tax at constant exchange rates grew modestly year-on-year, but was behind the Threshold level of performance
and so no bonus was paid on this element. Retail operating profit performance for B&Q and Koçtas¸ brands was just above Threshold
and so warranted a small bonus payment on this element for Kevin O’Byrne.
Like-for-like sales growth was below target as we faced significant sector-wide declines in a number of our markets. However, in a
number of our markets we grew market share even if absolute levels of like-for-like sales growth were below target. Overall this
performance resulted in a level of payment modestly above Threshold.
In the face of challenging trading conditions the Group made good productivity improvements at the level of store productivity but also
in identifying and delivering cost savings across the Group. As a result our productivity targets were slightly exceeded, leading to a
payment between Target and Maximum.
Similarly good progress was achieved on our sourcing strategy where synergies and improvements in direct sourcing and own brand
sourcing resulted in the Group as a whole being just above the target level of payment on this measure.
Personal components of bonus reflected generally strong performance against personal objectives and contribution to the One
Team behaviours.
Measure
Profit before
tax/retail
operating profit Like-for-like sales
KPI (Sourcing
and productivity)
Personal
performance
Weighting at maximum bonus 30% 30% 20% 20%
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Outcomes achieved as a % of Maximum
Performance Measure Target Actual Sir Ian Cheshire Kevin O’Byrne Philippe Tible Karen Witts
Profit before tax
(1)
£765m £744.0m 0% – – 0%
Retail operating profit
(2)
– – – 5% 0% –
Like for like sales
(3)
3.3% 0.7% 15% – – 15%
Divisional like for like sales
(2)
– – – 10% 15% –
Sourcing and productivity
(4)
– – 58% 71% 17% 58%
Personal objectives – – 80% 85% 78% 85%
Totals 32% 36% 24% 33%
Bonus receivable £ 532.7 453.9 239.4 319.8
(1) The award level was determined after removing any impact of exchange rate variations. Once the favourable exchange rate movement had been removed from the
results, the award level was determined as nil.
(2) Retail operating profit and divisional like-for-like sales, measured at the business unit level, are considered commercially confidential and are therefore not disclosed.
(3) The targets were set based on absolute like-for-like performance, with the ability for the Committee to use its judgement in adjusting awards up and down taking
into account like-for-like out-turn versus local market and any consequent improvement or deterioration in market share.
(4) Sourcing and productivity included measures related to cost price reduction and cost savings achieved from additional opportunities not included in the budget.
These measures are considered commercially confidential and are therefore not disclosed.
Long-term incentive plan
The LTIP amount included in the 2013/14 single figure table is the PSP award granted in 2011. Vesting is dependent upon
performance over the three financial years ending 1 February 2014 and continued employment up to the vesting date in June 2014.
The performance against performance targets is set out below.
Performance Measure
Threshold –
15 % vesting
Maximum –
100% vesting Actual
% of maximum
achieved.
Earnings per share (EPS) 25.8p 31.2p 23.4p 0%
Kingfisher Economic Profit (KEP) £229m £386m £288.4m 62.2%
Total 31.1%
KEP is defined in the Financial Review on page 24.
As the awards had not vested at the date this report was finalised, the average share price for the last three months of the financial
year (380.31p) has been used to determine the value for the purposes of the single figure total. The awards held by executive
directors were as follows:
2011 PSP awards
Number of
shares
awarded
Number of
dividend shares
applied
Number of
shares
vesting
Value of
shares
vesting
Sir Ian Cheshire 1,502,043 111,548 502,079 £1,909,457
Kevin O’Byrne 1,104,443 82,018 369,175 £1,404,009
Philippe Tible
(2)
851,440 54,914 282,018 £1,072,543
Karen Witts
(1)
498,857 14,240 159,653 £607,176
(1) Karen Witts received an award on joining the Group on 1 October 2012 based upon 285% of her base salary. The award was time pro-rated equivalent to the 500%
award the other executive directors received in June 2011.
(2) An additional award was made to Philippe Tible in May 2012 in recognition of the expansion of his role and to bring him in line with the other executive directors who
received awards of 500% compared to Mr Tible’s initial award of 375%.
For all participants, the vesting of awards have been estimated as if the full award were released and was available for exercise. However, 50% of the award will vest and
will be available for exercise in June 2014 with the remaining 50% to vest and be available to directors in June 2015.
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Directors’ pension plan benefits
The Company operates a defined contribution pension plan for executive directors based in the United Kingdom.
Sir Ian Cheshire’s defined contribution pension arrangement provides a Company contribution of 30% of his base salary, and Kevin
O’Byrne’s and Karen Witts’ arrangements provide a Company contribution of 20% of base salary. The Company operates a policy
to limit pension contributions during the tax year up to the Annual Allowance, with the excess being directed into a taxable monthly
cash payment. Following pension and tax legislation changes which took effect in 2012 and which reduced the lifetime allowance
from £1.8 million to £1.5 million, the Company has offered a fully taxable cash alternative, at no additional cost to the Company, to
executive directors wishing to exit the defined contribution scheme completely.
Kevin O’Byrne has chosen to receive his Company pension contributions as a taxable monthly cash supplement in full.
Philippe Tible is a member of a separate Group defined benefit pension scheme, for which eligibility requires him to retire with the
Kingfisher Group. He has now met the age criteria of 62 in this scheme to retire and for the pension to crystallise. Based upon 11
years’ service, the pension accrued is valued at £3.3m. The increase in the value of his pension over the course of the financial year
is £320,000 as shown in the single figure table. These figures are based on a crystallised pension and have not been discounted in
any way for the risk of forfeiture.
The following table shows details required under the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 as they apply to Kingfisher for the year ended 1 February 2014.
The value of the increase in pension savings over the year is split between:
• Defined benefit arrangements – the additional value achieved in the year based on the ‘HMRC methodology’
• Defined contribution arrangements – the cash value of any employer contributions over the year.
Source of remuneration
Pension
arrangement
Changes in
pension savings
£’000
Sir Ian Cheshire
Final Salary Defined benefit 2
Money Purchase Plan Defined contribution 0
Payment in lieu of retirement benefits n/a 258.4
Sir Ian Cheshire ceased to accrue future benefits in the Final Salary section on 30 June 2012. Under that scheme, Sir Ian’s normal retirement age is 65 and his accrued
pension figure at 1 February 2014 was £34,077.
The increase in Sir Ian Cheshire’s defined benefit arrangement is because the ‘HMRC methodology’ increases the opening pension (2 February 2013) with the change
in the CPI index whereas the closing pension (1 February 2014) includes an increase at 1 April 2013 based on the change in the RPI index. Note that there have been
no member contributions payable in respect of the Final Salary section since 30 June 2012.
The defined contribution figure above represents employer contributions to the Money Purchase Plan over the year in question. Member contributions of £52,000 were
paid on behalf of Sir Ian Cheshire through salary sacrifice.
The following table shows the employer contributions made to the defined contribution scheme, or cash alternative in relation to
service during the financial year to 1 February 2014:
Cash alternative
(1)
£’000 2013/14 2012/13
Sir Ian Cheshire
(2)
258.4 230.7
Kevin O’Byrne 123.1 114.6
Karen Witts
(3)
103.1 31.7
(1) Following pension and tax legislation changes, effective 6 April 2011, tax relief on the value of pension contributions and defined benefit accrual has been limited to
£50,000 p.a. The Company has offered, as an alternative to contributions into the defined contribution pension scheme, a taxable cash payment to the executive directors
at no additional cost to the Company.
(2) The payments to Sir Ian Cheshire in 2013/14 and 2012/13 include a goodwill payment received following the closure of the Kingfisher defined benefit scheme and
his transfer to the Kingfisher defined contribution scheme. These payments were offered to all members of the scheme on the same terms.
(3) Member contributions under the Kingfisher defined contribution pension scheme of £54,000 were paid on behalf of Karen Witts through salary sacrifice.
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Outside appointments for executive directors
Subject to the rules governing conflicts of interest, the Company is supportive of its executive directors holding non-executive roles
outside the Group as it recognises that such roles can broaden their experience and knowledge, which can be of benefit to the Group.
Subject to the Committee’s agreement, any fees may be retained by the individual.
Kevin O’Byrne is a non-executive director, Senior Independent Director and Chairman of the Audit Committee of Land Securities
Group plc, and during the year was paid £63,750, £10,000 and £17,500 per annum respectively for fulfilling these roles and he
retains these fees.
Sir Ian Cheshire is a non-executive director, member of the Remuneration Committee and Senior Independent Director of Whitbread
plc, and is paid £55,000, £5,000 and £10,000 per annum respectively for fulfilling these roles and he retains these fees. In addition,
Sir Ian Cheshire is lead non-executive member of the Department for Work and Pensions Board, for which he waives his fee.
Karen Witts became a non-executive director of Imperial Tobacco Group plc following the end of the financial year and will be paid
£72,500 per annum for fulfilling this role. She will retain her fee for this role.
Scheme interests awarded during the financial year (Audited)
Options and awards over shares were made during the year ended 1 February 2014 under the KISS and the CSOP. KISS awards
were made in respect of the executive directors’ annual bonus earned for the performance during 2012/13 and are deferred for three
years. The only qualifying condition for the options and awards to vest is for the director to be in the employment of the Company at
the vesting date.
Name Number of shares
Face value
of award
£
Market value
of shares at
date of grant
p
(2)
Vesting date Lapse date
Sir Ian Cheshire 57,603 171,196 297.2 11/04/2016 10/04/2020
Kevin O’Byrne 39,605 117,706 297.2 11/04/2016 10/04/2020
Philippe Tible 41,780 124,170 297.2 11/04/2016 10/04/2020
Karen Witts KISS Award 864 2,568 297.2 11/04/2016 10/04/2020
Karen Witts CSOP Option
(1)
10,313 30,650 297.2 11/04/2016 10/04/2020
(1) The option was granted at an option price of 290.87p calculated by reference to the average closing price of Kingfisher plc shares for the three dealing days immediately
before the date of grant.
(2) The market price of shares was determined by reference to the closing price of Kingfisher plc shares on the date of grant (11 April 2013).
Included as an element of the KISS award, Karen Witts was granted options under the CSOP, a HMRC approved plan. The CSOP is underpinned in part by a matching fixed
value element of the KISS share awards granted on the same day. On exercise, the proceeds of part of the KIS share award are used to fund the exercise price of the CSOP
award. The total value of the KISS share award is unchanged.
Dilution limits
Kingfisher’s share plans contain limits that set out the quantum of newly issued shares that may be used to satisfy awards granted
under those plans. These limits are in line with the current Association of British Insurers (ABI) guidance on headroom limits which
provide that overall dilution under all plans should not exceed 10% over a ten-year period in relation to the Company’s issued share
capital, with a further limitation of 5% in any ten-year period on executive plans. The Company has always operated within these
limits. The Committee regularly monitors the position and prior to the making of any award considers the effect of potential vesting
of options or share awards to ensure that the Company remains within these limits. Any awards which are required to be satisfied
by market purchased shares are excluded from such calculations. No treasury shares were held or utilised in the year ended
1 February 2014.
Payments to past directors and payments for loss of office
No payments were made to past directors or for loss of office during the year.
Annual Report and Accounts 2013/14
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Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
64
Statement of directors’ shareholding and share interests (Audited)
All executive directors are required to build up a significant shareholding in the Company within five years from the date of their first
award under a qualifying plan as described in the section on Remuneration Policy on page 52. Unvested deferred bonus awards are
not included when assessing holding requirements until the transfer of beneficial ownership at the end of the deferral period. Current
shareholdings are summarised in the following table. Calculations are based on a share price of £3.696 (being the closing price on 31
January 2014).
Shares held Awards over shares
Shareholding
required
(% of salary)
Current
shareholding
(% of salary)
Requirement
met
Number of shares
owned outright
Vested
but not
exercised
Unvested
(3)
and subject
to continued
employment
Unvested
and
subject to
performance
conditions 2013/14 2012/13
Executive directors
Sir Ian Cheshire 2,348,088 1,147,527 – 434,067 1,613,591 300% 1042% Yes
Kevin O’Byrne 141,431 141,431 1,393,280 320,049 1,186,461 200% 519% Yes
Philippe Tible 589,461 104,968 – 246,901 906,354 200% 427% Yes
Karen Witts 58,283
(2)
58,186 – 24,664 513,097 200% 44.5% n/a
(1)
Non-executive directors
Daniel Bernard 121,717 120,766
Andrew Bonfield 10,000 10,000
Pascal Cagni 30,570 30,000
Clare Chapman 6,990 6,990
Anders Dahlvig 75,000 75,000
Janis Kong 24,000 24,000
Mark Seligman 15,000 15,000
(1) Karen Witts has until 16 October 2017 to achieve the shareholding requirement, being five years from the date of her first award under a qualifying scheme.
(2) Between 1 February 2014 and the date of this report, Karen Witts acquired an additional 63 partnership shares under the Kingfisher Share Investment Plan (SIP).
(3) For UK based directors, this includes options granted under the CSOP, a HMRC approved plan and the CSOP underpin award, a matching fixed value element of the
KISS award granted on the same day as the KISS. Also included are options under the HMRC approved sharesave scheme.
As potential beneficiaries under the Kingfisher Employee Benefit Trust (the ‘Trust’), Sir Ian Cheshire, Kevin O’Byrne, Philippe Tible and Karen Witts are deemed to have an
interest in the Company’s ordinary shares held by the Trust. The Trust held 10,043,624 ordinary shares at 1 February 2014.
Nil-cost options which have vested but have yet to be exercised are considered to count towards the shareholding requirement, other than any such shares that correspond
to the estimated income tax and national insurance contributions that would arise on their exercise.
Non-executive directors do not have a shareholding requirement but are encouraged to hold shares in the Company.
Scheme interests exercised during financial year (Audited)
Name
Number of
shares
Exercise
price
p
Market value
of shares at
date of
exercise
p
Gain on
exercise of
options
£’000
Sir Ian Cheshire
ESOS 2003 award 134,538 237.8 288.3 67.9
KISS 2010 award 269,779 nil 288.7 777.9
PSP 2008 matching award 1,299,886 nil 292.7 3,805.2
PSP 2009 award 328,726 nil 297.7 962.3
PSP 2010 award 368,413 nil 324.8 1,196.7
Kevin O’Byrne
PSP 2008 award 665,000 nil 292.7 1,946.7
Philippe Tible
ESOS 2003 award 52,105 237.8 288.3 26.3
KISS 2010 award 132,368 nil 411.2 544.3
PSP 2010 award 274,602 nil 326.7 920.3
(1)
(1) Gain includes 247,224 shares transferred to Philippe Tible on 15 May 2013 at a market price of 326.7 pence per share and 27,378 shares exercised and sold on
11 September 2013 at a price of 411.2 pence per share.
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65
Performance graph and table
The graph below shows Kingfisher’s total shareholder return (‘TSR’) for the five years to 1 February 2014 which assumes that £100
was invested in Kingfisher on 1 February 2009. The Company chose the FTSE100 Index as an appropriate comparator for this graph
as Kingfisher has been a constituent of that index throughout the period.
Group Chief Executive’s pay in last five financial years
Year 2009/10 2010/11 2011/12 2012/13 2013/14
Group Chief Executive’s total single figure £’000 3,067.8 5,350.8 8,628.3 2,817.2 3,565.5
Bonus % of maximum awarded % 98.7 83.8 93.5 30.8 32.0
LTIP % of maximum vesting % 44.6 100.0 98.9 50.0 31.1
Percentage change in remuneration of director undertaking the role of Group Chief Executive
The table below shows how the percentage change in the Group Chief Executive’s salary, benefits and bonus between 2012/13 and
2013/14 compared with the average percentage change in the average of each of those components for all full-time equivalent employees
based in the UK. The UK employee workforce was chosen as a suitable comparator group as Sir Ian Cheshire is based in the UK (albeit
with a global role and responsibilities) and pay changes across the Group vary widely depending on local market conditions.
Group Chief Executive All employees
To 1 February
2014
£’000
Percentage
change
2013/14 vs
2012/13
Percentage
change
2013/14 vs
2012/13
Base salary 832.3 2.0% 2.0%
Taxable benefits 30.6 -0.6% -1.0%
Annual bonus 532.7 6.0% 71.8%
Total 1,395.6 3.4% 6.3%
The decrease in benefits is driven by a reduction in the private medical cover premium, rather than a reduction in the benefits offered.
The significant annual bonus % increase for all UK employees is driven off a relatively low base for 2012/13, hence this does not impact the overall increase significantly.
Relative importance of spend on pay
The table below shows the relative importance of spend on employee remuneration when compared with distributions
to shareholders.
£m 2013/14 2012/13
Percentage
change
Overall expenditure on pay 1,587 1,577 0.6%
Dividends paid in the year 224 221 1.4%
100
150
200
250
300
350
2009 2010 2011 2012 2013 2014
King?sher FTSE 100
Annual Report and Accounts 2013/14
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Governance
Directors’ Remuneration Report continued
Annual Report and Accounts 2013/14
66
Statement of implementation of Remuneration Policy in the following financial year
The Remuneration Policy will be implemented with effect from the AGM in 2014 in line with policy as follows:
Base salary and fees
Base salary and fees £’000
% increase As at 1 Feb 2014 As at 1 Feb 2013
Sir Ian Cheshire 849.0 832.3 2%
Kevin O’Byrne 639.5 627.0 2%
Philippe Tible 519.5 509.3 2%
Karen Witts 525.0 484.5 8%
Chairman 480.8 472.4 2%
Non-executive director fee 62.4 61.2 2%
Senior Independent director 17.4 17.4 0%
Chairman of Audit Committee 20.0 20.0 0%
Chairman of Remuneration Committee 15.0 15.0 0%
Philippe Tible’s remuneration and the fees paid to Provestis in respect of the provision of Daniel Bernard as Chairman, are paid in euros and are converted to sterling for
the purpose of the table at the average exchange rate over the course of the relevant year.
The increase awarded to Karen Witts was based on the intention to bring her up to the market median position as she develops into her role, and gains more experience
as a Group Financial Director.
Benefits
Implemented in line with policy.
All employee share plans
Implemented in line with policy.
Pension
Implemented in line with policy.
Annual bonus
Implemented in line with policy.
Weighting of annual bonus for 2014/15
• Profit before tax – 30%
• Like-for-like sales – 30%
• Cashflow – 20%
• Personal objectives – 20%
At the threshold level of performance, the award will be 10% of maximum.
Profit before tax is calculated on the basis of budgeted exchange rates and excludes exceptional items according to the judgement
of the Committee.
Like-for-like sales is set as an absolute target, but the Committee applies judgement in measuring the outcome against target,
taking into account sales growth against the local market out-turn and any consequent increase or decrease in market share.
Cashflow excludes capital expenditure, but the Committee may apply judgement to ensure that the measure has not been met at
the expense of investment.
Any exchange rate upsides/downsides will be removed from the results when determining award levels, since they are deemed to be
outside the executive directors’ control.
Long-term incentive plan
Implemented in line with policy.
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Performance measures for long-term incentives to be awarded in 2014/15
Performance measure
Threshold –
25% vesting
Maximum –
100% vesting
Earnings per share – compound annual growth up to 2016/17 4% 11.5%
The EPS growth targets have been set to be consistent with market practice in the FTSE100 and in particular the retail sector.
The intention is to operate this range consistently over the policy period. The Threshold level of performance provides for real
growth, which is considered suitably challenging in what remains an uncertain economic environment, but sets an achievable level
of performance to ensure participants place value on the plan and are motivated by it. The Maximum performance level ensures that
full vesting is only achieved for outstanding double-digit performance over the three-year period, well in excess of typical industry
growth rates.
Performance targets also include a KEP measure. KEP targets are calibrated to be consistent with the EPS growth targets, recognising
that in weaker performance scenarios offsetting capital efficiencies should be identified, whereas stronger performance scenarios
may allow increased capital investment. KEP is defined in the same way as set out in the Financial Review.
Consideration by the directors of matters relating to directors’ remuneration
The Committee has delegated responsibility from the Board for reviewing and approving the remuneration of the executive directors
and the members of the Group Executive and for setting the remuneration package for the Chairman. The Committee also has
oversight of the remuneration policy and packages for other senior members of staff.
Members of the Committee
The Committee comprised the following independent non-executive directors during the financial year to 1 February 2014.
From Attendance
Clare Chapman (Chairman) 16/02/2011 5/5
Daniel Bernard 03/06/2009 5/5
Andrew Bonfield 17/06/2010 5/5
Janis Kong 08/12/2006 5/5
At the invitation of the Committee, except where their own remuneration was being discussed, the following people attended
meetings and provided advice to the Committee: Sir Ian Cheshire (Group Chief Executive), Karen Witts (Group Finance Director),
Evelyn Gardiner (Group HR Director), Louise Bentham (Head of Group Reward) and Kathryn Hudson (Company Secretary).
Activities
During 2013/14 the Committee:
• agreed the performance targets for the annual bonus in the financial year and monitored progress against those targets;
• agreed the operation of the long-term incentive plans and policy for executive share plan awards to new recruits, and
promotions, including the level of individual awards and performance conditions;
• agreed the award level of the 2012/13 annual bonus;
• agreed the vesting levels of the 2010 PSP;
• recommended the 2012/13 Directors’ Remuneration Report for endorsement by the Board and subsequent approval
by shareholders;
• reviewed the Group’s remuneration strategy; and
• reviewed the Group’s Executive Remuneration Policy prior to recommending it for approval by shareholders.
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Annual Report and Accounts 2013/14
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Advisers to the Remuneration Committee
The Committee has authority to obtain the advice of external independent remuneration consultants and is solely responsible
for their appointment, retention and termination. In February 2013, following a robust tender process, the Committee appointed
PricewaterhouseCoopers LLP as its principal adviser. During the financial year to 1 February 2014, the following external advisers
provided services to the Committee. Unless otherwise stated, the advisers have no other connection with the Group, and the
Committee firmly believes that the advice received was, and continues to be, objective and independent:
PricewaterhouseCoopers LLP (PwC)
PwC provided the Committee with executive remuneration advice, including the operation of employee and executive share plans.
PwC is a member of the Remuneration Consultants Group (the professional body for executive remuneration consultants) and
provided certain other services to the Group. Total fees for advice provided to the Committee during the year were £195,000 of
which £91,000 related to the comprehensive review of executive remuneration conducted during the year.
Allen & Overy LLP (A&O)
A&O provided legal advice to the Committee on service and employment contracts, and for other employment and remuneration
issues. A&O also provides advice to the Group on other legal matters.
Statement of voting at the Annual General Meeting
At the Annual General Meeting (the ‘AGM’) on 13 June 2013 the annual advisory votes on the remuneration report were cast
as follows:
Votes for (and percentage
of votes cast)
Votes against (and percentage
of votes cast)
Proportion of
share capital
voting
Shares on
which votes
were withheld
Resolution
Remuneration report for year
ended 2 February 2013 1,585,211,665 97.66% 38,040,731 2.34% 68.41% 116,857,614
The Remuneration Policy contained within this report will be subject to a binding vote by shareholders at the AGM on 12 June 2014.
The Annual Remuneration Report will be subject to an advisory vote at the same meeting. The Chairman of the Committee will be
available at the meeting to answer any questions about the work of the Committee.
The 2014/15 Annual Remuneration Report will include details of the binding vote on the Remuneration Policy.
For and on behalf of the Committee
Clare Chapman
Chairman of the Remuneration Committee
24 March 2014
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Directors’ report
Annual Report and Accounts 2013/14
69
The Company is required by the Companies Act 2006 to present
a Directors’ Report for the financial year ended 1 February
2014. It is also required to report on its compliance with the
UK Corporate Governance Code (the ‘Code’) for the year and
provide certain disclosures in respect of the United Kingdom
Listing Authority’s (the UKLA) Disclosure and Transparency
and Listing Rules. The report, together with the Corporate
Governance report on pages 35 to 41 the Audit Committee report
on pages 42 to 45, and the Directors’ Remuneration Report on
pages 47 to 68 are incorporated into this Directors’ Report by
reference, and when taken together with cross references to
disclosures elsewhere in the Annual Report and Accounts, fulfil
the Company’s disclosure requirements.
Strategic Report
The Companies Act 2006 requires the Company to present
a fair review of the operations of the business during the year
to 1 February 2014 and the position of the Company at year
end along with the principal risks and uncertainties faced. The
Strategic Report of the Company, which includes the Group’s
Key Performance Indicators, a statement on Corporate
Responsibility, a Financial Review including financial and
capital risk, is detailed on pages 1 to 31 and is incorporated
by reference and deemed to form part of this report.
Dividends
The directors recommend a final dividend of 6.78p (2012/13:
6.37p) per ordinary share amounting to £160m (2012/13:
£150m) to be paid on 16 June 2014 to members appearing on
the Register at the close of business on 16 May 2014. Together
with the interim dividend of 3.12p (2012/13: 3.09p) per ordinary
share, amounting to £74m (2012/13: £73m), paid on 15
November 2013, the total dividend for the financial year ended
1 February 2014 will be 9.90p (2012/13: 9.46p) per ordinary
share, amounting to £234m (2012/13: £224m).
The Kingfisher Employee Benefit Trust has waived all dividends
payable by the Company in respect of the ordinary shares held
by it. The total dividends waived in the year to 1 February 2014
were in aggregate £1.1m.
Directors
Full biographical details of the current directors are set out on
pages 32 and 33. In accordance with the principles of the
UK Corporate Governance Code, all directors will retire and be
submitted for re-appointment at the AGM in 2014.
Directors’ indemnity arrangements
The Company has provided qualifying third-party deeds of
indemnity for the benefit of each director and former director
who held office during the 2013/14 financial year. The Company
has also purchased and maintained Directors’ and Officers’
liability insurance throughout 2013/14. Neither the indemnities
nor the insurance provides cover in the event that the director
concerned is proved to have acted fraudulently.
Directors’ interests
Details of directors’ remuneration, service contracts and interests
in the Company’s shares and share options are set out in the
Directors’ Remuneration Report on pages 47 to 68. No director
had a material interest at any time during the year in any derivative
or financial instrument relating to the Company’s shares.
Principal risk identification and management
The principal risks and uncertainties facing the Group have been
reviewed by the Board and are shown in the Risks section on
pages 28 to 31. The Risks section also provides information on
the performance of the Board in actively managing those risks, to
allow assessment of how the directors have performed their
statutory duty to promote the success of the Company.
Employees
The commitment of the Group’s employees is vital to ensure that
high standards of customer care and service are maintained
throughout the business. The Group is fully committed to treating
its employees and customers with dignity and respect, and to
valuing diversity. It is Group policy to:
• ensure there is no discrimination in employment on the
grounds of race, gender, age, disability, marital status,
sexual orientation or religious belief;
• implement measures in stores to ensure a level of customer
service for disabled people equivalent to that offered to
non-disabled people; and
• maintain a mechanism which customers and employees can
use to give feedback on the Group’s performance and ensure
that all customer comments are analysed, responded to and
acted upon.
A breakdown of employee gender diversity, as required by the
Companies Act 2006, can be found on page 19 the Net
Positive section of the Strategic Report and forms part of the
Directors’ Report disclosures. During the year B&Q UK
continued its long-established policy of promoting age diversity,
with around a quarter of its employees aged over 50.
The Group’s statement on employee development is set
out in the People section of the Company’s website
(www.kingfisher.com).
There are a number of communication channels in place to
help employees to develop their knowledge of, and enhance
their involvement with, the Group. These channels include
engagement surveys, briefing groups, internal magazines and
newsletters that report on business performance and objectives,
community involvement and other applicable issues. Directors
and senior management regularly visit stores and discuss
matters of current interest and concern with employees.
Greenhouse Gas Emissions
The Group is required to state the annual quantity of emissions
in tonnes of CO2 equivalent from activities for which the Group
is responsible. Details of our emissions for the year ended 1
February 2014 and the actions the Group is taking to reduce
their impact are set out within the Sustainability section of the
Strategic Report on pages 18 and 19 and form part of this
Directors’ Report.
Political donations
The Board annually seeks and obtains shareholders’ approval
to enable the Group to make donations or incur expenditure
in relation to EU political parties, other political organisations
or independent election candidates under section 366 of the
Companies Act 2006.
in
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70
Governance
Directors’ report continued
Annual Report and Accounts 2013/14
70
The Group made no political donations during the year
(2012/13: £nil). As with previous annual approvals, the Group
has no intention of changing its current policy and practice of not
making political donations. The Board seeks the approval on a
precautionary basis to avoid any unintentional breach of the
relevant provisions. Shareholder approval will be sought at this
year’s AGM to renew this authority; further details are provided
in the Notice of AGM.
Significant agreements – change of control
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Company following
a takeover bid, such as bank loan agreements, Medium Term
Note (‘MTN’) documentation, private placement debt and
employee share plans. None of these are deemed to be
significant in terms of their potential impact on the business
of the Group as a whole except for:
• the £200 million credit facility dated 8 July 2011 between
the Company, HSBC Bank plc (as the facility agent) and the
banks named therein as lenders, which contains a provision
such that in the event of a change of control any lender may,
if they so require, notify the agent that they wish to cancel
their commitment whereupon the commitment of that lender
will be cancelled and all their outstanding loans, together
with accrued interest, will become immediately due and
payable; and
• the US$297 million US Private Placement notes, issued
pursuant to a note purchase agreement dated 24 May 2006
by the Company to various institutions, which contains a
provision such that in the event of a change of control, the
Company is required to make an offer to the holders of the
US Private Placement notes to prepay the principal amount
of the notes together with interest accrued.
The Company does not have agreements with any director or
officer that would provide compensation for loss of office or
employment resulting from a takeover, except that provisions of
the Company’s share incentive schemes may cause options and
awards granted under such schemes to vest on a takeover.
Share capital
Details of the Company’s issued share capital are set out in
note 28 to the consolidated financial statements. All of the
Company’s issued ordinary shares are fully paid up and rank
equally in all respects.
The rights and obligations attaching to the Company’s ordinary
shares, in addition to those conferred on their holders by law, are
set out in the Company’s Articles of Association, copies of which
can be obtained from the Company’s website. The holders of
ordinary shares are entitled to receive the Company’s Annual
Report and Accounts, to attend and speak at general meetings
of the Company, to appoint proxies and to exercise voting rights.
There are no restrictions on the transfer of ordinary shares or on
the exercise of voting rights attached to them, except (i) where
the Company has exercised its right to suspend their voting rights
or to prohibit their transfer following the omission of their holder
or any person interested in them to provide the Company with
information requested by it in accordance with Part 22 of the
Companies Act 2006 or (ii) where their holder is precluded from
exercising voting rights by the Financial Services Authority Listing
Rules or the City Code on Takeovers and Mergers.
The Company has a Sponsored Level 1 American Depositary
Receipt (‘ADR’) programme in the United States.
Authority to allot shares
At the AGM in 2013, shareholders approved a resolution to give
the directors authority to allot shares up to an aggregate nominal
value of £124,279,699. In addition, shareholders approved a
resolution to give the directors authority to allot up to a nominal
amount of £248,559,398 in connection with an offer by way
of a rights issue in accordance with ABI guidance. If this
additional allotment authority were used, the ABI guidance
would be followed. The directors have no present intention to
issue ordinary shares, other than pursuant to employee share
incentive schemes. These resolutions remain valid until the
conclusion of this year’s AGM when resolutions will be proposed
to renew these authorities.
Authority to purchase own shares
At the AGM in 2013, shareholders approved a resolution
for the Company to make purchases of its own shares to a
maximum number of 237,261,243 ordinary shares, being
approximately 10% of the issued share capital. This resolution
remains valid until the conclusion of this year’s AGM. As at 24
March 2014, the directors have not used this authority. In order
to retain maximum flexibility, a resolution will be proposed at
this year’s AGM to renew this authority. It is the Company’s
current intention that shares acquired under this authority
will be cancelled.
Financial instruments
The Group’s financial risk management objectives and policies
are set out in note 24 to the financial statements on pages
107 to 109. Note 24 also details the Group’s exposure to foreign
exchange, interest, credit and liquidity risks. These notes are
included by reference and form part of this report.
Major shareholders
As at 24 March 2014, the Company had been notified of the
following interests in its shares:
Number of
ordinary
shares held
% of total
voting rights
The Capital Group Companies Inc. 139,479,920 6.05%
Annual General Meeting
The 2014 Annual General Meeting of the Company will be
held on 12 June 2014 at the Hilton London Paddington Hotel,
Paddington at 11.00am. A full description of the business to be
conducted at the meeting is set out in the separate Notice of
Annual General Meeting.
By order of the Board
Kathryn Hudson
Company Secretary
24 March 2014
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Directors’ statement of responsibility
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71
Going concern
The directors confirm that, after reviewing expenditure
commitments, expected cash flows and borrowing facilities,
they have a reasonable expectation that Kingfisher plc (the
‘Company’) and the Kingfisher group of companies (the ‘Group’)
have adequate resources to continue in operational existence for
the next financial year and the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing
these financial statements. Further details of the Group’s liquidity
are provided in the financial review on page 20.
Disclosure of information to auditors
Each person who is a director at the date of approval of this
report confirms that: so far as he or she is aware, there is no
relevant audit information (as defined by section 418 of the
Companies Act 2006) of which the Company’s auditors are
unaware; and each director has taken all the steps that he or
she ought to have taken as a director in order to make himself
or herself aware of any relevant audit information and to establish
that the Company’s auditors are aware of that information.
Responsibility for preparing financial statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
• UK company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (‘IFRS’) as adopted by the European
Union and Article 4 of the IAS Regulation and have elected
to prepare the parent Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards
and applicable law). Under company law the directors must
not approve the accounts unless they are satisfied that they
give a true and fair view of the state of affairs of the Company
and of the profit or loss of the Company for that period.
In preparing the parent Company financial statements, the
directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• follow applicable UK Accounting Standards (except where
any departures from this requirement are explained in the
notes to the parent Company financial statements); and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements in accordance
with IAS 1, ‘Presentation of Financial Statements’, the directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• present information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
• make an assessment of the Group’s ability to continue as a
going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement
The directors confirm that to the best of their knowledge:
• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole;
• the strategic report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face; and
• The Annual Report and financial statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
By order of the Board
Kathryn Hudson
Company Secretary
24 March 2014
Annual Report and Accounts 2013/14
72
Accounts
Independent Auditor’s Report to the members of Kingfisher plc
Annual Report and Account 2013/14
72
Opinion on financial statements of Kingfisher plc
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at
1 February 2014 and of the Group’s profit for the 52 weeks
then ended;
• the Group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union;
• the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the
IAS Regulation.
The financial statements comprise the consolidated income
statement, the consolidated statement of comprehensive
income, the consolidated statement of changes in equity,
the consolidated and Parent Company balance sheets, the
consolidated cash flow statement and the related notes 1 to
38 for the Group and 1 to 15 for the Parent Company financial
statements. The financial reporting framework that has been
applied in the preparation of the Group financial statements is
applicable law and IFRSs as adopted by the European Union.
The financial reporting framework that has been applied in
the preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Going concern
As required by the Listing Rules we have reviewed the directors’
statement on page 71 that the Group is a going concern.
We confirm that:
• we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial
statements is appropriate.
• we have not identified any material uncertainties that may
cast significant doubt on the Group’s ability to continue as a
going concern.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below
are those that had the greatest effect on our audit strategy, the
allocation of resources in the audit and directing the efforts of
the engagement team:
Subject Nature of risk How the scope of our audit responded to the risk
Inventories Assessing net realisable value is an area
of significant judgement, in particular with
regards to the estimation of provisions for
slow-moving and obsolete inventory.
We focused on the valuation of year end
inventory levels, including challenging
judgements taken regarding obsolescence.
Inventory provisioning has been assessed
using historic stock performance and
compared to the Group provision recognised.
Our procedures included assessing the
adequacy of, and movements in, inventory
provisions held by recalculating a sample of
items included within the provision to ensure
appropriate basis of valuation.
Supplier rebates Assessing the timing of recognition of rebate
income earned from suppliers, including
adherence to contractual terms, is an area
of complexity. The subsequent recoverability
of amounts due from suppliers is also an
area of management judgement.
We reviewed agreements with suppliers
and adherence to terms to assess whether
sufficient evidence to support the recognition
of rebate income exists. We circularised a
sample of suppliers where the outstanding
balances were significant at the year end in
order to assess recoverability.
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Subject Nature of risk How the scope of our audit responded to the risk
Property
As a result of the diverse property
portfolio across the Group, there are several
technically complex or judgemental aspects
of property accounting and accounting for
leases across the Group, including:
• The assessment of carrying values of
freehold stores;
• accounting for store closure costs; and
• other property related provisions,
including onerous leases.
For leasehold property, we focused our work
on the identification of complex or unusual
lease contracts to assess whether they were
appropriately accounted for under IAS 17:
‘Leases’. We also performed procedures to
identify leases which could be considered
onerous – for example, we reviewed the
properties currently under lease, and identified
those which may be vacant or underutilised,
or where properties are sublet whether the
estimated rental income leads to an
onerous contract.
For freehold properties, we reviewed
management’s assessment of carrying
values, challenged key assumptions used
in, and performed sensitivity analysis on,
the impairment models where indicators of
impairment were identified.
We considered the assumptions used by
management in estimating store closure costs
and challenged the timing of recognition of
associated provisions.
Goodwill and intangible assets Determining the appropriate carrying
value of goodwill and intangible assets
requires management to make significant
estimates. Cash generating units are
reviewed for impairment using a value in
use model, as described in note 12 to the
financial statements.
We reviewed the assumptions used in the
impairment model for goodwill and intangible
assets, including comparison of the input
assumptions to externally and internally
derived data, as well as forming our own
assessments, and challenged the key inputs
used, including specifically the operating cash
flow projections, discount rates, and long-term
growth rates. We considered the sensitivity of
the model to changes in key assumptions.
We also considered the adequacy of the
Group’s disclosures in respect of impairment
testing and whether disclosures about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
properly reflected the risks inherent in
the assumptions.
Taxation Due to the estimation uncertainty as referred
to in the Critical Accounting Estimates and
Judgements in the Consolidated Financial
Statements at page 88 in respect of
settlements with tax authorities around the
world, assessing the Group’s exposure to
significant tax risks and the level of provisions
recognised is a judgemental area.
We considered all significant taxation
exposures across the Group, including
challenging the estimates and judgements
made by management when calculating the
income tax payable in each territory and the
associated provisions held.
We reviewed correspondence with taxation
authorities in significant locations, as well as
reviewing the support or opinions received
from external counsel and other advisers
where management has relied on such
opinions to make assumptions on the level
of taxation payable.
The Audit Committee’s consideration of risks is set out on page 43.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and
not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect
to any of the risks described above, and we do not express an opinion on these individual matters.
Annual Report and Accounts 2013/14
74
Accounts
Independent Auditor’s Report to the Members of Kingfisher Plc continued
Annual Report and Account 2013/14
74
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.
We determined materiality for the Group to be £35 million,
which is below 5% of adjusted pre-tax profit, and below 1% of
equity. We use adjusted pre-tax profit to exclude the effect of
volatility due to exceptional items from our determination.
We agreed with the Audit Committee that we would report to
them all audit differences in excess of £700,000, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit scope focused primarily on all significant
trading entities and the Group head office, and included B&Q
UK, Castorama France, Brico Dépôt France, Castorama Poland,
Castorama Russia, B&Q China, Screwfix, Brico Dépôt Spain,
Bricostore Romania and the Koçtas¸ joint venture. These locations
represent the principal business units and account for 99% of
the Group’s revenue, 98% of the Group’s profit before tax after
taking into account the allocation of central sourcing costs, and
97% of the Group’s net assets. The locations in scope were
selected to provide an appropriate basis for undertaking audit
work to address the risks of material misstatement identified
above. Our audit work at these locations was executed at levels
of materiality applicable to each individual entity which were
lower than Group materiality. The entities which are out of our
scope are primarily individually insignificant cost entities, the
Hornbach investment and other smaller operations.
The Group audit team continued to follow a programme of
planned visits that has been designed so that the Senior
Statutory Auditor visits locations considered the most significant
each year. For the remaining locations where Group audit work is
performed but no visit is carried out, the Senior Statutory Auditor
has discussed and challenged the key areas of judgement with
the lead audit partner of the relevant component in the current
year, and a senior member of the Group engagement team has
visited the location. We also held regional planning briefings,
attended by the component auditors from each of the eleven
locations discussed above, at which we discussed developments
in the Group relevant to our audit, including risk assessment and
audit procedures to respond to the risks identified.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the
Companies Act 2006; and
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting
records
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not received all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the Parent Company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report
if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the Directors’ Remuneration
Report to be audited is not in agreement with the accounting
records and returns. We have nothing to report arising from
these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the part of
the Corporate Governance Statement relating to the company’s
compliance with nine provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we
are required to report to you if, in our opinion, information in the
Annual Report is:
• materially inconsistent with the information in the audited
financial statements; or
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in
the course of performing our audit; or
• otherwise misleading.
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In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider
the annual report is fair, balanced and understandable and
whether the annual report appropriately discloses those
matters that we communicated to the Audit Committee which we
consider should have been disclosed. We confirm that we have
not identified any such inconsistencies or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express
an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors. We
also comply with International Standard on Quality Control 1 (UK
and Ireland). Our audit methodology and tools aim to ensure that
our quality control procedures are effective, understood and
applied. Our quality controls and systems include our dedicated
professional standards review team, strategically focused
second partner reviews and independent partner reviews.
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the Parent
Company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all
the financial and non-financial information in the annual report
to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with,
the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications
for our report.
Panos Kakoullis
Senior statutory auditor
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London 24 March 2014
Annual Report and Accounts 2013/14
76
Accounts
Consolidated income statement
Year ended 1 February 2014
Annual Report and Accounts 2013/14
76
2013/14
2012/13
(Restated – note 2)
£ millions Notes
Before
exceptional
items
Exceptional
items
(note 5) Total
Before
exceptional
items
Exceptional
items
(note 5) Total
Continuing operations:
Sales 4 11,125 – 11,125 10,573 – 10,573
Cost of sales (7,005) – (7,005) (6,618) – (6,618)
Gross profit 4,120 – 4,120 3,955 – 3,955
Selling and distribution expenses (2,883) 2 (2,881) (2,768) (17) (2,785)
Administrative expenses (550) – (550) (525) (9) (534)
Other income 37 2 39 36 – 36
Share of post-tax results of joint ventures
and associates 17 22 (14) 8 20 – 20
Operating profit 746 (10) 736 718 (26) 692
Analysed as:
Retail profit 4 805 (10) 795 778 (26) 752
Central costs (42) – (42) (42) – (42)
Share of interest and tax of joint ventures
and associates (17) – (17) (18) – (18)
Finance costs (12) – (12) (16) – (16)
Finance income 8 27 35 15 – 15
Net finance income/(costs) 6 (4) 27 23 (1) – (1)
Profit before taxation 7 742 17 759 717 (26) 691
Income tax expense 9 (163) 114 (49) (128) 1 (127)
Profit for the year 579 131 710 589 (25) 564
Attributable to:
Equity shareholders of the Company 709 564
Non-controlling interests 1 –
710 564
Earnings per share 10
Basic 30.0p 24.1p
Diluted 29.7p 23.8p
Adjusted basic 23.4p 22.3p
Adjusted diluted 23.2p 22.0p
The proposed final dividend for the year ended 1 February 2014, subject to approval by shareholders at the Annual General
Meeting, is 6.78p per share.
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Strategic Report Governance Accounts
Consolidated statement of comprehensive income
Year ended 1 February 2014
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£ millions Notes 2013/14 2012/13
Profit for the year 710 564
Actuarial losses on post-employment benefits 27 (127) (29)
Tax on items that will not be reclassified 65 (18)
Total items that will not be reclassified subsequently to profit or loss (62) (47)
Currency translation differences
Group (210) 122
Joint ventures and associates (25) 8
Transferred to income statement (31) –
Cash flow hedges
Fair value losses (4) (14)
Losses/(gains) transferred to inventories 9 (8)
Tax on items that may be reclassified 2 4
Total items that may be reclassified subsequently to profit or loss (259) 112
Other comprehensive income for the year (321) 65
Total comprehensive income for the year 389 629
Attributable to:
Equity shareholders of the Company 388 629
Non-controlling interests 1 –
389 629
5
Annual Report and Accounts 2013/14
78
Accounts
Consolidated statement of changes in equity
Year ended 1 February 2014
Annual Report and Accounts 2013/14
78
Attributable to equity shareholders of the Company
£ millions
Share
capital
Share
premium
Own
shares
held
Retained
earnings
Other
reserves
(note 29) Total
Non-controlling
interests
Total
equity
At 3 February 2013 373 2,204 (60) 3,106 525 6,148 8 6,156
Profit for the year – – – 709 – 709 1 710
Other comprehensive income
for the year – – – (62) (259) (321) – (321)
Total comprehensive income
for the year – – – 647 (259) 388 1 389
Share-based compensation – – – 7 – 7 – 7
New shares issued under
share schemes – 5 – – – 5 – 5
Own shares issued under
share schemes – – 49 (41) – 8 – 8
Own shares purchased – – (24) – – (24) – (24)
Dividends – – – (224) – (224) – (224)
At 1 February 2014 373 2,209 (35) 3,495 266 6,308 9 6,317
At 29 January 2012 372 2,199 (134) 2,869 413 5,719 8 5,727
Profit for the year – – – 564 – 564 – 564
Other comprehensive income
for the year – – – (47) 112 65 – 65
Total comprehensive income
for the year – – – 517 112 629 – 629
Share-based compensation – – – 9 – 9 – 9
New shares issued under
share schemes 1 5 – – – 6 – 6
Own shares issued under
share schemes – – 74 (68) – 6 – 6
Dividends – – – (221) – (221) – (221)
At 2 February 2013 373 2,204 (60) 3,106 525 6,148 8 6,156
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Strategic Report Governance Accounts
Consolidated balance sheet
At 1 February 2014
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£ millions Notes 2013/14 2012/13
Non-current assets
Goodwill 12 2,417 2,399
Other intangible assets 13 222 166
Property, plant and equipment 14 3,625 3,748
Investment property 15 50 66
Investments in joint ventures and associates 17 32 289
Post-employment benefits 27 – 71
Deferred tax assets 25 12 17
Derivatives 23 40 55
Other receivables 19 15 18
6,413 6,829
Current assets
Inventories 18 2,054 2,083
Trade and other receivables 19 590 545
Derivatives 23 5 33
Current tax assets 15 9
Cash and cash equivalents 20 535 398
Assets held for sale 34 208 –
3,407 3,068
Total assets 9,820 9,897
Current liabilities
Trade and other payables 21 (2,486) (2,430)
Borrowings 22 (94) (99)
Derivatives 23 (27) (17)
Current tax liabilities (175) (289)
Provisions 26 (8) (35)
(2,790) (2,870)
Non-current liabilities
Other payables 21 (86) (115)
Borrowings 22 (230) (332)
Derivatives 23 – (12)
Deferred tax liabilities 25 (251) (303)
Provisions 26 (46) (38)
Post-employment benefits 27 (100) (71)
(713) (871)
Total liabilities (3,503) (3,741)
Net assets 4 6,317 6,156
Equity
Share capital 28 373 373
Share premium 2,209 2,204
Own shares held (35) (60)
Retained earnings 3,495 3,106
Other reserves 29 266 525
Total attributable to equity shareholders of the Company 6,308 6,148
Non-controlling interests 9 8
Total equity 6,317 6,156
The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:
Sir Ian Cheshire Karen Witts
Group Chief Executive Group Finance Director
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Accounts
Consolidated cash flow statement
Year ended 1 February 2014
Annual Report and Accounts 2013/14
80
£ millions Notes 2013/14 2012/13
Operating activities
Cash generated by operations 31 976 730
Income tax paid (142) (129)
Net cash flows from operating activities 834 601
Investing activities
Purchase of businesses, net of cash acquired 33 (28) –
Purchase of property, plant and equipment, investment property and intangible assets 4 (304) (316)
Disposal of property, plant and equipment, investment property and intangible assets 12 17
Interest received 8 18
Dividends received from joint ventures and associates 11 10
Net cash flows from investing activities (301) (271)
Financing activities
Interest paid (12) (18)
Interest element of finance lease rental payments (4) (4)
Repayment of bank loans (89) (31)
Repayment of Medium Term Notes and other fixed term debt (33) (162)
Receipt on financing derivatives 6 –
Capital element of finance lease rental payments (13) (12)
New shares issued under share schemes 5 6
Own shares issued under share schemes 8 6
Own shares purchased (24) –
Dividends paid to equity shareholders of the Company (224) (221)
Net cash flows from financing activities (380) (436)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts 153 (106)
Cash and cash equivalents and bank overdrafts at beginning of year 398 485
Exchange differences (17) 19
Cash and cash equivalents and bank overdrafts at end of year 32 534 398
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Notes to the consolidated financial statements
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1 General information
Kingfisher plc (‘the Company’), its subsidiaries, joint ventures
and associates (together ‘the Group’) supply home improvement
products and services through a network of retail stores and
other channels, located mainly in the United Kingdom,
continental Europe and China.
The Company is incorporated in the United Kingdom. The nature
of the Group’s operations and its principal activities are set out in
the Strategic Report on pages 1 to 31.
The address of its registered office is 3 Sheldon Square,
Paddington, London W2 6PX.
The Company is listed on the London Stock Exchange.
These consolidated financial statements have been approved
for issue by the Board of Directors on 24 March 2014.
2 Principal accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to the years presented,
unless otherwise stated. A prior year restatement as a result of
the amendments to IAS 19 (revised), ‘Employee benefits’, is
described in section a of this note.
a. Basis of preparation
The consolidated financial statements of the Company, its
subsidiaries, joint ventures and associates are made up to the
nearest Saturday to 31 January each year, except as disclosed
in note 17 and in note 4 of the Company’s separate financial
statements. The current financial year is the 52 weeks ended
1 February 2014 (‘the year’ or ‘2013/14’). The comparative
financial year is the 53 weeks ended 2 February 2013 (‘the prior
year’ or ‘2012/13’). The 53 weeks in the prior year only impacted
the UK and Ireland businesses with all of the other businesses
reporting on a calendar basis as a result of local requirements.
The directors of Kingfisher plc, having made appropriate
enquiries, consider that adequate resources exist for the Group
to continue in operational existence for the foreseeable future
and that, therefore, it is appropriate to adopt the going concern
basis in preparing the consolidated financial statements for the
year ended 1 February 2014. Refer to the Directors’ statement
of responsibility on page 71.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (‘IFRS’) and those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS and therefore the consolidated financial statements comply
with Article 4 of the EU IAS legislation.
The following new standards, amendments and interpretations,
which are mandatory for the first time for the financial year
ended 1 February 2014, are relevant and material for
the Group:
• IAS 1 (amended), ‘Presentation of items of other
comprehensive income’ (effective from 1 July 2012);
• IAS 19 (revised), ‘Employee benefits’ (effective from
1 January 2013);
• IFRS 7 (amended), ‘Disclosures – Offsetting financial assets
and financial liabilities’ (effective from 1 January 2013);
• IFRS 13, ‘Fair value measurement’ (effective from
1 January 2013).
The impact on the Group of the application of the above
standards is as follows:
• The amendments to IAS 1, ‘Presentation of items of other
comprehensive income’, require items presented in ‘other
comprehensive income’ to be grouped by those items that
may be reclassified subsequently to profit or loss and
those that will never be reclassified, together with their
associated income tax. The amendments have been
applied retrospectively and the presentation of items of
comprehensive income has been adjusted accordingly.
• IAS 19 (revised), ‘Employee benefits’, amends the accounting
for employment benefits and the Group has applied it
retrospectively in accordance with the transition provisions of
the standard. The impact on the Group has been in the
following areas:
– The standard replaces the interest cost on the defined
benefit obligation and the expected return on plan assets
with a single net interest expense or income based on the
net defined benefit asset or liability and the discount rate,
measured at the beginning of the year. There is no change
to determining the discount rate; this continues to reflect
the yield on high-quality corporate bonds. For the current
and comparative year, the Group’s reported profit before
taxation was not impacted as the expected rate of return
on assets at the start of the current and prior year was the
same as the discount rate for the UK scheme, the Group’s
principal defined benefit pension plan.
– The revised standard also requires administrative costs of
running the UK scheme to be reclassified from net finance
costs to operating costs. For the current year the Group’s
reported operating profit is £3m lower and net finance
income £3m higher than they would have been prior to the
adoption of IAS 19 (revised). For the year ended 2 February
2013 the Group’s reported operating profit is £3m lower
and net finance costs £3m lower than previously reported.
• IFRS 7 (amended), ‘Disclosures – Offsetting financial assets
and financial liabilities’, amended the required disclosures
surrounding the effect or potential effect of netting
arrangements, including rights of set-off associated with
recognised financial assets and liabilities, on the Group’s
financial position.
• IFRS 13, ‘Fair value measurement’, has impacted the
measurement of fair value for certain financial assets and
liabilities as well as introducing new disclosures.
Annual Report and Accounts 2013/14
82
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
82
2 Principal accounting policies continued
The following amendments and interpretations, which are
mandatory for the first time for the financial year ended
1 February 2014, are either not currently relevant or not
material for the Group:
• IFRS 1 (amended), ‘First time adoption’ on government
loans (effective from 1 January 2013);
• Amendments to IFRS 10, IFRS 12 and IAS 27 –
Investment entities;
• Annual improvements to IFRSs 2009-2011 (effective from
1 January 2013);
• IFRIC 20 ‘Stripping Costs in the Production Phase
of a Surface Mine’;
• Amendments to IFRS 1 Government Loans.
At the date of authorisation of these financial statements,
the following new standards, amendments and interpretations,
which have not been applied in these financial statements,
were in issue but not yet effective (and in some cases had
not yet been adopted by the EU):
• IFRS 9, ‘Financial instruments’ (effective from
1 January 2018);
• IFRS 10, ‘Consolidated financial statements’ (effective
from 1 January 2014);
• IFRS 11, ‘Joint arrangements’ (effective from
1 January 2014);
• IFRS 12, ‘Disclosure of interests in other entities’ (effective
from 1 January 2014);
• IAS 27 (revised), ‘Separate financial statements’ (effective
from 1 January 2014);
• IAS 28 (revised), ‘Investments in associates and joint ventures’
(effective from 1 January 2014);
• IAS 32 (amendment), ‘Financial instruments: Presentation’
on offsetting financial assets and financial liabilities
(effective from 1 January 2014).
The directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group in future periods, except that IFRS
9 will impact both the measurement and disclosures of
financial instruments.
Beyond the information above, it is not practicable to provide
a reasonable estimate of the effect of these standards until a
detailed review has been completed.
The consolidated financial statements have been prepared
under the historical cost convention, as modified by the use
of valuations for certain financial instruments, share-based
payments and post-employment benefits. A summary of the
Group’s principal accounting policies is set out below.
The preparation of financial statements in conformity with
IFRS requires the use of certain accounting estimates and
assumptions. It also requires management to exercise its
judgement in the process of applying the Group’s accounting
policies. The areas involving critical accounting estimates and
judgements, which are significant to the consolidated financial
statements, are disclosed in note 3.
Use of non-GAAP measures
In the reporting of financial information, the Group uses certain
measures that are not required under IFRS, the Generally
Accepted Accounting Principles (‘GAAP’) under which the Group
reports. Kingfisher believes that retail profit, adjusted
pre-tax profit, effective tax rate, adjusted post-tax profit and
adjusted earnings per share provide additional useful information
on underlying trends to shareholders. These and other non-
GAAP measures such as net debt/cash are used by Kingfisher
for internal performance analysis and incentive compensation
arrangements for employees. The terms ‘retail profit’, ‘exceptional
items’, ‘adjusted’, ‘effective tax rate’ and ‘net debt/cash’ are not
defined terms under IFRS and may therefore not be comparable
with similarly titled measures reported by other companies.
They are not intended to be a substitute for, or superior to,
GAAP measures.
Like-for-like (‘LFL’) sales growth is defined as the constant
currency, year-on-year sales growth for stores that have been
open for more than a year.
Retail profit is defined as continuing operating profit before
central costs (principally the costs of the Group’s head office),
exceptional items, amortisation of acquisition intangibles
and the Group’s share of interest and tax of joint ventures
and associates.
The separate reporting of non-recurring exceptional items,
which are presented as exceptional within their relevant income
statement category, helps provide an indication of the Group’s
underlying business performance. The principal items which
are included as exceptional items are:
• non-trading items included in operating profit such as
profits and losses on the disposal, closure or impairment
of subsidiaries, joint ventures, associates and investments
which do not form part of the Group’s trading activities;
• profits and losses on the disposal of properties; and
• the costs of significant restructuring and incremental
acquisition integration costs.
The term ‘adjusted’ refers to the relevant measure being
reported for continuing operations excluding exceptional items,
financing fair value remeasurements, amortisation of acquisition
intangibles, related tax items and prior year tax items (including
the impact of changes in tax rates on deferred tax). Financing
fair value remeasurements represent changes in the fair value
of financing derivatives, excluding interest accruals, offset by
fair value adjustments to the carrying amount of borrowings
and other hedged items under fair value hedge relationships.
Financing derivatives are those that relate to underlying items
of a financing nature.
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The effective tax rate represents the effective income tax
expense as a percentage of continuing profit before taxation
excluding exceptional items. Effective income tax expense is
the continuing income tax expense excluding tax on exceptional
items and tax adjustments in respect of prior years and the
impact of changes in tax rates on deferred tax.
Net debt/cash comprises borrowings and financing derivatives
(excluding accrued interest), less cash and cash equivalents
and current other investments.
b. Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company, its subsidiaries, joint ventures
and associates.
(i) Subsidiaries
Subsidiary undertakings are all entities over which the Group
has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one half
of the voting rights. Subsidiary undertakings acquired are
recorded under the acquisition method of accounting and their
results included from the date of acquisition. The results of
subsidiaries which have been disposed are included up to the
effective date of disposal.
The consideration transferred for the acquisition of a subsidiary
is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. On an acquisition-by-acquisition basis,
the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is
the amount of those interests at initial recognition plus the non-
controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non-controlling
interests even if this results in the non-controlling interests having
a deficit balance. Prior to 31 January 2010, losses exceeding
the non-controlling interest in the equity of a subsidiary were
required to be attributed to the parent; the resulting deficit
balances were not restated following amendment to IAS 27,
‘Consolidated and separate financial statements’.
The excess of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the acquisition-
date fair value of any previous equity interests in the acquiree
over the fair value of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of
the net assets of the subsidiary acquired in the case of
a bargain purchase, the difference is recognised directly
in the income statement.
Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Accounting policies of acquired subsidiaries have been
changed where necessary to ensure consistency with the
policies adopted by the Group.
(ii) Joint ventures and associates
Joint ventures are entities over which the Group has joint
control, with a third party, to govern the financial and operating
activities of that entity. The equity method is used to account
for the Group’s investments in joint ventures.
Associates are entities over which the Group has the ability
to exercise significant influence but not control, generally
accompanied by a shareholding of between 20% and 50%
of the voting rights. The equity method is used to account
for the Group’s investments in associates.
Under the equity method investments are initially recognised at
cost. The Group’s investments in joint ventures and associates
include goodwill (net of any accumulated impairment losses)
identified on acquisition.
The Group’s share of post-acquisition profits or losses is
recognised in the income statement within operating profit,
and its share of post-acquisition movements in reserves is
recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of
the investment. When the Group’s share of losses equals or
exceeds its interest, including any other long-term receivables,
the Group does not recognise any further losses, unless it has
incurred obligations or made payments on behalf of the joint
venture or associate.
Unrealised gains on transactions between the Group and its
joint ventures and associates are eliminated to the extent of the
Group’s interest. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of joint ventures and associates
have been changed where necessary to ensure consistency with
the policies adopted by the Group.
The equity method of accounting is discontinued from the date
an investment ceases to be a joint venture or associate, that is
the date on which the Group ceases to have joint control or
significant influence over the investee or on the date it is
classified as held for sale.
c. Foreign currencies
(i) Presentation and functional currencies
The consolidated financial statements are presented in
Sterling, which is the Group’s presentation currency. Items
included in the financial statements of each of the Group’s
entities are measured using the currency of the primary
economic environment in which the entity operates
(i.e. its functional currency).
(ii) Transactions and balances
Transactions denominated in foreign currencies are
translated into the functional currency at the exchange rates
prevailing on the date of the transaction or, for practical
reasons, at average monthly rates where exchange rates
do not fluctuate significantly.
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2 Principal accounting policies continued
Monetary assets and liabilities denominated in foreign
currencies are translated into Sterling at the rates of exchange
at the balance sheet date. Exchange differences on monetary
items are taken to the income statement. Exceptions to this are
where the monetary items form part of the net investment in a
foreign operation or are designated and effective net investment
or cash flow hedges. Such exchange differences are initially
deferred in equity.
(iii) Group companies
The balance sheets of overseas subsidiary undertakings
are expressed in Sterling at the rates of exchange at the
balance sheet date. Profits and losses of overseas subsidiary
undertakings are expressed in Sterling at average exchange
rates for the period. Exchange differences arising on the
retranslation of foreign operations, including joint ventures and
associates, are recognised in a separate component of equity.
On consolidation, exchange differences arising from the
retranslation of the net investment in foreign entities, and of
borrowings and other currency instruments designated as
hedges of such investments, are taken to equity. When a foreign
operation is sold, such exchange differences recorded since
1 February 2004 are recognised in the income statement as
part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the rates of exchange at the
balance sheet date. Goodwill arising prior to 1 February 2004
is denominated in Sterling.
Principal rates of exchange against Sterling:
2013/14 2012/13
Average
rate
Year end
rate
Average
rate
Year end
rate
Euro 1.18 1.22 1.23 1.15
US Dollar 1.57 1.64 1.59 1.57
Polish Zloty 4.95 5.17 5.13 4.79
Chinese Renminbi 9.62 9.97 10.01 9.80
d. Revenue recognition
Sales represent the supply of home improvement products and
services. Sales exclude transactions made between companies
within the Group, Value Added Tax, other sales-related taxes
and are net of returns, trade and staff discounts.
Sales of in-store products are generally recognised at the point
of cash receipt. Where award credits such as vouchers or loyalty
points are provided as part of the sales transaction, the amount
allocated to the credits is deferred and recognised when the
credits are redeemed and the Group fulfils its obligations to
supply the awards.
For delivered products and services, sales are recognised either
when the product has been delivered or, for installation income,
when the service has been performed. Sales from delivered
products and services represent only a small component of
the Group’s sales as the majority relates to in-store purchases
of products.
Other income is generally composed primarily of external
rental income and profits and losses on disposal of assets.
Rental income from operating leases is recognised on a straight
line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and
recognised on a straight line basis over the lease term.
e. Rebates
Rebates received from suppliers mainly comprise volume
related rebates on the purchase of inventories.
Volume related rebates are recognised based on actual
purchases in the period as a proportion of total purchases
forecast over the rebate period where it is probable the rebates
will be received and the amounts can be estimated reliably.
Rebates relating to inventories purchased but still held at the
balance sheet date are deducted from the carrying value so
that the cost of inventories is recorded net of applicable rebates.
Such rebates are credited to the income statement when the
goods are sold.
f. Dividends
Interim dividends are recognised when they are paid to the
Company’s shareholders. Final dividends are recognised
when they are approved by the Company’s shareholders.
g. Intangible assets
(i) Goodwill
Goodwill represents the future economic benefits arising
from assets acquired in a business combination that are
not individually identified and separately recognised.
Such benefits include future synergies expected from the
combination and intangible assets not meeting the criteria
for separate recognition.
Goodwill is carried at cost less accumulated impairment losses.
Goodwill is not amortised and is tested annually for impairment
by assessing the recoverable amount of each cash generating
unit or groups of cash generating units to which the goodwill
relates. The recoverable amount is assessed by reference
to the net present value of expected future pre-tax cash flows
(‘value-in-use’) or fair value less costs to sell if higher. The
discount rate applied is based upon the Group’s weighted
average cost of capital with appropriate adjustments for the risks
associated with the relevant cash generating unit or groups of
cash generating units. When the recoverable amount of the
goodwill is less than its carrying amount, an impairment loss is
recognised immediately in the income statement which cannot
subsequently be reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the
entity sold.
(ii) Computer software
Acquired computer software licences are capitalised on the
basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their
estimated useful lives of two to ten years.
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Costs that are directly associated with the production of
identifiable and unique software products controlled by the
Group, which are expected to generate economic benefits
exceeding costs beyond one year, are recognised as intangible
assets. Direct costs include software development, employee
and consultancy costs and an appropriate portion of relevant
overheads. These costs are amortised over their estimated
useful lives of two to ten years. Costs associated with identifying,
sourcing, evaluating or maintaining computer software are
recognised as an expense as incurred.
h. Property, plant and equipment
(i) Cost
Property, plant and equipment held for use in the business
are carried at cost less accumulated depreciation and any
provisions for impairment.
Properties that were held at 1 February 2004 are carried at
deemed cost, being the fair value of land and buildings as
at the transition date to IFRS. All property acquired after
1 February 2004 is carried at cost.
(ii) Depreciation
Depreciation is provided to reflect a straight line reduction
from cost to estimated residual value over the estimated useful
life of the asset as follows:
Freehold land – not depreciated
Freehold and long leasehold buildings – over remaining useful life
Short leasehold land and buildings – over remaining period
of the lease
Fixtures and fittings – between 4 and 20 years
Computers and electronic equipment – between 3 and 5 years
Motor cars – 4 years
Commercial vehicles – between 3 and 10 years
Long leaseholds are defined as those having remaining lease
terms of more than 50 years. Asset lives and residual values
are reviewed at each balance sheet date.
(iii) Impairment
Property, plant and equipment are reviewed for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. When a review for impairment
is conducted, the recoverable amount is assessed by reference
to the net present value of expected future pre-tax cash flows
(‘value-in-use’) of the relevant cash generating unit or fair
value less costs to sell if higher. The discount rate applied is
based upon the Group’s weighted average cost of capital with
appropriate adjustments for the risks associated with the relevant
cash generating unit. Any impairment in value is charged to the
income statement in the period in which it occurs.
(iv) Disposal
The gain or loss arising on the disposal or retirement of an asset
is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement. Sales of land and buildings are accounted for
when there is an unconditional exchange of contracts.
(v) Subsequent costs
Subsequent costs are included in the related asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item
can be measured reliably.
All other repairs and maintenance are charged to the income
statement in the period in which they are incurred.
i. Leased assets
Where assets are financed by leasing agreements which give
rights approximating to ownership, the assets are treated as if
they had been purchased outright. The amount capitalised is the
lower of the fair value or the present value of the minimum lease
payments during the lease term at the inception of the lease.
The assets are depreciated over the shorter of the lease term or
their useful life. Obligations relating to finance leases, net of
finance charges in respect of future periods, are included, as
appropriate, under borrowings due within or after one year.
The finance charge element of rentals is charged to finance
costs in the income statement over the lease term.
All other leases are operating leases and the rental payments
are generally charged to the income statement in the period
to which the payments relate, except for those leases which
incorporate fixed minimum rental uplift clauses. Leases which
contain fixed minimum rental uplifts are charged to the income
statement on a straight line basis over the lease term.
Where a lease is taken out for land and buildings combined,
the buildings element of the lease may be capitalised as a
finance lease if it meets the criteria for a finance lease, but the
land element will in most cases be classified as an operating
lease. If the contracted lease payments are not split between
land and buildings in the lease contract, the split is made based
on the market values of the land and buildings at the inception
of the lease.
Incentives received or paid to enter into lease agreements are
released to the income statement on a straight line basis over
the lease term.
j. Investment property
Investment property is property held by the Group to earn rental
income or for capital appreciation. The Group’s investment
properties are carried at cost less depreciation and provision for
impairment. Depreciation is provided on a consistent basis with
that applied to property, plant and equipment.
k. Capitalisation of borrowing costs
Interest on borrowings to finance the construction of properties
held as non-current assets is capitalised from the date work
starts on the property to the date when substantially all the
activities which are necessary to get the property ready for
use are complete. Where construction is completed in parts,
each part is considered separately when capitalising interest.
Interest is capitalised before any allowance for tax relief.
l. Inventories
Inventories are carried at the lower of cost and net realisable
value, on a weighted average cost basis.
Trade discounts and rebates received are deducted in
determining the cost of purchase of inventories. Cost includes
appropriate attributable overheads and direct expenditure
incurred in the normal course of business in bringing goods
to their present location and condition. Costs of inventories
include the transfer from equity of any gains or losses on
qualifying cash flow hedges relating to purchases.
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2 Principal accounting policies continued
Net realisable value represents the estimated selling price in the
ordinary course of business less the estimated costs necessary to
make the sale. Write downs to net realisable value are made for
slow moving, damaged or obsolete items and other events
or conditions resulting in expected selling prices being lower
than cost. The carrying value of inventories reflects known and
expected losses of product in the ordinary course of business.
m. Employee benefits
(i) Post-employment benefits
The Group operates various defined benefit and defined
contribution pension schemes for its employees, some of which
are required by local legislation. A defined benefit scheme is a
pension scheme which defines an amount of pension benefit
which an employee will receive on retirement. A defined
contribution scheme is a pension scheme under which the
Group usually pays fixed contributions into a separate entity.
In all cases other than some of the legally required schemes,
a separate fund is being accumulated to meet the accruing
liabilities. The assets of each of these funds are either held
under trusts or managed by insurance companies and are
entirely separate from the Group’s assets.
The asset or liability recognised in the balance sheet in respect
of defined benefit pension schemes is the fair value of scheme
assets less the present value of the defined benefit obligation
at the balance sheet date. The defined benefit obligation is
calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high quality corporate
bonds which are denominated in the currency in which the
benefits will be paid and which have terms to maturity
approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are credited or charged to
the statement of comprehensive income as they arise.
For defined contribution schemes, the Group has no further
payment obligations once the contributions have been paid.
The contributions are recognised as an employee benefit
expense when they are due.
(ii) Share-based compensation
The Group operates several equity-settled, share-based
compensation schemes. The fair value of the employee
services received in exchange for the grant of options or
deferred shares is recognised as an expense and is calculated
using Black-Scholes and stochastic models. The total amount
to be expensed over the vesting period is determined by
reference to the fair value of the options or deferred shares
granted, excluding the impact of any non-market vesting
conditions. The value of the charge is adjusted to reflect
expected and actual levels of options vesting due to
non-market vesting conditions.
n. Taxation
The income tax expense represents the sum of the tax
currently payable and deferred tax. The tax currently payable
is based on taxable profit for the year.
Taxable profit differs from profit before taxation as reported
in the income statement because it excludes items of income
or expense which are taxable or deductible in other years or
which are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit and is
accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available
against which deductible temporary differences or unused tax
losses can be utilised. Deferred tax liabilities are not recognised
if the temporary difference arises from the initial recognition
of goodwill in a business combination. Deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction which affects
neither the taxable profit nor the accounting profit. Deferred tax
liabilities are recognised for taxable temporary differences arising
on investments in subsidiaries, joint ventures and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Current and deferred tax are calculated using tax rates which
have been enacted or substantively enacted by the balance
sheet date and are expected to apply in the period when the
liability is settled or the asset is realised.
Current and deferred tax are charged or credited to the income
statement, except when they relate to items charged or credited
directly to equity, in which case the current or deferred tax is
also recognised directly in equity.
Current and deferred tax assets and liabilities are offset against
each other when they relate to income taxes levied by the same
tax jurisdiction and when the Group intends to settle its current
tax assets and liabilities on a net basis.
o. Provisions
Provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events, it is more
likely than not that an outflow of resources will be required to
settle the obligation and the amount can be reliably estimated.
Provisions are not recognised for future operating losses.
If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a
pre-tax rate which reflects current market assessments of the
time value of money and, where appropriate, the risks specific
to the liability.
p. Financial instruments
Financial assets and financial liabilities are recognised on the
Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Financial assets are
derecognised when the contractual rights to the cash flows
from the financial asset expire or the Group has substantially
transferred the risks and rewards of ownership. Financial
liabilities (or a part of a financial liability) are derecognised
when the obligation specified in the contract is discharged
or cancelled or expires.
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2 Principal accounting policies continued
Financial assets and liabilities are offset only when the Group
has a currently enforceable legal right to set-off the respective
recognised amounts and intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously.
(i) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits
held on call with banks and other short-term highly liquid
investments with original maturities of three months or less.
(ii) Borrowings
Interest bearing borrowings are recorded at the proceeds
received, net of direct issue costs and subsequently measured
at amortised cost. Where borrowings are in designated and
effective fair value hedge relationships, adjustments are made
to their carrying amounts to reflect the hedged risks. Finance
charges, including premiums payable on settlement or
redemption and direct issue costs, are amortised to the
income statement using the effective interest method.
(iii) Other investments
Other investments include bank deposits, government bonds
and other short-term investments with original maturities of
more than three months. Investments classified as ‘available-
for-sale’ under IAS 39, ‘Financial instruments: Recognition
and measurement’, are initially measured at fair value, with
subsequent changes in fair value recorded directly in equity.
Any dividends received are recognised in the income statement.
On disposal, the accumulated fair value adjustments recognised
in equity are transferred to the income statement.
(iv) Trade receivables
Trade receivables are initially recognised at fair value and are
subsequently measured at amortised cost less any provision
for bad and doubtful debts.
(v) Trade payables
Trade payables are initially recognised at fair value and are
subsequently measured at amortised cost.
(vi) Derivatives and hedge accounting
Where hedge accounting is not applied, or to the extent to
which it is not effective, changes in the fair value of derivatives
are recognised in the income statement as they arise. Changes
in the fair value of derivatives transacted as hedges of operating
items and financing items are recognised in operating profit
and net finance costs respectively.
Derivatives are initially recorded at fair value on the date a
derivative contract is entered into and are subsequently carried
at fair value. The accounting treatment of derivatives and other
financial instruments classified as hedges depends on their
designation, which occurs at the start of the hedge relationship.
The Group designates certain financial instruments as:
• a hedge of the fair value of an asset or liability or unrecognised
firm commitment (‘fair value hedge’);
• a hedge of a highly probable forecast transaction or firm
commitment (‘cash flow hedge’); or
• a hedge of a net investment in a foreign operation (‘net
investment hedge’).
Fair value hedges
For an effective hedge of an exposure to changes in fair
value, the hedged item is adjusted for changes in fair value
attributable to the risk being hedged with the corresponding
entry being recorded in the income statement. Gains or losses
from remeasuring the corresponding hedging instrument
are recognised in the same line of the income statement.
Cash flow hedges
Changes in the effective portion of the fair value of
derivatives that are designated as hedges of future cash flows
are recognised directly in equity, with any ineffective portion
being recognised immediately in the income statement
where relevant. If the cash flow hedge of a firm commitment or
forecast transaction results in the recognition of a non-financial
asset or liability, then, at the time it is recognised, the associated
gains or losses on the derivative that had previously been
recognised in equity are included in the initial measurement of
the non-financial asset or liability. For hedges that result in the
recognition of a financial asset or liability, amounts deferred in
equity are recognised in the income statement in the same
period in which the hedged item affects net profit or loss.
Net investment hedges
Where the Group hedges net investments in foreign operations
through foreign currency borrowings, the gains or losses on the
retranslation of the borrowings are recognised directly in equity.
If the Group uses derivatives as the hedging instrument, the
effective portion of the hedge is recognised in equity, with any
ineffective portion being recognised immediately in the income
statement. Gains and losses accumulated in equity are
recycled through the income statement on disposal of the
foreign operation.
In order to qualify for hedge accounting, the Group documents
in advance the relationship between the item being hedged
and the hedging instrument. The Group also documents and
demonstrates an assessment of the relationship between the
hedged item and the hedging instrument, which shows that the
hedge has been and will be highly effective on an ongoing basis.
The effectiveness testing is re-performed at each period end to
ensure that the hedge remains highly effective.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting. At that time, any cumulative gain or loss
on the hedging instrument recognised in equity is retained in
equity until the highly probable forecast transaction occurs.
If a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognised in equity is transferred
to the income statement.
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host
contracts, and the host contracts are not carried at fair value
with unrealised gains or losses reported in the income statement.
q. Assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amounts will be recovered through a sale
transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and
the asset or disposal group is available for immediate sale in
its present condition subject only to terms that are usual and
customary for sales of such assets.
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2 Principal accounting policies continued
Management must be committed to the sale, which should
be expected to qualify for recognition as a completed sale within
one year from the date of classification as held for sale.
Non-current assets and disposal groups classified as held for
sale are measured at the lower of carrying amount and fair value
less costs to sell. This excludes financial assets, deferred tax
assets and assets arising from employee benefits, which are
measured according to the relevant accounting policy.
Property, plant and equipment and intangible assets are not
depreciated once classified as held for sale. The group ceases to
use the equity method of accounting from the date on which an
interest in a jointly controlled entity or an interest in an associate
becomes held for sale.
3 Critical accounting estimates
and judgements
The preparation of consolidated financial statements under
IFRS requires the Group to make estimates and assumptions
that affect the application of policies and reported amounts.
Estimates and judgements are continually evaluated and are
based on historical experience and other factors including
expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates. The estimates and assumptions which have a
significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year
are discussed below.
Impairment of goodwill and other assets
As required, the Group applies procedures to ensure that its
assets are carried at no more than their recoverable amount.
The procedures, by their nature, require estimates and
assumptions to be made. The most significant are set out below.
The Group is required, on at least an annual basis, to test
whether goodwill has suffered any impairment. As part of this
testing the recoverable amounts of cash generating units have
been determined based on value-in-use calculations. The
use of this method requires the estimation of future cash flows
expected to arise from the continuing operation of the cash
generating unit and the choice of suitable discount and long-
term growth rates in order to calculate the present value of the
forecast cash flows. Actual outcomes could vary significantly
from these estimates. Further information on the impairment
tests undertaken, including the key assumptions, is given
in note 12.
Property, plant and equipment are reviewed for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. When a review for impairment
is conducted, the recoverable amount of an asset or a cash
generating unit is determined as the higher of fair value less
costs to sell and value-in-use, calculated on the basis of
management’s assumptions and estimates.
At each reporting date the Group is required to assess whether
there is objective evidence that its investments in associates
and joint ventures may be impaired. This requires estimates
of the investments’ recoverable amounts, including present
values of the Group’s share of future cash flows.
Inventories
As inventories are carried at the lower of cost and net realisable
value this requires the estimation of the eventual sales price of
goods to customers in the future. A high degree of judgement
is applied when estimating the impact on the carrying value of
inventories of factors such as slow moving items, shrinkage,
damage and obsolescence. The quantity, age and condition of
inventories are regularly measured and assessed as part of range
reviews and inventory counts undertaken throughout the year
and across the Group. Refer to note 18 for further information.
Income taxes
The Group is subject to income taxes in numerous jurisdictions
and there are many transactions for which the ultimate tax
determination is uncertain during the ordinary course of
business. Significant judgement may therefore be required in
determining the provision for income taxes in each territory. The
Group recognises liabilities for anticipated tax audit issues based
on estimates of whether additional taxes will be due. Where the
final outcome of these matters is different from the amounts
which were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which
such determination is made. These adjustments in respect of
prior years are recorded in the income statement or directly
in equity as appropriate. Refer to notes 9 and 25 for further
information.
Restructuring provisions
The Group carries a number of provisions in relation to
historical and ongoing restructuring programmes. The most
significant part of the provisions is the cost to exit stores and
property contracts. The ultimate costs and timing of cash flows
are dependent on exiting the property lease contracts on the
closed stores and subletting surplus space. Refer to note
26 for further information.
Post-employment benefits
The present value of the defined benefit liabilities recognised on
the balance sheet is dependent on a number of assumptions
including interest rates of high quality corporate bonds, inflation
and mortality rates. The net interest expense or income is
dependent on the interest rates of high quality corporate bonds.
The assumptions are based on the conditions at the time and
changes in these assumptions can lead to significant movements
in the estimated obligations. To help the reader understand the
impact of changes in the key assumptions, a sensitivity analysis
is provided in note 27.
Investment in Hornbach
During the year a number of developments have occurred
in respect of our strategic investment in Hornbach. This
has required judgement to be exercised surrounding the
ability of the Group to exercise significant influence over
Hornbach based on accounting definitions, and therefore the
appropriateness of continuing to account for the investment as
an associate. Following the decision to waive the right to appoint
directors to the board, the Directors have judged that the Group
ceased to have the ability to exercise significant influence from
31 January 2014. Further judgements have been required in
assessing the classification of the investment as an asset held for
sale, the valuation as at 1 February 2014 and whether it should
be classified as a discontinued operation, the latter not being
judged appropriate given its size relative to the Group as a
whole. Refer to notes 17 and 34 for further information.
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4 Segmental analysis
Income statement
2013/14
Other International
£ millions UK & Ireland France Poland Other Total
Sales 4,363 4,423 1,109 1,230 11,125
Retail profit 238 396 123 48 805
Exceptional items (10)
Central costs (42)
Share of interest and tax of joint ventures and associates (17)
Operating profit 736
Net finance income 23
Profit before taxation 759
2012/13 (Restated)
Other International
£ millions UK & Ireland France Poland Other Total
Sales 4,316 4,194 1,029 1,034 10,573
Retail profit 231 397 107 43 778
Exceptional items (26)
Central costs (42)
Share of interest and tax of joint ventures and associates (18)
Operating profit 692
Net finance costs (1)
Profit before taxation 691
The current financial year is the 52 weeks ended 1 February 2014 with the comparative financial year being the 53 weeks ended
2 February 2013. This only impacts the UK & Ireland businesses with all of the other businesses reporting on a calendar basis as
a result of local requirements. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional
£72m sales and an immaterial benefit to retail profit.
Balance sheet
2013/14
Other International
£ millions UK & Ireland France Poland Other Total
Segment assets 1,356 1,364 563 611 3,894
Central liabilities (232)
Goodwill 2,417
Net cash 238
Net assets 6,317
2012/13
Other International
£ millions UK & Ireland France Poland Other Total
Segment assets 1,458 1,443 600 620 4,121
Central liabilities (402)
Goodwill 2,399
Net cash 38
Net assets 6,156
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Accounts
Notes to the consolidated financial statements continued
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4 Segmental analysis continued
Other segmental information
2013/14
Other International
£ millions UK & Ireland France Poland Other Central Total
Capital expenditure 90 127 24 63 – 304
Depreciation and amortisation 127 84 19 30 1 261
Impairment losses
(1)
2 – – – – 2
Non-current assets
(2)
3,246 1,970 565 518 15 6,314
2012/13
Other International
£ millions UK & Ireland France Poland Other Central Total
Capital expenditure 125 93 49 43 6 316
Depreciation and amortisation 133 72 14 26 3 248
Impairment losses 8 – – – – 8
Non-current assets
(2)
3,332 1,984 584 459 20 6,379
(1) Impairment losses exclude the exceptional impairment of the investment in Hornbach of £45m.
(2) Non-current assets comprise goodwill, other intangible assets, property, plant and equipment and investment property.
The operating segments disclosed above are based on the information reported internally to the Board of Directors and Group
Executive. This information is predominantly based on the geographical areas in which the Group operates and which are
managed separately. The Group only has one business segment being the supply of home improvement products and services.
The ‘Other International’ segment consists of Poland, China, Spain, Russia, Romania, the associate Hornbach and the joint venture
Koçtas¸ in Turkey. Poland has been shown separately due to its significance.
Central costs principally comprise the costs of the Group’s head office. Central liabilities comprise unallocated head office and other
central items including pensions, interest and tax.
5 Exceptional items
£ millions 2013/14 2012/13
Included within selling and distribution expenses
Acquisition and integration costs (5) –
Ireland restructuring 7 (21)
UK restructuring – 4
2 (17)
Included within administrative expenses
UK restructuring – (20)
Net pension gain – 11
– (9)
Included within other income
Profit on disposal of properties 2 –
2 –
Included within share of post-tax results of joint ventures and associates
Net impairment of investment in Hornbach (14) –
(14) –
Included within finance income
Kesa demerger French tax case – repayment supplement income 27 –
27 –
Exceptional items before tax 17 (26)
Tax on exceptional items (4) 1
Kesa demerger French tax case 118 –
Exceptional items 131 (25)
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5 Exceptional items continued
Acquisition and integration costs of £5m principally comprise costs of acquiring and integrating the Bricostore Romania business.
The exceptional credit of £7m for Ireland restructuring reflects the release of provisions recorded in January 2013 when B&Q
Ireland entered into an Examinership process. It successfully exited Examinership in May 2013 with the closure of only one store.
A net impairment loss of £14m has been recognised in the year on the Group’s investment in Hornbach. This comprises a loss of
£45m on remeasurement of the investment to fair value, offset by a £31m gain on the transfer from reserves of cumulative foreign
exchange gains since transition to IFRS and is discussed further in note 17.
A £27m repayment supplement provision and £118m taxation provision related to the Kesa demerger French tax case have been
released in the year. Refer to note 9 for further details.
6 Net finance income/(costs)
£ millions 2013/14
2012/13
(Restated)
Bank overdrafts and bank loans (3) (8)
Medium Term Notes and other fixed term debt (3) (7)
Finance leases (4) (4)
Financing fair value remeasurements (2) 2
Capitalised interest – 1
Finance costs (12) (16)
Cash and cash equivalents 6 15
Net interest income on defined benefit pension schemes 2 –
Kesa demerger French tax case – repayment supplement income (note 9) 27 –
Finance income 35 15
Net finance income/(costs) 23 (1)
Medium Term Notes and other fixed term debt interest includes net interest income accrued on derivatives of £12m (2012/13:
£15m income) and amortisation of issue costs of borrowings of £1m (2012/13: £1m).
Capitalised interest relates to central borrowings and is calculated by applying a capitalisation rate of 1.2% (2012/13: 1.6%) to
expenditure on qualifying assets.
Financing fair value remeasurements comprise a net loss on derivatives, excluding accrued interest, of £41m (2012/13: £10m gain),
offset by a net gain from fair value adjustments to the carrying value of borrowings and cash of £39m (2012/13: £8m loss).
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Accounts
Notes to the consolidated financial statements continued
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7 Profit before taxation
The following items of revenue have been credited in arriving at profit before taxation:
£ millions 2013/14 2012/13
Sales 11,125 10,573
Other income 39 36
Finance income 35 15
Revenue 11,199 10,624
The following items of expense/(income) have been charged/(credited) in arriving at profit before taxation:
£ millions 2013/14 2012/13
Operating lease rentals
Minimum lease payments – Property 440 435
Minimum lease payments – Equipment 42 35
Sublease income (16) (17)
466 453
Rental income received on investment property (7) (6)
Amortisation of other intangible assets
(1)
31 27
Depreciation of property, plant and equipment and investment property
Owned assets 220 212
Under finance leases 10 9
Impairment of property, plant and equipment and investment property 2 8
Impairment of investment in Hornbach (note 17) 45 –
(Gain)/loss on disposal
Land and buildings and investment property (2) –
Fixtures, fittings and equipment 3 4
Other intangible assets – 1
Inventories: write down to net realisable value 32 16
Trade and other receivables: write down of bad and doubtful debts 4 4
(1) Of the amortisation of other intangible assets charge, £2m (2012/13: £1m) and £29m (2012/13: £26m) are included in selling and distribution expenses and
administrative expenses respectively.
Auditor’s remuneration
£ millions 2013/14 2012/13
Fees payable for the audit of the Company and consolidated financial statements 0.3 0.3
Fees payable to the Company’s auditor and their associates for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation 1.5 1.3
Audit fees 1.8 1.6
Audit-related assurance services 0.1 0.1
Other taxation advisory services 0.1 0.1
Other assurance services 0.1 0.1
Other services 0.1 0.1
Non-audit fees 0.4 0.4
Auditor’s remuneration 2.2 2.0
Details of the Group’s policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than
another supplier and how the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report
on page 44. No services were provided pursuant to contingent fee arrangements.
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8 Employees and directors
£ millions 2013/14 2012/13
Wages and salaries 1,279 1,276
Social security costs 265 258
Post-employment benefits
Defined contribution 27 17
Defined benefit (service cost only) 9 17
Share-based compensation 7 9
Employee benefit expenses 1,587 1,577
Number thousands 2013/14 2012/13
Stores 71 72
Administration 5 5
Average number of persons employed 76 77
The average number of persons employed excludes employees in the Group’s joint ventures and associates.
Remuneration of key management personnel
£ millions 2013/14 2012/13
Short-term employee benefits 6.6 5.2
Post-employment benefits 1.0 1.4
Share-based compensation 0.1 1.3
7.7 7.9
Key management consists of the Board of Directors and the Group Executive.
Further detail with respect to the Directors’ remuneration is set out in the Directors’ Remuneration Report on pages 47 to 68.
Other than as set out in the Directors’ Remuneration Report, there have been no transactions with key management during the
year (2012/13: £nil).
9 Income tax expense
£ millions 2013/14 2012/13
UK corporation tax
Current tax on profits for the year 47 47
Adjustments in respect of prior years (7) (13)
40 34
Overseas tax
Current tax on profits for the year 131 128
Kesa demerger French tax case (118) –
Other adjustments in respect of prior years (11) (54)
2 74
Deferred tax
Current year 16 18
Adjustments in respect of prior years – 5
Adjustments in respect of changes in tax rates (9) (4)
7 19
Income tax expense 49 127
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Accounts
Notes to the consolidated financial statements continued
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9 Income tax expense continued
Factors affecting tax charge for the year
The tax charge for the year differs from the standard rate of corporation tax in the UK of 23% (2012/13: 24%). The differences are
explained below:
£ millions 2013/14 2012/13
Profit before taxation 759 691
Profit multiplied by the standard rate of corporation tax in the UK of 23% (2012/13: 24%) 175 166
Share of post-tax results of joint ventures and associates (2) (5)
Net (income)/expenses not (chargeable)/deductible for tax purposes (16) 6
Temporary differences:
– Net gains on property (3) (3)
– Losses not recognised 9 11
Foreign tax rate differences 31 18
Adjustments in respect of prior years (136) (62)
Adjustments in respect of changes in tax rates (9) (4)
Income tax expense 49 127
The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes
in tax rates on deferred tax is 26% (2012/13: 27%). Tax on exceptional items for the year is a credit of £114m, £118m of which
relates to prior year items. In 2012/13 tax on exceptional items was a credit of £1m, with no amount relating to prior year items.
The effective tax rate calculation is set out in the Financial Review on page 23.
The overall tax rate for the year is 6% (2012/13: 18%) reflecting the release of a £118m exceptional tax provision following the
successful resolution of the Kesa demerger French tax case.
Kingfisher paid €138m tax to the French tax authorities in the year ended 31 January 2004 as a consequence of the Kesa Electricals
demerger and recorded this as an exceptional tax charge. Kingfisher appealed successfully against this tax liability and as a result
received €169m from the French tax authorities in September 2009, representing a refund of the €138m and €31m of repayment
supplement. The French tax authorities appealed this decision and the hearing took place in May 2011 with the Court of Appeal
finding in Kingfisher’s favour. In July 2013 the Conseil d’Etat, France’s ultimate court, found in favour of Kingfisher regarding the
Kesa demerger tax case, which concluded the matter. Whilst a refund was received from the French tax authorities following the
first positive decision in 2009, the Group continued to provide against the risk while litigation was ongoing. A £27m repayment
supplement provision and £118m taxation provision related to the case have subsequently been released and treated as exceptional.
In addition to the amounts charged to the income statement, tax of £67m has been credited directly to equity (2012/13: £14m
charge), of which a £19m credit (2012/13: £6m credit) is included in current tax and a £48m credit (2012/13: £20m charge) is
included in deferred tax.
Impact of changes in tax rates
The UK corporation tax rate fell from 24% to 23% from 1 April 2013 and will fall to 21% from 1 April 2014 and then to 20% from
1 April 2015. As all these rates have been enacted by the balance sheet date, their impact has been fully reflected in this Annual
Report and Accounts.
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10 Earnings per share
2013/14 2012/13
Earnings
£ millions
Weighted
average
number of
shares
millions
Earnings
per share
pence
Earnings
£ millions
Weighted
average
number of
shares
millions
Earnings
per share
pence
Basic earnings per share 709 2,363 30.0 564 2,339 24.1
Effect of dilutive share options 19 (0.3) 34 (0.3)
Diluted earnings per share 709 2,382 29.7 564 2,373 23.8
Basic earnings per share 709 2,363 30.0 564 2,339 24.1
Exceptional items before tax (17) (0.7) 26 1.1
Tax on exceptional and prior year items (141) (6.0) (67) (2.8)
Financing fair value remeasurements 2 0.1 (2) (0.1)
Tax on financing fair value remeasurements (1) – 1 –
Adjusted basic earnings per share 552 2,363 23.4 522 2,339 22.3
Diluted earnings per share 709 2,382 29.7 564 2,373 23.8
Exceptional items before tax (17) (0.7) 26 1.1
Tax on exceptional and prior year items (141) (5.9) (67) (2.8)
Financing fair value remeasurements 2 0.1 (2) (0.1)
Tax on financing fair value remeasurements (1) – 1 –
Adjusted diluted earnings per share 552 2,382 23.2 522 2,373 22.0
Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders of the Company by the
weighted average number of shares in issue during the year, excluding those held in the Employee Share Ownership Plan Trust
(‘ESOP’) which for the purpose of this calculation are treated as cancelled.
For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential
ordinary shares. These represent share options granted to employees where both the exercise price is less than the average market
price of the Company’s shares during the year and any related performance conditions have been met.
11 Dividends
£ millions 2013/14 2012/13
Dividends to equity shareholders of the Company
Final dividend for the year ended 2 February 2013 of 6.37p per share (28 January 2012: 6.37p per share) 150 148
Interim dividend for the year ended 1 February 2014 of 3.12p per share (2 February 2013: 3.09p per share) 74 73
224 221
The proposed final dividend for the year ended 1 February 2014 of 6.78p per share is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in these financial statements.
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
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12 Goodwill
£ millions
Cost
At 3 February 2013 2,524
Additions 18
Exchange differences (1)
At 1 February 2014 2,541
Impairment
At 3 February 2013 (125)
Exchange differences 1
At 1 February 2014 (124)
Net carrying amount
At 1 February 2014 2,417
Cost
At 29 January 2012 2,521
Exchange differences 3
At 2 February 2013 2,524
Impairment
At 29 January 2012 (124)
Exchange differences (1)
At 2 February 2013 (125)
Net carrying amount
At 2 February 2013 2,399
During the year the Group acquired the Bricostore Romania companies resulting in additions to goodwill of £18m. Refer to note 33.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to groups of cash generating units (‘CGUs’) as follows:
£ millions UK France Poland China Romania Total
At 1 February 2014
Cost 1,798 520 81 124 18 2,541
Impairment – – – (124) – (124)
Net carrying amount 1,798 520 81 – 18 2,417
At 2 February 2013
Cost 1,798 520 81 125 – 2,524
Impairment – – – (125) – (125)
Net carrying amount 1,798 520 81 – – 2,399
The recoverable amounts of these groups of CGUs have been determined based on value-in-use calculations. The groups of
CGUs for which the carrying amount of goodwill is deemed significant are the UK, France, Poland and Romania.
All CGU value-in-use calculations are considered to have been valued using level 3 inputs as defined by the fair value hierarchy
of IFRS 13, ‘Fair value measurement’.
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12 Goodwill continued
The Board has reviewed a sensitivity analysis, including the use of prior year discount and growth rates, and does not consider
that a reasonably possible change in the assumptions used in the value-in-use calculations would cause the carrying amounts
of the CGUs to exceed their recoverable amounts. The key assumptions used for value-in-use calculations are set out below.
Assumptions
• The cash flow projections are based on approved financial budgets and strategic plans covering a three year period. These are
based on both past performance and expectations for future market development.
• Key drivers in the plans are like-for-like (‘LFL’) sales, margin and operating profit percentage. LFL sales projections take into
consideration both external factors such as market expectations, and internal factors such as trading plans.
• Cash flows beyond this three year period are calculated using a growth rate which does not exceed the long-term average growth
rate for retail businesses operating in the same countries as the CGUs.
• The weighted average cost of capital, used to discount future cash flows, is calculated using a combination of the cost of debt,
leases and equity, weighted according to an estimate of the CGU’s capital gearing. A risk adjustment is also made for the country
in which the CGU operates.
The pre-tax risk adjusted discount rates and long-term growth rates used are as follows:
2013/14
Annual % rate UK France Poland Romania
Discount rate 8.9 10.5 10.2 12.7
Long-term growth rate 3.0 2.6 3.3 3.7
2012/13
Annual % rate UK France Poland Romania
Discount rate 8.9 9.6 10.5 n/a
Long-term growth rate 2.8 2.3 3.5 n/a
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
98
13 Other intangible assets
£ millions
Computer
software Other Total
Cost
At 3 February 2013 414 9 423
Acquisition of subsidiaries – 1 1
Additions 86 2 88
Disposals (7) – (7)
Exchange differences (3) – (3)
At 1 February 2014 490 12 502
Amortisation
At 3 February 2013 (253) (4) (257)
Charge for the year (30) (1) (31)
Disposals 5 – 5
Exchange differences 3 – 3
At 1 February 2014 (275) (5) (280)
Net carrying amount
At 1 February 2014 215 7 222
Cost
At 29 January 2012 343 9 352
Additions 72 – 72
Disposals (3) – (3)
Exchange differences 2 – 2
At 2 February 2013 414 9 423
Amortisation
At 29 January 2012 (226) (3) (229)
Charge for the year (26) (1) (27)
Disposals 1 – 1
Exchange differences (2) – (2)
At 2 February 2013 (253) (4) (257)
Net carrying amount
At 2 February 2013 161 5 166
None of the Group’s other intangible assets have indefinite useful lives.
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14 Property, plant and equipment
£ millions
Land and
buildings
Fixtures,
fittings and
equipment Total
Cost
At 3 February 2013 3,180 2,540 5,720
Additions 85 135 220
Acquisition of subsidiaries 55 5 60
Disposals (12) (29) (41)
Exchange differences (148) (64) (212)
At 1 February 2014 3,160 2,587 5,747
Depreciation
At 3 February 2013 (396) (1,576) (1,972)
Charge for the year (51) (178) (229)
Impairment losses (1) (1) (2)
Disposals 3 29 32
Exchange differences 16 33 49
At 1 February 2014 (429) (1,693) (2,122)
Net carrying amount
At 1 February 2014 2,731 894 3,625
Cost
At 29 January 2012 3,049 2,375 5,424
Additions 88 171 259
Disposals (19) (42) (61)
Transfers to investment property (12) – (12)
Exchange differences 74 36 110
At 2 February 2013 3,180 2,540 5,720
Depreciation
At 29 January 2012 (345) (1,412) (1,757)
Charge for the year (46) (174) (220)
Impairment losses (1) (7) (8)
Disposals 5 37 42
Exchange differences (9) (20) (29)
At 2 February 2013 (396) (1,576) (1,972)
Net carrying amount
At 2 February 2013 2,784 964 3,748
Assets in the course of construction included above at net carrying amount
At 1 February 2014 44 34 78
At 2 February 2013 81 46 127
Assets held under finance leases included above at net carrying amount
At 1 February 2014 18 33 51
At 2 February 2013 19 34 53
The amount of borrowing costs capitalised in property, plant and equipment in the year has been £nil (2012/13: £1m).
The cumulative total of borrowing costs included at the balance sheet date, net of depreciation, is £27m (2012/13: £27m).
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Accounts
Notes to the consolidated financial statements continued
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100
14 Property, plant and equipment continued
Land and buildings are analysed as follows:
2013/14 2012/13
£ millions Freehold
Long
leasehold
Short
leasehold Total Total
Cost 2,436 134 590 3,160 3,180
Depreciation (152) (6) (271) (429) (396)
Net carrying amount 2,284 128 319 2,731 2,784
Included in land and buildings is leasehold land that is in effect a prepayment for the use of land and is accordingly being
amortised on a straight line basis over the estimated useful life of the assets. The net carrying amount of leasehold land included
in land and buildings at 1 February 2014 is £254m (2012/13: £240m).
The Group does not revalue properties within its financial statements. A valuation exercise is performed for internal purposes annually
in November by independent external valuers. Based on this exercise the value of property is £3.4bn (2012/13: £3.5bn). The key
assumption used in calculating this is the estimated yields.
All the property, plant and equipment market valuations are considered to have been determined by level 2 inputs as defined by the
fair value hierarchy of IFRS 13, ‘Fair value measurement’.
15 Investment property
£ millions
Cost
At 3 February 2013 79
Disposals (3)
Transfers to assets held for sale (10)
Exchange differences (6)
At 1 February 2014 60
Depreciation
At 3 February 2013 (13)
Charge for the year (1)
Disposals 1
Exchange differences 3
At 1 February 2014 (10)
Net carrying amount
At 1 February 2014 50
Cost
At 29 January 2012 67
Additions 3
Transfers from property, plant and equipment 12
Exchange differences (3)
At 2 February 2013 79
Depreciation
At 29 January 2012 (12)
Charge for the year (1)
At 2 February 2013 (13)
Net carrying amount
At 2 February 2013 66
A property valuation exercise is performed for internal purposes annually as described in note 14. Based on this exercise the
fair value of investment property is £77m (2012/13: £121m). All the investment properties held by the Group at fair value are
considered to have fair values determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, ‘Fair value
measurement’.
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16 Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest
is given in note 4 of the Company’s separate financial statements.
17 Investments in joint ventures and associates
£ millions
At 3 February 2013 289
Share of post-tax results – before impairment 22
Share of post-tax results – exceptional impairment (45)
Dividends (11)
Transfers to assets held for sale (198)
Exchange differences (25)
At 1 February 2014 32
At 29 January 2012 271
Share of post-tax results 20
Dividends (10)
Exchange differences 8
At 2 February 2013 289
In 2013/14 Kingfisher acquired Bricostore in Romania and announced its intention to pilot four Screwfix outlets in Germany in
2014. At the same time Kingfisher undertook a review of its strategic investment in Hornbach, which has operations in both of these
markets. On 31 January 2014 the Group decided to divest its equity stake in Hornbach and also waive its right to appoint directors
to the Hornbach board.
Following this decision, the Group concluded it had lost the ability to exercise significant influence over the Hornbach businesses,
despite maintaining a 21% equity interest at the balance sheet date. This conclusion was reached based on the Group ceasing to
participate in the significant financial and operating policy decisions made by Hornbach. On 31 January 2014 the Group’s investment
was written down to its fair value of £198m, resulting in an exceptional impairment loss of £45m being recognised in the consolidated
income statement. The impairment loss is included within the Group’s share of post-tax results, however this excludes an exceptional
transfer from reserves of cumulative foreign exchange gains since transition to IFRS of £31m.
The Hornbach investment and retail profit contribution is included in the Other International reporting segment. In 2013/14 the Group
recorded a £14m pre-exceptional profit in relation to its share of Hornbach’s post-tax results, comprising £26m of retail profit less
£12m share of interest and tax.
Due to active marketing of the shares at the balance sheet date, the investment was reclassified as an asset held for sale – refer
to note 34. Following the end of the 2013/14 financial year, on 24 March 2014 Kingfisher agreed to sell all the shares it holds in
Hornbach Holding AG and Hornbach-Baumarkt AG which together formed its 21.2% stake in Hornbach for approximately £195m.
No goodwill is included in the carrying amount of investments in joint ventures and associates (2012/13: £nil).
Details of the remaining significant joint ventures and associates are shown below:
Country of
incorporation % interest held
Class of
shares owned Main activity
Principal joint ventures
Koçtas¸ Yapi Marketleri Ticaret A.S.
(1)
Turkey 50% Ordinary Retailing
Principal associates
Crealfi S.A.
(1)
France 49% Ordinary Finance
(1) Owing to local conditions, this company prepares its financial statements to 31 December.
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
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102
17 Investments in joint ventures and associates continued
Aggregate amounts relating to joint ventures and associates:
2013/14 2012/13
£ millions Joint ventures Associates Total Joint ventures Associates Total
Non-current assets 21 2 23 28 269 297
Current assets 47 81 128 56 303 359
Current liabilities (35) (69) (104) (47) (211) (258)
Non-current liabilities (13) (2) (15) (8) (101) (109)
Share of net assets 20 12 32 29 260 289
Sales 166 631 797 165 605 770
Operating expenses (155) (603) (758) (156) (576) (732)
Operating profit 11 28 39 9 29 38
Net finance costs (3) (6) (9) (3) (7) (10)
Profit before taxation 8 22 30 6 22 28
Income tax (1) (7) (8) (1) (7) (8)
Share of post-tax results before impairment 7 15 22 5 15 20
Exceptional impairment – (45) (45) – – –
Share of post-tax results 7 (30) (23) 5 15 20
18 Inventories
£ millions 2013/14 2012/13
Finished goods for resale 2,054 2,083
The cost of inventories recognised as an expense and included in cost of sales for the year ended 1 February 2014 is £6,461m
(2012/13: £6,093m).
19 Trade and other receivables
£ millions 2013/14 2012/13
Non-current
Prepayments 11 13
Property receivables 2 2
Other receivables 2 3
15 18
Current
Trade receivables 64 50
Provision for bad and doubtful debts (9) (11)
Net trade receivables 55 39
Property receivables 3 3
Prepayments 137 135
Other receivables 395 368
590 545
Trade and other receivables 605 563
Other receivables principally comprise rebates due from suppliers.
The fair values of trade and other receivables approximate to their carrying amounts. Refer to note 24 for information on the credit
risk associated with trade and other receivables.
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20 Cash and cash equivalents
£ millions 2013/14 2012/13
Cash at bank and in hand 238 268
Short-term deposits 297 130
535 398
Short-term deposits comprise bank deposits and investments in money market funds, fixed for periods of up to three months.
The fair values of cash and cash equivalents approximate to their carrying amounts.
The Group enters into multi-currency net overdraft facilities and cash pooling agreements with its banks. These agreements and
similar arrangements generally enable the counterparties to offset overdraft balances against available cash in the ordinary course
of business and/or in the event that the counterparty is unable to fulfil its contractual obligations.
21 Trade and other payables
£ millions 2013/14 2012/13
Current
Trade payables 1,403 1,370
Other taxation and social security 227 227
Deferred income 220 168
Accruals and other payables 636 665
2,486 2,430
Non-current
Accruals and other payables 86 115
Trade and other payables 2,572 2,545
Accruals include allowance for customer returns, representing the estimate of future sales returns at the year end.
The fair values of trade and other payables approximate to their carrying amounts.
22 Borrowings
£ millions 2013/14 2012/13
Current
Bank overdrafts 1 –
Bank loans 3 54
Medium Term Notes and other fixed term debt 75 32
Finance leases 15 13
94 99
Non-current
Bank loans 11 14
Medium Term Notes and other fixed term debt 172 266
Finance leases 47 52
230 332
Borrowings 324 431
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
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22 Borrowings continued
Bank overdrafts and loans
Bank overdrafts are repayable on demand. Current bank loans mature within the next 12 months. Both are arranged at floating rates
of interest.
Non-current bank loans have an average maturity of three years (2012/13: three years) and are arranged at fixed rates of interest
with an effective interest rate of 2.8% (2012/13: 3.8%).
At the year end, there were no drawn amounts under Chinese Renminbi committed facilities and therefore a nil effective borrowing
rate (2012/13: 6.2%). These facilities are unsecured (2012/13: assets worth RMB 1.6 billion (£163m) secured a bank facility in
China, which matured in 2013).
Medium Term Notes and other fixed term debt
Medium Term Notes (‘MTNs’) were issued in prior years under the Group’s €2,500m MTN programme and further notes issued as a
US Private Placement (‘USPP’).
2013/14 2012/13
£ millions
Principal
outstanding Maturity date Coupon
Effective
interest rate
Carrying
amount
Carrying
amount
US Dollar USPP – 24/05/13
(1)
6.14% 6.1% – 32
Sterling MTN £73m 15/12/14
(2)
5.63% 5.8% 75 78
US Dollar USPP $68m 24/05/16
(1)
6.30% 6.3% 45 49
US Dollar USPP $179m 24/05/18
(1)
6.40% 6.4% 127 139
247 298
(1) $247m swapped to floating rate Sterling based on 6 month LIBOR plus a margin using a cross-currency interest rate swap. $50m was repaid at maturity in May 2013.
(2) Swapped to floating rate Euro based on 3 month EURIBOR plus a margin using a cross-currency interest rate swap.
The Group values its MTNs and USPP on an amortised cost basis, adjusted for fair value gains and losses (based on observable
market inputs) attributable to the risk being hedged in designated and effective fair value hedge relationships.
The carrying amounts of the MTNs and USPP have been impacted both by exchange rate movements and fair value adjustments
for interest rate risk. At 1 February 2014, the cumulative effect of interest rate fair value adjustments is to increase the Group’s MTNs
and USPP carrying amounts by £25m (2012/13: £38m increase).
The USPP contains a covenant requiring that, as at the end of each semi-annual and annual financial reporting period, the ratio of
operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding 12 month period.
The Group has complied with this covenant for the year ended 1 February 2014.
Finance leases
The Group leases certain of its buildings and fixtures and equipment under finance leases. The average lease term maturity for
buildings is seven years (2012/13: seven years) and for fixtures and equipment is two years (2012/13: two years). Certain building
leases include a clause to enable upward revision of the rental charge to prevailing market conditions.
Future minimum lease payments under finance leases, together with the present value of minimum lease payments, are as follows:
2013/14 2012/13
£ millions
Present value
of payments
Minimum
payments
Present value
of payments
Minimum
payments
Less than one year 15 17 13 15
One to five years 28 39 30 42
More than five years 19 26 22 31
Total 62 82 65 88
Less amounts representing finance charges (20) (23)
Present value of minimum lease payments 62 65
The interest rates inherent in the finance leases are fixed at the contract date for the lease term. The weighted average effective
interest rate on the Group’s finance leases is 8.4% (2012/13: 8.5%).
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22 Borrowings continued
Fair value
£ millions 2013/14 2012/13
Bank overdrafts 1 –
Bank loans 16 69
Medium Term Notes and other fixed term debt 254 307
Finance leases 79 86
Borrowings 350 462
Where available, market values have been used to determine the fair values of borrowings. Where market values are not available
or are not reliable, fair values have been calculated by discounting cash flows at prevailing interest and foreign exchange rates.
This has resulted in a mix of Level 1 and Level 2 inputs as defined by IFRS 13 ‘Fair value measurements’ being used to value the
borrowings of the Group.
23 Derivatives
The net fair value of derivatives by hedge designation at the balance sheet date is:
£ millions 2013/14 2012/13
Fair value hedges 33 69
Cash flow hedges (8) (14)
Net investment hedges – (18)
Non-designated hedges (7) 22
18 59
Non-current assets 40 55
Current assets 5 33
Current liabilities (27) (17)
Non-current liabilities – (12)
18 59
The Group holds the following financial instruments at fair value:
£ millions 2013/14 2012/13
Cross currency interest rate swaps 42 63
Foreign exchange contracts 3 25
Derivative assets 45 88
£ millions 2013/14 2012/13
Cross currency interest rate swaps (9) (12)
Foreign exchange contracts (18) (17)
Derivative liabilities (27) (29)
The fair values are calculated by discounting future cash flows arising from the instruments and adjusted for credit risk. These fair
value measurements are all made using observable market rates of interest, foreign exchange and credit risk.
All the derivatives held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined by the fair
value hierarchy of IFRS 13, ‘Fair value measurement’. There are no non-recurring fair value measurements nor have there been any
transfers of assets or liabilities between levels of the fair value hierarchy.
At 1 February 2014 net derivative assets included in net cash amount to £27m (2012/13: £71m net derivative assets).
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
106
23 Derivatives continued
Fair value hedges
Fair value hedges comprise interest rate swap contracts that convert fixed rate debt issued under the Group’s Medium Term Note
programme and the US Private Placement to floating rate liabilities, along with certain cross-currency swaps. At 1 February 2014 the
Sterling equivalent amount of such contracts is £307m (2012/13: £261m). During the year, cross-currency interest rate swaps have
expired to coincide with repayments of underlying debt. The Sterling equivalent amount of those expired swaps (at year end exchange
rates) was £31m.
Cash flow hedges
Forward foreign exchange contracts hedge currency exposures of forecast inventory purchases. At 1 February 2014 the Sterling
equivalent amount of such contracts is £419m (2012/13: £441m). The associated fair value gains and losses will be transferred to
inventories when the purchases occur during the next 12 months. Losses of £9m (2012/13: £8m gains) have been transferred to
inventories for contracts which matured during the year.
Net investment hedges
Cross-currency interest rate swaps hedge currency exposures of overseas investments. At 1 February 2014 the Sterling equivalent
amount of such contracts is £nil (2012/13: £90m).
Non-designated hedges
The Group has entered into certain derivatives to provide a hedge against fluctuations in the income statement arising from balance
sheet positions. At 1 February 2014 the Sterling equivalent amount of such contracts is £813m (2012/13: £1,062m). These have not
been accounted for as hedges, since the fair value movements of the derivatives in the income statement offset the retranslation of
the balance sheet positions. These include short-term foreign exchange contracts.
The Group has reviewed all significant contracts for embedded derivatives and none of these contracts has any embedded derivatives
which are not closely related to the host contract and therefore the Group is not required to account for these separately.
Kingfisher enters into netting agreements with counterparties to manage the credit and settlement risks associated with over-the-
counter derivatives. These netting agreements and similar arrangements generally enable the Group and its counterparties to
settle cashflows on a net basis and set-off liabilities against available assets in the event that either party is unable to fulfill its
contractual obligations.
Offsetting of derivative assets:
£ millions
Gross amounts of
recognised
derivative assets
Gross amounts
offset in the
consolidated
balance sheet
Net amounts of
derivative assets
presented in the
consolidated
balance sheet
Gross amounts of
derivatives not
offset in the
consolidated
balance sheet Net amount
At 1 February 2014 45 – 45 (27) 18
At 2 February 2013 88 – 88 (29) 59
Offsetting of derivative liabilities:
£ millions
Gross amounts of
recognised
derivative liabilities
Gross amounts
offset in the
consolidated
balance sheet
Net amounts of
derivative
liabilities
presented in the
consolidated
balance sheet
Gross amounts of
derivatives not
offset in the
consolidated
balance sheet Net amount
At 1 February 2014 (27) – (27) 27 –
At 2 February 2013 (29) – (29) 29 –
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24 Financial risk management
Kingfisher’s treasury function has primary responsibility for managing certain financial risks to which the Group is exposed.
The Board reviews the levels of exposure regularly and approves treasury policies covering the use of financial instruments required
to manage these risks. Kingfisher’s treasury function is not run as a profit centre and does not enter into any transactions for
speculative purposes.
In the normal course of business the Group uses financial instruments including derivatives. The main types of financial instruments
used are Medium Term Notes and other fixed term debt, bank loans and deposits, money market funds, interest rate swaps,
commodity swaps and foreign exchange contracts.
Interest rate risk
Borrowings arranged at floating rates of interest expose the Group to cash flow interest rate risk, whereas those arranged at fixed
rates of interest expose the Group to fair value interest rate risk. The Group manages its interest rate risk by entering into certain
interest rate derivative contracts which modify the interest rate payable on the Group’s underlying debt instruments, principally the
Medium Term Notes and other fixed term debt.
Currency risk
The Group’s principal currency exposures are to the Euro, US Dollar and Polish Zloty. The Euro and Polish Zloty exposures are
operational and arise through the ownership of retail businesses in France, Spain, Ireland and Poland. In particular, the Group
generates a substantial part of its profit from the Eurozone, and as such is exposed to the economic uncertainty of its member
states. The Group continues to monitor potential exposures and risks, and consider effective risk management solutions.
Balance sheet Euro translation exposure is currently hedged by maintaining a proportion of the Group’s debt in Euro. It is the Group’s
policy not to hedge the translation of overseas earnings into Sterling. In addition, the Group has significant transactional exposure
arising on the purchase of inventories denominated in US Dollars, which it hedges using forward foreign exchange contracts. Under
Group policies, the Group companies are required to hedge committed inventory purchases and a proportion of forecast inventory
purchases arising in the next 12 months, and this is monitored on an ongoing basis.
Kingfisher’s policy is to manage the interest rate and currency profile of its issued debt using derivative contracts. The effect of these
contracts on the Group’s net debt/cash is as follows:
Sterling Euro US Dollar Other
£ millions Fixed Floating Fixed Floating Fixed Floating Fixed Floating Total
At 1 February 2014
Net cash before fair value
adjustments and financing
derivatives (111) 175 (28) 99 (150) 78 – 173 236
Fair value adjustments to net cash (3) – – – (22) – – – (25)
Financing derivatives 75 (763) – 201 173 233 – 108 27
Net cash (39) (588) (28) 300 1 311 – 281 238
At 2 February 2013
Net cash before fair value
adjustments and financing
derivatives (114) 91 (39) 135 (188) 3 103 14 5
Fair value adjustments to net cash (6) – – – (32) – – – (38)
Financing derivatives 78 (1,064) – 192 222 315 – 328 71
Net cash (42) (973) (39) 327 2 318 103 342 38
Annual Report and Accounts 2013/14
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Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
108
24 Financial risk management continued
Financial instruments principally affected by interest rate and currency risks, being the significant market risks impacting Kingfisher,
are borrowings, deposits and derivatives. The following analysis illustrates the sensitivity of net finance costs (reflecting the impact on
profit) and derivative cash flow hedges (reflecting the impact on other comprehensive income) to changes in interest rates and foreign
exchange rates.
2013/14 2012/13
£ millions
Net finance
costs
Income/
(costs)
Net finance
costs
Income/
(costs)
Effect of 1% rise in interest rates on net finance costs
Sterling (6) (10)
Euro 3 3
US Dollar 3 3
Polish Zloty 2 3
Due to the Group’s hedging arrangements and offsetting foreign currency assets and liabilities, there is no significant impact on
profit from the retranslation of financial instruments.
2013/14 2012/13
£ millions
Derivative
cash flow
hedges
Increase
Derivative
cash flow
hedges
Increase
Effect of 10% appreciation in foreign exchange rates on derivative cash flow hedges
US Dollar against Sterling 17 18
US Dollar against Euro 20 21
The impact of changes in foreign exchange rates on cash flow hedges results from retranslation of forward purchases of US Dollars
used to hedge forecast US Dollar purchases of inventories. The associated fair value gains and losses are deferred in equity until
the purchases occur. See note 23 for further details. The retranslation of foreign currency borrowings and derivatives designated as
hedges of net investments in foreign operations is reported in equity and offset by the retranslation of the hedged net investments.
The sensitivity analysis excludes the impact of movements in market variables on the carrying amount of trade and other payables
and receivables, due to the low associated sensitivity, and are before the effect of tax. It has been prepared on the basis that the
Group’s debt, hedging activities, hedge accounting designations, and foreign currency proportion of debt and derivative contracts
remain constant, reflecting the positions at 1 February 2014 and 2 February 2013 respectively. As a consequence, the analysis
relates to the position at those dates and is not necessarily representative of the years then ended. In preparing the sensitivity
analysis it is assumed that all hedges are fully effective.
The effects shown above would be reversed in the event of an equal and opposite change in interest rates and foreign
exchange rates.
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24 Financial risk management continued
Liquidity risk
The Group regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash
flow forecast for the next three years, determining the level of debt facilities required to fund the business, planning for repayments
of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows.
The following table analyses the Group’s non-derivative financial liabilities and derivative assets and liabilities into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. It excludes trade and other
payables due to the low associated liquidity risk. The amounts disclosed in the table are the contractual undiscounted cash flows
(including interest) and as such may differ from the amounts disclosed on the balance sheet.
£ millions
Less than
1 year 1-2 years 2-3 years 3-4 years 4-5 years
More than
5 years Total
At 1 February 2014
Bank overdrafts (1) – – – – – (1)
Bank loans (3) (2) (3) (4) (2) – (14)
Medium Term Notes and other fixed term debt (86) (10) (49) (7) (112) – (264)
Finance leases (17) (15) (11) (7) (6) (26) (82)
Derivatives – receipts 86 10 49 7 112 – 264
Derivatives – payments (87) (2) (39) (3) (99) – (230)
At 2 February 2013
Bank loans (55) (4) (2) (4) (5) – (70)
Medium Term Notes and other fixed term debt (47) (87) (10) (52) (7) (117) (320)
Finance leases (15) (16) (12) (8) (6) (31) (88)
Derivatives – receipts 47 87 10 52 7 117 320
Derivatives – payments (30) (93) (2) (39) (2) (98) (264)
At 1 February 2014 the Group has an undrawn revolving committed facility of £200m which matures in August 2016. The
£200m facility contains a covenant requiring that, as at the end of each annual and semi-annual financial reporting period, the
ratio of operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding
12 month period. The Group has complied with this covenant for the year ended 1 February 2014.
Credit risk
The Group deposits surplus cash with a number of banks with the strongest short-term credit ratings and with money market funds
which have AAA credit ratings and offer same day liquidity. A credit limit for each counterparty is agreed by the Board covering the
full value of deposits and the fair value of derivative contracts. The credit risk is reduced further by spreading the investments and
derivative contracts across several counterparties. At 1 February 2014, the highest total cash investment with a single counterparty
was £50m (2012/13: £39m).
The Group’s exposure to credit risk at the reporting date is the carrying value of cash at bank and short-term deposits and the fair
value of derivative assets.
No further credit risk provision is required in excess of the normal provision for bad and doubtful debts as the Group has a low
concentration of credit risk in respect of trade receivables. Concentration of risk is limited as a result of low individual balances with
short maturity spread across a large number of unrelated customers.
At 1 February 2014, trade and other receivables that are past due but not provided against amount to £50m (2012/13: £41m),
of which £4m (2012/13: £3m) are over 120 days past due.
Refer to note 36 for details on guarantees provided by the Group.
Capital risk
Capital risk management disclosures are provided in the Financial Review on page 27.
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110
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
110
25 Deferred tax
£ millions 2013/14 2012/13
Deferred tax assets 12 17
Deferred tax liabilities (251) (303)
(239) (286)
Deferred tax assets and liabilities are offset against each other when they relate to income taxes levied by the same tax jurisdiction
and when the Group intends to settle its current tax assets and liabilities on a net basis.
£ millions
Accelerated tax
depreciation
Gains on
property Provisions Tax losses
Post-
employment
benefits Other Total
At 3 February 2013 (136) (132) 20 8 (57) 11 (286)
Acquisition of subsidiaries – (3) – – – – (3)
(Charge)/credit to income statement (24) 17 2 – 2 (4) (7)
(Charge)/credit to equity – – (1) – 51 (2) 48
Exchange differences 9 4 (2) (1) (1) – 9
At 1 February 2014 (151) (114) 19 7 (5) 5 (239)
At 29 January 2012 (115) (144) 33 7 (30) 3 (246)
(Charge)/credit to income statement (17) 14 (15) 1 (2) – (19)
(Charge)/credit to equity – – – – (27) 7 (20)
Exchange differences (4) (2) 2 – 2 1 (1)
At 2 February 2013 (136) (132) 20 8 (57) 11 (286)
At the balance sheet date, the Group has unused tax losses of £221m (2012/13: £243m) available for offset against future profits.
A deferred tax asset has been recognised in respect of £22m (2012/13: £24m) of such losses. No deferred tax asset has been
recognised in respect of the remaining £199m (2012/13: £219m) due to the unpredictability of future profit streams. Included in
unrecognised tax losses are tax losses arising in China of £181m (2012/13: £187m) which can be carried forward only in the next
one to five years.
No deferred tax liability is recognised on temporary differences of £3,331m (2012/13: £2,980m) relating to the unremitted earnings
of overseas subsidiaries and joint ventures. This is because the earnings are continually reinvested by the Group and therefore no tax
is expected to be payable on them in the foreseeable future.
26 Provisions
£ millions
Onerous
property
contracts Restructuring Total
At 3 February 2013 21 52 73
Acquisition of subsidiaries 11 – 11
Charge/(credit) to income statement 2 (5) (3)
Utilised in the year (4) (22) (26)
Exchange differences (1) – (1)
At 1 February 2014 29 25 54
Current liabilities 4 4 8
Non-current liabilities 25 21 46
29 25 54
Within the onerous property contracts provisions, Kingfisher has provided against future liabilities for properties sublet at a shortfall
and long-term idle properties, along with properties acquired on acquisition of subsidiaries at above-market rents. Such provisions
exclude those related to restructuring programmes which are included in the restructuring provisions. The provisions are based on
the present value of future cash outflows relating to rent, rates and service charges.
Restructuring provisions include the estimated costs of the UK, Ireland and China restructuring programmes. The provisions have
been discounted to reflect the time value of money and the risks associated with the specific liabilities.
The ultimate costs and timing of cash flows related to the above provisions are largely dependent on exiting the property lease
contracts and subletting surplus space.
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27 Post-employment benefits
The Group operates a variety of post-employment benefit arrangements covering both funded and unfunded defined benefit
schemes and defined contribution schemes. The most significant defined benefit and defined contribution schemes are in the
UK. The principal overseas defined benefit schemes are in France, where they are mainly retirement indemnity in nature, and
the principal overseas defined contribution scheme is in China. The overseas schemes are not material in relation to the Group
as a whole.
Defined contribution schemes
Costs for the Group’s defined contribution pension schemes, at rates specified in the individual schemes’ rules, are as follows:
£ millions 2013/14 2012/13
Charge to operating profit 27 17
From July 2012 an enhanced defined contribution pension scheme was offered to all UK employees. Eligible UK employees have
been automatically enrolled into the scheme from 31 March 2013.
Defined benefit schemes
The Group’s principal defined benefit arrangement is its funded, final salary pension scheme in the UK. This scheme was closed
to new entrants from April 2004 and was closed to future benefit accrual from July 2012.
The scheme operates under trust law and is managed and administered by the Trustee on behalf of members in accordance with
the terms of the Trust Deed and Rules and relevant legislation. The Trustee Board consists of ten Trustee directors, made up of
five employer appointed directors, one independent director and four member nominated directors. The Trustee Board delegates
day-to-day administration of the scheme to the Group Pensions Department of Kingfisher plc.
The main risk to the Group is that additional contributions are required if investment returns and demographic experience is worse
than expected. The scheme therefore exposes the Group to actuarial risks, such as longevity risk, currency risk, inflation risk,
interest rate risk and market (investment) risk. The Trustee Board regularly reviews such risks and mitigating controls, with a risk
register being formally approved on an annual basis. The assets of the scheme are held separately from the Group and the Trustee’s
investment strategy includes a planned medium-term de-risking of assets, switching from return-seeking to liability-matching assets.
Other de-risking activities have included the scheme acquiring an interest in a property partnership, as set out further below.
A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee and the last full
valuation was carried out as at 31 March 2013.
Following this valuation and in accordance with the scheme’s Statement of Funding Principles, the Trustee and Kingfisher have
agreed annual employer contributions of £36m from April 2014. The contribution schedule has been derived with reference to a
funding objective that targets a longer-term, low risk funding position in excess of the minimum statutory funding requirements. This
longer-term objective is based on the principle of the scheme reaching a point where it can provide benefits to members with a high
level of security, thereby limiting its reliance on the employer for future support. The Company monitors the scheme funding level on
a regular basis and will review with the scheme Trustee at future valuations the continued appropriateness of the repayment schedule
currently in place.
The Trust Deed provides Kingfisher with an unconditional right to a refund of surplus assets assuming the full settlement of plan
liabilities in the event of a plan wind-up.
UK scheme interest in property partnership
In 2010/11, the Group established a partnership, Kingfisher Scottish Limited Partnership (‘Kingfisher SLP’), as part of an arrangement
with the UK scheme Trustee to address an element of the scheme deficit and provide greater security to the Trustee. The partnership
interests are held by the Group and by the scheme, the latter resulting from investments of £78m and £106m made by the Trustee
in January and June 2011 respectively. These investments followed Group contributions of the same amounts into the scheme.
In accordance with IAS 19, ‘Employee benefits’, the investments held by the scheme in Kingfisher SLP do not represent plan
assets for the purposes of the Group’s consolidated financial statements. Accordingly the reported pension position does not
reflect these investments.
UK property assets with market values of £83m and £119m were transferred, in January 2011 and June 2011 respectively, into
the partnership and leased back to B&Q plc. The Group retains control over these properties, including the flexibility to substitute
alternative properties. The Trustee has a first charge over the properties in the event that Kingfisher plc becomes insolvent. The
scheme’s partnership interest entitles it to the majority of the income of the partnership over the 20 year period of the arrangement.
The payments to the scheme by Kingfisher SLP over this term are reflected as Group pension contributions on a cash basis. At the
end of this term, Kingfisher plc has the option to acquire the Trustee’s partnership interest in Kingfisher SLP.
The Group has control over the partnership and therefore it is consolidated in these Group financial statements. Accordingly,
advantage has been taken of the exemptions provided by Regulation 7 of the Partnerships (Accounts) Regulations 2008 from the
requirements for preparation, delivery and publication of the partnership’s accounts.
Annual Report and Accounts 2013/14
112
Accounts
Notes to the consolidated financial statements continued
Annual Report and Accounts 2013/14
112
27 Post-employment benefits continued
Income statement
2013/14 2012/13 (Restated)
£ millions UK Overseas Total UK Overseas Total
Amounts charged/(credited) to operating profit
Current service cost 2 7 9 13 4 17
Administration costs 3 – 3 3 – 3
Exceptional curtailment gain – – – (27) – (27)
5 7 12 (11) 4 (7)
Amounts charged/(credited) to net finance costs
Net interest (income)/expense (4) 2 (2) (2) 2 –
Total charged/(credited) to income statement 1 9 10 (13) 6 (7)
Of the net charge to operating profit, a £8m charge (2012/13: £14m charge restated) and £4m charge (2012/13: £21m credit
restated) are included in selling and distribution expenses and administrative expenses respectively. Actuarial gains and losses
have been reported in the statement of comprehensive income.
In the prior year, the closure to future accrual resulted in an exceptional non-cash curtailment gain of £27m, representing the
one-off reduction in accounting liabilities as benefits were no longer linked to future salary increases other than in line with inflation.
Balance sheet
2013/14 2012/13
£ millions UK Overseas Total UK Overseas Total
Present value of defined benefit obligations (2,135) (92) (2,227) (1,994) (93) (2,087)
Fair value of scheme assets 2,106 21 2,127 2,065 22 2,087
(Deficit)/surplus in scheme (29) (71) (100) 71 (71) –
Movements in the surplus or deficit are as follows:
2013/14 2012/13 (Restated)
£ millions UK Overseas Total UK Overseas Total
Surplus/(deficit) in scheme at beginning of year 71 (71) – 25 (40) (15)
Current service cost (2) (7) (9) (13) (4) (17)
Administration costs (3) – (3) (3) – (3)
Curtailment gain – – – 27 – 27
Net interest income/(expense) 4 (2) 2 2 (2) –
Net actuarial (losses)/gains (131) 4 (127) (7) (22) (29)
Contributions paid by employer 32 1 33 40 1 41
Exchange differences – 4 4 – (4) (4)
(Deficit)/surplus in scheme at end of year (29) (71) (100) 71 (71) –
Movements in the present value of defined benefit obligations are as follows:
2013/14 2012/13
£ millions UK Overseas Total UK Overseas Total
Present value of defined benefit obligations at beginning
of year (1,994) (93) (2,087) (1,902) (60) (1,962)
Current service cost (2) (7) (9) (13) (4) (17)
Curtailment gain – – – 27 – 27
Interest expense (90) (3) (93) (84) (3) (87)
Actuarial (losses)/gains – changes in financial assumptions (8) 5 (3) (80) (18) (98)
Actuarial gains – changes in demographic assumptions 16 – 16 – – –
Actuarial losses– experience adjustments (120) (1) (121) – (4) (4)
Contributions paid by employees – – – (5) – (5)
Benefits paid 63 1 64 63 1 64
Exchange differences – 6 6 – (5) (5)
Present value of defined benefit obligations at end of year (2,135) (92) (2,227) (1,994) (93) (2,087)
The calculation of the current year UK defined benefit obligation allows for the detailed membership data provided for the funding
valuation as at 31 March 2013. It therefore incorporates a number of experience adjustments since the previous valuation as at
31 March 2010.
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27 Post-employment benefits continued
The present value of UK scheme defined benefit obligation is 62% (2012/13: 62%) in respect of deferred members and 38%
(2012/13: 38%) in respect of current pensioners.
The weighted average duration of the UK scheme obligations at the end of the year is 21 years (2012/13: 20 years).
Movements in the fair value of scheme assets are as follows:
2013/14 2012/13 (Restated)
£ millions UK Overseas Total UK Overseas Total
Fair value of scheme assets at beginning of year 2,065 22 2,087 1,927 20 1,947
Administration costs (3) – (3) (3) – (3)
Interest income 94 1 95 86 1 87
Actuarial (losses)/gains – actual return less interest income (19) – (19) 73 – 73
Contributions paid by employer 32 1 33 40 1 41
Contributions paid by employees – – – 5 – 5
Benefits paid (63) (1) (64) (63) (1) (64)
Exchange differences – (2) (2) – 1 1
Fair value of scheme assets at end of year 2,106 21 2,127 2,065 22 2,087
The fair value of scheme assets is analysed as follows:
2013/14 2012/13
£ millions UK Overseas Total % of total UK Overseas Total % of total
Government bonds 741 – 741 35% 722 – 722 35%
Corporate bonds 650 – 650 31% 645 – 645 31%
UK equities 73 – 73 3% 158 – 158 7%
Overseas equities 443 – 443 20% 394 – 394 19%
Property 32 – 32 2% 70 – 70 3%
Cash and other 167 21 188 9% 76 22 98 5%
Total fair value of scheme assets 2,106 21 2,127 100% 2,065 22 2,087 100%
All UK scheme assets have quoted prices in active markets, except for £157m (2012/13: £92m) of property and other assets.
Interest rate and inflation rate swaps are employed in the UK scheme to complement the use of fixed and index-linked bonds
for liability risk management purposes and are included in the Corporate bonds category above.
The estimated amount of total contributions to be paid to the UK and overseas pension schemes by the Group during the next
financial year is £36m.
Principal actuarial valuation assumptions
The assumptions used in calculating the costs and obligations of the Group’s defined benefit pension schemes are set by the
Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at
the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the
sensitivity analysis.
The UK scheme discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for
the difference in term between iBoxx and scheme liabilities.
2013/14 2012/13
Annual % rate UK Overseas UK Overseas
Discount rate 4.4 3.2 4.6 2.8
Price inflation 3.3 2.0 3.3 2.0
Rate of pension increases 3.1 – 3.3 –
Salary escalation n/a 2.3 n/a 2.5
For the UK scheme, the mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics
and experience of the membership of the scheme from 2010 to 2013. The base mortality assumptions have been derived by
adjusting standard mortality tables (SAPS tables) projected forward to 2013 using the ‘CMI 2013’ core projection improvement
factors, as published by the UK actuarial profession. In addition, allowance has been made for future increases in life expectancy.
The allowance is in line with CMI 2013 improvements subject to a long-term rate of 1.25% pa for males and 1.0% pa for females.
These improvements take into account trends observed within the scheme over the past decade and general population trends.
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Accounts
Notes to the consolidated financial statements continued
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27 Post-employment benefits continued
The assumptions for life expectancy of UK scheme members are as follows:
Years 2013/14 2012/13
2010
funding
valuation
Age to which current pensioners are expected to live (60 now)
– Male 86.7 86.7 86.4
– Female 87.3 87.4 87.1
Age to which future pensioners are expected to live (60 in 15 years’ time)
– Male 87.4 87.4 87.1
– Female 88.6 89.0 88.7
The following sensitivity analysis for the UK scheme shows the estimated impact on the obligation resulting from changes to key
actuarial assumptions, whilst holding all other assumptions constant.
Assumption Change in assumption Impact on defined benefit obligation
Discount rate Increase/decrease by 0.1% Decrease/increase by £43m
Price inflation Increase/decrease by 0.1% Increase/decrease by £38m
Rate of pension increases Increase/decrease by 0.1% Increase/decrease by £38m
Mortality Increase in life expectancy by one year Increase by £68m
Due to the asset-liability matching investment strategy, the above impacts on the obligations of changes in discount rate and price
inflation would be significantly offset by movements in the fair value of the scheme assets.
28 Share capital
Number of
ordinary
shares
millions
Ordinary
share capital
£ millions
At 3 February 2013 2,372 373
New shares issued under share schemes 4 –
At 1 February 2014 2,376 373
At 29 January 2012 2,369 372
New shares issued under share schemes 3 1
At 2 February 2013 2,372 373
Ordinary shares have a par value of 15
5
/7 pence per share.
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29 Other reserves
£ millions
Cash flow hedge
reserve
Translation
reserve Other Total
At 3 February 2013 (8) 374 159 525
Currency translation differences
Group – (210) – (210)
Joint ventures and associates – (25) – (25)
Transferred to income statement – (31) – (31)
Cash flow hedges
Fair value losses (4) – – (4)
Losses transferred to inventories 9 – – 9
Tax on other comprehensive income (2) 4 – 2
Other comprehensive income for the year 3 (262) – (259)
At 1 February 2014 (5) 112 159 266
At 29 January 2012 7 247 159 413
Currency translation differences
Group – 122 – 122
Joint ventures and associates – 8 – 8
Cash flow hedges
Fair value losses (14) – – (14)
Gains transferred to inventories (8) – – (8)
Tax on other comprehensive income 7 (3) – 4
Other comprehensive income for the year (15) 127 – 112
At 2 February 2013 (8) 374 159 525
The ‘other’ category of reserve represents the premium on the issue of convertible loan stock in 1993 and the merger reserve
relating to the acquisition of Darty in 1993.
30 Share-based payments
2013/14 2012/13
Options
Number
Weighted
average
exercise
price
£
Options
Number
Weighted
average
exercise
price
£
Outstanding at beginning of year 62,167,023 0.39 89,247,441 0.33
Granted during the year
(1),(2)
6,279,763 1.37 12,292,718 0.50
Forfeited during the year (9,569,630) 0.27 (12,013,719) 0.31
Exercised during the year (20,753,532) 0.33 (27,359,417) 0.27
Outstanding at end of year 38,123,624 0.61 62,167,023 0.39
Exercisable at end of year 2,731,735 0.41 6,253,122 0.29
(1) The charge to the income statement for the years ended 1 February 2014 and 2 February 2013 in respect of share-based payments includes the first year’s charge of
the 2014 and 2013 Kingfisher Incentive Share Scheme (‘KISS’) grants respectively, based on the bonus for the year. Since grants under the KISS are made following the
year end to which the first year of charge relates, it is not possible to give the number of options granted until after the year end.
(2) The weighted average exercise price for options granted during the year represents a blend of nil price KISS, Performance Share Plan and discounted Sharesave options
(see below).
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Accounts
Notes to the consolidated financial statements continued
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30 Share-based payments continued
Information on the share schemes is given in note 14 of the Company’s separate financial statements.
Options have been exercised on a regular basis throughout the year. On that basis, the weighted average share price during the year,
rather than at the date of exercise, is £3.53 (2012/13: £2.81). The options outstanding at the end of the year have exercise prices
ranging from £nil to £3.15 and a weighted average remaining contractual life of 2.9 years (2012/13: 3.1 years).
The Group recognised a total expense of £7m in the year ended 1 February 2014 (2012/13: £9m) relating to equity-settled share-
based payment transactions.
The fair value of share options and deferred shares is determined by independent valuers using Black-Scholes and stochastic option
pricing models. The inputs of the principal schemes into these models are as follows:
Date of
grant
Share price
at grant
£
Exercise
price
£
Expected
life
(2)
years
Expected
volatility
(3)
%
Dividend
yield
%
Risk free
rate
%
Fair
value
(4)
£
Kingfisher Incentive Share Scheme
(1)
12/04/11 2.60 – 7.0 – – – 2.60
06/05/11 2.80 – 7.0 – – – 2.80
25/04/12 2.96 – 7.0 – – – 2.96
11/04/13 2.97 – 7.0 – – – 2.97
Performance Share Plan 05/05/10 2.33 – 7.0 – – – 2.33
05/05/10 2.33 – 7.0 46.7% – 1.5% 1.30
21/10/10 2.47 – 7.0 – – – 2.47
12/04/11 2.60 – 7.0 – – – 2.60
17/06/11 2.65 – 7.0 – – – 2.65
21/10/11 2.63 – 7.0 – – – 2.63
03/05/12 2.91 – 7.0 – – – 2.91
16/10/12 2.81 – 7.0 – – – 2.81
25/04/13 3.10 – 7.0 – – – 3.10
22/10/13 3.74 – 7.0 – – – 3.74
UK and International 29/10/08 1.09 1.09 5.5 30.8% 4.9% 3.8% 0.10
Sharesave 03/11/09 2.24 1.72 5.5 36.4% 2.4% 2.9% 0.38
28/10/10 2.39 1.87 3.5 44.3% 2.3% 1.1% 0.53
28/10/10 2.39 1.87 5.5 37.3% 2.3% 1.9% 0.39
26/10/11 2.64 1.99 3.5 39.1% 2.9% 0.9% 0.54
26/10/11 2.64 1.99 5.5 37.6% 2.9% 1.4% 0.42
19/10/12 2.85 2.17 3.5 25.9% 3.3% 0.4% 0.45
19/10/12 2.85 2.17 5.5 37.6% 3.3% 0.9% 0.49
22/10/13 3.74 3.15 3.5 23.3% 2.5% 0.9% 0.49
22/10/13 3.74 3.15 5.5 33.6% 2.5% 1.6% 0.59
(1) The Kingfisher Incentive Share Scheme includes the Company Share Option Plan (‘CSOP’) element of the KISS awards. Details of the CSOP element of the award are set
out in the Director’s Remuneration Report.
(2) Expected life is disclosed based on the UK schemes. For the KISS and PSP schemes in the UK, the expiry date is 7 years from the date of grant. Expiry of overseas KISS
schemes and CSOP is 6 months from the date of vesting. Expiry of overseas PSP schemes is 1 year from the date of vesting.
(3) Expected volatility was determined for each individual award, by calculating the historical volatility of the Group’s share price (plus reinvested dividends) immediately prior
to the grant of the award, over the same period as the vesting period of each award, adjusted by expectations of future volatility.
(4) The fair values of UK and International Sharesave awards granted on or before 1 January 2009 have been restated to reflect the 17 January 2008 amendment to IFRS 2
on vesting conditions and cancellations.
31 Cash generated by operations
£ millions 2013/14
2012/13
(Restated)
Operating profit 736 692
Share of post-tax results of joint ventures and associates (8) (20)
Depreciation and amortisation 261 248
Impairment losses 2 8
Loss on disposal of property, plant and equipment, investment property and intangible assets 1 5
Share-based compensation charge 7 9
Increase in inventories (31) (191)
Increase in trade and other receivables (60) (6)
Increase in trade and other payables 118 19
Movement in provisions (29) 14
Movement in post-employment benefits (21) (48)
Cash generated by operations 976 730
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32 Net cash
£ millions 2013/14 2012/13
Cash and cash equivalents 535 398
Bank overdrafts (1) –
Cash and cash equivalents and bank overdrafts 534 398
Bank loans (14) (68)
Medium Term Notes and other fixed term debt (247) (298)
Financing derivatives 27 71
Finance leases (62) (65)
Net cash 238 38
£ millions 2013/14 2012/13
Net cash/(debt) at beginning of year 38 (88)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts 153 (106)
Repayment of bank loans 89 31
Repayment of Medium Term Notes and other fixed term debt 33 162
Receipt on financing derivatives (6) –
Capital element of finance lease rental payments 13 12
Cash flow movement in net cash 282 99
Borrowings acquired (35) –
Exchange differences and other non-cash movements (47) 27
Net cash at end of year 238 38
33 Acquisitions
On 31 May 2013, the Group acquired 100% of the share capital of the Bricostore Romania companies from Group Bresson, a
French retail company. Consideration of £51m comprised £35m cash and a further £16m non-cash element, representing the
obligation to assume a liability of the vendor.
Goodwill of £18m has been recognised on provisional net assets of £33m, representing a strategic premium to strengthen the
Group’s position in Eastern Europe and anticipated synergies that will arise from the acquisition.
£ millions
Provisional fair value amounts recognised of identifiable assets acquired and liabilities assumed
Other intangible assets 1
Property, plant and equipment 60
Inventories 29
Trade and other receivables 22
Cash and cash equivalents 7
Trade and other payables (34)
Current tax liabilities (3)
Deferred tax assets 1
Deferred tax liabilities (4)
Borrowings (35)
Provisions (11)
Total identifiable net assets acquired 33
Goodwill 18
Total consideration 51
The acquisition amounts recorded in the consolidated cash flow statement for the year are:
£ millions
Cash consideration (35)
Cash acquired 7
Purchase of businesses, net of cash acquired (28)
Immediately following the acquisition, Kingfisher settled Bricostore Romania’s borrowings of £35m (included within repayment of
loans in the cash flow statement).
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Accounts
Notes to the consolidated financial statements continued
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33 Acquisitions continued
Acquisition related fees of £2m have been charged in the consolidated income statement in the year.
Owing to local conditions, Bricostore Romania prepares its financial statements to 31 December. In the period from 31 May 2013 to
31 December 2013, it contributed sales of £72m and a retail profit of £1m. If the acquisition had occurred at the start of the financial
year, the Group’s sales would have been £11,163m and Group operating profit, after exceptional items, would have been £734m for
the year ended 1 February 2014.
34 Assets held for sale
£ millions 2013/14 2012/13
Assets held for sale 208 –
Assets held for sale include the Group’s investment in Hornbach of £198m, which was subsequently agreed to be sold on
24 March 2014 for approximately £195m (see note 17). It also includes a UK freehold property asset of £10m, which was
subsequently sold on 4 February 2014 for £32m.
The investment in Hornbach is measured based on the 31 January 2014 market price of the shares of Hornbach Holding AG and
Hornbach-Baumarkt AG which are listed on the German Stock Exchange, along with the sale price agreed after the balance sheet
date for the unlisted shares in Hornbach Holding AG.
The fair value of the investment in Hornbach has been determined using a mixture of level 1 and level 2 inputs as defined by the
fair value hierarchy of IFRS 13, ‘Fair value measurement’.
35 Commitments
Operating lease commitments
The Group is a lessee of various retail stores, offices, warehouses and plant and equipment under lease agreements with varying
terms, escalation clauses and renewal rights.
The Group is also a lessor and sub-lessor of space with freehold and leasehold properties respectively. Lease arrangements under
which rental payments are contingent upon sales, other performance or usage are not significant for the Group.
Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:
£ millions 2013/14 2012/13
Less than one year 460 461
One to five years 1,571 1,589
More than five years 2,347 2,637
4,378 4,687
Undiscounted total future minimum rentals receivable under non-cancellable operating leases are as follows:
£ millions 2013/14 2012/13
Less than one year 31 32
One to five years 101 100
More than five years 104 118
236 250
The total of future minimum operating sublease receipts expected to be received is £197m (2012/13: £203m).
Capital commitments
Capital commitments contracted but not provided for by the Group amount to £31m (2012/13: £36m).
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36 Contingent liabilities
The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees,
only £1m (2012/13: £1m) would crystallise due to possible future events not wholly within the Group’s control.
The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are
considered likely to arise on the basis of current information and legal advice.
37 Related party transactions
During the year, the Company and its subsidiaries carried out a number of transactions with related parties in the normal course of
business and on an arm’s length basis. The names of the related parties, the nature of these transactions and their total value are
shown below:
2013/14 2012/13
£ millions
Income/
(expense)
Receivable/
(payable)
Income/
(expense)
Receivable/
(payable)
Transactions with Koçtas¸ Yapi Marketleri Ticaret A.S. in which the Group
holds a 50% interest
Provision of employee services (0.1) – (0.2) (0.1)
Commission and other income 1.2 0.6 0.8 0.4
Transactions with Hornbach Holding A.G. in which the Group holds a 21% interest
Commission and other income 0.3 – 0.9 0.1
Transactions with Crealfi S.A. in which the Group holds a 49% interest
Provision of employee services 0.1 – 0.1 –
Commission and other income 7.1 0.4 4.3 0.3
Transactions with Kingfisher Pension Scheme
Provision of administrative services 0.8 0.1 1.4 0.1
Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists in
force with non-related parties.
The remuneration of key management personnel is given in note 8.
Other transactions with the Kingfisher Pension Scheme are detailed in note 27.
38 Post balance sheet events
Certain assets classified as held for sale were disposed of subsequent to the balance sheet date, refer to note 34 for further detail.
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Accounts
Company balance sheet
At 1 February 2014
Annual Report and Accounts 2013/14
120
£ millions Notes 2013/14 2012/13
Fixed assets
Tangible fixed assets 3 – –
Investments 4 7,101 6,978
7,101 6,978
Current assets
Debtors due within one year 5 3,259 3,414
Debtors due after more than one year 5 44 62
Cash at bank and in hand 153 124
3,456 3,600
Current liabilities
Creditors: amounts falling due within one year 6 (5,539) (5,669)
Net current liabilities (2,083) (2,069)
Total assets less current liabilities 5,018 4,909
Non-current liabilities
Creditors: amounts falling due after more than one year 7 (172) (278)
Provisions for liabilities 8 (7) (7)
(179) (285)
Net assets excluding net pension asset 4,839 4,624
Net pension asset 9 – –
Net assets 4,839 4,624
Capital and reserves
Called up share capital 11 373 373
Share premium account 12 2,209 2,204
Other reserves 12 711 711
Profit and loss account 12 1,546 1,336
Equity shareholders’ funds 13 4,839 4,624
The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:
Sir Ian Cheshire
Group Chief Executive
Karen Witts
Group Finance Director
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Notes to the Company financial statements
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1 Principal accounting policies
The financial statements of Kingfisher plc (‘the Company’)
are made up to the nearest Saturday to 31 January each year.
The directors of Kingfisher plc, having made appropriate
enquiries, consider that adequate resources exist for the
Company to continue in operational existence for the foreseeable
future and that, therefore, it is appropriate to adopt the going
concern basis in preparing the financial statements for the year
ended 1 February 2014. Refer to the Directors’ statement of
responsibility on page 71.
The financial statements have been prepared under the historical
cost convention, as modified by the use of valuations for certain
financial instruments, share-based payments and pensions,
and are prepared in accordance with applicable accounting
standards in the United Kingdom and the Companies Act 2006.
The Company’s financial statements are included in the
consolidated financial statements of Kingfisher plc. As permitted
by section 408 of the Companies Act 2006, the profit and loss
account and statement of total recognised gains and losses are
not presented. The Company has taken advantage of the
exemption from preparing a cash flow statement under the terms
of FRS 1, ‘Cash flow statements’. The Company is exempt under
the terms of FRS 8, ‘Related party disclosures’, from disclosing
related party transactions with wholly owned subsidiaries of
Kingfisher plc. The Company has taken advantage of the
exemption to provide financial instrument disclosures under
the terms of FRS 29, ‘Financial instruments: Disclosures’.
The principal accounting policies applied in the preparation
of these financial statements are set out below. These policies
have been consistently applied to the years presented, unless
otherwise stated.
a. Foreign currencies
Monetary assets and liabilities denominated in foreign currencies
are translated into Sterling at the rates of exchange at the
balance sheet date. Exchange differences on monetary items
are taken to the profit and loss account.
Principal rate of exchange against Sterling:
Euro 2013/14 2012/13
Year end rate 1.22 1.15
b. Tangible fixed assets
Tangible fixed assets are carried in the balance sheet at
cost less accumulated depreciation and any provisions for
impairment. Depreciation is provided to reflect a straight line
reduction from cost to estimated residual value over the
estimated useful life of the asset as follows:
Fixtures and fittings – between 4 and 20 years
Computers and electronic equipment – between 3 and 5 years
Motor cars – 4 years
Tangible fixed assets are reviewed for impairment if events or
changes in circumstances indicate that the carrying amount
may not be recoverable. When a review for impairment is
conducted, the recoverable amount is assessed by reference
to the higher of value-in-use and net realisable value. Any
impairment in value is charged to the profit and loss account
in the period in which it occurs.
c. Investments
Investments in subsidiaries and associates are included in the
balance sheet at cost, less any provisions for impairment.
d. Operating leases
Rentals under operating leases are charged to the profit
and loss account in the period to which the payments relate.
Incentives received or paid to enter into lease agreements are
released to the profit and loss account on a straight line basis
over the lease term or, if shorter, the period to the date on
which the rent is first expected to be adjusted to the prevailing
market rate.
e. Employee benefits
(i) Pensions
The Company operates defined benefit and defined contribution
pension schemes for its employees. A defined benefit scheme
is a pension scheme that defines an amount of pension
benefit that an employee will receive on retirement. A defined
contribution scheme is a pension scheme under which the
Company usually pays fixed contributions into a separate entity.
In all cases a separate fund is being accumulated to meet the
accruing liabilities. The assets of each of these funds are either
held under trusts or managed by insurance companies and
are entirely separate from the Company’s assets.
The asset or liability recognised in the balance sheet in respect
of defined benefit pension schemes is the fair value of scheme
assets less the present value of the defined benefit obligation at
the balance sheet date, together with an adjustment for any past
service costs not yet recognised. The defined benefit obligation is
calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high quality corporate
bonds which are denominated in the currency in which the
benefits will be paid and which have terms to maturity
approximating to the terms of the related pension liability.
A net pension asset is only recognised to the extent that it is
recoverable either through reduced future contributions or
through agreed refunds from the scheme.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are credited or charged
directly to the profit and loss reserve as they arise.
Past service costs are recognised immediately in the profit
and loss account, unless the changes to the pension scheme
are conditional on the employees remaining in service for a
specified period of time (the vesting period). In this case, the
past service costs are amortised on a straight line basis over the
vesting period.
For defined contribution schemes, the Company has no further
payment obligations once the contributions have been paid.
The contributions are recognised as an employee benefit
expense when they are due.
(ii) Share-based compensation
The Group operates several equity-settled, share-based
compensation schemes for the employees of the Company
and its subsidiaries using the Company’s equity instruments.
Annual Report and Accounts 2013/14
122
Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
122
1 Principal accounting policies continued
The fair value of the Company’s employees’ services received
in exchange for the grant of options or deferred shares is
recognised as an expense and is calculated using Black-Scholes
and stochastic models. The total amount to be expensed over
the vesting period is determined by reference to the fair value of
the options or deferred shares granted, excluding the impact of
any non-market vesting conditions. The value of the charge is
adjusted to reflect expected and actual levels of options vesting
due to non-market vesting conditions.
The fair value of the compensation given to subsidiaries in
respect of share-based compensation schemes is recognised
as a capital contribution over the vesting period. The capital
contribution is reduced by any payments received from
subsidiaries in respect of these schemes.
(iii) Employee Share Ownership Plan Trust (‘ESOP’)
The ESOP is a separately administered discretionary trust.
Liabilities of the ESOP are guaranteed by the Company and the
assets of the ESOP mainly comprise shares in the Company.
Own shares held by the ESOP are deducted from equity
shareholders’ funds and the shares are held at historical cost
until they are sold. The assets, liabilities, income and costs
of the ESOP are included in both the Company’s and the
consolidated financial statements.
f. Deferred tax
Provision is made for deferred tax using the incremental
provision approach and is measured on an undiscounted
basis at the tax rates that are expected to apply in the periods
in which timing differences reverse, based on tax rates and
laws substantively enacted at the balance sheet date.
Deferred tax is recognised in respect of timing differences
that have originated but not reversed by the balance sheet
date subject to the following:
• deferred tax is not recognised on the revaluation of non-
monetary assets such as property unless a binding sale
agreement exists at the balance sheet date. Where rollover
relief is available on an asset, deferred tax is not recognised;
• deferred tax is recognised on unremitted earnings of overseas
subsidiaries and associates only where dividends are accrued
as receivable or there is an intention to remit these in the
foreseeable future;
• deferred tax assets are recognised to the extent that they are
regarded as recoverable. Assets are regarded as recoverable
when it is regarded as more likely than not that there will be
suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted; and
• deferred tax is not recognised on permanent differences.
g. Provisions
Provisions are recognised when the Company has a present
legal or constructive obligation as a result of past events, it
is more likely than not that an outflow of resources will be
required to settle the obligation and the amount can be
reliably estimated. Provisions are not recognised for future
operating losses.
h. Financial instruments
Financial assets and financial liabilities are recognised on the
Company’s balance sheet when the Company becomes a party
to the contractual provisions of the instrument. Financial assets
are derecognised when the contractual rights to the cash flows
from the financial asset expire or the Company has substantially
transferred the risks and rewards of ownership. Financial
liabilities (or a part of a financial liability) are derecognised
when the obligation specified in the contract is discharged
or cancelled or expires.
(i) Borrowings
Interest bearing borrowings are recorded at the proceeds
received, net of direct issue costs and subsequently measured at
amortised cost. Where borrowings are in designated and effective
fair value hedge relationships, adjustments are made to their
carrying amounts to reflect the hedged risks. Finance charges,
including premiums payable on settlement or redemption and
direct issue costs, are amortised to the profit and loss account
using the effective interest method.
(ii) Trade creditors
Trade creditors are initially recognised at fair value and are
subsequently measured at amortised cost.
(iii) Derivatives and hedge accounting
Where hedge accounting is not applied, or to the extent to which
it is not effective, changes in the fair value of derivatives are
recognised in the profit and loss account as they arise.
Derivatives are initially recorded at fair value on the date a
derivative contract is entered into and subsequently carried at
fair value. The accounting treatment of derivatives classified as
hedges depends on their designation, which occurs at the start
of the hedge relationship. The Company designates certain
derivatives as a hedge of the fair value of an asset or liability
(‘fair value hedge’).
For an effective hedge of an exposure to changes in fair value,
the hedged item is adjusted for changes in fair value attributable
to the risk being hedged with the corresponding entry being
recorded in the profit and loss account. Gains or losses from
remeasuring the corresponding hedging instrument are also
recognised in the profit and loss account.
In order to qualify for hedge accounting, the Company
documents in advance the relationship between the item
being hedged and the hedging instrument. The Company
also documents and demonstrates an assessment of the
relationship between the hedged item and the hedging
instrument, which shows that the hedge has been and will be
highly effective on an ongoing basis. The effectiveness testing
is re-performed at each period end to ensure that the hedge
remains highly effective.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting.
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of
host contracts, and the host contracts are not carried at fair
value with unrealised gains or losses reported in the profit
and loss account.
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2 Profit and loss account disclosures
The audit fee for the Company and the consolidated financial statements is disclosed in note 7 of the Kingfisher plc consolidated
financial statements. Fees payable to Deloitte LLP and their associates for audit and non-audit services to the Company are not
required to be disclosed because the Group financial statements disclose such fees on a consolidated basis. Details of the Company’s
policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than another supplier and how
the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report on page 44.
Dividend disclosures are provided in note 11 of the Kingfisher plc consolidated financial statements.
£ millions 2013/14 2012/13
Wages and salaries 20 21
Social security costs 3 3
Pensions
Defined contribution 2 2
Defined benefit (service cost only) – 1
Share-based compensation 1 7
Employee benefit expenses 26 34
Number 2013/14 2012/13
Average number of persons employed
Administration 157 172
Directors’ remuneration and details of share option exercises are disclosed in the Directors’ remuneration report on pages 47 to 68.
Total Directors’ remuneration for the year is £6m (2012/13: £4.6m).
3 Tangible fixed assets
£ millions
Fixtures,
fittings and
equipment
Cost
At 3 February 2013 4
At 1 February 2014 4
Depreciation
At 3 February 2013 (4)
At 1 February 2014 (4)
Net carrying amount
At 2 February 2013 –
At 1 February 2014 –
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
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4 Investments
£ millions
Investments
in Group
undertakings
At 3 February 2013 6,978
Additions 135
Capital contributions given relating to share-based payments 10
Contributions received relating to share-based payments (22)
At 1 February 2014 7,101
Additions to investments in Group undertakings represent £135m (2012/13: £nil) of capital injections into a subsidiary undertaking
as part of Group restructuring activities undertaken.
The Directors consider that to give the full particulars of all subsidiary undertakings would lead to a statement of excessive length.
In accordance with Section 410(2)(a) of the Companies Act 2006, the information below relates to those Group undertakings at the
financial year end whose results or financial position, in the opinion of the Directors, principally affect the figures of the consolidated
financial statements of Kingfisher plc. Details of all subsidiary undertakings will be annexed to the next Annual Return of Kingfisher
plc to be filed at Companies House.
Country of
incorporation and
operation
% interest held and
voting rights
Class of
share owned Main activity
B&Q plc Great Britain 100%
Ordinary &
special
(1)
Retailing
B&Q Properties Limited Great Britain 100% Ordinary Property investment
Halcyon Finance Ltd
(2)
Great Britain 100% Ordinary Finance
Kingfisher Information Technology Services (UK) Limited
(2)
Great Britain 100% Ordinary IT services
Screwfix Direct Limited Great Britain 100% Ordinary Retailing
Sheldon Holdings Limited
(2)
Great Britain 100% Ordinary Holding company
Zeus Land Investments Limited Great Britain 100% Ordinary Holding company
B&Q Ireland Limited Ireland 100% Ordinary Retailing
Brico Dépôt S.A.S.
(3)
France 100% Ordinary Retailing
Castorama Dubois Investissements S.C.A.
(3),(4)
France 100% Ordinary Holding company
Castorama France S.A.S.
(3)
France 100% Ordinary Retailing
Eurodépôt Immobilier S.A.S.
(3)
France 100% Ordinary Property investment
Immobilière Castorama S.A.S.
(3)
France 100% Ordinary Property investment
Kingfisher France S.A.S.
(3)
France 100% Ordinary Holding company
B&Q Asia Holdings Ltd
(5)
Hong Kong 100% Ordinary Holding company
Kingfisher Asia Limited Hong Kong 100% Ordinary Sourcing
B&Q (China) B.V.
(5)
Netherlands 100% Ordinary Holding company
Castim Sp.z.o.o.
(3)
Poland 100% Ordinary Property investment
Castorama Polska Sp.z.o.o.
(3)
Poland 100% Ordinary Retailing
Castorama RUS LLC
(6)
Russia 100% Ordinary Retailing
Bricostore Romania S.A.
(6)
Romania 100% Ordinary Retailing
Euro Dépôt España S.A.U.
(3)
Spain 100% Ordinary Retailing
(1) The special shares in B&Q plc are owned 100% by Kingfisher plc and are non-voting.
(2) Held directly by Kingfisher plc.
(3) Owing to local conditions, these companies prepare their financial statements to 31 January.
(4) Castorama Dubois Investissements S.C.A. is 100% owned, of which 46% is held directly by Kingfisher plc.
(5) Holding companies for the Group’s Chinese retailing operations, which have a 31 December year end.
(6) Owing to local conditions, this company prepares its financial statements to 31 December.
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5 Debtors
£ millions 2013/14 2012/13
Amounts falling due within one year
Owed by Group undertakings 3,178 3,314
Corporation tax 76 71
Derivatives 3 28
Other debtors 2 1
3,259 3,414
Amounts falling due after more than one year
Derivatives 40 55
Deferred tax assets 4 7
44 62
6 Creditors: amounts falling due within one year
£ millions 2013/14 2012/13
Medium Term Notes and other fixed term debt 75 32
Derivatives 14 1
Owed to Group undertakings 5,413 5,600
Other taxation and social security 1 1
Accruals and other payables 36 35
5,539 5,669
7 Creditors: amounts falling due after more than one year
£ millions 2013/14 2012/13
Borrowings
Medium Term Notes and other fixed term debt 172 266
172 266
Derivatives – 12
172 278
Borrowings fall due for repayment as follows:
One to two years – 78
Two to five years 172 49
More than five years – 139
172 266
8 Provisions for liabilities
£ millions
Onerous
property
contracts
At 3 February 2013 7
Charge to income statement 1
Utilised in the year (1)
At 1 February 2014 7
Within the onerous property contracts provision, the Company has provided against future liabilities for all properties sublet at a
shortfall and long-term idle properties. The provision is based on the present value of future cash outflows relating to rent, rates
and service charges.
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
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9 Net pension asset
The Company participates in both a funded defined benefit scheme and a funded defined contribution scheme.
Defined contribution scheme
Pension costs for the defined contribution scheme, at rates specified in the scheme’s rules, are as follows:
£ millions 2013/14 2012/13
Charge to operating profit 2 2
From July 2012 an enhanced defined contribution scheme has been offered to all Company employees. Eligible Company
employees have been automatically enrolled into the defined contribution scheme from 31 March 2013.
Defined benefit scheme
Kingfisher plc is one of a number of Group companies that participate in the Kingfisher Pension Scheme, and therefore the
Company has accounted for its share of the scheme assets and liabilities. The valuation of the scheme has been based on the
most recent actuarial valuation as at 31 March 2013 and has been updated to 1 February 2014.
In the prior year the UK final salary pension scheme was closed to future benefit accrual with effect from July 2012. The closure to
future accrual resulted in an exceptional non-cash curtailment gain of £1m, representing the one-off reduction in accounting liabilities
as benefits are no longer linked to future salary increases other than in line with inflation. Furthermore, it resulted in a full provision
against the net surplus being recognised at the curtailment date. This exceptional non-cash asset restriction loss of £6m reflected the
requirements under UK accounting standards, which restrict the amount of surplus that can be recognised following the closure to
future accrual of benefits.
In 2010/11 and 2011/12 the Company entered into two phases of a property partnership arrangement with the scheme Trustee
to address an element of the scheme deficit. Further details on this arrangement are given in note 27 of the consolidated financial
statements. The reported pension position, before provision for asset restriction, reflects the Company’s share of the resulting
scheme asset.
Profit and loss account
£ millions 2013/14 2012/13
Amounts charged/(credited) to operating profit
Current service cost – 1
Curtailment gain – (1)
Asset restriction loss – 6
– 6
Amounts charged/(credited) to net finance costs
Interest on defined benefit obligation 3 3
Expected return on pension scheme assets (3) (3)
– –
Total charged to profit and loss account – 6
Balance sheet
£ millions 2013/14 2012/13
Present value of defined benefit obligation (63) (59)
Fair value of scheme assets 68 67
Net pension asset before provision for asset restriction 5 8
Provision for asset restriction (5) (8)
Net pension asset – –
Movements in the net pension asset are as follows:
£ millions
Defined
benefit
obligation
Scheme
assets Total
Provision for
asset
restriction Net
At 3 February 2013 (59) 67 8 (8) –
Interest on defined benefit obligation (3) – (3) – (3)
Expected return on pension scheme assets – 3 3 – 3
Actuarial (losses)/gains (3) (1) (4) 3 (1)
Contributions paid by employer – 1 1 – 1
Benefits paid 2 (2) – – –
At 1 February 2014 (63) 68 5 (5) –
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9 Net pension asset continued
£ millions
Defined benefit
obligation
Scheme
assets Total
Provision
for asset
restriction Net
At 29 January 2012 (55) 62 7 – 7
Current service cost (1) – (1) – (1)
Curtailment gain 1 – 1 – 1
Asset restriction loss – – – (6) (6)
Interest on defined benefit obligation (3) – (3) – (3)
Expected return on pension scheme assets – 3 3 – 3
Actuarial (losses)/gains (3) 3 – (2) (2)
Contributions paid by employer – 1 1 – 1
Benefits paid 2 (2) – – –
At 2 February 2013 (59) 67 8 (8) –
The fair value of scheme assets is analysed as follows:
2013/14 2012/13
£ millions % of total £ millions % of total
Equities 15 22% 16 24%
Bonds 41 61% 40 60%
Property 1 1% 2 3%
Other 11 16% 9 13%
Total fair value of scheme assets 68 100% 67 100%
The actual return on pension scheme assets is as follows:
£ millions 2013/14 2012/13
Actual return on pension scheme assets 2 6
The estimated amount of contributions expected to be paid to the pension scheme by the Company during the next financial year
is £1m.
Amounts for current and previous four years
£ millions 2013/14 2012/13 2011/12 2010/11 2009/10
Present value of defined benefit obligation (63) (59) (55) (45) (49)
Fair value of scheme assets 68 67 62 47 44
Net pension asset/(liability) before provision for asset restriction 5 8 7 2 (5)
Provision for asset restriction (5) (8) – – –
Net pension asset/(liability) – – 7 2 (5)
Changes in assumptions underlying present value of defined benefit obligation – (3) (8) 2 (6)
Percentage of defined benefit obligation
– 5%
15% (4%) 12%
Experience (losses)/gains arising on defined benefit obligations (3) – – 2 –
Percentage of defined benefit obligation
5% – –
(4%)
–
Actual return less expected return on pension scheme assets (1) 3 9 – 1
Percentage of scheme assets
(1%) 4%
15% – 2%
Provision for asset restriction – movement recognised in the profit and loss reserve 3 (2) – – –
Total (losses)/gains recognised in the profit and loss reserve in the year (1) (2) 1 4 (5)
Cumulative losses recognised in the profit and loss reserve (16) (15)
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
128
9 Net pension asset continued
Principal actuarial valuation assumptions
The assumptions used in calculating the costs and obligation of the defined benefit pension scheme are set by the Directors after
consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and
changes in these assumptions can lead to significant movements in the estimated obligation.
The discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference
in term between iBoxx and scheme liabilities. The overall expected rate of return on scheme assets reflects market expectations at
the valuation date of long-term asset returns and the mix of assets in the scheme.
Annual % rate 2013/14 2012/13
Discount rate 4.4 4.6
Price inflation 3.3 3.3
Rate of pension increases 3.1 3.3
% rate of return 2013/14 2012/13
Equities 7.2 7.6
Bonds 3.7 3.5
Property 6.5 5.9
Other 4.5 4.7
Overall expected rate of return 4.7 4.7
The mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics and experience
of the membership of the scheme from 2010 to 2013. The base mortality assumptions have been derived by adjusting standard
mortality tables (SAPS tables) projected forward to 2013 using the ‘CMI 2013’ core projection improvement factors, as published
by the UK actuarial profession. In addition, allowance has been made for future increases in life expectancy. The allowance is in
line with CMI 2013 improvements subject to a long-term rate of 1.25% pa for males and 1.0% pa for females. These improvements
take into account trends observed within the scheme over the past decade and general population trends.
The assumptions for life expectancy of the scheme members are as follows:
Years 2013/14 2012/13
2010
funding
valuation
Age to which current pensioners are expected to live (60 now)
– Male 86.7 86.7 86.4
– Female 87.3 87.4 87.1
Age to which future pensioners are expected to live (60 in 15 years’ time)
– Male 87.4 87.4 87.1
– Female 88.6 89.0 88.7
10 Commitments
Operating lease commitments
The Company is a lessee of offices under lease agreements with varying terms, escalation clauses and renewal rights.
Annual commitments under non-cancellable operating leases are as follows:
£ millions 2013/14 2012/13
Less than one year – –
One to five years – –
More than five years 3 3
3 3
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11 Called up share capital
Number of
ordinary
shares
millions
Ordinary
share
capital
£ millions
At 3 February 2013 2,372 373
New shares issued under share schemes 4 –
At 1 February 2014 2,376 373
At 29 January 2012 2,369 372
New shares issued under share schemes 3 1
At 2 February 2013 2,372 373
Ordinary shares have a par value of 15
5
/7 pence per share.
12 Reserves
£ millions
Share
premium
account
Other
reserves
Profit and
loss account Total
At 3 February 2013 2,204 711 1,336 4,251
Profit for the year – – 440 440
Actuarial losses on defined benefit pension scheme – – (1) (1)
Share-based compensation – – 1 1
Capital contributions given relating to share-based payments – – 10 10
New shares issued under share schemes 5 – – 5
Own shares issued under share schemes – – 8 8
Own shares purchased – – (24) (24)
Dividends – – (224) (224)
At 1 February 2014 2,209 711 1,546 4,466
The other reserves represent the premium on the issue of convertible loan stock in 1993 and the merger reserve relating to the
acquisition of Darty.
The value of own shares deducted from the profit and loss reserve at 1 February 2014 is £35m (2012/13: £60m).
13 Reconciliation of movement in equity shareholders’ funds
£ millions 2013/14 2012/13
Profit for the year 440 8
Dividends (224) (221)
216 (213)
Actuarial losses on defined benefit pension scheme (1) (2)
Share-based compensation 1 7
Capital contributions given relating to share-based payments 10 71
New shares issued under share schemes 5 6
Own shares issued under share schemes 8 6
Own shares purchased (24) –
Net increase/(decrease) in equity shareholders’ funds 215 (125)
Equity shareholders’ funds at beginning of year 4,624 4,749
Equity shareholders’ funds at end of year 4,839 4,624
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
130
14 Share options
The Company operates a number of share incentive plans including the Kingfisher Incentive Share Scheme (‘KISS’), Kingfisher
Retention Share Scheme, Kingfisher Performance Share Plan, Store Management Incentive Share Scheme and Sharesave plans
in the UK, Ireland and overseas.
A summary of options is detailed below.
2013/14 2012/13
Options
Number
Weighted
average
exercise
price
£
Options
Number
Weighted
average
exercise
price
£
Outstanding at beginning of year 21,815,585 0.04
30,966,831 0.08
Granted during the year
(1),(2)
1,213,771 0.18
3,013,615 0.09
Forfeited during the year (4,061,019) 0.05
(1,988,084) 0.11
Exercised during the year (6,368,940) 0.02
(10,176,777) 0.15
Outstanding at end of year 12,599,397 0.07
21,815,585 0.04
Exercisable at end of year 1,581,128 0.02
4,756,463 0.02
(1) The charge to the profit and loss account for the years ended 1 February 2014 and 2 February 2013 in respect of share-based payments includes the first year’s charge
of the 2014 and 2013 Kingfisher Incentive Share Scheme.
(2) The weighted average exercise price for options granted during the year represents a blend of nil price KISS, Performance Share Plan and discounted Sharesave options.
Options have been exercised on a regular basis throughout the year. On that basis, the weighted average share price during the
year, rather than at the date of exercise, is £3.53 (2012/13: £2.81). The options outstanding at the end of the year have exercise
prices ranging from nil to £3.15 and a weighted average remaining contractual life of 3.9 years (2012/13: 4.3 years).
A full list of outstanding options granted by the Company to the Group employees, which includes those held by the Executive
Directors, is shown below. The Executive Directors’ awards are disclosed in the Directors’ Remuneration Report on pages 47 to 68.
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14 Share options continued
2013/14 2012/13
Date of grant
Exercisable
from
Exercise
price
£
Shares under
option
number
Shares under
option
number
Kingfisher Incentive Share Scheme 21/04/09 21/04/12 – 61,967 207,009
06/04/10 06/04/13 – 281,952 2,198,684
05/05/10 05/05/13 – 22,305 5,126,662
12/04/11 12/04/14 – 3,355,824 3,763,341
06/05/11 06/05/14 – 492,244 646,141
25/04/12 25/04/15 – 3,865,650 4,388,519
11/04/13 11/04/16 – 1,863,737 –
9,943,679 16,330,356
Restricted Awards (granted under the Kingfisher Incentive Share Scheme) 06/04/10 21/04/11 – – 42,190
06/04/10 21/04/12 – – 65,835
06/04/10 21/04/13 – – 19,762
24/08/10 24/08/13 – – 23,095
18/01/11 09/06/13 – – 6,815
21/02/11 01/06/12 – – 12,533
21/02/11 01/06/13 – – 21,268
21/02/11 01/06/14 – 4,557 4,557
21/02/11 01/06/15 – 1,709 1,709
26/04/11 21/04/12 – – 25,569
03/01/12 21/05/13 – – 6,344
03/01/12 31/05/14 – 10,300 10,300
16/10/12 16/01/14 – 5,975 5,975
22/10/13 22/10/14 – 32,834 –
55,375 245,952
Kingfisher Performance Share Plan 01/02/08 01/02/12 – – 1,299,709
21/04/08 21/04/12 – 106,417 867,504
01/10/08 01/10/11 – 89,652 745,856
01/10/08 01/02/12 – 760,642 745,856
01/10/08 01/10/12 – – 303,212
21/04/09 21/04/12 – 76,490 412,486
30/10/09 21/04/12 – 2,579 2,509
05/05/10 05/05/13 – 313,741 8,240,710
21/10/10 21/04/12 – 12,944 28,586
21/10/10 05/05/13 – 42,456 72,128
12/04/11 05/05/13 – – 164,945
17/06/11 17/06/14 – 7,061,836 8,264,108
17/06/11 17/06/15 – 6,927,122 8,242,011
21/10/11 05/05/13 – – 22,095
21/10/11 17/06/14 – 103,016 142,346
21/10/11 17/06/15 – 103,021 142,351
03/05/12 17/06/14 – 360,056 424,398
03/05/12 17/06/15 – 380,601 424,407
16/10/12 17/06/14 – 526,995 583,611
16/10/12 17/06/15 – 527,002 583,619
25/04/13 17/06/14 – 65,820 –
25/04/13 17/06/15 – 65,264 –
22/10/13 22/10/16 – 105,069 –
17,630,723 31,712,447
Annual Report and Accounts 2013/14
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Accounts
Notes to the Company financial statements continued
Annual Report and Accounts 2013/14
132
14 Share options continued
2013/14 2012/13
Date of grant
Exercisable
from
Exercise
price
£
Shares under
option
number
Shares under
option
number
Kingfisher Retention Share Scheme 21/04/08 21/04/12 – – 145,000
– 145,000
Store Management Incentive Share Scheme 21/04/09 21/04/12 – 88,000 231,000
88,000 231,000
UK, Ireland and International Sharesave 01/11/07 01/12/12 1.55 – 139,052
29/10/08 01/12/13 1.09 631,044 3,116,385
03/11/09 01/12/12 1.72 – 371,226
03/11/09 01/12/14 1.72 1,009,170 1,087,075
28/10/10 01/12/13 1.87 235,571 1,285,330
28/10/10 01/12/15 1.87 536,050 599,082
26/10/11 01/12/14 1.99 2,475,062 2,862,161
26/10/11 01/12/16 1.99 471,008 530,998
19/10/12 01/12/15 2.17 1,978,663 2,275,239
19/10/12 01/12/17 2.17 419,519 467,618
22/10/13 01/12/16 3.15 2,067,578 –
22/10/13 01/12/18 3.15 582,182 –
10,405,847 12,734,166
Executive, International Executive
and Phantom Share Option Schemes
17/04/03 17/04/06 2.38 – 436,215
17/04/03 17/04/07 2.38 – 331,890
– 768,105
Total 38,123,624 62,167,026
The Kingfisher Incentive Share Scheme (‘KISS’) and Performance Share Plan are described as part of the Directors’ Remuneration
Report on pages 47 to 68.
Restricted Awards are granted as one-off compensatory awards granted under the rules of the KISS. They are granted as nil
cost options, as with the KISS, but do not accrue dividends until after they are exercised. Vesting dates may vary according to
individual grants.
Certain employees, excluding directors, have been granted contingent share awards under the Kingfisher Retention Share Scheme.
The last awards granted under this scheme vested in 2012. These awards do not accrue dividends during the vesting period.
The Store Management Incentive Share Scheme provided awards to store managers in 2009 with vesting dates of April 2011 and
April 2012. There were performance conditions based on store standards and awards lapsed if not maintained throughout the
performance period. These awards do not accrue dividends during the vesting period.
Under the UK Sharesave scheme, eligible UK employees have been invited to enter into HMRC approved savings contracts for a
period of three or five years, whereby shares may be acquired with savings under the contract. The option price is the average market
price over three days shortly before the invitation to subscribe, discounted by 20%. Options are exercisable within a six month period
from the conclusion of a three or five year period. The Irish and International Sharesave plans, which operate along similar lines to the
UK Sharesave scheme, include eligible employees in Ireland and certain overseas locations.
The last grant of options under the Executive, International Executive and Phantom Share Option Scheme were in April 2003. Under
these schemes, participants received a bi-annual grant of options based on their position in the Group. These options are normally
exercisable from the third anniversary of the date of the grant (up to the tenth anniversary), except where the performance conditions
have not been met. The performance conditions for all options have now been met. On the exercise of Phantom Share Options,
participants receive in cash the increase in value of the allocated number of shares in the Company. All options granted under these
schemes have either now been exercised or have lapsed.
The rules of all schemes include provision for the early exercise of options in certain circumstances.
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14 Share options continued
The Employee Share Ownership Plan Trust (‘ESOP Trust’)
The ESOP Trust is funded by an interest free loan from the Company of £82m (2012/13: £95m) to enable it to acquire shares
in Kingfisher plc. The shares are used to satisfy options awarded under the KISS, Performance Share Plan, Kingfisher Retention
Share Scheme and Store Management Incentive Share Scheme.
The ESOP Trust’s shareholding at 1 February 2014 is 10 million shares (2012/13: 21 million shares) with a nominal value of
£2m (2012/13: £3m) and a market value of £37m (2012/13: £57m). Dividends on these shares were waived for the interim and
final dividends.
15 Related party transactions
During the year, the Company carried out a number of transactions with related parties in the normal course of business and on
an arm’s length basis. The names of the related parties, the nature of these transactions and their total value are shown below:
2013/14 2012/13
£ millions
Income/
(expense)
Receivable/
(payable)
Income/
(expense)
Receivable/
(payable)
Transactions with Koçtas¸ Yapi Marketleri Ticaret A.S. in which the Group holds
a 50% interest
Provision of employee services (0.1) – (0.1) –
Commission and other income 0.6 0.4 0.3 0.2
Transactions with Kingfisher Pension Scheme
Provision of administrative services 0.8 0.1 1.4 0.1
Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists
in force with non-related parties.
Directors’ remuneration and details of share option exercises are disclosed in the Directors’ Remuneration Report on pages 47 to 68.
Other transactions with the Kingfisher Pension Scheme are detailed in note 9.
Annual Report and Accounts 2013/14
134
Accounts
Group five year financial summary
Annual Report and Accounts 2013/14
134
£ millions
2009/10
52 weeks
2010/11
52 weeks
2011/12
52 weeks
2012/13
53 weeks
(1)(2)
2013/14
52 weeks
(1)
Income statement
Sales 10,503 10,450 10,831 10,573 11,125
Retail profit 664 762 882 778 805
Central costs (41) (41) (43) (42) (42)
Share of interest and tax of joint ventures and associates (17) (17) (20) (18) (17)
Operating profit before exceptional items 606 704 819 718 746
Net finance costs before financing fair value remeasurements and
exceptional items (59) (34) (12) (3) (2)
Adjusted pre-tax profit 547 670 807 715 744
Exceptional items 17 (6) (12) (26) 17
Financing fair value remeasurements 2 7 2 2 (2)
Profit before taxation 566 671 797 691 759
Income tax expense (181) (180) (158) (127) (49)
Profit for the year 385 491 639 564 710
Balance sheet
Goodwill and other intangible assets 2,465 2,481 2,520 2,565 2,639
Property, plant and equipment and investment property 3,636 3,664 3,722 3,814 3,675
Assets held for sale – – – – 208
Investments in joint ventures and associates 234 259 271 289 32
Other net current liabilities
(3)
(648) (576) (290) (128) (19)
Post-employment benefits (198) (58) (15) – (100)
Other net non-current liabilities
(3)
(284) (324) (393) (422) (356)
Capital employed 5,205 5,446 5,815 6,118 6,079
Equity shareholders’ funds 4,945 5,452 5,719 6,148 6,308
Non-controlling interests 10 8 8 8 9
Net debt/(cash) 250 (14) 88 (38) (238)
Capital employed 5,205 5,446 5,815 6,118 6,079
Other financial data
Like-for-like sales growth (1.5%) (0.9%) 1.3% (2.9%) 0.7%
Effective tax rate 30% 29% 28% 27% 26%
Basic earnings per share (pence) 16.5 21.0 27.5 24.1 30.0
Adjusted basic earnings per share (pence) 16.4 20.5 25.1 22.3 23.4
Dividend per share (pence) 5.5 7.07 8.84 9.46 9.9
Gross capital expenditure
(4)
256 310 450 316 304
Number of stores 831 856 955 1,025 1,124
(1) Like-for-like sales growth in 2012/13 was calculated by comparing 53 weeks against the equivalent 53 weeks of the prior year. Like-for-like sales growth in 2013/14
is calculated by comparing 52 weeks against the equivalent 52 weeks of the prior year. This only impacts the UK & Ireland businesses with all of the other businesses
reporting on a calendar basis. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional £72m sales and an immaterial
benefit to retail profit.
(2) 2012/13 has been restated for IAS 19 (revised), ‘Employee benefits’, resulting in the reclassification of £3m of pension administration costs from net finance costs to
retail profit.
(3) Other net current liabilities and other net non-current liabilities reported above exclude any components of net debt/(cash).
(4) Excluding business acquisitions.
www.king?sher.com
135
Strategic Report Governance Accounts
Shareholder information
www.kingfisher.com
135
Annual General Meeting
The Annual General Meeting of Kingfisher plc will be held
on Thursday, 12 June 2014 at 11.00am at the Paddington
London Hilton Hotel, 146 Praed Street, London W2 1EE.
Financial calendar
The proposed financial calendar for 2014/15 is as follows:
First quarter results 29 May 2014
Pre-close first half trading results 24 July 2014
Interim results to 2 August 2014 10 September 2014
Third quarter results 25 November 2014
Preliminary results to 31 January 2015 March 2015
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0870 702 0129
Website:http://www.investorcentre.co.uk
Shareholder enquiries
Any queries that shareholders have regarding their shareholdings,
such as a change of name or address, transfer of shares, lost
share certificates or dividend cheques, should be referred to the
Registrar using the contact details above. A Shareholder Helpline
is available on UK business days between 8.30am and 5.30pm
and contains an automated self-service functionality which is
available 24 hours a day.
Share dealing facilities
Shareholders have the opportunity to buy or sell Kingfisher plc
shares using a share dealing facility operated by the Registrar.
• Telephone share dealing: Commission is 1%, plus £35; stamp
duty at 0.5% is payable on purchases. The service is available
from 8.00am to 4.30pm Monday to Friday excluding bank
holidays. Telephone: 0870 703 0084.
• Internet share dealing: Commission is 1%, subject to a
minimum charge of £30; stamp duty at 0.5% is payable
on purchases. The service is available to place orders out of
market hours. Simply log ontohttp://www.investorcentre.co.uk.
Terms and conditions of both of these services can be
obtained by calling 0870 702 0129.
Unauthorised brokers (boiler room scams)
Kingfisher plc is legally obliged to make its share register
available to the general public. Consequently some shareholders
may receive unsolicited mail, including correspondence from
unauthorised investment companies. We are aware that
some shareholders have received unsolicited phone calls or
correspondence concerning investment matters. These are
typically from overseas based brokers who target UK
shareholders offering to sell what often turn out to be worthless
or high risk shares in US or UK investments. They can be very
persistent and extremely persuasive. Shareholders are advised
to be very wary of any unsolicited advice, offers to buy shares at
a discount or offers of free company reports. Details of any share
dealing facilities that the Company endorses will be included in
Company mailings.
Share price history
£ per ordinary share* Dollars per ADR**
Financial year High Low High Low
2013/14 4.20 2.71 9.34 8.40
2012/13 3.14 2.54 9.98 7.81
2011/12 2.87 2.17 9.34 6.91
2010/11 2.72 1.96 8.16 5.93
2009/10 2.47 1.18 8.24 3.15
* Based on the daily closing price of Kingfisher plc shares on the London
Stock Exchange.
** Based on the daily closing price of Kingfisher plc ADRs in the Over-the-Counter
(OTC) market.
Dividend
The interim dividend for the financial year ended 1 February
2014 of 3.12p per share was paid on 15 November 2013.
The table below provides the payment information for the final
dividend of 6.78p per share, subject to shareholder approval
at the Annual General Meeting on 12 June 2014:
Ex-dividend date 14 May 2014
Record date 16 May 2014
Final date for return of DRIP mandate
forms/currency elections 23 May 2014
Euro exchange rate notification 27 May 2014
Payment date and DRIP purchase 16 June 2014
Payment methods
Shareholders can elect to receive their dividends in a number
of ways:
• Cheque: Dividends will automatically be paid to shareholders
by cheque, which will be sent by post to the shareholder's
registered address;
• BACS: Dividends can be paid by mandate directly to a
UK bank or building society account through the BACS
system. This method of payment reduces the risk of your
cheque being intercepted or lost in the post. Shareholders
wishing to receive their dividends in this way can update
their mandate instructions at www.investorcentre.co.uk or
should complete a dividend mandate form and return it to
the Registrars;
• Dividend Reinvestment Plan (DRIP): The Company also offers
shareholders a DRIP, whereby shareholders can use their
cash dividend to buy additional shares in the Company.
Shareholders can apply online at www.investorcentre.co.uk or
complete a mandate form and return it to the address shown
above; and
• Global Payments Service: This service, provided by the
Registrar enables shareholders to have dividend payments
paid directly into their bank account in their chosen
local currency. To view terms and register, please visit
www.computershare.com/uk/investor/GPS.
Annual Report and Accounts 2013/14
136
Accounts
Shareholder information continued
Annual Report and Accounts 2013/14
136
American Depositary Receipt (ADR)
The Company has a Sponsored Level 1 ADR programme in
the United States. Each ADR represents two Kingfisher shares.
Electronic communication
Shareholders who have not yet elected to receive shareholder
documentation in electronic form can sign up by visiting
www.investorcentre.co.uk/ecomms and registering their details.
When registering for electronic communications, shareholders
will be sent an email each time the Company publishes statutory
documents, providing a link to the information.
Electing for electronic communications does not mean that
shareholders cannot obtain hard copy documents. Should
shareholders require a paper copy of any of the Company’s
shareholder documentation, they should contact the Registrar
at the address stated under the section headed ‘Registrar’.
Corporate website
Shareholders are encouraged to visit Kingfisher’s corporate
website (www.kingfisher.com). The website includes information
about the Company, its strategy and business performance,
latest news and press releases and approach to corporate
governance. The Investor Relations section is a key tool for
shareholders, with information about Kingfisher’s share price,
financial results, shareholders meetings and dividends. This
section also contains frequently asked questions and copies of
the current and past annual reports.
Kingfisher has an Investor Relations app for the iPad. The app
provides access to the latest share price information, corporate
news, financial reports, presentations, corporate videos and
earnings webcasts both online and offline. It is updated with the
latest financial information at the same time as the corporate
website. To discover more, download it free from the App store.
Document viewing
Shareholders will have the opportunity to view certain
documentation as outlined in the Notice of Annual General
Meeting from at least 15 minutes prior to the meeting, until
its conclusion. The rules of the Kingfisher Incentive Share
plans and the Articles of Association of the Company and
other documentation referred to in this Annual Report can be
viewed at the registered office during normal business hours.
Company Secretary and Registered Office
Kathryn Hudson
Kingfisher plc
3 Sheldon Square
Paddington
London W2 6PX
Telephone: +44 (0)20 7372 8008
Fax: +44 (0)20 7644 1001
www.kingfisher.com
Registered in England and Wales
Registered Number 01664812
Forward-looking statements
Certain statements included in this Annual Report and Accounts
are forward-looking and should be considered, amongst other
statutory provisions, in light of the safe harbour provisions of the
United States Private Securities Litigation Reform Act of 1995.
All statements other than historical facts may be forward-looking
statements. Such statements are therefore subject to risks,
assumptions and uncertainties that could cause actual results
to differ materially from those expressed or implied because
they relate to future events. These forward-looking statements
include, but are not limited to, statements relating to the
Company’s expectations around the Company’s programme
known as Creating the Leader and its associated eight steps.
Forward-looking statements can be identified by the use of
relevant terminology including the words: ‘believes’, ‘estimates’,
‘anticipates’, ‘expects’, ‘intends’, ‘plans’, ‘goal’, ‘target’, ‘aim’,
‘may’, ‘will’, ‘would’, ‘could’ or ‘should’ or, in each case, their
negative or other variations or comparable terminology and
include all matters that are not historical facts. They appear in a
number of places throughout this Annual Report and Accounts
and include statements regarding our intentions, beliefs or
current expectations and those of our officers, directors and
employees concerning, amongst other things, our results of
operations, financial condition, changes in tax rates, liquidity,
prospects, growth, strategies and the businesses we operate.
Other factors that could cause actual results to differ materially
from those estimated by the forward-looking statements include,
but are not limited to, global economic business conditions,
monetary and interest rate policies, foreign currency exchange
rates, equity and property prices, the impact of competition,
inflation and deflation, changes to regulations, taxes and
legislation, changes to consumer saving and spending habits;
and our success in managing these factors.
Consequently, our actual future financial condition, performance
and results could differ materially from the plans, goals and
expectations set out in our forward-looking statements. Reliance
should not be placed on any forward-looking statement.
The forward-looking statements contained herein speak
only as of the date of this Annual Report and the Company
undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events
or otherwise.
King?sher is included in two socially responsible indices, the
FTSE4Good and Dow Jones Sustainability Indexes. We also
achieved Business in the Community’s Corporate Responsibility
Index Platinum Big Tick in the 2013 survey.
This document is printed on UPM Fine Offset, a paper
containing virgin ?bre sourced from well-managed,
responsible, FSC
®
certi?ed forests.
100% of the inks used are vegetable oil based, 95% of press
chemicals are recycled for further use and, on average 99%
of any waste associated with this production will be recycled.
Printed by Park Communications on FSC
®
certi?ed paper.
Park is an EMAS certi?ed company and its Environmental
management System is certi?ed to ISO 14001.
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Glossary
Adjusted measures are before exceptional items, financing fair
value remeasurements, amortisation of acquisition intangibles,
related tax items and tax on prior year items including the impact
of rate changes on deferred tax. A reconciliation to statutory
amounts is set out in the Financial Review (pages 20 to 27).
Banque de France data includes relocated and extended stores.
Brico Dépôt comparable market is a rolling 12 month average of
Banque de France (60%) and I+C (www.iplusc.com) trade data
(40%) February 2013 – January 2014.
Common means two or more operating companies selling the
same product or a similar product but from the same supplier
where the same product is not possible due to market / legal
reasons (e.g. electrical extension cable which is the same
supplier but with different electrical sockets).
Constant currency 13 week basis In the UK & Ireland Kingfisher
reports each financial year up to the nearest Saturday to 31
January. In 2012/13 this resulted in a 14 week fourth quarter.
Constant currency change 52 week basis In the UK & Ireland
Kingfisher reports each financial year up to the nearest Saturday
to 31 January. In 2012/13 this resulted in a 53 week year.
EBITDA (earnings before interest, tax, depreciation and
amortisation) which is calculated as Retail profit less central
costs and before depreciation and amortisation.
EBITDAR (earnings before interest, tax, depreciation,
amortisation and property operating lease rentals) which is
calculated as Retail profit less central costs, before depreciation
and amortisation and property operating lease rentals.
France consists of Castorama France and Brico Dépôt France.
Free cash flow represents cash generated from operations less
the amount spent on tax, interest and capital expenditure during
the year (excluding acquisitions). A reconciliation from operating
profit (before exceptional items) is set out in the Financial
Review (pages 20 to 27).
FFVR (financing fair value remeasurements) represents
changes in the fair value of financing derivatives, excluding
interest accruals, offset by fair value adjustments to the carrying
value of borrowings and other hedged items under fair value
hedge relationships.
KEP (Kingfisher Economic Profit) represents earnings after a
charge for the annual cost of capital employed in the business.
A definition is provided in the Financial Review (pages 20 to 27).
LFL stands for like-for-like sales growth which represents the
constant currency, year-on-year sales growth for stores that
have been open for more than a year.
LME is the legislative change shortening payment terms in
France, implemented over the three years to 2012.
Market for the UK’s leading home improvement retailers
Kingfisher estimate for the UK RMI (Repairs, Maintenance &
Improvement) market incorporates GfK data, which includes
new space but which excludes B&Q Ireland and private retailers
e.g. IKEA and other smaller independents. It is on a cash sales
basis and is adjusted for discounts.
Net cash comprises borrowings and financing derivatives
(excluding accrued interest), less cash and cash equivalents
and current other investments.
Omnichannel – allowing customers to shop with us in any way
they prefer (via shops, the internet or catalogues).
Other International consists of China, Poland, Romania,
Russia, Spain, Turkey (Koçtas¸ JV) and Hornbach in Germany.
Retail profit is operating profit stated before central costs,
exceptional items, amortisation of acquisition intangibles and
the Group’s share of interest and tax of JVs and associates.
2012/13 Group and UK retail profit comparatives restated by
£3 million to reflect reclassification of pension administrative
expenses from finance costs to retail profit in the UK, as per
the amended IAS 19.
Sales Joint Venture (Koçtas¸ JV) and Associate (Hornbach) sales
are not consolidated.
Smaller tradesman market Kingfisher estimate for the UK
smaller tradesman market is a weighted average incorporating
70% trade (using the most recent public data available for the
big trade merchants as a proxy) and 30% DIY (using the UK
RMI (Repairs, Maintenance & Improvement) GfK large chain
(shed) data).
TradePoint B&Q UK & Ireland’s trade-only offer.
UK & Ireland consists of B&Q in the UK & Ireland and Screwfix.
King?sher plc, 3 Sheldon Square, Paddington, London W2 6PX Telephone: +44 (0)20 7372 8008 www.king?sher.com
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