TIDMKGF
RNS Number : 9975U
Kingfisher PLC
09 April 2021
09 April 2021
KINGFISHER PLC
(the "Company")
Annual Report and Accounts 2020/21 and Notice of 2021 Annual
General Meeting
The Company's Annual Report and Accounts for the year ended 31
January 2021 (the 'Annual Report') and Notice of Annual General
Meeting to be held on 30 June 2021 have been published on the
Company's website www.kingfisher.com (together 'the Documents').
The Documents have also been posted or otherwise made available to
shareholders, depending on their elected method of
communication.
In accordance with Listing Rule 9.6.1 a copy of the Documents,
together with the Form of Proxy have also been submitted to the
National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
The final results for the year ended 31 January 2021, released
by the Company on 22 March 2021, include the information required
pursuant to Rules 4.1 and 6.3.5R of the UK Disclosure Guidance and
Transparency Rules, excepting publication of the responsibility
statement of the Directors in respect of the 2021 Annual Report, a
description of the principal risks and uncertainties facing the
Company, and the related party transactions carried out by the
Company and its subsidiaries during the year, which are detailed
below:
1. Principal risks
The principal risks and uncertainties facing the Company are set
out below.
1. Our People
Our colleagues are critical to the successful delivery of our
'Powered by Kingfisher' strategy. We are rebalancing responsibilities
between Group and local level to set the right conditions for
our individual banners to grow and to leverage the Group's
scale and expertise to meet customer needs.
Failure to manage the impact of organisation changes, to attract,
retain and develop colleagues with the appropriate skills,
capabilities and diverse backgrounds, or to have adequate succession
plans, could impact our ability to meet our business objectives.
How our risks have changed
No change. We continue to monitor and manage this risk closely.
While the risk exposure is significant, we have a clear understanding
of the scale of the change and have plans in place.
Link to strategic priorities
* Move to a balanced, simpler local-group operating
model with an agile culture
* Grow e-commerce sales
* Build a mobile-first, service orientated customer
experience
* Differentiate and grow through own exclusive brands
(OEB)
* Lead the industry in Responsible Business practices
How we manage and monitor the risk
* The Board has approved our Group strategy for people
and culture, with individual priorities agreed for
each banner and function.
* The Group Executive and Board hold regular talent
reviews focused on ensuring the senior leadership
group has the required capabilities to deliver the
strategy and on activities to strengthen our
leadership succession pipeline.
* We have continued to invest in developing our leaders
as their roles change in the new strategy and have
conducted a capability review to identify future
skill requirements (with a particular focus on
technology and commercial functions). We have
invested in tools and infrastructure to support our
colleagues' learning, including a leadership
development portal for bite-size instant learning and
e-learning for our store teams on new products.
* We have implemented a rebalanced commercial operating
model, placing significant emphasis on providing
transparency of accountability, engaging and
retaining colleagues during the change and defining
effective future ways of working. We have also
launched several Centres of Excellence to provide
expertise and drive innovation and facilitate sharing
of learnings and best practices across the Group. In
addition, we are implementing our new IT operating
model, which will enable our people to deliver change
to our systems with greater agility and pace.
* A cross-functional taskforce was set up to identify
opportunities to embed the key cultural shifts
required to deliver the new strategy, focused on
building agility, trust and an inclusive environment.
* Each banner has a tailored diversity and inclusion
plan and relevant targets are linked to the
remuneration of senior leaders.
* The physical and mental wellness of our colleagues
has been a priority during the year with additional
communications, provision of external support (e.g.
mental health awareness training for line managers),
new processes to protect our teams and regular
listening to ensure concerns were quickly addressed.
We adapted our annual colleague survey to
specifically check in on key lessons learned during
the first Covid-19 lockdown.
2. Level and Impact of Change
Under our strategic plan 'Powered by Kingfisher', the business
is utilising its core strengths and commercial assets, and
'powering' its distinct retail banners to address the significant
growth opportunities that exist within the home improvement
market. Actions are already underway bringing continuous improvements
to our offer, market positions and cost base. We have strong
ambitions that require changes to roles and ways of working,
while continuing to implement our IT systems programme.
Where relevant we may also consider complementary acquisitions,
partnerships and joint ventures to optimise our business activities
and support our strategy.
Failure to properly prioritise activity and manage change effectively
could result in weaker than anticipated sales growth, reduced
operating margins or insufficient cash being generated to meet
our objectives.
How our risks have changed
No Change. Change has been a constant feature of our business
for some time and we have established processes in place to
manage, monitor and report the delivery of strategic activities
arising from these programmes.
Link to strategic priorities
* Move to a balanced, simpler local-group operating
model with an agile culture
* Grow e-commerce sales
* Build a mobile-first, service orientated customer
experience
* Differentiate and grow through own exclusive brands
(OEB)
* Test compact store concepts and adapt our store
footprint
* Source and buy better, reduce our costs and our
inventory
* Lead the industry in Responsible Business practices
How we manage and monitor the risk
* Our 'Powered by Kingfisher' strategy has been clearly
articulated to all colleagues.
* The Board has approved three-year plans for each
banner and Group Function, that are aligned with
delivering the strategy.
* The strategy has been externally validated by a
global consultancy business.
* A central Results Delivery Office provides monthly
reporting to the Group Executive and quarterly to the
Board, based on a set of circa 60 KPIs, measuring the
implementation and performance of strategic
initiatives.
* Each of our key growth pillars is led and monitored
by one of our banners or Global Functions, with
monthly review points with the Group Executive
sponsor.
* Annual strategic review and six-monthly updates
performed with the Board, considering the agreed
priorities and making changes where appropriate.
* Regular communication with all colleagues on the
delivery of the strategy, key changes being made and
forthcoming business developments.
* Periodic reviews of governance and enabling
activities undertaken by Internal Audit.
* We have a dedicated M&A function, with accountability
resting with the Chief Transformation and Development
Officer. M&A activity exceeding GBP10 million in
value requires Kingfisher plc Board scrutiny and
approval.
3. Contagious Diseases
A prolonged global health threat and associated government
restrictions could adversely affect our operations and those
of our partners and suppliers. This could cause a significant
reduction in footfall and consumer spending and could negatively
impact our ability to receive products from affected countries.
High levels of absence in our workforce could impact our ability
to operate stores and warehouses, deliver products or provide
appropriate functional support to our business. There is also
a risk that we are perceived not to prioritise safety by our
customers, colleagues or stakeholders, which could negatively
impact our brands.
Such restrictions and/or reductions in demand could adversely
affect our financial results and the financial condition of
the Group.
How our risks have changed
No change. We now have procedures in place to enable us to
protect our colleagues and customers while continuing to trade.
However, the risk of new variants and new diseases remains
possible.
Link to strategic priorities
* Lead the industry in Responsible Business practices
How we manage and monitor the risk
* The health and safety of our colleagues and customers
remains our top priority, alongside supporting
governments to limit the spread of the virus. We have
implemented changes to all our stores, with strict
hygiene and social distancing measures in place. We
significantly invested in PPE to ensure availability
for our staff, deep cleaned stores where required and
allowed staff to self-isolate while continuing to be
paid.
* We have communicated regularly to colleagues and
customers, providing reassurance and responding to
common concerns.
* Our Group Crisis Committee has met at least weekly
throughout the year in response to the pandemic, with
representation from banners and functions. The
committee monitors events, changes in governments'
approaches and response strategies. The Board
provides regular oversight to evaluate the impact of
Covid-19 on Kingfisher.
* Close liaison with governments to ensure we can
continue to provide essential goods while playing our
role to limit transmission of the disease.
* We have ensured that our office-based colleagues are
able to work from home, in line with local
governmental guidance, with access to appropriate
equipment. Ongoing line manager training and mental
health 'wellness' awareness has been provided for
working in this way.
* We have mobilised business continuity and crisis
teams in each of our markets, to ensure our response
is prompt and tailored to the local situation.
* If required, we are able to significantly reduce
discretionary spend (including freezing pay reviews,
delaying bonus payments and/or recruitment), stop all
non-committed capital expenditure, reprioritise
sourcing requirements and adjust purchasing plans.
* We regularly monitor customer, colleague and
stakeholder sentiment through social media and
colleague feedback. This output is used to influence
the operational decisions we take.
4. Supply Chain Resilience
A resilient supply chain is key to our business and the achievement
of our strategic objectives. We are dependent on complex supply
chains and delivery solutions to deliver our products to our
customers. This year, there has been significant disruption
caused by the pandemic with congestion at ports and an increased
demand for containers. The pandemic has also caused operational
difficulties for our suppliers, testing their ability to respond
quickly to changes in demand. Major disruption to our supply
chain could result in reduced levels of product available for
sale, with an adverse financial and reputational impact.
How our risks have changed
No change. Although there have been specific challenges to
our supply chain as a result of the pandemic and Brexit, we
have responded effectively.
Link to strategic priorities
* Move to a balanced, simpler local-group operating
model with an agile culture
* Grow e-commerce sales
* Source and buy better, reduce our costs and our
inventory
How we manage and monitor the risk
* A new three-year Supply and Logistics roadmap was
developed in 2020/21. It considers our future
logistics capacity needs based upon the various
sourcing, inventory and sales generative strategies
identified in the Group's strategic planning
activities.
* Business continuity plans are updated regularly,
covering our internal points of failure and key
partner disaster-recovery plans. The actions include
a response to supplier and logistics failures, and
plans were tested live as part of our Covid-19
response activities.
* Established partnerships with key transportation and
logistics suppliers to align planning and secure
capacity.
* A multi-functional Kingfisher Brexit Steering Group
has been in place since 2016. This group is
responsible for monitoring any issues arising from
the recent Brexit deal.
* Since the start of the pandemic, a weekly meeting of
Supply Chain Directors from across the Group has been
held to identify and agree key actions to respond to
the changing supply needs.
* In addition, a working group from our supply chain
and sourcing teams is addressing supply challenges in
critical categories and identifying where we
anticipate future potential supply issues may occur.
* We have accelerated the implementation of store-based
fulfilment for customer orders to support the
business operation and increased demand during
lockdown.
* We have an agreed supplier strategy which includes
guidance on choosing which regions to source from and
when to use more than one factory or supplier to
increase resilience.
* There is a robust process for selecting individual
suppliers. This includes checks on financial strength,
ethical and environmental risks and their ability to
manufacture the products to the agreed specification.
* We continually review key suppliers by category to
establish capacity and volumes and assess the impact
of an interruption in supply.
5. Competition
Our competitors include both traditional store-based and online
retailers. The pandemic has accelerated changes in the market,
with a sharp rise in the use of online marketplaces. Competitors
are also developing their offers, including both direct-to-customer
operations and the services offered. Targeted actions by competitors
could negatively impact our market share, the value of our
assets and our financial results.
How our risks have changed
No change.
Link to strategic priorities
* Move to a balanced, simpler local-group operating
model with an agile culture
* Grow e-commerce sales
* Build a mobile-first, service orientated customer
experience
* Differentiate and grow through own exclusive brands
(OEB)
* Source and buy better, reduce our costs and our
inventory
How we manage and monitor the risk
We are building a differentiated offer through:
* Clear positioning for each of our banners, with
different operating models to address diverse
customer needs.
* A clearly defined set of range principles and
customer projects to create a compelling offer and to
reinforce differentiation of our offer to build sales
growth and margin improvement.
* Giving greater autonomy to local banners and allowing
more local ranges, services and store formats that
are tailored to customers' needs.
* Competing on price by using the scale of our Group to
benefit from volume and lower purchase prices.
We monitor our performance, and that of our competitors, to
react quickly to targeted actions via:
* Comparison of price indices vs competition in our key
categories and measure customer price perception on a
regular basis.
* Customer trend monitoring in all our markets to
anticipate and develop an appropriate offer.
6. Changing Customer Preferences
The pandemic has caused an acceleration in the pace of change,
with a greater use of e-commerce solutions for Click & Collect
and home delivery. We must ensure we have innovative digital
channels supported by an agile and reliable infrastructure,
including technology and logistics capability, and an optimised
property portfolio with in-store services, to make our product
sufficiently compelling to customers and available when and
where they want it. Failure to identify new trends and optimise
our channels could affect our ability to stimulate spend and
adversely impact the value of our assets and our financial
results.
How our risks have changed
Increasing. Failure to keep pace with changing customer preferences
is a key risk for us and an area we recognise is evolving even
more rapidly due to the pandemic. We continue to enhance our
priorities and processes to improve our capability and speed
of delivery.
Link to strategic priorities
* Grow e-commerce sales
* Build a mobile-first, service orientated customer
experience
* Test compact store concepts and adapt our store
footprint
How we manage and monitor the risk
Innovation
* A Group digital strategy has been developed and
approved by the Board, with various priority
programmes underway.
* New teams have been created to take the lead on
customer insight, digital experience and data.
* We have an established Product Council, meeting on a
quarterly basis, to monitor financial and project
portfolio performance and to prioritise upcoming
digital initiatives.
* We have launched strategic programmes to grow
e-commerce, focusing on putting stores at the centre
of our fulfilment model.
* We are developing our service offer with the recent
acquisition of NeedHelp, one of Europe's leading home
improvement services marketplaces, and the trialling
of third-party tool hire concessions in the UK.
* We have continued to develop our understanding of
compact store formats with openings in the UK and
France and the first concessions in ASDA (UK).
* We have a new strategic direction for technology,
moving away from a long-release and waterfall-based
approach to a product and agile-based methodology.
7. Political and Market Volatility
Kingfisher operates in eight countries and relies on a global
supply base, exposing us to geopolitical uncertainty and local
volatility. Forms of disruption could include strikes, work
stoppages and/or our ability to receive products from affected
countries. This could also include the restrictions imposed
by different governments in response to the current pandemic.
Market volatility has increased due to the pandemic, creating
a prolonged economic downturn resulting in changing customer
behaviours and reduced consumer confidence. If governments
try to recoup their budget deficits incurred through taxation,
this will create additional burdens on businesses. These impacts
could potentially disrupt the day-to-day operations of our
business and our ability to meet our strategic objectives.
How our risks have changed
Increasing. We have seen an increased level of uncertainty
relating to the economy as a result of the pandemic, heightened
geopolitical tensions, disruption in some of our markets and
continued currency volatility.
Link to strategic priorities
* Move to a balanced, simpler local-group operating
model with an agile culture
How we manage and monitor the risk
Monitoring and engagement activities
* Our Corporate Affairs team actively monitors the
political and economic situations in the countries in
which we operate, or which may impact our operations.
This is supported by membership of key business trade
associations in every market.
* Strategies are in place to identify, monitor and
influence changes to legislation that may impact our
business.
* Crisis management processes and teams are in place to
monitor and manage situations as they arise.
* Group Offer and Sourcing teams manage supplier
relationships with the aim of maintaining appropriate
levels of product availability through periods of
disruption.
Mitigation activities
* Each banner has a strategy for product offer and
pricing that is designed to address consumer
confidence.
* The Group has access to significant committed
liquidity facilities and debt funding, through drawn
term loans and the ability to issue debt into the
capital markets through its European Medium-Term Note
(EMTN) programme.
* Cash holdings are diversified across a number of
financial institutions (for which credit risk is
closely monitored).
* We have an appropriate and prudent mix of hedging
policies, cash deposits and debt financing to
minimise the impact of foreign exchange currency
volatility on the company.
8. Legal and Regulatory
The Group's operations are subject to a broad range of regulatory
requirements in the markets in which it operates. A major corporate
issue or crisis, a significant fraud or material non-compliance
with legislative or regulatory requirements would impact our
brands and reputation, could expose us to significant fines
or penalties and would require significant management attention.
How our risks have changed
No change.
Link to strategic priorities
* Move to a balanced, simpler local-group operating
model with an agile culture
* Source and buy better, reduce our costs and our
inventory
* Lead the industry in Responsible Business practices
How we manage and monitor the risk
Policies and procedures:
* Policies and procedures are in place including, but
not limited to: Code of Conduct, Anti-Bribery and
Corruption, Gifts & Hospitality, Data Protection,
Money Laundering, Fair Competition and Market Abuse
Regulation.
* A new Goods Not For Resale Vendor Engagement
Assessment tool was implemented in October 2020, to
increase the level of supplier due diligence covering
business integrity, data protection and information
security.
* A whistleblowing policy and hotline, facilitated by
an independent third party, is in place throughout
the Group. All calls are followed up and investigated
where necessary.
Training and communication:
* Revised Group-wide mandatory training on the Code of
Conduct was rolled out in December 2020 with two
modules for all staff (Code of Conduct, including
anti-bribery and corruption, and GDPR) and two for
head-office staff (Fair Competition & Market Abuse
Regulation). These are required to be performed
annually.
* An internal communication campaign was run during the
year to raise awareness of the Code of Conduct and
related processes.
Oversight and reporting:
* Our Legal & Compliance network is well established,
for teams at Group and retail banners to work and
communicate together.
* A new Group Ethics and Compliance Committee (GECC)
was formed in November 2020, ensuring that the Code
of Conduct, related Group Policies and Standards, as
well as the Group approach to ethics and compliance,
are adequate and effective. This includes approving
compliance training and reviewing both compliance
risks and the outcomes of investigations. The GECC
will be mirrored in each of the retail banners.
* We have a Disclosure Committee in place to address
our Market Abuse Regulation requirements.
* Whistleblowing statistics and trends are monitored in
the Local Ethics and Compliance Committees and
reported to the GECC and to the Audit Committee twice
annually.
9. Cyber and Data Security
Cyber-attacks and security incidents have increased in recent
years and the retail sector has joined a number of industry
sectors as a target due to it becoming more data driven. Several
high-profile organisations have suffered severe security incidents
in recent times that have had an impact on operations, profitability
and reputation, demonstrating the requirement not only to protect
data but to have the ability to detect breaches and respond
accordingly.
How our risks have changed
Increasing. We remain vigilant of the constantly changing threats
we face, especially as we see the risk extending beyond traditional
IT environments into business processing, the supply chain
and connected device products we sell in stores.
Covid-19 has seen a global increase in cyberattacks against
businesses trying to respond to the crisis. Combine this with
a response of accelerated digital growth and the risk landscape
grows.
Link to strategic priorities
* Grow e-commerce sales
* Build a mobile-first, service orientated customer
experience
How we manage and monitor the risk
* Cyber security continues to receive Group
Executive-level sponsorship and Board focus.
* Cyber security is an integral part of the IT strategy
with a clear three-year plan to continue to develop
and evolve our capabilities to meet new threats such
as Ransomware.
* Cyber insurance is purchased to provide financial
cover and additional loss management support, should
we suffer an event at Group or banner level.
* New IT developments go through a 'Secure By Design'
process to ensure solutions are secure and compliant
with regulations when deployed.
* We perform security assurance on our supply chain
where a third party processes our data.
* We undertake regular vulnerability scanning of our
perimeter, e-commerce platforms, websites and core
internal systems.
* We have a deployed a number of defensive and
protective tools that are actively managed and
monitored.
* We have a robust major incident management process to
respond to and manage security incidents and data
breaches.
* We regularly review the cyber threats facing
Kingfisher and have been working with partners and
security specialists to implement tools and processes
to better identify and remediate vulnerabilities.
* We have assessed our capability against the National
Cyber Security Centre's (NCSC) '10 steps to cyber
security' and have robust controls in each area.
* Independent reviews are performed of our cyber
security processes and initiatives.
10. Reputation and Trust
Our customers, colleagues, suppliers, investors and the communities
in which we operate expect us to conduct our business in a
way that is responsible. We have publicly communicated ambitious
Responsible Business targets (see the Responsible Business
section on pages 25 to 29 of the Annual Report). Failure to
deliver on our obligations and commitments could undermine
trust in Kingfisher, damage our reputation and impact our ability
to meet our strategic objectives.
How our risks have changed
Increasing. During the last year, we have seen an increased
level of scrutiny and higher expectations from our stakeholders,
particularly around our response to Covid-19 and the environment.
Link to strategic priorities
* Lead the industry in Responsible Business practices
How we manage and monitor the risk
Governance:
* Our Code of Conduct establishes the core behaviours
we expect of ourselves and others, including our
suppliers.
* The Responsible Business Committee leads and oversees
the delivery of the responsible business strategy. It
is chaired by a non-executive director and includes
the Chief Executive Officer.
* Proactively taking steps to support our communities,
be it through our Covid-19 response or through our
community priority (see the Responsible Business
section on pages 25 to 29 of the Annual Report).
* Our annual reward measures help to ensure that
Environment, Social and Governance (ESG) issues and
stakeholder concerns are further prioritised.
Issues tracking and stakeholder dialogue:
* Monitoring of external stakeholders' views of our
company through traditional and digital media for all
our companies.
* For colleagues, we have employee forums and works'
councils in all of our businesses including a
collective forum that meets with the CEO and members
of the Board.
* Externally, we have regular engagement with NGO
partners in our key markets, which helps to ensure
that the company remains close to social and
environmental concerns.
Due diligence and external assurance:
* Our due diligence of suppliers covers a range of ESG
issues, from environment to modern slavery; and
includes our policy framework and supplier standards,
which we expect suppliers to adhere to; supplier
training and capacity building; and auditing of
high-risk suppliers.
* Our due diligence extends to the data we disclose.
Selected ESG data in the annual Responsible Business
Report and Modern Slavery Statement is independently
audited by DNV.
* Independent ratings agencies also monitor and rate
our ESG performance throughout the year - including
MSCI, CDP, Sustainalytics and ISS ESG.
2. Details of 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:
2020/21 2019/20
GBPmillions Income Receivable Income Receivable
------- ----------- ------- -----------
Transactions with Koçtas
Yapi Marketleri Ticaret
A.S. in which the Group
holds a 50% interest
Commission and other income 0.2 - 0.3 -
------- ----------- ------- -----------
Transactions with Crealfi
S.A. in which the Group
holds a 49% interest
Provision of employee services
Commission and other income 0.2 - 0.1 -
4.8 0.2 4.9 0.2
------- ----------- ------- -----------
Transactions with Kingfisher
Pension Scheme
Provision of administrative
services 0.7 0.3 1.0 0.2
------- ----------- ------- -----------
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 9
to the Annual Report.
Other transactions with the Kingfisher Pension Scheme are
detailed in note 28 to the Annual Report.
3. Directors' 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 parent 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 they face.
-- 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 position and
performance, business model and strategy.
Paul Moore, Group Company Secretary
Tel: +44 (0)207 644 1041
Mobile: +44 (0) 7887 456498
Kingfisher plc
3 Sheldon Square, London W2 6PX
- Ends -
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ACSSSLFSUEFSEDL
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