The directors present their report and accounts for the Company together with the consolidated accounts of the Kingfisher group of companies for the financial year ended 31 January 2009. The Corporate Governance, Audit Committee and Directors’ remuneration reports are set out within the Corporate governance section. The Business review is incorporated by reference, as is all other information in the 2008/09 Annual Report to which this Directors’ report makes specific cross-reference.
Kingfisher plc is the holding company of the Kingfisher group of companies. The Company through its wholly-owned subsidiaries, joint venture and associates, delivers the full range of products and services of an international home improvement business operating in markets that fit strategic criteria of attractive scale, structure and economics.
Review of operations, current position and future prospects
Details of the Group’s operations for the year ended 31 January 2009, its current position and future prospects are contained in the Business review. These include a balanced and comprehensive analysis of the main trends and factors likely to affect the development, performance and position of the business, including environmental, employee and social and community issues, the Group’s Key Performance Indicators (KPIs) and a description of the principal risks and uncertainties facing the business.
Results and dividends
The Group results are shown in the consolidated income statement. The profit before taxation of the Group amounted to £90m (2007/08: £366m) with a profit after taxation of £206m (2007/08: £272m).
The directors recommend a final dividend of 3.4p (2007/08: 3.4p) per ordinary share amounting to £80m (2007/08: £80m) to be paid on 19 June 2009 to members appearing on the Register at the close of business on 8 May 2009. Together with the interim dividend of 1.925p (2007/08: 3.85p) per ordinary share, amounting to £45m (2007/08: £90m), paid on 14 November 2008, the total dividend for the year will be 5.32p (2007/08: 7.25p) per ordinary share, amounting to £125m (2007/08: £170m).
The current directors who served during the 2008/09 financial year are listed in Board of Directors. Of those directors, Kevin O’Byrne was appointed to the Board on 1 October 2008. Duncan Tatton-Brown also served on the Board in 2008 from 2 February 2008 to 1 October 2008.
Appointment and replacement of directors
The rules governing the appointment and replacement of directors are contained in the Company’s Articles of Association. The powers of the directors are determined by UK legislation and the Memorandum and Articles of Association of the Company in force from time to time. In accordance with the requirements of the Company’s Articles, Peter Jackson, Phil Bentley and John Nelson retire by rotation at this year’s Annual General Meeting (AGM) and, with the exception of Peter Jackson who will not offer himself for re-election, are offering themselves for re-election. Having served for over 11 years as a non-executive director, and in accordance with the Combined Code, Michael Hepher is also retiring and offers himself for re-election. He has taken this step to provide continuity of Board membership as Daniel Bernard takes up his new role as Chairman of the Board. Mr Hepher’s independence is assured through his continued application of his breadth of experience in a manner that provides challenge within a supportive context. He maintains strong principles, acting as the conscience of shareholders as well as an ambassador for the business. Following his appointment as Group Finance Director during the year, Kevin O’Byrne is required under the Articles of Association to submit himself for election by the shareholders at the first AGM following appointment and, being eligible, he will do so at the AGM on 3 June 2009.
Directors’ interests and indemnity arrangements
Qualifying third-party indemnity provisions (as defined in section 234 of the Companies Act 2006) are in force for the benefit of the directors and former directors who held office during the 2008/09 financial year.
No director had a material interest at any time during the year in any derivative or financial instrument relating to the Company’s shares. Details of directors’ remuneration, service contracts and interests in shares of the Company are set out in the Directors’ remuneration report.
Risk identification, assessment and management
A summary of the Group’s position regarding risk identification, assessment and management is contained in the Risks section.
The Board continues to emphasise high standards of customer care and service in each operating company and the commitment of employees to this principle is vital. The Group has developed channels of communication including engagement surveys, briefing groups, internal magazines and newsletters that report on business performance and objectives, community involvement and other issues to help people expand their knowledge of, and involvement with, the Group. Directors and senior management regularly visit stores and discuss matters of current interest and concern with employees.
- 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 our performance and ensure that all customer comments are analysed, responded to and acted upon.
Details of the Group’s corporate responsibility policy and operations are set out in the Corporate responsibility section.
The Group made contributions to charity/community projects worth an estimated £1.4m in the financial year ended 31 January 2009 – equivalent to 0.4% of pre-tax profits. This included cash donations (£0.6m) and gifts-in-kind (£0.6m – retail cost). Support was also given through the donation of time by employees (£0.2m).
The Board annually seeks and obtains shareholders’ approval to enable the Group to make donations to or incur expenditure in relation to EU political parties, other political organisations or independent election candidates under section 366 of the Companies Act 2006. The approval given in 2008 restricted such expenditure to an aggregate limit of £75,000 in the period of 12 months following the date of the AGM.
The Group has made no political donations during the year. As with previous annual approvals, the Group has no intention of changing its current policy and practice of not making political donations and will not do so without the specific endorsement of shareholders. The Board obtains the approval on a precautionary basis to avoid any possibility of unintentionally breaching the relevant provisions.
Supplier payment policy
The Company does not impose standard payment terms on its suppliers but agrees specific terms with each of them, and then pays in accordance with those terms. The Company is a holding company and therefore has no trade creditors. On average, the Group’s suppliers are paid in 45 days.
The Company is required to make certain additional disclosures under section 992 of the Companies Act 2006 which implements the EU Takeovers Directive. Such disclosures, not covered elsewhere in this Annual Report, include:
Significant agreements – change of control
- the £500 million credit facility dated 15 March 2005 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;
- the $466.5 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 €550 million MTNs, issued on 23 November 2005 under the Group’s €2,500 million MTN programme by the Company to various institutions, which contains an option such that in the event of a change of control and, as a result of the change of control, the Company’s credit rating is downgraded below investment grade (BBB- or equivalent) any holder of the MTNs may require the Company to prepay the principal amount of that note 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 plans may cause options and awards granted under such plans to vest on a takeover.
There is no information that the Company would be required to disclose about persons with whom it has contractual or other arrangements which are essential to the business of the Company.
Share capital and control
Details of the Company’s issued share capital are set out in note 29 of the consolidated financial statements. All of the Company’s issued ordinary shares are fully paid up and rank equally in all respects.
Information on the Company’s stock exchange listings is set out under Compliance with the Combined Code.
During the year ended 31 January 2009, options were exercised pursuant to the Company’s share option schemes, resulting in the allotment of 27,555 new ordinary shares. No new ordinary shares have been allotted under these schemes since the end of the financial year to the date of this report. As at 31 January 2009 Barclays Wealth, as trustee of the Employee Share Ownership Plan Trust, held 14,913,743 shares to satisfy future exercises of options and awards under the Group’s share plans. Barclays Wealth exercises all of the voting rights attached to these shares at its discretion.
Rights attaching to shares
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 Companies House in the UK or from the Company’s website or by writing to the Company Secretary. The holders of ordinary shares are entitled to receive the Company’s reports and accounts, to attend and speak at general meetings of the Company, to appoint proxies and to exercise voting rights.
Transfers of shares
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 FSA’s listing rules or the City Code on Takeovers and Mergers.
Authority to purchase own shares
At the AGM on 5 June 2008, shareholders approved a resolution for the Company to make purchases of its own shares to a maximum number of 236,081,072 ordinary shares. This resolution remains valid until the conclusion of this year’s AGM. As at 1 February 2009, the directors had not used this authority. It is Kingfisher’s present intention to cancel any shares acquired under such authority, unless purchased to satisfy outstanding awards under employee share incentive plans. A resolution will be proposed at this year’s AGM to renew this authority.
Issue of shares
At the 2008 AGM, shareholders approved a resolution to give the directors authority to allot shares up to an aggregate nominal value of £104,015,458. In addition, shareholders approved a resolution giving the directors a limited power to allot shares for cash other than pro rata to existing shareholders. These resolutions remain valid until the conclusion of this year’s AGM. Resolutions will be proposed at this year’s AGM to renew these authorities. Additionally, following the report of the Rights Issues Review Group and guidance from the ABI, the Company intends to ask shareholders to grant it authority to allot additional shares up to an aggregate nominal value of £123,662,752 for use in a rights issue only. If this additional allotment authority is used, the ABI guidance will be followed and, if appropriate, all the directors of the Company will retire at the next AGM and submit themselves for re-election. The directors have no present intention to issue ordinary shares, other than pursuant to employee share schemes and pursuant to the dividend re-investment plan.
Further explanation on the proposed resolutions is included with the notice of the meeting circulated to shareholders with this report.
As at 25 March 2009, the Company had been notified in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority of the following interests in the Company’s shares:
|Company||Number of shares held||% of issued share capital held|
|Fidelity Investment Services Ltd (Europe)||122,916,013||5.21%|
|Legal & General Investment Management Ltd||107,459,913||4.55%|
|Brandes Investment Partners LP||106,447,846||4.51%|
|A D R Facility||90,745,362||3.84%|
|AGF Management Ltd||87,547,133||3.71%|
|Capital Research & Management (Americas)||71,253,215||3.02%|
Memorandum and Articles of Association
The Company’s Memorandum and Articles of Association may only be amended by special resolution at a general meeting of the shareholders. The final tranche of the Companies Act 2006 will be implemented on 1 October 2009 and, from that date, the nature of the Company’s constitutional documents will change so that the Memorandum of Association becomes a snapshot historical document. Relevant provisions in an existing company’s Memorandum of Association such as the objects clause and the share capital provisions will, automatically, be imported into the Articles of Association. Under the Companies Act 2006, a company’s objects will be unrestricted unless its articles specifically restrict them. The importation of the Company’s objects clause into the Articles of Association from 1 October 2009 will likely act as such a restriction. In order to avoid this, a special resolution will be put to shareholders to delete the objects clause from the Memorandum of Association with effect from 1 October 2009.
Annual General Meeting
The 2009 Annual General Meeting of the Company will be held on 3 June 2009 at the Hilton London Paddington Hotel, Paddington at 11:00am. A separate document accompanying this report contains the notice of meeting and description of the business to be conducted at the meeting.
By order of the Board
25 March 2009