Governance

Directors’ remuneration report

I am pleased to present the Remuneration report for 2008/09. The report is made by the Board on the recommendation of the Remuneration Committee and sets out the policy and disclosures on directors’ remuneration as required by schedule 7A of the Companies Act 1985. In addition to these requirements, the Remuneration Committee has followed the principles of good governance set out in the Combined Code and complied with the Listing Rules.

During the year the Remuneration Committee undertook a wider review of the remuneration policy that resulted in it adopting, for executive directors, similar long-term incentive plans to that used for Ian Cheshire and which are detailed later in this report. The long-term incentive plans for the members of the Retail Board were also similarly aligned.

We welcomed Kevin O’Byrne to the Board on 1 October 2008. Details of Kevin’s remuneration can be found later in this report.

A resolution will be put to the shareholders at the Annual General Meeting on 3 June 2009 asking them to approve this report.

John Nelson
Chairman of the Remuneration Committee
25 March 2009

Information subject to audit

The following sections, on pages 40 to 46, of the Remuneration report are audited:

The Remuneration Committee

Chairman John Nelson
Committee members Michael Hepher
  Peter Jackson
  Janis Kong
Management attendees  
Chief Executive Ian Cheshire
Group HR Director Tony Williams
Head of Group Reward Kevin Blake

No member or attendee is present when his or her own arrangements are considered.

The Remuneration Committee has authority to obtain the advice of external independent remuneration consultants and is solely responsible for their appointment, retention and termination, and for approval of the basis of their fees and other terms.

In the year to 31 January 2009, the following external advisers provided services to the Remuneration Committee:

  • Hewitt New Bridge Street (HNBS) advises on the ongoing operation of employee and executive share plans and executive remuneration generally;
  • Allen & Overy LLP provides legal advice on service and employment contracts and for other employment and remuneration issues in relation to executive directors. They also provide advice to the Company on other legal matters; and
  • Watson Wyatt advised on the wider review of remuneration policy and provides advice and benchmarking on the market competitiveness of remuneration for executives in the UK and overseas. They also provide advice to the Company on pensions and related matters

Remuneration policy for executive directors

The aim of the Company’s policy on executive directors’ remuneration is to ensure that senior executives are rewarded for their contribution to Kingfisher and are motivated to enhance returns to shareholders. Executive director remuneration should be competitive by reference to the experience of the executive concerned, the role fulfilled, internal relativities and the markets in which the Company competes, and is designed to promote business success through the recruitment, retention and motivation of the highest quality executives.

The Remuneration Committee consults with shareholders to ensure their views are understood and taken into account in its deliberations, particularly in relation to changes in Kingfisher employee share scheme arrangements and wider trends in executive remuneration.

The remuneration strategy for executive directors and other senior executives is tailored to emphasise the delivery of strong earnings growth as well as sustained performance in the longer term. Long-term performance is rewarded through the delivery of shares (the Performance Share Plan (PSP)) and short-term performance through a combination of cash and an element of compulsory deferred shares (the KIS Cash and KIS Share schemes). The Remuneration Committee believes that this structure is weighted towards the achievement of stretching, individually targeted annual bonus measures but also aligns the interests of executives with those of shareholders through a continued emphasis on strong annual performance combined with long-term executive share ownership, providing a strong link between the incentives received and shareholder value delivered. The Remuneration Committee intends to continue this policy and is satisfied that there is an appropriate balance between the different elements of pay (including the split between fixed and variable pay).

Following the extensive review of the Group Chief Executive’s remuneration with the assistance of HNBS, which had received a favourable response in discussions with shareholders and was reported in the 2007/08 remuneration report, the Company undertook a wider review of senior executive remuneration during the year. As a result of this review, the Remuneration Committee determined that it was appropriate to provide the Retail Board members with long-term goals aligned to those of the executive directors and therefore awarded PSP grants with performance conditions to 2012, aligned with those of the executive directors’, in respect of the specific regions or functions. Kevin O’Byrne’s long-term remuneration is based on the same criteria and performance conditions used for Ian Cheshire.

Executive directors’ service contracts

All executive directors have service contracts terminable by no more than 12 months’ notice by either side. The contracts for all executive directors provide that termination payments would be paid on a phased basis at a monthly rate of 15% of annual salary for a maximum of 12 months from the termination date. Lower amounts are payable if the director commences lower-paid employment during the 12-month period, and payments cease immediately when employment providing the same or higher value remuneration is started. Details of the executive directors’ contracts are summarised below:

Executive director Date of last contract Notice period (months)
  1. Duncan Tatton-Brown resigned as a director of Kingfisher plc on 01/10/2008.
Ian Cheshire 28/01/2008 12
Kevin O’Byrne 01/10/2008 12
Duncan Tatton-Brown 01/02/2004 Terminated on 14/10/20081

Executive directors’ remuneration

Kevin O’Byrne received a recruitment award under the PSP of shares worth 300% of salary with 50% subject to the same TSR conditions as those used for the award to Ian Cheshire and the other 50% subject to the same EPS conditions in respect of the special award to Ian Cheshire on his recruitment as Group Chief Executive (for details of these performance conditions see Pension provision). Kevin O’Byrne also received a cash award of £250,000 to compensate him for his losses from leaving DSG International and to further encourage him to join the Company at the earliest opportunity. He used the net proceeds of the £250,000 he received to purchase the Company’s shares in the open market. He subsequently placed the shares in the Group SIPP and has committed to purchasing and placing further shares in the Group SIPP when he receives the tax refund from the earlier purchase.

Components of executive directors’ remuneration

Remuneration packages for executive directors consist of the following elements: salary, annual bonus including the deferred KIS Share award with a maximum potential of 200% of salary, long-term incentive under the PSP at 200% face value of salary at maximum vesting, the ShareSave Option Scheme for all employees, pension contributions; and non-cash benefits.

Relative proportions of each executive director’s remuneration (%): 2008/09

Bar graph showing components and relative proportions of each executive director’s remuneration (%): 2008/09

* Annual bonus figure assumes maximum payment and LTIP figure assumes maximum vesting.

A summary of the remuneration package and the applicable performance measures for executive directors for the 2008/09 financial year is set out in the table at the bottom of this page.

Base salary

Salaries are reviewed annually in August, taking into account market conditions, affordability, the level of increases awarded to staff generally and the individual’s contribution. Ian Cheshire did not receive an increase in his base salary other than the increase he received on his appointment as Group Chief Executive.

Annual bonus

Future annual bonus objectives for the executive directors and the Retail Board will continue to focus on key strategic goals, rather than solely on the annual budget, and indicative targets pre-set for four years during 2007/08 will be confirmed annually. In particular, in the current climate and with the focus on debt financing, the Committee intends to continue to incentivise the executive directors to ensure that the business is focused on good cash management and minimising its requirement for external credit facilities.

Annual bonuses are awarded under the KIS. The KIS comprises the Kingfisher Cash Incentive Scheme 2003 (KIS Cash scheme) and the Kingfisher Incentive Share Scheme 2003 (KIS Shares scheme). Under these arrangements senior executives may receive a performance related cash bonus under the KIS Cash scheme and a contingent share award under the KIS Shares scheme equal to half the value (at the time of award) of the cash bonus. The contingent share award must normally be held for three years before it vests, with the shares being normally subject to forfeiture should the executive leave Kingfisher during the three-year deferral period as a result of voluntary resignation or dismissal for cause. In line with ABI best practice, contingent share awards from April 2007 receive a dividend roll-up on vesting calculated on the basis of a notional purchase of shares on each relevant ex-dividend date using that day’s closing mid-market price.

Substantial awards under the KIS Cash scheme and the KIS Shares scheme are only payable to executives on achievement of the performance targets agreed by the Remuneration Committee at the beginning of each year, based on Kingfisher’s strategic and financial planning process, and the economic and competitive environment in which the Company and its principal businesses operate.

Maximum vesting under the KIS and PSP result in up to approximately 75% of total remuneration being performance-related, an approach the Remuneration Committee believes is appropriate for Kingfisher as a dynamic international retailer.

Element Performance measures Purpose

Base salary (set annually on 1 August)

Role, individual contribution to business and market forces

To attract and retain talented people

Annual Bonus
KIS Award
(Up to 133% of salary in cash and 67% in deferred forfeitable shares)

Objectives relating to:
Group net debt
Group profit after tax personal performance
Corporate key performance indicators

Ensures a commitment to delivering on Group recovery and meeting debt targets, delivering on strategic objectives and ensures alignment with shareholder interests

Long-term incentive Performance Share Plan
(Up to 200% of salary vesting 3 years from award date)

Delivering value on:
TSR
EPS

Ensures a focus on long-term business success and shareholder returns

Long-term incentive

The PSP remains the primary long-term incentive for the top senior executives. Following the wider review of remuneration policy undertaken after Ian Cheshire’s appointment and as disclosed last year, the Remuneration Committee decided to increase the annual limit to 200% of salary, with the performance measures made correspondingly more demanding, in order to bring long-term incentive provision into line with median practice in other FTSE100 companies and other retailers of a similar size.

The review by the Remuneration Committee concluded that all future PSP awards should be subject to performance targets that are based equally on EPS and TSR. The combination of TSR and EPS measures was selected as the most appropriate combined performance measure for the PSP. This combination is robust and simple to understand, provides an effective measure of management performance, aligns executives’ interests with those of shareholders and is generally favoured by the Company’s major shareholders. The FTSE100 was chosen as the comparator group because there is a general lack of directly quoted home improvement businesses against which to compare the Company’s TSR specifically. HNBS independently carries out the relevant TSR calculations for the Remuneration Committee.

The Remuneration Committee may, in its absolute discretion:

  • amend the range of EPS targets set out in the table below to take account of any material change in the retail prices index over the performance period or any change to, or event that affects, the structure or business of the Kingfisher Group or any other material change in circumstances; and
  • vary the performance condition if an event has occurred which causes it to consider that it would be appropriate, provided the varied condition is considered fair and reasonable and not materially less challenging than the original condition would have been but for the event in question.

Any such amendments will be disclosed in the relevant Directors’ remuneration report.

The TSR and EPS performance targets for all PSP awards are:

50% TSR at the end
of the Performance Period
Percentage of this part of the award of performance shares that will vest 50% EPS at the end of the Performance Period Percentage of this part of the award of performance shares that will vest
Less than median plus 1 percentage point Nil Less than 15.9p Nil
Median plus 1 percentage point 15.625% 15.9p 15.625%
Between median plus 1 percentage point and upper quintile plus 1 percentage point Straight-line vesting between 15.625% and 100% Between 15.9p and 17.0p Straight-line vesting between 15.625% – 50%
Upper quintile plus 1 percentage point 100% 17.0p 50%
    Between 17.0p and 19.6p Straight-line vesting between 50% – 100%
    19.6p 100%

Performance Shares receive a dividend roll-up calculated on the basis of a notional purchase of shares on each relevant ex-dividend date using that day’s closing mid-market price. Shares used to satisfy awards under a plan are normally purchased in the market through an employee benefit trust.

Under the PSP, provisional awards of Performance Shares have been granted to selected senior executives following the publication of the annual results. Awards were made on 21 April 2008.

As part of the terms of his recruitment, awards were made to Ian Cheshire on 1 February 2008 in respect of his 2008/2009 allocations under the plan using the TSR performance target only and therefore no further awards were made to him during the financial year. Awards were also made to Kevin O’Byrne as part of his recruitment on 1 October 2008 in respect of his 2008/2009 allocations under the plan. Kevin O’Byrne’s awards are subject to the TSR (50%) and EPS (50%) performance targets. Although the EPS performance condition was over a four-year period in respect of the above awards, the Committee intends to revert to the normal three-year period going forward.

Other long-term incentive plans

Apart from the ShareSave Option Scheme, all other option and incentive arrangements have been discontinued, but awards made under these schemes in previous years will vest over time in accordance with the rules governing the various plans. The details are shown in the section entitled Closed Incentive Plans.

Pension provision

Ian Cheshire is a member of the main defined benefit funded arrangement, the Kingfisher Pension Scheme and subject to the scheme cap, which was closed to new employees of the Group on 1 April 2004. Following his appointment as Group Chief Executive, Ian Cheshire also receives a 30% Company contribution, on his salary above the pension cap, into defined contribution arrangements. Kevin O’Byrne receives a 20% Company contribution into his defined contribution arrangements. Duncan Tatton-Brown was also a member of the defined benefit arrangement, subject to the scheme cap and received a 15% Company contribution to defined contribution arrangements and a cash supplement of 5% on his salary above the pension cap. Details of individual arrangements for the executive directors are set out in Directors’ pension benefits.

Non-cash benefits

The Company provides a range of additional benefits, including medical insurance, a subsidised staff canteen, a staff discount card, 30 working days’ holiday per year and a company car or cash allowance.

Share ownership guidelines

The formal share ownership guidelines prohibit executive directors selling shares obtained through the KIS Shares scheme and long-term incentive plans including the PSP (except to meet tax obligations) until they hold shares costing or worth at least two times base salary for the Group Chief Executive and at least one times base salary for the Group Finance Director. The Remuneration Committee believes that this will provide a longer-term retention mechanism and means that, over time, executives will have a significant personal interest in Kingfisher shares. The Remuneration Committee believes these arrangements align executives’ and shareholders’ interests effectively and encourage a long-term view of performance.

Executive directors’ remuneration overview

The current annual base salaries of the executive directors as at 25 March 2009 are £800,000 for Ian Cheshire and £575,000 for Kevin O’Byrne.

The internally set profit targets for the 2008/09 annual bonus awards have been partially achieved. Group net debt has significantly reduced beyond our stated objective of maintaining it at the 2007/08 year-end level (excluding proceeds from the sale of Castorama Italy). Further progress has also been made in other strategic areas aligned to our seven steps to ‘Delivering Value’ and therefore bonuses will be paid against those targets that have been achieved.

The actual remuneration for the executive directors for the 2008/09 financial year is set out in the table below:

Executive directors

  Total remuneration
£000 Base salary Total benefits1 Cash bonus2 2008/09 2007/084
  1. Total benefits include cash payments representing Scheme Cap supplements of £16,655 for Duncan Tatton-Brown. Ian Cheshire no longer receives a pension cash supplement but a contribution to defined contribution arrangements. Non-cash benefits comprise medical and life insurances. Ian Cheshire receives a company car and a cash payment as he has not taken the full entitlement of his allowance for his car. Kevin O’Byrne receives a cash payment in lieu of a company car and received a payment of £250,000 on joining which he used to purchase the Company’s shares in the open market.
  2. The contingent shares award under the KIS Shares scheme in relation to the financial year ended 31 January 2009 are set out in the table under KIS Share awards.
  3. Under the terms of his service agreement, which was terminated on 14 October 2008, Duncan Tatton-Brown received staged payments subject to a requirement for him to mitigate in respect of his future earnings. The maximum sum due in respect of Duncan Tatton-Brown’s basic salary compensation will be £844,312 paid monthly. He was also entitled to a pro-rata bonus for 2008/09 to his leaving date.
  4. The total for 2007/08 includes payments made to Gerry Murphy in that year.
Ian Cheshire 800.0 35.3 801.6 1,636.9 550.1
Kevin O'Byrne 206.9 259.9 204.8 671.6 n/a
Duncan Tatton-Brown3 321.8 33.2 449.5 804.5 612.5
Gerry Murphy n/a n/a n/a n/a 1,634.6
Total 1,328.7 328.4 1,455.9 3,113.0 2,797.2

Outside appointments for executive directors

Subject to the rules governing conflicts of interest, the Company encourages its executive directors to hold one non-executive role outside the Group as it recognises that such roles can broaden experience and knowledge which can benefit the Group. Non-executive directorships and fees retained by the relevant individual during 2008/09 are set out below:

Director Company in which non-executive role is held Fee retained by director in 2008/09
  1. This is the fee paid to Ian Cheshire from February 2008 until he resigned as a director of Bradford & Bingley plc in November 2008.
  2. This is the annual fee. Kevin O’Byrne joined the Board of Land Securities in April 2008. He became chairman of their audit committee from 1 January 2009 and will be paid an additional fee of £17,500 for this additional responsibility.
Ian Cheshire Bradford & Bingley plc £36,0001
Kevin O’Byrne Land Securities Group plc £55,0002
Duncan Tatton-Brown Rentokil Initial plc £54,999

KIS Share awards

Awards of contingent shares, in respect of the financial year ended 31 January 2009, are due to be made on 21 April 2009, vesting in April 2012, to Ian Cheshire and Kevin O’Byrne under the KIS Shares scheme to the value of £400,800 and £102,414, respectively, at the average mid-market price over the three dealing days, 16, 17 and 20 April 2009. As the awards will be made after publication of the accounts for the financial year ended 31 January 2009, the detail will be disclosed fully in next year’s Annual Report.

Once the contingent share award is made in respect of the bonus earned, the only qualifying condition for the award normally to vest is to be in the employment of the Company at the vesting date. In respect of bonuses paid in 2004, 2005 and 2006, an additional Multiplier Award of shares was potentially receivable by certain executive directors – details of these are shown under Closed Incentive Plans. Following the introduction of the PSP, no further Multiplier Awards have been granted.

Name Number of contingent shares at start of year Number of contingent shares awarded in year Price per share Dividend roll-up shares1 Number of contingent shares exercised in year2 Number of contingent shares at end of year Vesting date Lapse date
  1. The prices used to calculate the dividend roll-up shares were 127.3p, being the market price on 16 April 2008, and 130p, being the market price on 8 October 2008.
  2. The market price on exercise was 134.3p on 7 April 2008 and 134.1p on 29 September 2008 for Ian Cheshire and Duncan Tatton-Brown respectively.
  3. As disclosed in last year’s remuneration report the awards under the KIS Shares scheme were made on 21 April 2008, in respect of the financial year ended 2 February 2008. These awards are structured as nominal cost options (on payment in aggregate of a maximum of £1). They will normally vest in April 2011 and will be exercisable within the period of six months starting from the vesting date.
  4. Duncan Tatton-Brown’s awards vested on 14 October 2008, his termination date, and are capable of exercise during the six-month period following 14 October 2008.
Ian Cheshire 39,685   286.92p   39,685 0 6/04/2008 6/10/2008
  60,471   233.83p     60,471 10/04/2009 10/10/2009
  49,795   277.75p 3,116   52,911 11/04/2010 11/10/2010
    21,1153 126.63p 312   21,427 21/04/2011 21/10/2011
Total 149,951 21,115   3,428   134,809    
Kevin O'Byrne  
Total                
Duncan Tatton-Brown4 44,913   286.92p   44,913 0 14/10/2008 14/04/2009
  10,777   233.83p     10,777 14/10/2008 14/04/2009
  39,867   277.75p 1,876   41,743 14/10/2008 14/04/2009
    44,6173 126.63p     44,617 14/10/2008 14/04/2009
Total 95,557 44,617   1,876   97,137    
Totals 245,508 65,732   5,304 84,958 231,946    

Performance Share awards

Performance Shares will normally vest subject to the Company’s TSR performance relative to the constituents of the FTSE100 over a fixed three-year performance period. The awards for Kevin O’Byrne are subject to the TSR (50%) and EPS (50%) performance targets. Further details of the performance targets are outlined on page 40.

Name Number of Performance Shares at start of year Number of Performance Shares awarded in year Date of grant Price per share Dividend roll-up shares1 Number of contingent shares at end of year Vesting date Lapse date
  • * In accordance with the KIS scheme rules, Duncan Tatton-Brown has the right to exercise his KIS options over the shares that had already been earned in relation to past bonuses for six months from termination until 14 April 2009. The Remuneration Committee also exercised its discretion and allowed the pro-rata vesting of Duncan Tatton-Brown’s PSP awards and his outstanding 2003 ESOS award.
  1. The price used to calculate the dividend roll-up shares was 127.3p, being the market price on 16 April 2008, and 130p, being the market price on 8 October 2008.
  2. As the awards are structured as nominal cost options (on payment in aggregate of a maximum of £1) they can be exercised within a six-month period starting from the vesting date.
Ian Cheshire 117,663   28/06/2006 225.75p 12,463 130,126 28/06/2009 28/12/2009
  107,632   24/10/2006 255.50p 9,537 117,169 24/10/2009 24/04/2010
  99,277   11/04/2007 277.00p 6,213 105,490 11/04/2010 11/10/2010
  159,039   01/10/2007 178.10p 9,952 168,991 01/10/2010 01/04/2011
  1,114,206   01/02/2008 143.60p – 1,114,206 01/02/2011 01/08/2011
Total 1,597,817       38,165 1,635,982    
Kevin O’Byrne 656,392 01/10/2008 131.4p 656,392 01/10/2011 01/04/2012
    656,392 01/10/2008 131.4p – 656,392 01/02/2012 01/08/2012
Total 1,312,784       1,312,784    
Duncan Tatton-Brown* 110,741   28/06/2006 225.75p 9,943 120,684 28/06/2009 28/12/2009
  107,632   24/10/2006 255.50p 9,537 117,169 24/10/2009 24/04/2010
  99,277   11/04/2007 277.00p 6,213 105,490 11/04/2010 11/10/2010
  159,039   01/10/2007 178.10p 9,952 168,991 01/10/2010 01/04/2011
    715,786 01/04/2008 126.63p 10,599 726,385 01/04/2011 01/07/2011
Total 476,689 715,786     46,244 1,238,719    
Totals 2,074,506 2,028,570     84,409 4,187,485    

Award of Matching Shares to Ian Cheshire on 1 February 2008

Type of award1,2 At start of year Awarded during year Vested during the year Lapsed during the year At end of year Market price of shares when award made Qualifying conditions Vesting date3,4 Lapse date
  1. In accordance with the terms of his appointment, the Committee offered Ian Cheshire the opportunity to purchase 266,667 shares in the Company and in return receive a matching award of 200% of salary (i.e. broadly a 4:1 match, he bought 268,924 shares at 148p) subject to performance conditions and his continuing to hold the purchased shares. The value of the matching award was £1,600,000 as of the date of appointment.
  2. No Matching Shares vest unless EPS at the end of the four-year performance period is greater than 15.9p, at which level of performance 15.625% of the award will vest. The percentage vesting increases on a pro-rata basis so that 50% of the Matching Shares vest if EPS is 17.0p. Full vesting occurs if EPS is 19.6p at the end of the performance period with pro-rata vesting between 17.0p and 19.6p.
  3. If Ian Cheshire’s employment terminates before any vesting date by reason of death, injury, ill health, early termination by the Company (other than for cause) or resignation for “good reason” (as defi ned in his service contract), then subject to the discretion of the Remuneration Committee in certain limited circumstances, such of the Matching Shares as can be treated as vested will vest, taking into account EPS performance up to the date of cessation of his employment, but reduced on a time pro-rated basis.
  4. As the awards are structured as nominal cost options (on payment in aggregate of a maximum of £1) they can be exercised within a six-month period starting from the vesting date.
Matching shares granted pursuant to Listing Rule 9.4.2 1,114,206 1,114,206 143.6p EPS 1 February 2012 1 August
2012

ShareSave Option Scheme

A UK ShareSave Option Scheme is open to all eligible employees, including executive directors. As is the case with all savings-related share option schemes open to all employees, there are no performance criteria.

  Number of options  
  At start of year Granted during year Exercised during year Lapsed during year At end of year Option price Date from which exercisable Lapse date
  • * Duncan Tatton-Brown's awards lapsed on 1 October 2008, his termination date.
Ian Cheshire 4,805 4,805 196.67p 01/12/2009 01/06/2010
    8,807 8,807 109.00p 01/12/2011 01/06/2012
Duncan Tatton-Brown* 5,324 5,324 175.60p 01/12/2008 01/06/2009
Totals 10,129 8,807 10,129 8,807      

Closed incentive plans

There are outstanding awards under the Executive Share Option Scheme, as well as Multiplier Awards made in previous years under the KIS Shares scheme that may become exercisable or vest at the end of their respective deferral periods. These are plans that are now closed and under which no further awards will be made. The full details of each can be found in previous annual reports. The outstanding awards are as follows:

Executive share options

The last grants under the Executive Share Option Scheme were made on 17 April 2003. The options vest from three to 10 years of the grant date subject to the satisfaction of a performance condition which generally requires the growth in the Company’s EPS over a three-year period to have exceeded that of the Retail Price Index (RPI) plus 6%. The criteria were set and approved by shareholders when the scheme was established in 1993 and were judged at the time to be appropriate criteria.

  Number of options  
  At start of year Exercised during year Lapsed during year At end of year Option price Date from which exercisable Lapse date
  1. Phantom Options over 91,350 shares were granted to Ian Cheshire in addition to these options at the same price, with the same performance conditions and over the same maturity periods. On exercise, only the cash equivalent to any gain will be paid and disclosed as remuneration at that time.
  2. The performance conditions for all options have been met with the exception of the final grant made on 17 April 2003.
  3. The market price on 26 September 2008, the day Duncan Tatton-Brown undertook his partial exercise, was 134.1p.
Ian Cheshire 45,489 45,489 395.69p 26/10/2004 26/10/2008
  30,520 30,520 589.76p 01/04/2004 01/04/2009
  74,346 74,346 393.43p 17/04/2004 17/04/2010
  69,991 69,991 357.18p 25/09/2004 25/09/2010
  126,231 126,231 209.93p 26/09/2004 26/09/2011
  91,3501 91,350 290.08p 09/04/2005 09/04/2012
  164,144 164,144 194.95p 08/10/2005 08/10/2012
  134,538 134,538 237.85p 17/04/20062 17/04/2013
  736,609 45,489 691,120      
Duncan Tatton-Brown* 72,272 103 72,262 209.93p 26/09/2004 26/09/2011
  26,151 26,151 290.08p 09/04/2005 09/04/2012
  43,600 43,600 194.95p 08/10/2005 08/10/2012
  35,736 35,736 237.85p 17/04/20062 17/04/2013
  177,759 10 177,749      

In the period 3 February 2008 to 31 January 2009, the highest and lowest market price for Kingfisher shares was 153.6p and 91.8p respectively. The market price at close of business on 31 January 2009 was 139.1p.

Multiplier awards relating to prior year KIS Share awards

Bonuses paid under the KIS Shares scheme in April 2005 and 2006 were matched at a ratio of 0.4:1 by a conditional Multiplier award of shares. Vesting of these awards is subject to the TSR performance of the Company against the constituents of the FTSE100 over the three-year period following the year for which the bonus was earned. No vesting will occur at or below median performance. 25% of these shares will vest at above median performance, increasing on a straight-line basis to 100% at above upper quartile performance. In addition, the Remuneration Committee must also be satisfied that the TSR performance is reflective of underlying Company performance for such awards to vest.

Name Multiplier awards at start of year Multiplier awards granted in year Price per share Market price per share on date awarded Multiplier awards lapsed during the year Multiplier awards at end of year Vesting date1 Lapse date
  1. Since the end of the financial year ended 2 February 2008 the TSR performance has been calculated in respect of the potential Multiplier award vesting in April 2008 and median performance was not achieved. Accordingly, this Multiplier award did not vest and therefore lapsed.
Ian Cheshire 15,8741 286.92p 285.50p 15,874 06/04/2008 06/10/2008
  24,188 233.83p 231.25p 24,188 10/04/2009 10/10/2009
Total 40,062     15,874 24,188    
Duncan Tatton-Brown* 17,9651 286.92p 285.50p 17,965 06/04/2008 06/10/2008
  4,310 233.83p 231.25p 4,310 10/04/2009 10/10/2009
Total 22,275     17,965 4,310    
Totals 62,337     33,839 28,498    

Dilution limits

Kingfisher share plans comply with recommended guidelines on dilution limits and the Company has always operated within these limits. Assuming none of the extant options lapse and will be exercised and having included all exercised options, the Company has utilised 2.5% of the 10% in 10 years and 1% of the 5% in 10 years in accordance with the Association of British Insurers (ABI) guidance on dilution limits.

Directors’ pension benefits

Ian Cheshire and Duncan Tatton-Brown have entitlement to part of their pension benefits through the Kingfisher defined benefit pension scheme (subject to the scheme cap) and partly through defined contribution schemes. Kevin O’Byrne only has entitlement to a defined contribution pension.

The following table shows details required under both schedule 7A to the Companies Act 1985 and the Listing Rules as they apply to Kingfisher for the year ended 31 January 2009. In respect of the Companies Act, the details shown represent for the defined benefit section:

  • accrued pension benefits at the relevant dates;
  • the increase in the amount of accrued pension during this year;
  • the transfer value amounts as at 2 February 2008 and 31 January 2009;
  • the increase in transfer value between those dates, net of member contributions paid.
Directors’ remuneration report regulations 2002   Additional listing rules
      Accrued pension   Transfer value   Pension cost
As at the year-end Age Years of service Increase in accrued pension £000 pa 2009 £000 pa 2008 £000 pa   Increase in transfer value £000 (net of director's contributions) 2009 £000 2008 £000   Increase in accrued pension £000 pa (net of inflation) 2009 £000 2008 £000
  1. Accrued pensions and transfer values include employer contributions (by way of bonus surrender) made in March 2004 of £15,000.
  2. Accrued pensions and transfer values include employer contributions (by way of bonus surrender) made in March 2004 of £20,000, in March 2005 of £30,000 and in March 2007 of £30,000.
  3. Ceased serving as a director on 14 October 2008.
  4. The above relates only to benefits accrued in the defined benefit section, and so excludes any defined contribution section or AVC benefits.
  5. A new Transfer Value basis was introduced with effect from 1 October 2008. The figures above have been calculated by reference to the basis in force at the appropriate date.
Ian Cheshire1 49 10 3 23 20   62 277 207   2 10 5
Duncan Tatton-Brown2,3 44 8 2 29 27   65 265 193   1 3 29

The following table shows the employer contributions made to the defined contribution schemes:

  Employer contributions
  1. This figure represents 15% of Kevin O’Byrne’s salary earned in 2008/09 whereas he is entitled to a 20% contribution. 5% is only payable as a lump sum, upon completion
    of one year’s service, into the Kingfisher Pension Scheme defined contribution section in accordance with the scheme rules. Therefore a further £10,346 relating to his 2008/09
    service will be paid in September 2009.
Ian Cheshire £204,960
Kevin O’Byrne £31,0371
Duncan Tatton-Brown £19,492

Remuneration policy for non-executive directors

The Board determines the fees paid to non-executive directors under a policy which seeks to recognise the time commitment, responsibility and technical skills required to make a valuable contribution to an effective Board. During 2008 the basic non-executive director’s fee was increased from £51,500 to £53,300 per annum with effect from 1 August 2008 in line with the 3.5% inflationary increase that was granted to all UK employees. No additional fees are paid for membership of committees. The fee paid for chairing the Audit Committee is £15,000, and the fee paid for chairing the Remuneration Committee is £10,000, each per annum. The fee for the Senior Independent Director is £13,000 per annum.

The fee paid to Daniel Bernard as Deputy Chairman was increased from €206,000 to €213,200 per annum (£142,344 to £172,394) with effect from 1 August 2008 in line with the 3.5% inflationary increase that was granted to all UK employees. The increase in the pound sterling figure for 2008/09 is driven by the change in average exchange rates and reflects that Daniel Bernard is paid in Euros.

The Chairman’s fees are set by reference to his time commitment and relevant benchmark data. The fee paid to Peter Jackson was increased from £284,000 to £294,000 per annum with effect from 1 August 2008.

Daniel Bernard will be appointed as Chairman and John Nelson as Deputy Chairman with effect from 3 June 2009 whereupon their fees will increase to €450,000 and to £110,000 respectively, which have been set with due regard to their time commitments and relevant benchmark data.

Non-executive remuneration

  Total remuneration1
Non-executive director 2008/09
£000
2007/08
£000
  1. Non-executive directors are only paid fees.
  2. Daniel Bernard is paid in Euros.
Peter Jackson 289.0 279.5
Daniel Bernard2 169.4 140.3
John Nelson 73.9 73.0
Phil Bentley 67.4 65.8
Michael Hepher 52.4 50.8
Hartmut Krämer 52.4 50.8
Janis Kong 52.4 50.8
Total 756.9 711.0

Non-executive directors have letters of engagement and not service contracts. The Chairman’s letter of engagement allows for six months’ notice up to the age of 65 when the appointment ends without the need for notice. Other non-executive directors are appointed for an initial period of three years. Their position can be revoked without compensation at any time at the discretion of the Company.

  Date of last letter Unexpired term Total length of service
Peter Jackson 12/02/2009 35 months 3 years and 3 months
Daniel Bernard 17/03/2009 36 months 2 years and 10 months
John Nelson 20/03/2008 22 months 7 years and 3 months
Phil Bentley 12/02/2009 35 months 6 years and 6 months
Hartmut Krämer 12/02/2009 35 months 6 years and 5 months
Michael Hepher 19/03/2007 5months 11 years and 7 months
Janis Kong 17/10/2006 8 months 2 years and 4 months

Directors’ interests

The directors who held office at 31 January 2009 had the following interests in the shares of the Company:

Shares Ordinary shares
31 January 2009
Ordinary shares
2 February 2008
or, if later, on appointment
Phil Bentley 18,097 18,097
Daniel Bernard 10,835 10,651
Ian Cheshire 375,177 342,506
Michael Hepher 1,599 1,599
Peter Jackson 60,000 60,000
Janis Kong 24,000 24,000
John Nelson 43,750 43,750
Kevin O’Byrne 112,994 n/a

Between 31 January 2009 and 25 March 2009 there was no change in the relevant interests of the directors.

Shareholder return

The Company’s TSR (share price growth plus dividends paid) for the five years to 31 January 2009 is shown in the graph below, which plots the value of £100 invested in Kingfisher over the last five financial years, assuming shares awarded in Kesa, when demerged, were sold and the proceeds re-invested in Kingfisher shares. The other line on the graph shows the performance of the FTSE100 Index over the same period.

The Company chose the FTSE100 Index as an appropriate comparator for this graph because the Company has been a constituent of that index throughout the period and its constituents are used as the comparator group for the PSP.

Total shareholder return

Line graph showing total shareholder return chamge for the years 2004-2009

By order of the Board

John Nelson
Chairman of the Remuneration Committee
25 March 2009