TIDMKGF
RNS Number : 5444Y
Kingfisher PLC
09 May 2019
9 May 2019
KINGFISHER PLC
(the "Company")
Annual Report and Accounts 2019 and Notice of 2019 Annual
General Meeting
The Company's Annual Report and Accounts for the year ended 31
January 2019 (the 'Annual Report') and Notice of Annual General
Meeting to be held on 9 July 2019 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 and Notice of Availability for
documents on the Company's website have also been submitted to the
National Storage Mechanism and will shortly be available for
inspection at www.morningstar.co.uk/uk/nsm.
The final results for the year ended 31 January 2019, released
by the Company on 20 March 2019, include the information required
pursuant to Rules 4.1 and 6.3.5 of the UK Disclosure Guidance and
Transparency Rules, excepting publication of the responsibility
statement of the Directors in respect of the 2019 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. LEVEL AND IMPACT OF CHANGE
As our transformation to ONE Kingfisher progresses we are continuing
to carry out a number of significant projects across the Group,
while facing issues due to the external environment. The scope
and pace of change may disrupt our business as usual activities
and the external factors may
increase this risk.
Strategic pillar
- Unified & Unique offer
- Digital
- Operational efficiency
How our risks have changed
Increasing. This is an area of increasing risk for us as we
transform the business in a changing external environment.
How we manage and monitor the risk
* Programme of strategic updates to the Board planned
during the year.
* Monthly tracking against key milestones and reporting
to the Group Executive and the Board.
* Transformation function to coordinate and monitor
progress.
* Operating Company Transformation Directors in place
to deliver the transformational change.
* A release approach in place which:
o Delivers groups of internally consistent deliverables.
o Improves dependency management.
o Delivers clearer implementation path.
2. TECHNOLOGY DELIVERY
Technology is key to enabling our strategy, meeting customer
needs and growing the business. Our unified IT platform is
designed to deliver our requirements in line with the plan
to support the strategy. Failure to do this may impact the
anticipated benefits and disrupt the underlying business.
Strategic pillar
- Digital
How our risks have changed
No change. Having completed all the core activities within
B&Q and Castorama France (our biggest Operating Companies)
as well as implemented a number of key modules in all other
markets, which includes the rollout to stores, we have learnt
and continue to learn with each implementation and this is
then rolled into the next area of change.
How we manage and monitor the risk
* Change control procedure in place with the leadership
team having final approval on all functional changes.
* The rollout plan avoids a 'big bang' implementation
approach. Instead gradual increments are implemented
over a short period, ensuring that dual running is
kept to a minimum and allowing any issues to be
identified and resolved before moving on.
* Process in place to establish learning points and to
ensure these are built into future rollouts.
* 'Agile' ways of working are already in place and are
currently being enhanced to support the appropriate
areas.
* Existing partners have skills that can support our
needs in this area.
* We have good quality skills and capabilities both in
the central team and in the local teams which has
been essential as we have rolled out further and will
be important for maintaining and enhancing the
platform in the future.
* Applications are being provided in accordance with
our proposed three-tier architecture, which provides
flexibility to areas where innovative ideas are most
likely. Tools are typically agnostic and therefore
can be interchanged in the event this is required.
* Digital IT team is integrated within the overall IT
function with common release management and
operations in place.
3. UNIFYING OUR OFFER AND PROCESSES
We aim to offer customers a product range which is differentiated
from that of our competitors through innovation, exclusivity
and affordability. We are unifying our offer and standardising
our activities and processes. This is a large and complex project
therefore there is a risk of not executing this across the
Group and delivering the projected benefits.
Strategic pillar
- Unified & Unique offer
How our risks have changed
No change. As the project progresses we have a better understanding
of the risks following previous implementations and have used
this information to improve our planning, execution and implementation
of range changes.
How we manage and monitor the risk
* A clearly defined set of range principles and the
main customer projects that will provide the
opportunity to create the unique offer have been
defined.
* Teams with specialised roles are tasked to develop
and take best practice and the best products from
across the company.
* Strong sourcing network which is focused on securing
company buying opportunities.
* Validation and governance processes in place for
business case approvals of range and procurement
decisions.
* The plan for each range change is discussed and
agreed with the trading function and Directors at key
points in the process.
* Strong project management process including capturing
lessons learned for continuous improvement.
* Monthly tracking and review by the Offer & Sourcing
board to identify and respond to potential risks.
* Performance of the ranges and brands is tracked, and
strategies updated accordingly.
* Vendor management process in place which includes
vendor selection, risk assessments, monitoring of
vendor responses, and communication.
* We have a systems roadmap which is reviewed regularly
with IT to identify and prioritise key programmes.
4. CHANNEL DEVELOPMENT
As consumer preferences continue to change, we must ensure
we create and deliver a culture of innovation in our format
and digital channels that keeps pace with changing consumers
behaviours and our competitors to be able to stimulate spend
and deliver the desired sales growth.
Strategic pillar
- Unified & Unique offer
- Digital
- Retail operations
How our risks have changed
No change. Failing to keep pace within the digital area is
a risk for us. However, we have continued to make good progress
this year to ensure we are better positioned to fulfil our
digital ambitions.
How we manage and monitor the risk
* A Group digital strategy has been developed and a
prioritised delivery roadmap is underway across the
local markets.
* Rollout of next generation e-commerce in local
markets and development of new kitchens and bathroom
capability to be deployed in local markets.
* A monthly Digital Governance Forum is in place to
monitor financial and project portfolio performance
and to prioritise upcoming digital initiatives,
ensuring we deliver the greatest benefits and
features to customers through our online channels and
in store.
* Group mobile and desktop platform has been built and
launched in B&Q; new online search and content
management capabilities will be launched in 2019 to
improve diy.com customers' experience further. A
rollout plan has also been developed for our other
local markets in line with unified IT platform and
Group transformation timelines.
* Digital ways of working and increasing levels of
Agile development are being progressed in all digital
functions.
* Unified IT Platform continues to be rolled out across
the Group to provide the systems and capabilities
required to deliver the foundations for the digital
strategy.
* Group Concept Director appointed.
* Developing the concept combining the best of store
format and digital in pilot stores to be launched in
2019.
* Group Trading Director and trading team established.
* Director of Pricing and Pricing Centre of Excellence
created.
* A Group pricing strategy is in place. The Offer &
Sourcing and Trading functions set recommended prices
on all unified ranges, securing the best selling
price whilst optimising margin.
* Pricing tools and tracking compliance in place.
5. POLITICAL ENVIRONMENT
With continuing geopolitical and local market uncertainty and
market volatility across all the economies in which we operate,
we are exposed to potential risks which may both impact consumer
confidence and disrupt the day-to-day operations of the business.
Strategic pillar
- Retail operations
How our risks have changed
Increasing. We have seen an increased number of uncertainties
relating to the economy across our key markets, heightened
geopolitical tensions, disruption in some of our markets and
continued currency volatility.
How we manage and monitor the risk
* Provision of supply chain finance programmes to
support suppliers. Additional information on these
arrangements can be found on page 150.
* Portfolio of international banking partners that
provide flexibility and reliable local retail cash
and card payment processing services.
* Access to funding: both debt funding, including an
up-to-date debt capital markets programme, and
significant committed liquidity facilities.
* 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
company.
* Offer and pricing strategies designed to address
consumer confidence.
* Corporate Affairs team actively monitors the
political and economic situations in the countries in
which we operate or those which may impact our
operations.
* Strategies in place to identify, monitor and aim to
influence changes to legislation which may impact the
business.
* Corporate Affairs team oversees direct policy and
political engagement with dedicated resource in the
UK, France, Belgium, Poland and Romania. This is
supported by local representatives in our Operating
Companies and our membership of key business trade
associations in every market.
* Crisis management processes and teams in place to
monitor and manage situations as they arise.
6. EU REFERUM
Following the UK's decision to leave the EU we continue to
see increased economic uncertainty, exchange rate volatility
and an impact on consumer confidence in the UK market. These
issues may impact our purchase costs, including additional
import tariffs and packaging costs, and our operations, including
supply chain delays for the UK, Ireland and Northern Europe.
Assuming an agreement to exit is reached, the negotiations
on the future relationship may also result in further
changes to regulation and operational frameworks which may
impact our ability to operate across our European businesses
as we do today.
Strategic pillar
* Retail operations
How our risks have changed
Increasing. This risk has increased due to the continuing uncertainty
as to the operational implications of the decision to leave
the EU and the impact on trading performance from impacts on
the economy in our key markets.
How we manage and monitor the risk
* A Brexit Steering Group has been in place since the
2016 referendum. This group is responsible for
monitoring the Brexit process and agreeing actions.
The Group consists of Finance, Tax, Treasury, HR, IT,
Legal, Corporate Affairs, Regulatory and Operational
teams.
* Third-party advisors were engaged to advise on risk
and mitigation plans, especially in the event of a
'No Deal', and action plans developed.
* We continue to engage directly with government and
alongside key trade bodies.
* Work has been done to consider the implications of
Brexit, considering different scenarios and preparing
mitigation plans across key operational areas
including:
Import tariffs
* We have assessed the impact of a 'No Deal' scenario
on our tariff rates and have built mitigation
contingency plans in case required.
* We have also updated our sourcing tender process to
take account of Brexit related risk in the selection
of new vendors.
Customs clearance
* We are taking steps to mitigate the risk of UK port
delays in the event that customs clearance processes
and transport infrastructures become overwhelmed,
including improving our customs and import management
capability.
Vendor readiness
* We are working with our vendors through our buying
offices to check that vendors are as ready as they
can be for Brexit with necessary processes in place
where they are responsible for importing product from
EU to UK and from UK to EU.
Product standards
* We are working with vendors to ensure they have taken
necessary steps to update product testing
accreditation and regulations around chemicals,
horticulture etc. so they remain valid both in the UK
and EU markets as regulations start to diverge.
Data
* In order to continue to comply with General Data
Protection Regulation we are acting to add additional
clauses in some vendor agreements and inter-company
agreements.
7. ATTRACTING, RETAINING AND INVESTING IN OUR PEOPLE CAPABILITY
Our colleagues are critical to the successful delivery of our
strategy and business. We must ensure we take steps to retain
and attract talent to the company and make the necessary investment
in our people to ensure that we have the appropriate capacity,
skills and capabilities.
Strategic pillar
* Unified & Unique offer
* Digital
* Operational efficiency
* Retail operations
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 plans in place to deliver the
model.
How we manage and monitor the risk
* The Chief People Officer is leading the work to
improve our capabilities, ensuring we have effective
KPIs and relevant reward structures.
* Work is underway to redesign, where required, HR
processes, policies and guidelines to ensure they are
fit for purpose and in line with our ambition.
Initial focus will be on recruitment, reward, talent
and engagement.
* Engagement process in place to ensure we have an
appropriate and timely engagement methodology which
enables us to check across all colleagues our ability
to drive the changes we need whilst being able to
respond to any insights which may impact upon our
duty of care as an employer.
* Creating a strong pipeline of developing talent
through structured programmes including graduate and
high-potential schemes for the development of senior
leaders.
* Continue to invest in development activities for our
store-based colleagues and in how we support and
recognise the role of our customer advisors across
the organisation.
* Home Improvement and Range Academies developed to
build capability and inform colleagues on the new
ways of working and product ranges.
* Remuneration committee oversees reward policy.
* Nomination committee oversees Board composition and
succession planning.
8. LEGAL AND REGULATORY
The Group's operations are subject to an increasing range of
regulatory requirements in the countries in which it operates.
A major corporate issue or crisis, a significant corporate
fraud or
material non-compliance with legislative or regulatory requirements
would impact Kingfisher's brand and reputation and could expose
us to significant fines.
Strategic pillar
* Unified & Unique offer
* Digital
* Retail operations
How our risks have changed
Increasing. Regulatory requirements are increasing in many
areas and therefore we see this as an area of increasing risk.
How we manage and monitor the risk
* 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 Operating Company CEO.
* Appropriate resources are available to our Operating
Companies to ensure that both colleagues and
suppliers are aware of, and comply with, the Code.
* Legal teams at Kingfisher and each of our Operating
Companies work and communicate together to form a
legal and compliance network.
* Communications teams at Kingfisher and each of our
Operating Companies work together to form a
communications network.
* A Crisis Communications team is in place to manage
major incidents.
* Policies and procedures in place to support the
health and safety, environmental, ethical, fraud,
crisis management, legislative and regulatory areas.
* Anti-bribery training in place and all key
individuals must complete this training.
* Whistleblowing hotline operates throughout the Group
and all calls are followed up, including monitoring
at the local Audit Committee level.
* Market Abuse Regulation policy and training in place.
9. CYBER AND DATA SECURITY
Cyber-attacks and security incidents have increased in recent
years and the retail sector is now a target. There have been
a number of high-profile attacks in the sector in recent times
that have had an impact on operations, profitability and reputation.
Strategic pillar
* Digital
* Retail operations
How our risks have changed
Increasing. We continue to see an increase in the frequency
and sophistication of cyber-attacks and security incidents
which require us to remain vigilant in this area.
How we manage and monitor the risk
Cyber security
* Cyber security continues to receive Executive level
sponsorship and Board focus.
* Dedicated IT governance boards are established to
monitor this evolving risk and the associated
mitigating controls.
* As part of the IT planning process, we have
established a roadmap which covers security,
governance and identity initiatives to continue to
mature the tools and capabilities we have available
to us.
* Independent reviews are performed of the Group's
cyber security processes and initiatives on an annual
basis.
* We regularly review the threats facing Kingfisher and
have been working with partners and security
specialists to implement tools and processes to
identify and remediate vulnerabilities.
Data protection
* We have data protection and management policies in
place.
* Data protection has been enhanced in light of the
General Data Protection Regulation.
* IT solutions and appropriate training regarding data
protection and management in place.
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:
2018/19 2017/18
GBPmillions Income Receivable Income Receivable
------- ----------- ------- -----------
Transactions with KoƧtas
Yapi Marketleri Ticaret
A.S. in which the Group
holds a 50% interest
Commission and other income 0.4 - 0.7 0.2
------- ----------- ------- -----------
Transactions with Crealfi
S.A. in which the Group
holds a 49% interest 0.6 - 0.2 -
Provision of employee services 5.7 0.3 6.6 0.2
Commission and other income
------- ----------- ------- -----------
Transactions with Kingfisher
Pension Scheme
Provision of administrative
services 1.5 - 1.3 -
------- ----------- ------- -----------
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 26.
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 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.
Paul Moore, Group Company Secretary
Tel: +44 (0)207 644 1041
Kingfisher plc
3 Sheldon Square, London W2 6PX
- Ends -
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END
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