Annual Financial Report

RNS Number : 0201M

Kingfisher PLC

01 May 2015

 



1 MAY 2015

 

KINGFISHER PLC - ANNUAL REPORT AND ACCOUNTS AND NOTICE OF ANNUAL GENERAL MEETING

 

Kingfisher plc (the "Company") announces that the following documents have today been posted or otherwise made available to shareholders and published on the Company's website at www.kingfisher.com . The documents can be accessed using the links below:

§  Annual Report and Accounts for the year ended 31 January 2015 (the "2014/15 Annual Report")

           www.kingfisher.com/reports

§  Notice of Annual General Meeting 2015

           www.kingfisher.com/agm

§  Proxy Form

           www.kingfisher.com/agm

In accordance with Listing Rule 9.6.1, the documents listed above have also been submitted to the UK Listing Authority via the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

Additional Information required by Disclosure and Transparency Rule 6.3.5

In compliance with DTR 6.3.5, the following information is extracted from the 2014/15 Annual Report and should be read in conjunction with the Company's Preliminary Results announcement for the year ended 31 January 2015 issued on 31 March 2015.  Both documents are available at www.kingfisher.com and together constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  Page and note references in the text refer to page numbers and notes in the 2014/15 Annual Report.  This material is not a substitute for reading the 2014/15 Annual Report in full and page numbers and cross-references in the extracted information refer to page numbers and cross-references in the 2014/15 Annual Report.

1.       Principal Risk Factors

Given the scale and diversity of our businesses, the Board of Directors recognises that the nature, scope and potential impact of our key business and strategic risks is 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.

See the Corporate Governance report on pages 33 to 45

The Board considers that the principal risks to achieving its strategic aims are set out below.

Group Risks	Mitigation
Organising Kingfisher as a more unified company with a common customer offer rather than a collection of individual businesses fails to deliver the anticipated benefits.	We are organising the business differently, becoming a more unified company rather than a collection of individual businesses. The new leadership team structure reflects the new organisational design. As with all initiatives undertaken, the leadership team will monitor the programme and benefits realisation on a regular basis, ensuring sufficient resources are available to deliver the requirements. We will continue to ensure that changes are only implemented once we have completed an appropriate level of planning and testing, relative to the risk. In addition, we ensure 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 prior to their introduction.
Our investments fail to deliver value to the Group, especially our investment in the IT strategy programme.	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. We are investing in our financial and operational systems to develop a company-wide IT solution. The IT strategy project is supported and monitored via the programme team and the programme office. Each business is represented on the project team to ensure the appropriate solution is delivered to the company. Regular updates are given to the leadership team and all decisions are approved in line with our investment methodology. Country and market entry strategies are based on the application of a proven operating model and supported by the part of the business 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 leadership team 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 advisors 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. All investments are evaluated and monitored via our post investment review methodology in place across the business.
We fail to deliver the benefits of a more unified and unique offer and standardised activities and processes.	We aim to offer customers a product range which is differentiated from that of our competitors through innovation and exclusivity. To support this, we continue to evolve and innovate across our product ranges, formats and customer offer. We have: ·      Project teams to identify the optimum opportunities for presenting the same products in our stores across Europe, e.g. a unified bathroom and garden offer. ·      Performance of the ranges and brands is tracked and strategies updated accordingly ·      A strong sourcing network which is focused on securing Group buying opportunities. ·      Initiatives to take the best practice and best product from across the Group.
We fail to create enough innovation opportunities.	We view innovation as an area of future growth. The leadership team is responsible for developing new business opportunities. The leadership team reviews the opportunities identified and works within a risk weighted project appraisal framework.
We fail to identify and maximise potential cost reductions and efficiency savings.	Ensuring we operate efficiently and reduce our costs is a key area of focus for us. As part of our five year planning process each business reviews its cost base and identifies potential savings which are then monitored as part of the budgeting and forecasting processes. As part of our investment in IT we have identified a number of benefits and benchmarked these externally. In future, the cost base will be reviewed across the Group to identify further potential savings. Reviews of our processes and infrastructure will be carried out to develop a unified approach and realise further costs and efficiency savings.
Our investments in new store formats, customer markets and customer proposition strategies fail to stimulate increased consumer spend and do not deliver the desired sales growth in our mature markets.	We continue to invest in our Omnichannel strategy. We continue to invest in Omnichannel technologies and take learnings from our businesses which have well developed models, e.g. Screwfix. We are developing a platform which will be rolled out across the Group to offer alternative channels for customers. Our investment in the IT strategy programme will provide systems and capabilities to respond to the changing ways that customers shop. We continue to invest in our existing store portfolio whilst 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 skills and capabilities available within the Group.
Uncertainty surrounding the resilience of the global economy and increased geo-political volatility, particularly in Russia, may impact both consumer confidence and the long-term sustainability and capabilities of our supplier base.	The spread of countries in which the Company operates aids in the mitigation of this risk, however, 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. ·      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. ·      The geo-political drivers for uncertainty and volatility in the Eurozone are being monitored continuously, such that if risks escalate, measures are implemented to ensure there is sufficient and co-ordinated contingency planning. ·    A cross-functional steering group established to monitor developments in Russia, consider business continuity action and undertake scenario planning.
We do not make the necessary investment in our people to ensure that we have the appropriate capacity, skills and experience.	Across our businesses we are developing our talent and building our leadership capacity. Specific examples of this include: ·      The Chief People Officer will join the leadership team to prioritise the build of capabilities, effective KPIs and relevant reward structures. We have begun to align reward structures across the Group. ·      Focused development activities for our store-based colleagues and an increased focus on how we support and recognise the role of our customer advisors across the organisation. ·      We are creating a strong pipeline of developing talent through structured programmes including graduate and high potential schemes e.g. LEAD programme for the development of senior leaders.
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 (BioRegional and Forum for the Future). ·      As part of our business planning process, we set and annually review sustainability plans for each business. ·      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 business, responsibility has been assigned to a team or individual for the delivery of the sustainability targets. Meetings of the sustainability teams are held twice a year to exchange best practice and progress common initiatives. ·      Our Net Positive Advisory Council provides an external review of our processes and provides technical support and advice.
A lack or 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. ·      More targeted use of online and mass media tools to communicate and reinforce price perception (for example, price comparison websites, such as kitchen-compare.com and bathroomcompare.com in the UK).
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 & 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 & 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 & Safety audits, with issues reported through local Audit Committees and escalated to the Group Executive, Group Audit Committee or Board where necessary.
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 our businesses can manage the legislative or regulatory challenges presented by their respective jurisdictions.

2.       Details of 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:

	2014/15		2013/14
£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 Commission and other income	(0.1) 0.4	- 0.4	(0.1) 0.6	- 0.4
Transactions with Kingfisher Pension Scheme: Provision of administrative services	1.3	0.4	0.8	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 46 to 75.

Other transactions with the Kingfisher Pension Scheme are detailed in note 11.

3.       Directors' Statement of Responsibility

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.

Clare Wardle

Company Secretary

Tel:  [phone]

 

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