Directors' remuneration report
This report has been prepared on behalf of the Board by the Remuneration Committee (the 'Committee') and has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the 'Regulations') issued under the Companies Act 2006 (the 'Act') and describes how the Board has applied the principles relating to directors' remuneration set out in the Combined Code, and complied with the Financial Services Authority Listing Rules.
This report sets out the policy for the year just ended, the forthcoming year, and subject to ongoing review by the Committee, subsequent years. A resolution will be put to the shareholders at the Annual General Meeting on 16 June 2011 asking them to approve this report.
- Since the appointment of Ian Cheshire as Group Chief Executive in January 2008, the Group has performed strongly and made great progress, resulting in Earnings Per Share ('EPS') growth of 93% and similar share price growth. Part of Ian Cheshire's LTIP award made upon appointment, vested in full after the end of the financial year, following the measurement of the Company's Total Shareholder Return ('TSR') performance versus the FTSE 100 in that period, and reflects the recovery of the Group during his tenure. This Total shareholder return – 3 years graph illustrates this performance, and shows the Company's TSR for the three years to 29 January 2011, plotting the value of £100 invested in Kingfisher plc over the last three years compared to the performance of the FTSE100 Index over the same period, placing Kingfisher in the top four performing stocks of the FTSE100 Index in the period. For the purposes of calculating the TSR, the base return index was averaged over each weekday in the one month period from 1 January 2008 to 31 January 2008. The end return was averaged over each weekday in the one month period from 1 January 2011 to 31 January 2011.
- Previously the Committee reported that the executive directors' salaries would be reviewed in January of each year. The Committee reviewed the Group Chief Executive's basic salary and concluded it should remain unchanged at £816,000. The Committee approved an increase for the Group Finance Director in June 2010 of 2.4% to £600,000 in recognition of his contribution to the business. No further increase was awarded in January 2011 and the next review is due in January 2012.
- The Committee reviewed the financial performance measures for the 2010/11 annual bonus award. Despite the continuing challenging global economic climate, the Group produced excellent results in terms of cashflow such that the financial outcomes exceeded the financial targets that had been set. Significant progress also continued with regard to the non-financial measures. Accordingly, both the Group Chief Executive and the Group Finance Director received near maximum bonuses. A third of these bonuses are awarded in the form of deferred shares, which will vest after a three-year holding period contingent on continued employment, and these levels of bonus are commensurate with the level of bonus paid elsewhere in the Group.
- The Committee reviewed the Kingfisher executive remuneration structure for 2011/12, and concluded that three changes are appropriate: (a) the weighting of financial measures under the annual bonus has increased to 60% with the non-financial measures reducing to 40%; (b) executives should receive a single award under the Performance Share Plan ('PSP') of up to 500% of salary in 2011 (instead of three awards of 200% in 2011, 2012 and 2013) with no further awards to continuing executives until 2014, the awards being subject to stretching financial targets and with 50% of any shares which vest being released after three years and 50% after four years. This structure for the awards is felt to be an important incentive to complete the Group's recovery programme over that period. A resolution seeking shareholder approval for an amendment to the rules of the PSP to facilitate this award is included in the Notice of the forthcoming Annual General Meeting; (c) consistent with developments in best practice guidelines the Group's various incentive plans have been amended to give the Committee the ability to claw-back any sums paid to participants in certain circumstances.
- The Company welcomed Andrew Bonfield, Pascal Cagni and Clare Chapman to the Board on 11 February 2010, 17 November 2010 and 2 December 2010 respectively. Details of their terms of appointment and their remuneration can be found later in this report.
The Remuneration Committee
Role and responsibilities
The Committee's primary purpose is to make recommendations to the Board on the Group's framework or broad policy for executive remuneration and its costs. The Board has delegated responsibility to the Committee for determining the remuneration, benefits and contractual arrangements of the Chairman, executive directors, certain senior executives and the Company Secretary, and for overseeing the Group's share-based incentive schemes and bonus schemes. The remuneration of non-executive directors is determined by the Chairman and executive members of the Board.
The Committee recommends and monitors the structure and levels of remuneration of senior managers throughout the Group and for executive directors, ensures that contractual terms on termination, and any payments made are fair to the individual and the Group, ensuring that failure is not rewarded and that the departing manager's duty to mitigate is fully recognised.
The Committee is committed to the principles of accountability and transparency, and to ensuring remuneration arrangements demonstrate a clear link between reward and performance. Operating under delegated authority from and reporting to the Board, its activities are governed by terms of reference which are available from the Company Secretary and can be found on the Company's website www.kingfisher.com.
The Committee comprised the following independent non-executive directors during the financial year to 29 January 2011.
|Committee members||Daniel Bernard|
|Andrew Bonfield (appointed 17 June 2010)|
|Michael Hepher (retired 17 June 2010)|
The Committee is required by its terms of reference to meet at least twice a year, and has a standing calendar of items within its remit. During the year the Committee met nine times. Committee meetings are attended by the Group Chief Executive (other than when his own remuneration is being discussed) who provides advice that is of material assistance to the Committee. The Group HR Director (from her appointment on 6 April 2010) and the Head of Group Reward also attend Committee meetings and provide material assistance and advice on remuneration policy, and the Group Finance Director attends by invitation on matters relating to the performance measures and targets for the Group's share-based incentive schemes. The Company Secretary generally acts as Secretary to the Committee. No member of the Committee has any personal financial interest (other than as a shareholder), conflicts of interests arising from cross-directorships, or day-to-day involvement in running the business. No person plays a part in any discussion about his or her own remuneration. Details of individual attendance are given in the Corporate Governance section.
In 2010/11 the Committee agreed:
- the performance targets for the financial year and progress against those targets;
- the operation of the long-term incentive plans and policy for executive share scheme awards, including the level of individual grants, performance conditions and measurement and validation of the out-turn of prior year awards;
- the review of basic salaries of the Group Executive;
- the policy for the operation of the all-employee share schemes;
- the award of annual incentives based on the prior year's performance;
and in particular the Committee:
- recommended the 2009/10 Directors' Remuneration Report for approval by the directors;
- following approval by shareholders at the last Annual General Meeting, adopted the rules of the Share Incentive Plan (SIP);
- approved the non-financial KPI measures used to determine part of the Group's annual Kingfisher Incentive Scheme ('KIS') bonus plan for 2010/11;
- approved the establishment of a Company Share Option Plan following HMRC approval; and
- reviewed executive pension policy in the light of legislative changes.
The Committee also 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 financial year to 29 January 2011, the following external advisers provided services to the Committee. Unless otherwise stated, the advisers have no other connection with the Group:
|Hewitt New Bridge Street ('HNBS')|
Advice on the ongoing operation of employee and executive share plans and executive remuneration generally.
|Allen & Overy LLP|
Legal advice on service and employment contracts and for other employment and remuneration issues in relation to the executive directors. (Allen & Overy LLP also provide advice to the Group on other legal matters.)
Advice on the wider review of remuneration policy and benchmarking on the market competitiveness of remuneration for executives in the UK and overseas. (Towers Watson also provide advice to the Group on pensions and related matters.)
The Group's remuneration strategy is to attract, retain and motivate executives of the highest quality, incentivising them to deliver exceptional performance aligned with the interests of the Company's shareholders and to deliver the Group's business plan. The remuneration strategy continues to ensure that a significant element of executives' remuneration remains 'at risk'.
The key principles of the Group's remuneration policy are to:
- provide executives with a remuneration package that recognises the experience of the individual concerned and the role fulfilled;
- ensure performance-related remuneration constitutes a substantial proportion of the remuneration package;
- encourage a high-performance culture by offering substantial reward only for exceptional performance;
- be competitive in the market in which the Group competes;
- be fair and transparent; and
- ensure remuneration arrangements apply consistently throughout the Group.
The Committee intends to continue this policy and is satisfied that there is an appropriate balance between the fixed and variable elements of pay, as described within this report.
Summary of key elements of executive directors' remuneration
|Element of remuneration package||Objective||Policy||Operation|
To help recruit and retain executives.
To reflect an individual's role, experience and contribution to the Group.
Reviewed annually in January each year.
Benchmarked against suitable comparator companies.
Salaries are reviewed against personal performance and Group financial targets and take into account salary increases within the Group.
Salary is supplemented with normal benefits available to senior managers including car allowance and medical insurance.
Incentivise executives to achieve/exceed annual financial, strategic and personal objectives.
Maximum award payable for stretching targets. Two-thirds of bonus payable in cash. One-third of bonus payable in deferred shares to be held for three years before vesting.
0-200% of annual salary and reflects performance against stretching financial and personal targets.
Includes the provision for claw-back of the deferred bonus element.
Performance Share Plan
Incentivise executives to achieve superior returns for shareholders.
Retention of executives over the performance period of the awards.
The primary long-term incentive plan for executives.
Awards of conditional shares with vesting dependent on stretching performance measures. (Note: shareholder approval being sought for revision of the scheme rules in 2011/12).
Aligned to shareholder interests.
Currently awards made annually of up to 200% of executives' base salary, with vesting after three years based on achievement against targets.
The 2011 awards of 500% of annual salary (instead of three awards of 200% in 2011, 2012 and 2013) will be subject to stretching performance targets measuring the three financial years to January 2014 but only 50% of any shares earned will vest then with the balance remaining contingent on continued employment for a further year. No further award will be made until 2014.
Reward sustained contribution.
Provide competitive retirement benefits.
Company contributes to defined benefit/defined contribution schemes.
Group Chief Executive: A member of the defined benefit arrangement in respect of a notional earnings cap (currently £123,600) and also receives a Company contribution of 30% of salary above that cap into a defined contribution arrangement.
Group Finance Director: Receives a Company contribution of 20% of salary into a defined contribution arrangement.
Share ownership guidelines
To align interests of executives and shareholders.
The Group Chief Executive is required to build and maintain a shareholding with a value equivalent to 200% of base salary.
The Group Finance Director is required to build and maintain a shareholding with a value equivalent to 100% of base salary.
Executives are expected to build a shareholding through the vesting of shares under the Group's share-based incentive schemes.
Until the requisite holding is achieved, executives are prohibited from selling shares obtained through the Group's incentive plans (except to satisfy tax and NIC liabilities).
Alignment with shareholder interests
The Committee proactively consults with its largest shareholders and their representative bodies regarding its remuneration policy to ensure that their views are understood and duly taken into account in its deliberations, particularly in relation to changes in Kingfisher share-based incentive scheme arrangements and wider trends in executive remuneration. The interests of shareholders are also considered when structuring remuneration packages. Annual bonus objectives focus on a mixture of financial and non-financial measures to ensure the operational success of the Group, whilst sustained performance is rewarded through incentive measures designed to improve shareholder returns. Short-term rewards are further aligned with shareholders' interests through the compulsory deferral of one-third of annual bonuses into share awards under the Kingfisher Incentive Share Scheme (the 'KIS'). Long-term rewards are similarly aligned with shareholders' interests by the requirement that executives hold a specified percentage of their annual salary in shares of the Company, and that they may not sell shares vesting under these plans until a minimum shareholding has been achieved.
Alignment with Group strategy
The executive directors were incentivised to deliver milestones addressing the Group's strategic plans for 'Delivering Value' to:
- drive up B&Q UK's profit;
- exploit our UK Trade opportunity;
- expand our total French business;
- roll out in Eastern Europe;
- turn around B&Q China;
- grow Group sourcing; and
- reduce working capital.
Please see the Delivering Value section of this report for further information on progress made in achieving the Group's 'Delivering Value' strategy.
Planned future changes
The structure for remuneration for executives for the year 2011/12 was debated by the Committee and remains broadly similar to previous years. However, whereby in 2010/11 50% of the annual bonus was measured against financial targets and 50% against non-financial targets, for the 2011/12 financial year, the split between financial and non-financial measures will be re-balanced so that 60% of the bonus is payable against financial objectives and 40% against non-financial objectives. There is no change to the level of maximum bonus opportunity of 200% of annual salary. Given the achievements on reducing debt and generating cash, the financial target for 2011/12 will focus on profit.
The Committee is recommending a change to the structure of the long-term incentive scheme and has recommended proposals for changes to the Performance Share Plan ('PSP') awards to be made in 2011. The revised PSP would grant certain executives an award of 500% of their annual base salary with shares vesting subject to suitably stretching earnings per share ('EPS') and Kingfisher Economic Profit ('KEP') targets over the three financial years to January 2014. 50% of any vesting shares would be released to participants in 2014 with the remaining shares held over for release in 2015. This award would replace the 200% annual award with no further awards made under the PSP to those executives participating in the 2011 award until 2014. This is to enable recipients to receive a single award in 2011 in lieu of awards which would otherwise have been made in 2011, 2012 and 2013. This is felt to be both appropriate to incentivise the completion of the recovery programme and in the interests of shareholders (as the single award is smaller than the sum of the individual awards would have been). The awards will be subject to two separate performance targets:
Earnings Per Share ('EPS')
50% of the shares subject to an award will be subject to an EPS condition against the following targets:
|Compound annual growth in EPS||Percentage of this part of the award that will vest|
The definition of EPS remains unchanged from prior awards and compares the Company's EPS for the final financial year in the performance period (i.e. the year to January 2014) to the EPS for the year to January 2011 (20.5p).
Kingfisher Economic Profit ('KEP')
50% of the shares subject to an award will be subject to a KEP target with the following targets:
|Aggregate KEP over the performance period||Percentage of this part of the award that will vest|
KEP is defined as consolidated EBIT, lease adjusted – (Capital employed, including capitalised leases, adjusted from pensions x WACC). The exchange rates assumed at the outset will be fixed for the period as will the Company's cost of capital of 6.8%. These targets compare with a KEP for the year to January 2011 of £68.4m. Subsequent Annual Reports will disclose the Company's performance to date against the KEP targets.
The Committee considers these targets to be the most appropriate measures over the next three years, to incentivise the Group's highly respected management team to focus on and deliver against the completion of the Group's recovery programme which requires each of; top-line growth, keen cost control and efficient use of shareholders' capital. The structure of these awards will extend to the senior executive team across the Group (approximately 50 individuals) although the two targets will be re-expressed as divisional ones where relevant. The Committee considers it important to operate a coherent arrangement across the entire leadership team. Senior executives below Board level received a similar one-off award in 2008 on the launch of the recovery programme under Ian Cheshire's leadership, and the Committee believes that was an important contributor to the significant growth in shareholder value over the last three years and that it is appropriate to repeat such an approach as the Company moves into the second phase of that strategy.
In addition, the Committee has recently amended the rules of the PSP, consistent with best practice guidelines, to include provision for claw-back in certain circumstances.
The making of these awards is conditional on shareholders approving the amendment to the rules of the PSP to increase the individual limit at the Annual General Meeting.
During the year, the Committee debated the impact of changes in UK pension legislation reducing the annual allowance for pension contributions. From April 2011, when an executive's pension contributions breach the annual allowance in a tax year, the Company pension contribution will be converted to a cash supplement.
Executive directors' appointments terms & remuneration
Executive directors' service contracts
Ian Cheshire: 28 January 2008.
12 months' notice by either the director or the Company.
Payment in lieu of notice on a phased basis at a monthly rate of 15% of annual salary in respect of Ian Cheshire, and at a monthly rate of 12% of annual salary in respect of Kevin O'Byrne, for a maximum of 12 months from the termination date1.
Lower amounts are payable if the director commences lower-paid employment during the 12-month period following cessation of employment, and payments cease immediately when employment providing the same or higher value remuneration is started.
As described in this report.
The Company provides a range of additional benefits, including medical insurance, life assurance cover equal to four times base salary, a subsidised staff canteen, a staff discount card, 30 equivalent working days' holiday per year and a company car or cash allowance.
Reimbursement of reasonably incurred costs in accordance with their duties.
Sickness or injury
In line with senior management terms i.e. 100% basic salary for 26 weeks, and 75% thereafter (without benefits).
During employment and for 12 months after leaving.
Overview of executive directors' remuneration
The remuneration package for executive directors consists of the following elements: base salary, annual bonus including the deferred share award under the Kingfisher Incentive Scheme (KIS), the long-term incentive under the PSP, the Sharesave Option Scheme for all-employees (ShareSave), pension contributions and non-cash benefits. The Committee considers that the total remuneration package links corporate and individual performance with an appropriate balance between short and long-term elements, and fixed and variable components.
Table 1 below shows the breakdown of the remuneration package into its main constituent elements and assumes maximum payment of annual bonus and maximum vesting of PSP deferred share awards, the Company's long-term incentive plan.
The first chart below gives the proportions of fixed cash, variable cash and deferred shares which make up the executive directors' salary, bonus and long-term incentive opportunity according to achievement of objectives at stretch. Fixed cash comprises base salary, whilst variable cash is the 67% of annual bonus paid in cash, and the share element includes the 33% of bonus deferred into shares, and the PSP. The second chart shows the proportions of base salary, cash and deferred bonus and PSP and indicates the total remuneration 'at risk'.
Remuneration elements split between cash and deferred shares at stretch
Fixed and 'at risk' elements of remuneration at stretch
Note: the fixed elements in the charts above include pensions and benefits. For the purposes of the above, the historic practice of awarding 200% of base salary annually under the PSP is assumed.
The Committee believes that the targets set for the different elements of performance-related remuneration are both appropriate and stretching in the context of the business environment and the challenges with which the Group is faced. The performance-related remuneration constitutes a substantial proportion of the remuneration package, and is 'at risk', being subject to achievement of performance hurdles, deferral periods during which the individual must remain employed, and fluctuations in the market price of shares. The maximum bonus payable under the KIS is made up of 133% of salary in cash and 67% in deferred forfeitable shares, and the maximum vesting under the PSP is currently 200% of salary in deferred forfeitable shares. Accordingly, the maximum awards under the KIS and PSP result in 75% of total remuneration being performance-related.
Components of executive directors' remuneration 2010/11
Details of each individual element of the remuneration package are given below.
Executive salaries are reviewed with effect from January each year and are generally set to be competitive, taking into account the prevailing market and economic conditions, affordability, the level of increases awarded to employees generally and the individual's contribution.
In June 2010 the basic salary of Kevin O'Byrne was increased by 2.4% to £600,000. Ian Cheshire proposed that his salary was not reviewed in January 2011 and no further review was applied to Kevin O'Byrne. The base salaries of the executive directors as at 23 March 2011 were £816,000 for Ian Cheshire and £600,000 for Kevin O'Byrne.
The annual bonus is earned by the achievement of performance targets set by the Committee at the start of each financial year and is delivered under the KIS.
The KIS comprises the Kingfisher Cash Incentive Scheme 2003 ('KIS Cash Scheme') and the Kingfisher Incentive Share Scheme 2003 ('KIS Share Scheme'). Senior executives may receive a performance-related cash bonus under the KIS Cash Scheme, and a contingent share award under the KIS Share Scheme, in the proportions of 67% of the bonuses earned being payable in cash, and 33% in deferred shares. The vesting of the deferred shares are subject to a three-year holding period, with the shares being subject to forfeiture should the executive leave the Group during the holding period as a result of voluntary resignation or dismissal for cause. Participants granted deferred shares under the KIS Share Scheme are entitled to receive a dividend equivalent payment in the form of additional deferred shares, which is equal to the value of dividends that would have been earned over the holding period. These additional shares are conditional upon the original deferred shares vesting. The award of deferred shares is subject to a claw back provision, whereby unvested deferred shares previously granted under the KIS Share Scheme may lapse if the Committee decides the grant of deferred shares was not justified.
Included as an element of a KIS award, individuals now receive a grant under the Company Share Option Plan (CSOP) an HMRC approved plan, which provides tax and NIC advantages for participants and potential NIC savings for Kingfisher at no additional cost for the Group. The CSOP is underpinned by a matching fixed value element of the KIS, however, the value of the total award remains unchanged.
The maximum bonus is considered in the light of market practice for companies of a similar size and industry sector. The maximum bonus payable is 200% of base salary, which remains unchanged from last year.
The executive directors' targets for the 2010/11 bonus were based on both corporate and individual objectives and were structured equally between financial and non-financial measures as in the previous year as set out below.
operating cash flow
|Weighting at maximum bonus||50%||20%||30%|
The non-financial measures included KPIs of Group sourcing achievement; employee engagement and market share; plus a personal performance element.
The outcomes achieved against each measure are summarised below.
|Measure||Ian Cheshire||Kevin O'Byrne|
earned as a % of
annual base salary
earned as a % of
annual base salary
Further details of the awards under the KIS Cash Scheme and KIS Share Scheme reflecting these outcomes for 2010/11.
Performance Share Plan ('PSP')
The PSP remains the primary long-term share incentive plan for the top senior executives, which allows a maximum annual award not exceeding 200% of base salary or 300% of base salary in exceptional circumstances. The PSP currently runs over a period of three years and has performance hurdles requiring Kingfisher's Total Shareholder Return ('TSR') to exceed median level of TSR measured against the FTSE 100, and adjusted Earnings Per Share ('EPS'). Relative TSR was considered as a valid benchmark as it measures the performance of executives in terms of delivery of shareholder return against that of other businesses. The Committee chose the FTSE 100 as the comparator group because of the 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 Committee. This relative measure is coupled with EPS as a driver for absolute performance.
The TSR and EPS performance targets for all PSP awards in 2010/11 are set out in the notes to the PSP awards table.
Shares delivered on the vesting of an award 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 the PSP are normally purchased in the market by the Kingfisher Employee Benefit Trust. As described earlier in this report, the Committee has reviewed the appropriateness of the quantum and performance measures under the PSP during the year and subject to shareholder approval at the Annual General meeting on 16 June 2011, awards in 2011/12 will be made on the basis set out in planned future changes.
Other long-term incentive plans
Apart from the Sharesave Option Scheme and those described above, all other option and incentive arrangements for executive directors 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.
Ian Cheshire is a member of the main defined benefit arrangement, the Kingfisher Pension Scheme, and subject to the scheme cap (currently £123,600). Following his appointment as Group Chief Executive, Ian Cheshire also receives a 30% Company contribution, on his base salary above the pension cap, into defined contribution arrangements. Kevin O'Byrne commenced employment after the defined benefit section had closed to new members and thus is a member of the defined contribution arrangements and receives a Company contribution of 20% of base salary.
Each executive director is entitled to a car or car allowance, an allowance for financial planning, medical insurance, life insurance equivalent to four times salary, a subsidised staff canteen, a staff discount card and 30 equivalent working days' holiday per year.
Outside appointments for executive directors
Subject to the rules governing conflicts of interest, the Company encourages its executive directors to hold non-executive roles outside the Group as it recognises that such roles can broaden experience and knowledge which can benefit the Group. Subject to the Committee's agreement, any fees may be retained by the individual. Kevin O'Byrne is a non-executive director of Land Securities Group plc, and acts as Chairman of their Audit Committee; he is paid £60,000 and £17,500 respectively for fulfilling these roles and retains these fees. In January 2011, Ian Cheshire became a non-executive director of Whitbread plc and was appointed Chairman of their Remuneration Committee; he is paid £55,000 and £10,000 respectively for fulfilling these roles and retains these fees. In January 2011, Ian Cheshire was invited to act as the lead non-executive member of the Department for Work and Pensions Board. He waived his right to the fees payable for this role.
Share ownership guidelines
The Group Chief Executive and Group Finance Director are required to build a shareholding in the Company. The table below details the minimum shareholding required and the date by which that shareholding must be acquired. Shares which have not yet vested under any share-based incentive plans are not taken into account in applying this test.
|Executive||Minimum shareholding||Date by
|Shareholding as at
28 January 2011
(29 January 2010)
|% of basic salary
as at 28 January 2011
(29 January 2010)1
|Ian Cheshire||200%||28 January 2013||509,794 (410,792)||160% (131%)|
|Kevin O'Byrne||100%||1 October 2013||133,577 (112,994)||57% (50%)|
Executive directors' remuneration
The remuneration paid to the executive directors for the 2010/11 financial year is set out in the table below:
|Base salary||Total benefits1||Cash bonus2||2010/11||2009/10|
Tabular information relating to directors' interests in shares and executive directors' pension arrangements
Directors' interests in shares of Kingfisher plc
The directors who held office at 29 January 2011 had the following interests in the shares of the Company:
29 January 2011
30 January 2010
There were no changes in the interests of the directors between 29 January 2011 and 23 March 2011.
KIS Share awards
Awards of contingent shares, in respect of the financial year ended 29 January 2011, are due to be made in April 2011, vesting in April 2014, to Ian Cheshire and Kevin O'Byrne under the KIS Share Scheme to the value of £455,872 and £335,200, respectively, at the average mid-market price over the three dealing days prior to the date of grant in April 2011. As the awards will be made after publication of the accounts for the financial year ended 29 January 2011, the detail will be disclosed 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.
|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 year||Number of contingent shares at end of year||Vesting date||Lapse date|
Performance Share awards
|Name||Number of performance shares at start of year||Number of performance shares awarded in year||Date of grant||Price per share when awarded||Dividend roll-up shares1||Number of performance shares exercised during year||Number of performance shares lapsed during year||Number of performance shares at end of year||Vesting date||Lapse date|
- The price used to calculate the dividend roll-up shares was 237.95p, being the market price on 5 May 2010, and 228.35p, being the market price on 6 October 2010.
- The vesting date for this award was accelerated to 25 March 2010 at the discretion of the Committee.
- Subject to the performance condition having been partially met, 44.6% of these awards became exercisable. The remaining shares lapsed on the vesting date.
- The market price on exercise for Ian Cheshire was 225.01p on 26 March 2010. In line with the Group's share ownership guidelines, Ian Cheshire sold sufficient shares to meet his tax liabilities, i.e. 19,882 shares were sold and he retained 28,486 shares.
- The market price on exercise for Ian Cheshire was 234.50p on 1 October 2010. In line with the Group's share ownership guidelines, Ian Cheshire sold sufficient shares to meet his tax liabilities, i.e. 40,257 shares were sold and he retained 38,480 shares.
- Award subject to TSR performance targets only. TSR conditions require the Group's TSR to be at least median plus 1% for 15.625% to vest and upper quintile plus 1% for it all to vest. Intermediate performance vests on a sliding scale basis between these points.
- Award is subject to EPS and TSR conditions (50% of the shares to each). The EPS condition requires EPS at the end of the three-year performance period to be at least 15.9p for 15.625% of that part to vest and 19.6p for all of it to vest. The TSR condition requires the Group's TSR to be at least median plus 1% for 15.625% to vest and upper quintile plus 1% for it all to vest. In both cases, intermediate performance vests on a sliding scale basis.
- Award is subject to EPS and TSR conditions (50% of the shares to each). The EPS condition requires EPS at the end of the three-year performance period to be at least 20p for 15.625% of that part to vest and 23p for all of it to vest. The TSR condition requires the Group's TSR to be at least median plus 1% for 15.625% to vest and upper quintile plus 1% for it all to vest. In both cases, intermediate performance vests on a sliding scale basis.
Award of Matching Shares to Ian Cheshire on 1 February 2008
|Type of award1,2||At start of year||Dividend roll-up shares4||At end of year||Market price of shares when award made||Qualifying conditions||Vesting date3||Lapse date|
|Matching Shares granted pursuant to Listing Rule 9.4.2||1,193,477||28,142||1,221,619||143.6p||EPS||01/02/2012||01/08/2012|
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, 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|
Closed incentive plans
Executive share options
There are outstanding awards under the Executive Share Option Scheme that may become exercisable or vest at the end of their respective deferral periods. This plan is now closed and no further awards will be made. The full details of the plan can be found in previous Annual Reports. The performance conditions for all awards under this plan have now been met. The last grants under the Executive Share Option Scheme were made on 17 April 2003. The outstanding awards are as follows:
|Number of options|
|At start of year||Exercised during year||Lapsed during year||At end of year||Option price (pence)||Date from which exercisable||Lapse date|
In the period 1 February 2010 to 28 January 2011, the highest and lowest market price for Kingfisher shares was 271.3p and 198.5p respectively. The market price at close of business on 28 January 2011 was 255.6p.
Kingfisher share plans comply with recommended guidelines on dilution limits and the Company has always operated within these limits. The current Association of British Insurers ('ABI') guidance on headroom limits provide that overall dilution under all plans should not exceed 10% over a ten year period in relation to the Company's issued share capital, with a further limitation of 5% in any ten year period on executive plans. Assuming none of the extant options lapse and will be exercised and having included all exercised options, the Company has utilised 4.53% of the 10% in ten years and 3.67% of the 5% in ten years in accordance with the ABI guidance on dilution limits.
Directors' pension benefits
Ian Cheshire has an entitlement to part of his 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 an entitlement to a defined contribution pension.
The following table shows details required under both Schedule 8 to the Accounting Regulations under the Companies Act 2006 and the Listing Rules as they apply to Kingfisher for the year ended 29 January 2011. In respect of the Companies Act 2006, 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 31 January 2010 and 29 January 2011; and
- the increase in transfer value between those dates, net of member contributions paid.
The table below relates only to benefits accrued in the Final Salary section, and excludes any Money Purchase section or AVC benefits.
|Accrued pension||Transfer value||Pension cost|
|Age||Years of service||Increase in accrued pension
|Increase in transfer value £000 (net of director's contributions)||2010/11
|Increase in accrued pension
£000 pa (net of inflation)
- Accrued pensions and transfer values include employer contributions (by way of bonus surrender) made in March 2004 of £15,000.
- The above relates only to benefits accrued in the Final Salary section, and also excludes any Money Purchase section or AVC benefits.
The following table shows the employer contributions made to the defined contribution schemes in relation to service during the financial year to 29 January 2011:
Total Shareholder Return
The first graph below shows the progress of the Company since the appointment of Ian Cheshire in January 2008. The graph illustrates the Company's TSR for the three years to 29 January 2011, plotting the value of £100 invested in Kingfisher plc shares over the last three financial years compared to the performance of the FTSE100 Index over the same period.
The Company's TSR for the five years to 29 January 2011 is shown in the second graph below, which plots the value of £100 invested in Kingfisher plc shares over the last five financial years. 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 – 3 years
Total shareholder return – 5 years
Chairman's & non-executive directors' appointment, terms and fees
Daniel Bernard was appointed Chairman on 3 June 2009, for an initial fixed three-year term, unless terminated earlier in accordance with the Company's Articles of Association, or by either party giving the other not less than six months' prior written notice. His appointment is documented in a letter of appointment and he is required to devote no fewer than two to three days a week to his duties as Chairman. His appointment as Chairman will automatically terminate if he ceases to be a director of the Company. His fee, determined by reference to his time commitment and relevant benchmark data, was set at €450,000 per annum, and is paid to a service company, Provestis, which also receives a monthly contribution of €5,000 towards the cost of running an office in Paris. The fee payable to the Chairman was increased from 1 February 2011 from €450,000 p.a. to €461,250 p.a. an increase of 2.5%.
Non-executive directors are appointed under letters of engagement. Appointments have historically been for an initial period of three years and invitations to act for subsequent three-year terms are subject to a review of performance, and taking account of the need to progressively refresh the Board.
The appointment may be terminated by either party giving the other not less than three months' prior written notice, unless terminated earlier in accordance with the Company's Articles of Association, and the Company has no obligation to pay compensation when their appointment terminates.
Non-executive directors are subject to re-appointment by shareholders at the Annual General Meeting following their appointment, and subsequently at intervals of no more than three years. In advance of the implementation of the UK Corporate Governance Code, the Company has voluntarily adopted the requirement for all directors to submit themselves for re-appointment at each Annual General Meeting, accordingly, all directors will be offering themselves for re-appointment at the Company's Annual General Meeting to be held on 16 June 2011.
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. The Board will also review information on fees paid to non-executive directors in similar companies and will review fees for non-executive directors in January each year.
All fees payable to non-executive directors were increased by 2.5% with effect from 1 February 2011. The fee for a non-executive director increased from £55,000 p.a. to £56,375 p.a.; the fee payable to the Chairman of the Audit Committee increased from £17,000 p.a. to £17,425 p.a.; the fee payable to the Chairman of the Remuneration Committee increased from £10,000 to £10,250; and the fee payable to the Deputy Chairman increased from £45,000 p.a. to £46,125 p.a.
|Date of appointment||Expiry of current term||Total length of service at 29 January 2011
or, if earlier, on retirement
|Daniel Bernard1||24/05/2006||03/06/2012||4 years 8 months||384.6||329.5|
|Phil Bentley2||04/10/2002||–||7 years 5 months||9.4||68.3|
|Andrew Bonfield3||11/02/2010||10/02/2013||11 months||68.0||–|
|Pascal Cagni4||17/11/2010||16/11/2013||2 months||11.2||–|
|Clare Chapman5||02/12/2010||01/12/2013||1 month||8.9||–|
|Anders Dahlvig||16/12/2009||15/12/2012||1 year 1 month||55.0||6.6|
|Michael Hepher6||01/09/1997||–||12 years 9 months||20.9||53.3|
|Janis Kong||08/12/2006||07/12/2012||4 years 1 month||55.0||53.3|
|John Nelson7||11/01/2002||10/01/2011||9 years||110.0||98.0|
In the independent auditors' report, Deloitte LLP refer to the parts of the Directors' remuneration report that are subject to audit. These comprise the following sections in this report: the disclosures under headings 'Executive directors' remuneration', 'Directors' interests in shares of Kingfisher plc', 'KIS Share awards', 'Performance Share awards', Sharesave Option Scheme', 'Closed incentive plans', 'Directors' pension benefits' and 'Non-executive remuneration'.
For and on behalf of the Committee
Chairman of the Remuneration Committee
23 March 2011