Kingfisher : 2022/23 Annual Report and Accounts.

2022/23 Annual Report and Accounts

Kingfisher at a glance

Contents

Strategic Report

• 2 Chair's statement

• 3 Chief Executive Officer's statement

• 5 Our markets

• 6 Our strategy

• 8 Performance against priorities

• 10 Key Performance Indicators

• 12 Business model

• 14 People and culture

• 16 Stakeholder engagement and decision-making

• 23 Responsible Business

• 27 Our response to the Task Force on Climate-related Financial Disclosures

• 36 Non-financial information statement

• 39 Financial review

• 47 Trading review by division

• 51 Risks

• 59 Viability statement

• 61 Going concern

Governance

• 62 Corporate governance

• 64 Board of Directors

• 66 Board composition

• 67 Board activities

• 68 Board effectiveness

• 69 Nomination Committee report

• 71 Responsible Business Committee report

• 73 Audit Committee report

• 77 Directors' remuneration report

• 101 Directors' report

• 104 Statement of directors' responsibility

Financial Statements

• 105 Independent auditors' report

• 116 Consolidated income statement

• 117 Consolidated statement of comprehensive income

• 118 Consolidated statement of changes in equity

• 119 Consolidated balance sheet

• 120 Consolidated cash flow statement

• 121 Notes to the consolidated financial statements

• 167 Company balance sheet

• 168 Company statement of changes in equity

• 169 Notes to the Company financial statements

• 181 Group five year financial summary

• 182 Shareholder information

• 184 Glossary

Financial highlights

For the year ended 31 January 2023

Sales

£13,059m

2021/22: £13,183m

(0.7)%1

Like-for-like2

Retail profit2/margin2

£923m

2021/22: £1,148m

7.1%

(160)bps

Statutory profit - pre-tax and post-tax

Pre-tax

£611m

2021/22: £1,007m

Post-tax

£471m

2021/22: £843m

Total dividend3

12.40p

2021/22: 12.40p

Free cash flow2,3

£(40)m

2021/22: £385m

Net debt2 to EBITDA2

1.6x

2021/22: 1.0x

• 1. Variance in constant currency.

  Gross profit/margin2

  £4,795m

  2021/22: £4,935m

  36.7%

  (70)bps

  Adjusted pre-tax profit2/margin

  £758m

  2021/22: £949m

  5.8%

  (140)bps

  Basic earnings per share (EPS) - adjusted and statutory

  Adjusted 2

  29.7p

  2021/22: 35.2p

  Statutory

  23.8p

  2021/22: 40.3p

  Net decrease in cash

  £(555)m

  2021/22: £(237)m

  Net debt2

  £(2,274)m

  2021/22: £(1,572)m

• 2. Alternative performance measure (APM). See the Glossary on pages 184 to 187 for definitions and reconciliations of APMs.

• 3. The Board has proposed a final dividend per share of 8.60p (FY 21/22 final dividend: 8.60p), resulting in a proposed total dividend per share of 12.40p in respect of FY 22/23 (FY 21/22: 12.40p). The final dividend is subject to the approval of shareholders at the Annual General Meeting on 27 June 2023.

Strategic Report

GovernanceFinancial Statements

Chair's statement

Kingfisher has seen a tremendous amount of change over the last few years as we set about modernising the company and positioning it for future growth. We are now three years into the 'Powered by Kingfisher' strategy and Chief Executive Thierry Garnier and his team have done a great job organising the resources of the Group. This means we can make the most of our overall size and scale while keeping, through our local teams, the majority of operational decisions as close to the customer as possible.

Last year this strategy delivered above average market performance in all our banners together with solid increases in customer satisfaction and colleague engagement. These are the 'vital signs' for a company like Kingfisher and it's encouraging to see them consistently on the rise. At the same time, continued investment in our IT and digital capability is paying dividends and, along with other initiatives, such as the opening of our first Screwfix store in France last October, gives us great confidence in our ability to generate growth in shareholder value going forward.

Our strategy and infrastructure investments are also making Kingfisher a more resilient business, one more capable of absorbing and responding to external shocks, of which there seems to be no shortage. During the year we saw this greater resilience clearly as our supply chain and stock availability held up very well despite the significant sourcing challenges created by repeated Covid-19 lockdowns in China and the impact on energy prices and supplier confidence arising as a result of the war in Ukraine.

In the year, the Group delivered a resilient financial performance, particularly given the year on year comparable and the impact of rapid inflation and rising interest rates on consumer confidence towards the end of the year. Overall revenues for the Group were down 0.7% (3-year LFL up 15.6%),

adjusted pre tax profits at £758 million with statutory pre-tax profits at £611 million, down 39.3%. The Board is proposing a final dividend of 8.60p, which would make the total dividend for the year 12.40p and bring our total return to shareholders in the year to £583 million.

Our purpose is to 'make better homes accessible for everyone'. This is a task that is always worthwhile but perhaps never more so than right now. The pandemic has changed the role of the home with more working from home and with energy management an increasing priority for both households and governments, this is a time when Kingfisher can really step up and help. The recent surge in interest in our energy saving products and services has been remarkable and with the profile of the transition to a net zero economy only increasing, we expect this interest to be sustained. Our offer in this critical area will continue to grow in line with demand and using the Group's scale and design capability, we will look to continue to offer these products at prices that are affordable to the majority.

Underpinning our purpose is a determination to operate the company in a way that is sensitive to the current and future needs of the communities and customers we serve, our colleagues and the planet. Kingfisher has a long history as a pioneer of Responsible Business and we are committed to staying an acknowledged leader in the field. Over the last year we made good progress in a number of important areas. These include the roll out of immersive diversity and inclusion training for senior teams, the creation of new development programmes for store-based colleagues, support for apprenticeship programmes, reducing our carbon emissions, increasing the number of 'sustainable' products we offer and setting new, ambitious targets as part of our net zero commitment. These and other initiatives are covered in detail in this report and will hopefully provide compelling evidence of our determination to play our part as a good corporate citizen.

Our ESG commitments and progress are discussed in detail on pages 23 to 26.

Good governance is an integral part of the Company's success. We have a diverse and balanced Board who make a strong contribution to strategic development and stewardship of the Group. Recently, the Board received inclusive leadership training and completed an externally facilitated Board effectiveness review. The outcome of this review was positive and concluded that the Board operates effectively and well.

In May we were delighted to welcome Bill Lennie to the Board. Bill spent the bulk of his career in the US Home Improvement market and his deep knowledge of the sector has been very much in evidence in his early dealings with both executive and Board colleagues. Bill will be a great asset to the business going forward.

I would also like to thank all my other colleagues on the Board for their continued commitment and support of the business. We have had challenges to face over the past 12 months and the quality of the Board and its collegiate way of working has clearly helped us make good decisions, often at pace. I must also thank Thierry and the team for their tireless efforts to drive the business forward and our wider base of colleagues right across the business who make Kingfisher what it is.

We look forward with confidence. Short term macro economic challenges are clearly present but with a compelling strategy, excellent leadership and the evident commitment of our people, I remain very optimistic about our prospects.

Andrew Cosslett Chair of the Board

20 March 2023

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Kingfisher 2022/23 Annual Report and Accounts

Chief Executive Officer's statement

After two extraordinary years dominated by the pandemic, this year has brought new challenges, as households and businesses across Europe navigate the impact of inflationary pressures.

I would like to thank one more time all Kingfisher colleagues for their hard work to support our customers throughout this time. Thanks to their efforts, the business has delivered a year of solid execution and a resilient performance while continuing to make strategic progress at pace.

A year of solid execution

Kingfisher's financial performance for FY 22/23 was in line with our expectations and guidance, against strong prior year comparatives. Like-for-like sales were 15.6% ahead of pre-pandemic levels, and our sales outperformed home improvement industry growth. Across all our markets, our sales have remained resilient in both DIY and DIFM/trade channels. To reflect our performance, the Board has proposed a total dividend of 12.40p per share, in line with FY 21/22.

We have maintained a sharp focus to deliver on value to our customers during this challenging period for household finances, while at the same time managing our cost inflation pressures effectively. Strong supply chain management has ensured good product availability while keeping a firm grip of our inventories.

Strong progress against our strategic priorities

We are pleased with the progress we have made in the three years since launching our 'Powered by Kingfisher' strategic plan. This has been achieved against the backdrop of an extraordinary operating environment, which has presented challenges as well as opportunities for our business. To reflect the fast-moving world in which we live, we have refreshed our strategic focus areas to ensure data, trade, culture and agility are given increased prominence and focus, and to better align to our investments for growth in multiple areas of the business. You can read more about the refreshed pillars of 'Powered by Kingfisher' on pages 6 to 9.

Our e-commerce sales have increased by 146% over the last three years. This has been driven by improvements to our e-commerce proposition that offer our customers more convenience, faster fulfilment of orders, and broader product choice. To expand choice, this year we launched marketplaces at B&Q in the UK and Brico Dépôt in Spain and Portugal, all of which are performing strongly. Our stores are at the heart of our e-commerce proposition and continue to play a fundamental role, with 91% of online orders picked in store.

Our own exclusive brands (OEB), which represent 45% of Group sales, continue to be a point of differentiation for our banners. During the year, we redefined our OEB strategy around three core pillars: innovation, affordability and sustainability. Moving forward, all new product launches and range reviews will clearly align to these pillars.

Throughout the year, we have continued to take advantage of expansion opportunities for our different banners. Screwfix opened a record 82 new stores in the UK and Ireland in the year, creating over 800 jobs in local communities. We also took the first steps in bringing its proven model to France, with five stores opened between October 2022 and January 2023. In Poland, we opened seven new Castorama stores, bringing its total to 97 stores.

Our compact store format tests in the UK, France and Poland have delivered encouraging learnings and results. In the year ahead, we will continue to test further compact stores in several markets, including B&Q Local in the UK, where we see considerable opportunity to increase our presence in more urban areas.

As a Group, we have been prioritising Responsible Business for over three decades and this year, we continued to make progress against our targets. We exceeded our 1.5°C aligned science-based scope 1 and 2 carbon reduction targets, reducing emissions by 52.7% (FY 19/20: 18.5%). Sustainable

Home Products accounted for £6.2 billion of sales, representing 47% of Group sales (FY 21/22: 44%). This has more than doubled since we established the programme in FY 11/12.

During the year, we expanded our range of energy-saving products and services to help customers save money by improving their homes' energy efficiency. This included launching new energy-saving diagnostic solutions in the UK and France, which help customers create personalised home energy efficiency action plans and access relevant products and services.

Multiple profitable growth opportunities

Kingfisher is well positioned to navigate the year ahead and deliver medium-term profitable growth, while driving strong cash generation. Our banners are diverse, representing the full spectrum of the home improvement market with distinct offers for both DIY and trade customers. We continue to invest for growth and our refreshed strategy provides us with a clear plan to maximise the many opportunities we see ahead of us.

We see significant potential to grow by building on our different banner propositions in new and existing markets. Screwfix France is well positioned to take a share of the trade professional market in France, which has an estimated total market size of over €29 billion, with up to 25 new stores planned for FY 23/24. We are building on our leadership position in Poland, targeting 80 medium-box and compact store openings over the next five years.

We have plans to continue to build our e-commerce offer through greater speed and choice, including further expansion of our marketplace model by growing product ranges and preparing to roll out marketplaces in France and Poland. Leveraging the power of data is another big opportunity, to build customer-centric tools and solutions, support better commercial decision-making, and unlock significant new sources of revenue for the Group. For example, we are exploring opportunities to quickly monetise our data capabilities through retail media (advertising placed within our e-commerce platforms and apps).

Across the Group, we are also strengthening our proposition for trade customers, building on the success of B&Q's TradePoint and the accelerated expansion of Screwfix. This includes exploring dedicated trade counters in France, Poland & Iberia, and developing trade-focused ranges, services and loyalty programmes. Over time, we expect increased trade customer penetration to contribute to higher sales and profit growth.

Kingfisher 2022/23 Annual Report and Accounts

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