2016/17 Annual Report & Accounts ONE

OUR JOURNEY HAS BEGUN Contents Financial highlights

UNDERLYING ADJUSTED Strategic Report † † 1 Chairman’s statement PRE-TAX PROFIT PRE-TAX PROFIT 2 Our journey has begun ONE AMBITION £787m £743m 6 Our ambition + 14.7% + 8.3% 7 Our home improvement ecosystem 8 Our framework for action 2016/17 £787m 2016/17 £743m 9 Business model ONE PLAN 2015/16 £686m 2015/16 £686m 12 Chief Executive Officer’s statement 15 Our transformation ONE YEAR 18 Progress against Year 1 strategic milestones UNDERLYING BASIC ADJUSTED BASIC 21 Our Year 2 strategic milestones EARNINGS PER SHARE† EARNINGS PER SHARE† 22 Long-term roadmap ONE KINGFISHER 25.9p 24.4p 26 People: our journey so far + 17.7% + 10.9% 28 Sustainability 30 Financial Review 38 Risks 2016/17 25.9p 2016/17 24.4p 2015/16 22.0p 2015/16 22.0p Governance 47 Our leadership team 48 Board of Directors 52 Corporate Governance FULL YEAR STATUTORY 60 Audit Committee Report DIVIDEND† PRE-TAX PROFIT† 64 Nomination Committee Report 66 Directors’ Remuneration Report 10.4p £759m 89 Directors’ Report + 3.0% + 48.2% 92 Directors’ Statement of Responsibility

Accounts 2016/17 10.4p 2016/17 £759m 93 Independent auditor’s report to the 2015/16 10.1p 2015/16 £512m members of Kingfisher plc 100 Consolidated income statement 101 Consolidated statement of comprehensive income 102 Consolidated statement of changes in equity STATUTORY BASIC EARNINGS 103 Consolidated balance sheet POST-TAX PROFIT† PER SHARE† 104 Consolidated cash flow statement 105 Notes to the consolidated financial statements £610m 27.1p 143 Company balance sheet + 48.1% + 52.2% 144 Company statement of changes in equity 145 Notes to the Company financial statements 156 Group five year financial summary 2016/17 £610m 2016/17 27.1p 157 Shareholder information 2015/16 £412m 2015/16 17.8p 158 Forward-looking statements 159 Glossary

† See the Financial Review on page 30. Underlying measures exclude transformation costs and exceptional items. Adjusted measures exclude exceptional items. Above measures are on a reported currency basis. Kingfisher at a glance

Kingfisher plc is a home improvement company with nearly 1,200 stores in 10 countries across Europe. We employ 77,000 people and nearly six million customers shop in our stores and through our websites and apps every week. Our ambition is to become the leading home improvement company. We believe everyone should have a home they feel good about, so our purpose is to make home improvement accessible for everyone.

UK & IRELAND GERMANY 812* 19

RUSSIA 21 FRANCE ** 221 POLAND 75

ROMANIA SPAIN 28 15

TURKEY† PORTUGAL 3

1,194† 77,000†§ stores colleagues

UK & Ireland France Other International

* B&Q 295, Screwfix 517. † Turkey joint venture not consolidated. ** Castorama 102, Brico Dépôt 119. § Total, not full-time equivalent (FTE). Geographic contribution

18% 44% £1,992m £4,979m

TOTAL SALES GERMANY 19 £11.2bn

RUSSIA 21 38% £4,254m

POLAND UK & Ireland France Other International 75 ROMANIA 16% 42% 15 £136m £358m

RETAIL PROFIT TURKEY† £847m

42% £353m

Sustainability achievements 28% 96% of our sales come from of the wood and paper sustainable products, which used in our products is have a positive or much lower responsibly sourced. impact on people and the environment.

For information about our sustainability programmes see pages 28 to 29. Strategic report

Chairman’s statement

It is a pleasure to report another solid year of progress at Kingfisher. The financial performance was ahead on all key measures with the business delivering a solid start to the transformation programme, which we announced a year ago. The plan aims to create a single, unified company where customer needs come first. The transformation also aims to deliver £500 million of sustainable annual profit uplift by the end of Year 5, over and above ‘business as usual’. Turning to the figures for the year, underlying pre-tax profit was up 14.7% to £787 million. This was driven by sales growth in the UK and Poland as well as £30 million of benefits from our Goods Not For Resale programme, which is delivering earlier than planned. In addition, favourable currency movements contributed £52 million on the translation of non-Sterling retail profits. The full year dividend is 10.4p, up 3.0%. In addition, we returned £200 million to shareholders via a share buy-back programme. In the UK & Ireland, retail profit grew by 9.9% to £358 million. B&Q grew like-for-like sales by 3.5%, of which 2.6% resulted from sales transference associated with store closures. Screwfix grew like-for-like sales by 14%. During the year, Screwfix opened its 500th store, with an increased overall target of 700 stores in the UK. In France, retail profit was broadly flat at £353 million, despite weaker sales. In our Other International operations, retail profit increased by 14.5% to £136 million, driven by Poland. We have also delivered our key strategic milestones for the first year. These include achieving 4% unified ranges across our business and implementing the unified IT platform at B&Q, with the roll-out to Castorama France now underway. Our second year will be even bigger in terms of activity. We are aware of the challenges as we move into the second year of our transformation and are taking steps to ensure we manage the step-up in activity. We are committed to being a truly sustainable company. Today, 28% of our sales come from sustainable home products, which have a lower environmental impact. Our Offer & Supply Chain function is integrating sustainability into the development of our unique and unified ranges so we can have an even greater positive impact in future. In March, we announced that I will be standing down from the Board at our Annual General Meeting (AGM) in June after eight years as Chairman, and 11 on the Board. It has been a privilege to have chaired this business and I am very proud of its progress. This is a particularly exciting period for Kingfisher, with an ambitious transformation plan and a dynamic leadership team, led by Véronique Laury. We are now at the end of the first year of our plan, and I believe it is the right time for a new Chairman to oversee its full delivery. I am delighted that Andy Cosslett will be appointed to the Board as a non-executive director and Chairman-elect on 1 April 2017, to succeed me as Chairman in June 2017, with shareholders’ approval. Andy is a very experienced board director, having been CEO of Intercontinental Hotels Group for six years, as well as having a strong track record in consumer-related businesses, such as Unilever and Cadbury Schweppes. I would like to take this opportunity to welcome Andy to the Board and wish him every success as Chairman. And finally, I would like to pay tribute to the 77,000 colleagues who serve our customers every day. Their hard work and commitment is the lifeblood of the business.

Daniel Bernard Chairman

www.kingfisher.com 1 Our journey has begun

Just over a year ago we announced our transformation plan, focused on putting customer needs first. This report provides updates on our ambition, our plan, our progress in the first year and our journey to create ONE Kingfisher.

ONE ONE AMBITION PLAN

Our ambition is to become the leading home The ONE Kingfisher five year plan, which improvement company. At Kingfisher we started in 2016/17, will leverage the scale of believe everybody should be able to have a the business by creating a unified company, home they can feel good about, so our where customer needs always come first. purpose is to make home improvement Our intention is that this five year accessible for everyone. transformation plan will deliver a £500 million sustainable annual profit uplift by the end of Year 5, over and above ‘business as usual’.

Find out more: pages 5 to 9 Find out more: pages 11 to 15

2 Kingfisher plc | Annual Report 2016/17 Strategic report

ONE ONE YEAR KINGFISHER

This is the first year of our five year Through our ONE Kingfisher ambition, we transformation plan. It has been a very are reorganising ourselves to operate as one productive and important year, which has company. We are also developing a new delivered sales and profit growth. This culture of curiosity, simplicity, humility, performance has been achieved alongside excellence and working together as one. delivering the key first year Because our colleagues are the ones who strategic milestones. are making our ambition a reality, we want them to feel good about working at Kingfisher. We also aim to be a truly sustainable company, because we believe a good home is a sustainable one.

Find out more: pages 17 to 23 Find out more: pages 25 to 29

www.kingfisher.com 3 4 Kingfisher plc | Annual Report 2016/17 ONE AMBITION

Our ambition is to become the leading home improvement company. At Kingfisher we believe everybody should be able to have a home they can feel good about, so our purpose is to make home improvement accessible for everyone.

www.kingfisher.com 5 Our ambition Our ambition is to become the leading home improvement company. We believe everyone should have a home they feel good about, so our purpose is to make home improvement accessible for everyone.

The home is at the heart of people’s lives. After their loved Lots of things are changing for customers: ones, there is nothing more important for people than their –– demographics: 30-45% of homes in Western Europe are home. But many people don’t have the home that they want single households; or they deserve. That is why 170 million households across Europe undertook home improvement projects last year(1). –– urbanisation: today, 54% of the world’s population lives in urban areas, which is expected to increase to 66% by 2050(3); The home improvement market is huge. There are 320 million –– the internet: there are more than 3 billion(4) internet users homes in Europe, which are mostly old. The average age of around the world today. housing stock in Europe is between 50 and 60 years. And the European home improvement market is worth £235 billion. Their expectations are changing too. They want great prices Out of household spending, housing (including home and convenience. They want autonomy and help. They want equipment and maintenance) is the top priority for people, inspiration and technical support. They want to shop in stores above food, transport and leisure(2). and online. Across Europe, people find that starting, completing and We have an opportunity to mobilise the desire that people keeping up with improvements to their homes is more difficult have to improve their homes and meet customers’ demands than it needs to be. They don’t have the skills, knowledge, in a way they didn’t expect. By embracing this challenge resources, inspiration, support, time or muscles! and this opportunity, we will become the leading home improvement company. Despite all these challenges, people remain determined, (1) Source: Eurostat, National Statistical Office, Kingfisher Usage and Attitudes survey by because having a good home is a major source of happiness Harris interactive-2015. and pride. Ask anyone who has ever swung a hammer, tiled a (2) Source: Eurostat Households statistics (Europe 28) + ‘The EU in the World Report floor, or painted a room, and they’ll tell you that, once it’s done, 2015’ (Russia). (3) Source: www.un.org/en it’s all worth it. (4) Source: www.InternetLiveStats.com There is an opportunity to help more people do more in their homes by solving what they call their home improvement “nightmare”. We at Kingfisher want to unlock this opportunity. We are going to really understand customers’ needs, their home improvement journeys, the way they live, and the way they shop.

6 Kingfisher plc | Annual Report 2016/17 Strategic report

Our home improvement ecosystem Our market is a large ecosystem, rather than traditional, separate segments.

The tools

Helpers Media

Friends Homes

Home Digital Stores improvers

Extended family

Pros

HOME IMPROVERS HELPERS Our customers are the millions of home improvers who want to improve Even if people desire to improve their homes, they are not always able, their homes; whether they be an owner or a renter, whether they live in or they do not always want, to do it on their own. Outside help is often a flat or a house, whether they have a garden or not. Some of them have needed to get things done right, especially for bigger jobs or where home improvement skills, some don’t. Some of them have money, some people lack skills or confidence. This is when they call on their helpers. less so. This could be the neighbour who does small jobs, the handy uncle who is willing to get involved, or the professional tradesperson. At Kingfisher, we stand for being for all home improvers. And they are many: three-quarters of the population of Europe visited a home THE TOOLS improvement store last year(1). For most customers, the ‘tools’ of their home improvement project HOMES invariably start with digital, whether that be researching for ideas and inspiration, ‘how to do it’ videos or price comparisons. Home At the heart of our customers’ lives are their homes. People have an improvement is something that people want to feel and see. emotional connection with their home. It is where they raise their families, So the second ‘tool’ in home improvement projects is our stores. see their friends and express themselves. People undertake home improvement: because their family is changing, their life is changing and so their home needs to adapt and evolve; for functional reasons; and for aesthetic reasons.

(1) Kingfisher Usage and Attitudes survey by Harris Interactive-2015.

www.kingfisher.com 7 Our framework for action

actions7

These are the seven actions we will do together to achieve our ambition.

We will think of customer needs first

We will design a seamless customer process

We will create a unique and leading offer with an integrated supply chain

We will create a leading customer experience in our stores

We will be a truly sustainable company

We will work as One

We will be low cost always

8 Kingfisher plc | Annual Report 2016/17 Strategic report

Our business model We want to create good homes by making home improvement accessible for everyone. We will achieve this by delivering on our strategy and thereby creating value for our customers, our colleagues, our shareholders, our suppliers and broader society.

Our customers

…WE DEVELOP …WE MEET THOSE …WE DO THIS A DEEP UNDERSTANDING CUSTOMER NEEDS ALL THE BY WORKING OF CUSTOMER NEEDS… WAY THROUGH THEIR PROJECT… AS ONE…

How they use their homes Unified & Unique Offer Colleagues

What they need to improve Ranges which meet customers’ Involved colleagues with the right their homes needs training to help customers

How they undertake Retail Operations Driving Sales home improvement Stores that are easy to shop, the Through more people doing way customers want to shop home improvement, which creates growth Digital Operational Efficiency Support customers through every part of their home improvement Leverage our scale, simpler and journey more effective ways of working, low cost always

Sustainability

Source and operate responsibly and use resources efficiently

Creating value for…

CUSTOMERS COLLEAGUES SHAREHOLDERS SUPPLIERS SOCIETY Homes that are good Rewarding work, good Total Shareholder Developing shared Employment, to live in, with better working environment, Return value in the supply operating sustainably products, higher consistent and fair chain and community quality, lower prices reward and recognition, involvement opportunities for development

Read about our strategy on pages 11 to 15

www.kingfisher.com 9 10 Kingfisher plc | Annual Report 2016/17 ONE PLAN

The ONE Kingfisher five year plan, which started in 2016/17, will leverage the scale of the business by creating a unified company, where customer needs always come first. Our intention is that this five year transformation plan will deliver a £500 million sustainable annual profit uplift by the end of Year 5, over and above ‘business as usual’.

www.kingfisher.com 11 Chief Executive Officer’s statement Starting with the customer first, we made a commitment to make home improvement accessible for everyone, and we are changing our business to support this ambition.

12 Kingfisher plc | Annual Report 2016/17 Strategic report

In January 2016, the leadership team and I set out our plan The benefit to customers is a choice of unique and higher to transform Kingfisher and to become the leading home quality products at lower prices, alongside significant business improvement company. We have visited thousands of people’s benefits such as higher sales and improved processes. We homes over the past few years to listen and learn directly from have successfully unified 4% of our products (cost of goods our customers what the reality of their lives in their homes is sold) including batteries, tool storage and kitchen sink ranges. like. Starting with the customer first, we made a commitment This will increase to 20% next year. to make home improvement accessible for everyone, and we In 2017 we are launching ONE Kingfisher’s first unique are changing our business to support this ambition. ranges, designed, developed and priced affordably based on Since then we have been working hard across the business deep customer insights into how they live. The first product towards the strategic milestones we set out for the first year, ranges are for Outdoor and Bathroom which are rolling as well as focusing on ‘business as usual’. The commitment out over the year to our stores. The new Outdoor products and dedication of our people is what is making our progress include durable and easy-to-install modular fence panels, and success possible, and I am really pleased with what we uniquely designed sheds and garden furniture with built-in have achieved this year. storage. In the Bathroom category, the clever new ranges are designed to make the most of limited space in what is generally regarded as the busiest and most space constrained room in the house. The ranges are supported by a brand new “We set ourselves a big challenge, and advertising campaign developed to connect with the real lives of customers. Teams right across Kingfisher have worked I am delighted with our performance. together to bring these ranges to life and I would like to We have delivered our key strategic congratulate everyone involved. Digital is another key strategic pillar in our plan. We want to milestones for Year 1.” deliver a stronger digital offer to our customers. Behind the scenes, we have completed the roll-out of our unified IT platform at B&Q stores ahead of plan, and have almost finished with back office and supply chain. We are progressing with Before I talk about the future, let me take a look back at what the roll-out in Castorama France too. We are also continuing we have done over the last 12 months. We set ourselves a big to invest in our website capabilities, and we are developing a challenge, and I am delighted with our performance. We have digital platform to help our customers through every step delivered our key strategic milestones for Year 1. We have also of their home improvement journey. I believe these solutions delivered both sales and profit growth, driven by the UK and are revolutionary and will be a game changer in the future. Poland, and we have benefited from operational efficiencies The third transformational pillar is Operational Efficiency where coming through earlier than planned. we have achieved savings ahead of plan, driven mainly by our We have progressed well towards creating a unified, unique Goods Not For Resale programme. and leading home improvement offer. We know that our Alongside these pillars, Retail Operations is a key focus area customer needs across our markets are more similar than for us. Last year we launched four Big Box best practice stores, different, and we have begun unifying our offer to answer in the UK, France, Poland and Russia and early results are their needs. encouraging. Cross-functional and market teams worked as one to build the approach together. In addition, we celebrated the opening of our 500th Screwfix store in the UK, and a further 10 in Germany.

www.kingfisher.com 13 CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED

It has been a busy and exciting time for our business and I am pleased with our performance this year, as well as the delivery of our key Year 1 milestones. We have learned a lot along “As I go around our business visiting the way and we have taken on board these learnings as we stores, distribution centres and offices, prepare for our second year of the plan, and start planning for Year 3. In 2017/18 the level of activity across the company will I am constantly impressed by the increase, and we are ready for this. dedication, enthusiasm and expertise Over the course of the year, I have strengthened our leadership team with two key Group Executive appointments. of our people.” Jean-Paul Constant joined us in the summer as Chief Sales and Retail Operations Officer after spending 30 years at Decathlon in the UK, France and Australia. Jean-Paul is leading the Looking ahead, we are in a globally challenging political and ONE Kingfisher Retail Operations strategy for the company, economic environment. Some events occurred last year that working closely with the CEOs of our retail operations. Alastair were not widely expected, like the result of the EU referendum Robertson joined as our Chief People Officer in October after in the UK, and other equally unpredictable events may still holding senior roles, most recently at Tetra Pak and C&A. He happen in the future. Longer term, supported by the expertise will drive our vitally important people agenda. In addition, Marc and energy of our colleagues, we remain confident in our Ténart was appointed to the role of CEO of Kingfisher France, ability to deliver our plan, which is our key growth driver, both and will have responsibility for Castorama and Brico Dépôt in from the financial benefits the transformation will unlock and France. Marc has held a number of senior roles at Kingfisher, the stronger business it will create. most recently as CEO of Castorama France. In June our Chairman, Daniel Bernard, will step down after I would like to take the opportunity to say a few words about serving 11 years on the Board, and eight as Chairman. I would our people. As I go around our business visiting stores, like to take the opportunity to personally thank Daniel for his distribution centres and offices, I am constantly impressed by support and counsel to the business. His deep understanding the dedication, enthusiasm and expertise of our people. Our of retail, his passion for people and his great leadership, have colleagues are a vital part of our journey and one of the key been invaluable to Kingfisher, the Board, the leadership team strengths of our business. This year some of our businesses and of course, to me. He has overseen new strategic thinking won awards for being great places to work. Congratulations as well as the successful first year of transformation with to Screwfix in the UK, Brico Dépôt in Spain and Castorama challenge and dedication. I am happy that Andy Cosslett will in Poland. join the Board in April and succeed Daniel as Chairman in June. Andy’s consumer industries experience from companies such as Unilever, Cadbury Schweppes and Intercontinental Hotels “Next year the level of Group, will be a great asset and addition to the Board. I am looking forward to working with Andy and the Board as we activity across the company progress our plan. will increase, and we are Véronique Laury ready for this.” Chief Executive Officer

14 Kingfisher plc | Annual Report 2016/17 Strategic report

Our transformation In January 2016 Kingfisher announced the ONE Kingfisher plan. This plan will leverage the scale of the business by creating a unified company, where customer needs always come first.

The focus, over the five years of the plan, will be on three key pillars: creating a unified, unique and leading home improvement offer; driving our digital capability; and optimising our operational efficiency. Overall, this five year transformation plan aims to deliver £500 million of sustainable annual profit uplift by Year 5, over and above ‘business as usual’. By this we mean that without the transformation we would expect performance to be broadly in line with the macroeconomic backdrop in our respective markets. Until we have unified our customer offer, we will have limited expansion, the focus of which, in the medium-term, will be Screwfix both in the UK and in Europe.

BUSINESS AS USUAL TRANSFORMATION

Expansion Unified Operational EBIT & Unique Digital Efficiency uplift Offer Market £350m £50m £100m £500m We know that our customer This consists of The biggest opportunity is Expected to generate needs are already more two programmes: in unifying around 90% of £500 million of similar than different across £1.2 billion Goods Not For sustainable annual –– investing in our all our markets. Resale (GNFR) spend. This profit uplift by the core e-commerce will be achieved through end of Year 5. Going forward, we will move platforms by leveraging a combination of cost to having a unified and our Screwfix best-in- savings and working in a unique offer. This will deliver class capability (‘Brilliant simpler, more effective way. significant benefits for our Basics’); and customers, such as newer –– building capability to Read more on page 20 products, higher quality and enable us to unlock better sustainability, all at more of our customers’ the best prices. There will complex home also be significant benefits improvement journeys. to the business, including higher sales and improved Read more on page 19 sourcing efficiencies.

Read more on page 18

For a review of what we have identified as the principal risks to delivering our strategy see page 38.

www.kingfisher.com 15 16 Kingfisher plc | Annual Report 2016/17 ONE YEAR

This is the first year of our five year transformation plan. It has been a very productive and important year, which has delivered sales and profit growth. This performance has been achieved alongside delivering our key first year strategic milestones.

www.kingfisher.com 17 Progress against our Year 1 strategic milestones

UNIFIED, UNIQUE We have delivered the key first AND LEADING OFFER year strategic milestones of our We have started unifying our offer. Unified This will deliver significant customer & Unique ambitious five year transformation benefits (newer products, higher Offer plan. The following pages provide quality, better sustainability, lower prices, simpler ranges, clearer more detail behind each one. merchandising and better packaging) alongside significant business benefits (higher sales, fewer Stock Keeping Units (SKUs), fewer suppliers, cost price reduction (CPR) and improved processes). Achieve 4% unified cost of goods sold Achieve 4% unified cost of goods We have unified 4% of COGS across the year with an exit Unified sold (COGS) rate of 8%, including air treatment, light bulbs, kitchen sinks & Unique and ladders. Sales excluding clearance on those ranges Deliver new ONE Offer & Supply offer were slightly ahead of last year, with cost of change and CPR Chain Organisation delivering in line with expectations. On these ranges we have reduced the total number of SKUs across the company from c.28,000 to c.7,000, without impacting the choice on offer to customers in each country. The number of suppliers of these Complete unified IT platform roll- ranges has reduced from 840 to 130. out in B&Q(1) and start Castorama Digital France roll-out In addition, having undertaken in-depth studies of customer needs for outdoor and bathroom ranges, we are starting to Build Digital ‘Brilliant Basics’ land our first unique ranges across Kingfisher. These comprise platform for B&Q features such as slim bathroom storage solutions, that make

(1) Substantially complete. the most of limited space; easy-to-store, space efficient outdoor furniture and low maintenance, easy-to-install Complete the closure modular fencing. of around 15% surplus space Deliver new ONE Offer & Supply Chain Organisation Operational at B&Q (65 stores) Efficiency We are moving away from an organisation structure Deliver £20 million of benefits with nine buying and logistics teams, in nine Operating from unified GNFR programme Companies which source and merchandise their own ranges independently. Instead, we are reorganising as ONE organisation, starting with our offer, with planning underway to develop an integrated supply chain network. New unified global functions and roles started from June 2016, mostly as a result of internal moves, leading to lower transformation exceptional costs than originally anticipated for this year. New range teams, located across the UK and France are working closely with Operating Companies, who retain responsibility for activities such as trading, range implementation, local pricing and customer needs.

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www.kingfisher.com Digital

NEVA FENCE SYSTEM NEVA fence Neva and flexible The easy-to-use design and practical has endless system the style to possibilities, bringing indoor build, with mix- It is simple to outdoors. bespoke panels and posts for and-match of materials. in a variety combinations

DRIVING OUR DIGITAL DRIVING OUR DIGITAL CAPABILITY The implementation of a unified IT our ONE enabler of is a key platform Kingfisher plan. It will also provide a with a seamless significant opportunity, for our digital offer and stronger substantially increase to customers, sales and digital penetration. roll-out in B&Q and Complete unified IT platform roll-out France start Castorama quarter, in the first was completed roll-out The B&Q store now and supply chain ahead of plan, with back office were pilot stores Six Castorama substantially complete. half, with the wider in the second launched successfully underway. now roll-out B&Q for Build Digital ‘Brilliant Basics’ platform platforms, e-commerce in our core investing This involves our and leveraging enabled by the new unified IT platform, best-in-class capability. Screwfix digital upweighted benefit from to The UK has started at and new checkout search site improved marketing, for being further developed are All these areas Screwfix. a new also developing are We and castorama.fr. both diy.com launch during 2017. due for mobile platform, company-wide DENIA GARDEN FURNITURE of wooden range This contemporary and extending folding features furniture cushion an innovative as solutions as well chairs and store and easy-to-carry box and benches. INDUS SHED metal shed ofOur ‘Little House’ is the only It is a hybrid betweenits kind on the market. in aa house, a shed and a greenhouse, build, itScandinavian design. Simple to novice two for hours three should only take construct. to home improvers Launch of unique gardenLaunch ranges and outdoor Ultimately, improvements. them make and watched space outdoor and gardens they use their how about of customers thousands to talked We with combined functionality, and great things. They want comfort want the same fundamental markets our across that customers discovered we and clean; and that store around, move easy to that are assemble; products get home and easy to are that products modern design. They want range of outdoor exciting an created we’ve That’s why affordable. they want things that are And crucially, weather! in the European durable are andstores will only find in our that our customers products unique outdoor we launched new, This spring, Kingfisher. unique to that are products realities of their lives. the reflect designed to online, and that are Using new hand held devices at B&Q, supported by the unified at B&Q, supported new hand held devices Using IT platform Progress against our Year 1 strategic milestones continued

OPTIMISING OUR OPERATIONAL Like-for-like sales transference benefit of 2.6% during the year EFFICIENCY has supported the business case for the closures. In the first The main driver will come from unifying Operational quarter B&Q outsourced the remaining lease exits to a third party via a lease liability transaction. Of the 15 exits secured around 90% of the £1.2 billion of Efficiency annual spend on Goods Not For Resale. in 2016/17, 11 were undertaken by this third party. Of the 65 This programme is a combination of stores, we have now secured exits on a total of 55. cost savings and an opportunity to Deliver £20 million of benefits from unified work in a simpler and more effective GNFR programme way across the business. Alongside helping us to work in a simpler more effective Complete closure of around 15% surplus space way, we have achieved cost savings on categories reviewed at B&Q (65 stores) so far. During the year, we achieved £30 million of benefit, The closure programme is now complete with 35 stores £10 million ahead of our target at the start of the year, closed during 2016/17, taking the total to 65. reflecting early delivery of the plan.

RETAIL OPERATIONS Alongside these three strategic pillars, which collectively drive the £500 million of sustainable profit uplift by the end of Year 5, we are also working on our Retail Operations. In this area last year, we launched four Big Box best practice stores, in the UK, France, Poland and Russia in a first step towards convergence and early results are encouraging. In addition, we opened 60 Screwfix outlets in the UK and 10 in Germany.

Big Box best practice stores Screwfix 500th store In the summer of 2016 we opened four Big Box best practice Screwfix reached a major landmark when it opened its 500th store in the stores in the UK, France, Poland and Russia. They bring together UK, in Enfield, north London. Screwfix has opened one store per week, on the best things we do across the company, marking a step- average, for the past six years. change in how we work together to make our customers’ shopping experiences as easy and enjoyable as possible. For example, lighting and decor displays take their inspiration from France, tools from Poland, and garden centres from the UK. Similarly, bathroom displays have been reimagined to better reflect how they might look in our customers’ own homes. We’re constantly testing new formats for our customers, so this isn’t the store of the future, but it’s a step in the right direction and we’re really proud of what we’ve achieved together.

Clockwise from top left: Russia, UK, Poland, France.

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www.kingfisher.com – how and when we clear is nowwe and when – how clearing of old ranges enable a consistent to best practice by group supported and proposition availability maximise customer to approach, has started cost. Clearance while minimising the financial track; on and is so far physically we – how of new ranges remerchandising space store 25% of our company-wide remerchandise with resourcing best practice by group supported is now and plans in place; change –managing the volume of organisational the widerto approach identified the need have we ensure to releases’ as a series of ‘change transformation and prioritisation. cross-visibility appropriate – – – PREPARING FOR YEAR 2 YEAR FOR PREPARING and learnings, as outlined below, key on board taken have We of transformation of the challenges as the level aware are we activity increases: – – –

Deliver a furtherDeliver £20 million unified GNFRof benefits from programme Achieve 20% unified cost 20% unified Achieve of goods sold (COGS) unified 2 of three-year Year Deliver out alongside roll IT platform ‘Brilliant Basics’

Offer Digital Unified Unified & Unique & Unique Efficiency Operational Operational The strategic milestones for 2017/18 are set out below: 2017/18 are for milestones The strategic We are well set up to deliver Year 2 Year deliver set up to well are We alongside of our transformation, 3. Year for preparing Our Year 2 strategic milestones 2 strategic Year Our A clear long-term roadmap

2015/16 2016/17 2017/18 2018/19

NEW UNIFIED AND UNIQUE OFFER Unified & NEW OFFER AND SUPPLY CHAIN ORGANISATION Unique offer ‘CUT THE TAIL’

UNIFIED IT PLATFORM ROLL-OUT

Digital DIGITAL ‘BRILLIANT BASICS’ DIGITAL ‘BRILLIANT BASICS’

DIGITAL ‘BRILLIANT BASICS’ CUSTOMER JOURNEYS

B&Q STORE CLOSURES Operational GOODS NOT FOR RESALE (GNFR) Efficiency FURTHER OPERATIONAL

RETAIL BEST PRACTICES STORE OF THE FUTURE

Retail SCREWFIX UK & EUROPE RETAIL EXPANSION Operations RETAIL EXPANSION (EXCLUDING SCREWFIX)

22 Kingfisher plc | Annual Report 2016/17 Strategic report 23

2017/18 2017/18 www.kingfisher.com strategic milestones strategic Deliver a furtherDeliver £20 million of unified GNFRbenefits from programme of concept store develop to Start the future outlets in the UK Open 50 Screwfix Deliver Year 2 of three-year unified 2 of three-year Year Deliver alongside roll-out IT platform ‘Brilliant Basics’ Achieve 20% unified cost of unified 20% Achieve goods sold and started (1) 2016/17 strategic strategic 2016/17 milestones delivered milestones Substantially complete. Completed closure of around 15% of around closure Completed at B&Q (65 stores) surplus space £30 million of benefits Delivered unified GNFR programme from of(£10 million ahead of target £20 million) best Big Box Launched four in the UK, France, stores practice and Russia Poland outlets in the Opened 60 Screwfix UK and 10 in Germany Castorama France roll-out France Castorama Built Digital ‘Brilliant Basics’ B&Q for platform Completed unified IT platform unified IT platform Completed in B&Q roll-out (1) Achieved 4% unified cost ofcost 4% unified Achieved goods sold & Supply new ONE Offer Delivered Chain Organisation 2020/21 2019/20 EFFICIENCY INITIATIVES STORE OF THE FUTURE STORE CUSTOMER JOURNEYS CUSTOMER FURTHER OPERATIONAL DIGITAL ‘BRILLIANT BASICS’ DIGITAL NEW UNIFIED AND UNIQUE OFFER RETAIL EXPANSION (EXCLUDING SCREWFIX) (EXCLUDING EXPANSION RETAIL SCREWFIX UK & EUROPE RETAIL EXPANSION RETAIL SCREWFIX UK & EUROPE 24 Kingfisher plc | Annual Report 2016/17 ONE KINGFISHER

Through our ONE Kingfisher ambition, we are reorganising ourselves to operate as one company. We are also developing a new culture of curiosity, simplicity, humility and excellence and working together as one. Because our colleagues are the ones who are making our ambition a reality, we want them to feel good about working at Kingfisher. We also aim to be a truly sustainable company, because we believe a good home is a sustainable one.

www.kingfisher.com 25 People: our journey so far

Our transformation plan is being delivered by people across Kingfisher. Everyone within Kingfisher – from store colleagues, Aspire Talent Programme to logistics managers, to buyers, to our CEO – has a vital role to play in helping us to achieve our ambition. We recognise that B&Q’s Aspire Talent Programme offers fast-paced and change is hard and that the pace at which we are changing challenging structured learning, designed to get colleagues is fast. So the aim of our People strategy is to ensure our to where they want to go, but quicker than if they did it colleagues are inspired and engaged, skilled and supported by themselves. It’s a framework of development for those to deliver great performance and an outstanding customer identified as having talent, drive and the potential to experience. We want to engage and enable colleagues to work grow their B&Q career. It’s completed within a six-month towards creating ONE Kingfisher, develop as individuals, deliver period alongside their current role, with a further four the brand promise and grow. months to consolidate and apply their learning before the final Spotlight event. This marks the completion of the To achieve this, our Chief People Officer, Alastair Robertson, programme for the Aspirees, giving them the opportunity is working with the Human Resources leaders from across to share their progress with guests from around the the company to review and develop our People philosophy business. This year, 258 colleagues have completed the and plan. We are focusing on what engagement means and programme, with 167 from our stores and 91 from our how we leverage it during periods of transformation. We are Store Support Office. also developing our reward mechanisms and improving our learning and development abilities for both our colleagues and our customers. We are building an environment where the value of working in Kingfisher is recognised as greater than the value of going to work. We want our people to get more out of working for us than they put in.

Offer & Supply Chain One of the major People initiatives of the past year has been the creation of Kingfisher’s new Offer & Supply Chain (OSC) function, with dedicated teams in Range, Sourcing, Commercial and the support functions.

“We want our people to get more out of working for us than they put in.”

OSC colleagues with Chief Offer & Supply Chain Officer, Arja Taaveniku (front left).

26 Kingfisher plc | Annual Report 2016/17 Strategic report 27 www.kingfisher.com Castorama Poland was awarded the “Investor in Human“Investor the was awarded Poland Castorama Institute by the Management Observatory Capital” award in Poland. Spain of the ‘Best Workplaces Dépôt Spain came top Brico over employing companies for 2016’ list, in the category topped theretailer has time that a 1,000 people. It is the first time that Brico consecutive in Spain. It is the fifth ranking in this list. Dépôt Spain has appeared Screwfix was named one of the Best Places to Work in the to named one of the Best Places was Screwfix Awards. Choice UK by Glassdoor’s Employees’ Engagement for a number of awards received Kingfisher During the year, as a being a the company engagement, which recognised good employer: Steps’ and ‘Fast Track’ programmes are programmes Track’ ‘Fast and Steps’ st fully accredited with City & Guilds and the Institute of with City & Guilds and the Institute fully accredited 2, 3 & 4 qualifications, and Management Level Leadership on the programmes 820 colleagues with approximately in 2016/17. our for a new learning strategy developing are We of home their knowledge enhance to colleagues ranges and and our new unified product improvement customers. to provide the service that we to improve Castorama and Brico Dépôt France work in partnership with in partnership work Dépôt France and Brico Castorama apprentices recruit schools to and business universities The placements. degree and master’s undergraduate for placement range of in-store a wide offers programme were of 713 apprentices opportunities. In 2016/17, a total Dépôt France. and Brico Castorama across recruited that develop a number of programmes runs Screwfix the shop floor all the way from people in their careers, store Their roles. and leadership into management management ‘1 – – – – 713 apprentices were recruited across Castorama and Brico Castorama across recruited were 713 apprentices Dépôt France. ACHIEVEMENTS THIS YEAR ACHIEVEMENTS and Development Training – – Sustainability: being a truly sustainable company

At Kingfisher we believe that a good home is a sustainable We are working to integrate responsible sourcing of wood and home. We want to support our customers in making paper into our processes for unified sourcing to enable us to sustainable choices, at affordable prices. We will make further improve performance in future years. our home – our business – sustainable too. We aim to have a positive impact by helping to protect and As we transform our business we are working as ONE restore forests. For example, our partnership with the RSPB Kingfisher to embed sustainability into our ranges. We are and their Birdlife partners is supporting their efforts to restore developing the tools, accountabilities and processes to make 100,000 hectares of Indonesian rainforest. This has enabled sustainability part of how our people work in our Operating the replanting of areas of forest and provided training and Companies, our global functions, our stores, and with economic opportunities for indigenous communities. our suppliers. ENERGY AND CARBON In 2012 we launched Net Positive – our aspiration to help Our energy saving products help customers save money by customers create sustainable homes, to be restorative to the reducing how much energy they use. Our customers have environment, and to improve life in the communities where saved 12.8TWh of energy through sales of such products we operate and in our supply chain. Since then, we have made and services since 2011/12. We estimate this could save our strong progress and we achieved many of our milestones for customers over £840 million every year (based on the average 2016/17. UK household energy bill). We are in the process of reviewing our sustainability goals We are making savings in our business by improving energy to make sure they fully align with and support our business efficiency. We will have installed renewable energy generation, transformation. We will build on what we have learnt and the such as solar panels, at three stores and four distribution progress made to date for the next phase of our sustainability centres by April 2017, with plans underway for another three journey. A full update against our targets will be included in our distribution centres and 10 stores during 2017. Also in 2017, Sustainability Report, which will be published in June 2017. our UK operations will be moving to 100% renewable power, SUSTAINABLE HOME PRODUCTS which will make a significant contribution to reducing our carbon footprint. We have cut our property carbon intensity Our sustainable home products help our customers create by 25% since 2010/11. A breakdown of our carbon footprint good homes while having a positive or much lower impact on is shown in the Directors’ Report on page 89. people and the environment. Today, 28% of our sales come from sustainable home products (2015/16: 28%), generating COMMUNITIES £3.1 billion for the business. During the year 40% of sales at We have supported 1,453 community projects since B&Q came from sustainable home products, far exceeding 2012/13. We continue to evolve our approach to community our group target. investment to ensure it fully supports our ambition. Our Offer & Supply Chain Sustainability Director and product We have established a new partnership with the British sustainability experts are working with our product leads, Red Cross to support people affected by local and designers, engineers and marketers to integrate sustainability international emergencies. into the development of our unique and unified ranges and customer communications. We have updated our Sustainable Home Product Guidelines to make them easier to use and published them on our Sustainability – what our customers think website (www.kingfisher.com/shpguidelines). The guidelines We want to have a positive impact by helping our customers to live are endorsed by Arja Taaveniku, our Chief Offer & Supply Chain sustainably. We carried out research during 2016/17 to deepen our Officer. We have also created sustainability roadmaps with understanding of customer attitudes to sustainability and make sure we know targets for each of our seven range categories and will launch what really matters to them. Our research covered 45 households in five sustainability training for all colleagues in our Offer & Supply markets and included visits to customer homes and their local stores. Chain function. The research showed that for many, making sustainable choices is often too WOOD AND PAPER complex or time consuming. People expect big brands to take a lead and We have been working on the responsible sourcing of wood to make sustainability simpler. They are most motivated when sustainability and paper for many years. Now, over 96% of the wood and helps them to save money, or when it is better for their health and wellbeing paper used in our products is responsibly sourced. and that of their family.

28 Kingfisher plc | Annual Report 2016/17 Strategic report 29 www.kingfisher.com Better packaging for customers Better and the environment range tap our unified kitchen for New packaging our customers for and is better is saving resources which is 30% in a triangular box come now Taps too. design. This packaging smaller than the previous and each year material of packaging 45 tonnes saves load, in each can be transported taps means more easy and fuel use. The packs are costs freight reducing and widely recyclable. We our customers open for to all our unified design for the packaging reviewing are right for it is always sure make to and unique ranges and right and products our brands right for customers, the environment. for We have integrated the standards into our unified vendor our unified into the standards integrated have We against our standards suppliers audit key and we contract our training are We framework. based on our risk assessment teams commercial our unified professionals, procurement can be The standards on our standards. suppliers and key at www.kingfisher.com/sustainability. on our website found Modern slavery recognise We of modern slavery. any form tolerate do not We It is our that no supply chain is without risk of modern slavery. these risks and work understand we ensure to responsibility them. Following mitigate to with our suppliers in partnership are of the UK’s Modern Slavery we Act, the introduction on modern slavery. our due diligence improve to working in our Modern Slavery will be provided information More which will be published on Statement, Act Transparency in June 2017.our website

). 2 Solar roof panels for B&Q to in the estate was the latest in Poole Our B&Q store solarroof panels. This is the largest solar with be fitted and complements done on a store have installation we lighting that was installed previously. LED the internal that to equivalent energy The installation will produce and will reduce a year, for 90 homes power needed to by 23% per consumption grid energy the store’s panels,solar 1,048 to home now is roof store’s year. The tennis of six the size an area cover which would courts (or 1,500m in Poole Responsible sourcing Responsible on who meet high standards suppliers from source aim to We and the environment. practices human rights, employment & Supply Chain our Offer through unify our sourcing As we closer develop opportunities to function, this creates standards. and improve our suppliers relationships with outline our ethical Standards Our Supply Chain Workplace sites. and their production our suppliers for labour standards Solar panels at B&Q Poole HUMAN RIGHTS and promote positively human rights and aim to respect We in our support workers the human rights of our colleagues, by our business activities. affected supply chain and others and conventions is guided by international Our approach Nations (UN) Universal including the United standards of Human Rights, the UN Guiding Principles onDeclaration LabourBusiness and Human Rights and the International Principles and on Fundamental Declaration Organization’s a member of the UN Global Compact. are We Rights at Work. Financial review

Reported retail profit grew by 13.5% including £52 million of favourable foreign exchange movement on translating foreign currency results into Sterling. In constant currencies retail profit grew by 6.1%, reflecting strong LFL performance in the UK and Poland, flat profits in France and including £16 million of new country development losses. Our ongoing focus on cash and tight capital discipline enabled continued investment in the business and the transformation, the payment of £230 million in cash dividends and a return of a further £200 million to shareholders via share buyback, while maintaining a strong balance sheet. Total adjusted sales grew to £11.2 billion, up 1.7% on a constant currency basis with LFL sales up 2.3%. On a reported rate basis, which includes the impact of exchange rates, adjusted sales increased by 8.7%. During the year, sales growth benefited from 38 net new stores, driven by 60 Screwfix outlet Karen Witts openings in the UK, offset by the B&Q store closures (65 over Chief Financial Officer two years; 35 in FY 2016/17). As previously announced, Kingfisher disposed of a controlling 70% stake in B&Q China on 30 April 2015. On 23 March 2016 Kingfisher exercised its option to dispose of the remaining 30% economic interest, with the agreement of Wumei Holdings Inc. (“Wumei”). Following regulatory approval, Kingfisher received net proceeds of £63 million in July 2016, completing the transaction. Underlying pre-tax profit, which excludes the impact of transformation P&L costs, exceptional items and FFVR, increased by 14.7%, to £787 million, in line with reported retail profit. Adjusted pre-tax profit, which excludes the impact of exceptional items and FFVR, increased by 8.3% to £743 million, reflecting £44 million of transformation P&L costs. Statutory pre-tax profit, which includes the impact of transformation costs, exceptional items and FFVR, increased by 48.2% to £759 million, reflecting an exceptional gain compared to a charge last year (see opposite).

30 Kingfisher plc | Annual Report 2016/17 Strategic report 31 +6.1% +0.7% +1.7% +8.3% +9.4% Change Increase +13.5% +48.2% +14.7% % Constant Currency% Constant

– (4) (5) (4) £m (45) (10) n/a n/a 746 512 686 678 686 (166) +3.0% +8.3% +7.5% +8.7% Change 2015/16 +14.7% +10.9% +13.5% +17.7% +52.2% +48.2% www.kingfisher.com % Reported – – (5) (1) (7) 17 £m (48) (44) 847 759 743 742 787 26% 22.0p 10.1p 22.0p 17.8p 2015/16 £(99)m £200m £546m £686m £746m £686m £512m 2016/17 £10,441m £10,331m 26% 24.4p 10.4p 25.9p 27.1p £11m 2016/17 £200m £641m £787m £847m £743m £759m £(44)m £11,225m £11,225m (2) (2) (1) (1) (1) (1) Statutory results include B&Q China up to the date of disposal of controlling 70% stake (30 April 2015). 70% stake of disposal of controlling the date include B&Q China up to results Statutory on underlying additional useful information provide these measures results, as it believes and underlying adjusted to calculate costs in order and transformation items reportsexceptional Kingfisher separately and trends. performance Up to the date of disposal of controlling 70% stake (30 April 2015). 70% stake of disposal of controlling the date Up to Transformation P&L costs Transformation Basic earnings per share Capital return – share buyback – share Capital return Net cash Underlying pre-tax profit Underlying pre-tax Statutory pre-tax profit pre-tax Statutory Adjusted basic earnings per share Adjusted Full year ordinary dividend ordinary year Full Retail profit Retail Adjusted pre-tax profit pre-tax Adjusted (post-tax) items Exceptional Effective tax rate tax Effective Underlying basic earnings per share Statutory sales Statutory Central costs Central Retail profit Retail (1) (2) is set out below: profit pre-tax basis for the statutory the underlying basis to from A reconciliation Adjusted sales Adjusted A summary of the reported financial results for the year ended 31 Januaryfor the 2017 is set out below: results financial A summary of the reported Share of interest and tax of joint ventures & associates and tax of joint ventures of interest Share B&Q China operating loss B&Q China operating (1) pillar. range implementation and the digital strategic unified and unique offer the to of £44 million principally relate P&L costs Transformation FFVR Statutory pre-tax profit pre-tax Statutory Exceptional items before tax before items Exceptional Finance costs before exceptional items & financing fair valuefair & financing items exceptional before costs Finance (FFVR) remeasurements Transformation P&L costs Transformation Adjusted pre-tax profit Adjusted pre-tax Profit before exceptional items and tax items exceptional before Profit Underlying pre-tax profit Underlying pre-tax FINANCIAL REVIEW CONTINUED

Trading review by division Castorama total sales declined by 2.4% (-3.0% LFL) to £2,308 million. LFL sales of seasonal products were down 4.6% and sales of non- Note: all commentary below is in constant currencies seasonal products, including showroom, were down 2.5%. Brico Dépôt UK & IRELAND total sales were broadly flat (-2.3% LFL) at £1,946 million reflecting store % openings. Across the two businesses, one net new store was opened and % Constant Reported Currency % LFL four were revamped, adding around 1% new space. £m 2015/16 Change Change Change 2016/17 By the end of next year, our ONE Kingfisher plan will provide newness Sales 4,979 4,853 +2.6% +2.4% +5.9% in our customer proposition as over half of France’s offer will be unified Retail profit 358 326 +9.8% +9.9% and unique. Some of the CPR benefits will be reinvested in price as we start to move towards making home improvement more affordable Kingfisher UK & Ireland sales were up 2.4% (+5.9% LFL) to £4,979 million for customers. In addition, this year we will complete the roll out of the benefiting from a broadly supportive backdrop and continued strong unified IT platform in Castorama France, enabling us to build a stronger Screwfix performance. Retail profit grew by 9.9% to £358 million. Gross digital offer, starting with new mobile and site search. margins were down 80 basis points reflecting mix effects from strong growth in Screwfix, clearance related to the B&Q store closures and higher Retail profit was broadly flat at £353 million, despite the weaker sales, digital sales. Focus on cost control continued. reflecting higher gross margins (+20 basis points) benefiting from less promotional activity, and continued focus on cost control. B&Q total sales declined by 3.3% to £3,680 million reflecting planned store closures partly offset by sales transference. LFL sales increased by OTHER INTERNATIONAL 3.5% of which c.2.6% resulted from sales transference associated with the % store closures. LFL sales of seasonal products were up 3.1% while sales of % Constant Reported Currency % LFL non-seasonal products, including showroom, were up 3.6%. £m 2016/17 2015/16 Change Change Change Click & collect is now available on over 31,500 products (FY Sales 1,992 1,692 +17.8% +7.0% +5.1% 2015/16: 16,700). Total digital sales, including home delivery, continued Retail profit to make good progress with sales growing by 45%. Other International (established) 152 126 +19.6% +9.7% Screwfix grew total sales by 23.2% (+13.8% LFL) to £1,299 million, driven New Country by strong growth from the specialist trade desks exclusive to plumbers Development (16) (17) n/a n/a and electricians, strong digital growth (e.g. click & collect +60%, mobile +124%) and the continued roll out of new outlets. 60 new outlets were Total 136 109 +24.1% +14.5% opened, taking the total to 517. Our overall target is to have around 700 Other International total sales increased by 7.0% (+5.1% LFL) to outlets in the UK, up from 600 previously. £1,992 million. Retail profit increased by 14.5% to £136 million, driven FRANCE by Poland. % During the year 12 net new stores were opened, including two in Poland % Constant Reported Currency % LFL and 10 in Screwfix Germany, adding around 2% more space compared to £m 2016/17 2015/16 Change Change Change last year. Sales 4,254 3,786 +12.4% (1.4)% (2.7)% Other International (established): Retail profit 353 311 +13.6% (0.3)% Sales in Poland were up 10.1% (+7.5% LFL) to £1,191 million benefiting Kingfisher France sales declined by 1.4% (-2.7% LFL) to £4,254 million. from a supportive market and new ranges. LFL sales of seasonal products According to Banque de France data, sales for the home improvement were up 9.5% with sales of non-seasonal products, including showroom market were down 0.6%. Whilst holding a strong market position in up 7.3%. Gross margins were up 90 basis points driven by strong trading France and benefiting from a well invested store estate, both businesses and sales mix benefits. Retail profit grew by 15.8% to £144 million have delivered weaker sales compared to the market. reflecting the sales growth and higher gross margins.

32 Kingfisher plc | Annual Report 2016/17 Strategic report –

33 0.4 (0.2) (4.3) (0.1) EPS 22.0 22.0 17.8 pence 2015/16 9 – (4) (3) £m (99) 509 509 412 Earnings – 0.6 2.2 (1.5) (0.1) EPS 25.9 24.4 27.1 pence 2016/17 – (1) 11 49 £m (33) 584 551 610 www.kingfisher.com Earnings DIVIDENDS AND CAPITAL RETURNS DIVIDENDS AND CAPITAL a fullresults in a final dividend of 7.15p which has proposed The Board 10.1p). The full of 3.0% (2015/16: an increase dividend of 10.4p, year earnings (2015/16: 2.2 2.3 times by adjusted dividend is covered year dividend cover with medium term comfortable be to continue times). We basic earnings per 2.5 times based on adjusted of 2.0 to in the range with the capital needs of is consistent believes the Board a level share, the business. on the to shareholders The final dividend will be paid on 19 June 2017 on 5 May 2017. A dividend reinvestment at close of business register their invest to prefer who would shareholders to plan (DRIP) is available on will go ex-dividend The shares of the company. dividends in the shares the DRIP the last receive electing to those shareholders 4 May 2017. For of election is 26 May 2017. receipt for date return around to On 25 January its intention 2016 Kingfisher announced during 2016/17 shareholders a further £600 million of surplus capital to buyback. be via share to This is expected years. two and the following to was returned During 2016/17 £200 million (58 million shares) buyback. via share shareholders Underlying basic earnings per share Transformation P&L costs (net P&L costs Transformation of tax) Adjusted basic earnings per share loss B&Q China operating items Net exceptional tax items Prior year FFVR (net of tax) Basic earnings per share grew by 10.9% to 24.4p, which excludes the impact of exceptional items, of exceptional the impact excludes which 24.4p, to by 10.9% grew by increased share Basic earnings per tax items. FFVR and prior year as set out below: 27.1p 52.2% to The disposal of the remaining 30% stake in B&Q China for a net China for in B&Q 30% stake The disposal of the remaining of £3 million. in a gain million resulted of £63 consideration which 25.9p, to by 17.7% grew Underlying basic earnings per share FFVR and items, exceptional costs, the impact of transformation excludes Adjusted basic earnings per share year tax items. of prior the effect – 67 14 £m (18) (99) 143 (305) (166) Gain/ 2015/16 (charge) 3 4 – (5) (6) 15 11 17 £m Gain/ 2016/17 (charge) (1) Disposal of properties includes the disposal of a property company in the prior year which held 3 in the prior year company includes the disposal of a property Disposal of properties properties. non-operational Profit on disposal of B&Q China on disposal Profit Transformation exceptional costs of £5 million principally relate to the to of £5 million principally relate costs exceptional Transformation and Supply Chain organisation. setup of the new Offer restructuring and Europe UK & Ireland in the two (c.15% of space) of 65 stores the closure B&Q completed in FY 2016/17; 30 closures ending 31 January 2017 (35 closures years with a a lease liability transaction into in FY 2015/16). In Q1 B&Q entered announced, leases. As previously dispose of the remaining party to third across of loss making stores will also be a small number of closures there and one closed, one in Russia were stores In FY 2016/17 two Europe. be made in due course. to on further closures in Spain, with an update give to was originally expected programme rationalisation store The total principally relating £350 million, of around charge an exceptional rise to of £305 million was charge An exceptional lease provisions. onerous to gain of £15 million was exceptional in FY 2015/16. An overall reported exit B&Q store expected than lower in FY 2016/17 reflecting reported and the decision to the lease liability transaction, from resulting costs partly closure, open that was originally planned for one B&Q store keep other store. of one closure forced by the offset UK & Ireland and Europe restructuring Europe and UK & Ireland Dépôt Romania Impairment of Brico and other disposals Property (1) Transformation exceptional costs exceptional Transformation New Country Development comprises our operations in Romania, in Romania, our operations comprises New Country Development £140 million with losses of Sales were and Germany. Portugal loss). Romania retail £16 million (2015/16: £17 million reported (2015/16: £9 million loss) and Screwfix result a breakeven delivered in a £14 million lossGermany opened 10 new outlets, resulting (2015/16: £7 million loss). a gain of £11 million items (post tax) were Exceptional as detailed below: (2015/16: £99 million charge) New Country Development: sales declined slightly by 0.2% (+0.3% LFL) to £349 million 0.2% (+0.3% LFL) to sales declined slightly by In Russia +7.2% LFL). The business (2015/16: comparatives against strong retail profit) reported (2015/16: £6 million a £1 million profit delivered currency foreign and adverse environment a challenging reflecting by 2.1% (+0.5% LFL) to In Spain sales increased movements. exchange In (2015/16: breakeven). profit a £2 million retail £312 million, delivering of £5 millionretail profit contributed Koçtaş, , Kingfisher’s 50% JV, Turkey profit). retail (2015/16: £7 million reported Net exceptional items Net exceptional Exceptional items before tax items before Exceptional tax items Exceptional FINANCIAL REVIEW CONTINUED

TAXATION TAX CONTRIBUTION Kingfisher’s effective tax rate is sensitive to the blend of tax rates and Kingfisher makes a significant economic contribution to the countries profits in the Group’s various jurisdictions. It is higher than the UK in which it operates. In 2016/17 it contributed £1.8 billion in taxes it statutory rate because of the amount of Group profit that is earned in both pays and collects for these governments. The Group pays tax on higher tax territories. The effective tax rate, calculated on profit before its profits, its properties, in employing 77,000 people, in environmental exceptional items, prior year tax adjustments and the impact of rate levies, in customs duties and levies as well as other local taxes. The most changes on deferred tax, was 26% (2015/16: 26%). The effective rate significant taxes it collects for governments are the sales taxes charged of tax is in line with the prior year, a result of tax rate reductions in the to its customers on their purchases (VAT) and employee payroll-related year having been broadly offset by changes to profit mix in taxes. Taxes paid and collected together represent Kingfisher’s total tax reported currencies. contribution which is shown below: The overall rate of tax includes the impact of exceptional items and prior 2016/17 2015/16* Total taxes paid as a result of Group operations £bn £bn year adjustments. The effect of such items reduced the rate from 26% Taxes borne 0.7 0.7 to 20%. This predominately reflects enacted rate reductions in both the UK and France, due to have full effect in 2020/21, which have resulted Taxes collected 1.1 1.1 in deferred tax credits in the year, as well as the release of prior year Total tax contribution 1.8 1.8 provisions which have either been agreed with tax authorities, reassessed, * 2015/16 comparatives are presented on a constant currency basis. or time expired. Kingfisher participates in the Total Tax Contribution survey that PwC Profit Tax 2016/17 2015/16 Effective tax rate calculation £m £m % % perform for the Hundred Group of Finance Directors. The 2016 survey ranked Kingfisher 31st (2015: 32nd) for its Total Tax Contribution in the UK. Profit before tax and In 2016, 100 (2015: 105) companies contributed to the survey. exceptional items 742 (192) 26 26 Exceptional items 17 (6) TAXATION GOVERNANCE AND RISK MANAGEMENT Prior year items 49 The Kingfisher Code of Conduct applies high standards of professionalism Total – overall 759 (149) 20 20 and integrity which underpins the Group’s approach to tax policy, strategy and governance, which is Board approved. Our core tax objective is to pay There continues to be a global focus on international tax reform, and the right amount of tax at the right time and to comply with all relevant as Kingfisher operates in numerous jurisdictions, changes to tax rules tax legislation in all Group entities. Kingfisher undertakes its activities, in countries around the world, including the impact of changes from and pays tax in the countries in which it operates, in compliance with the the European Commission’s state aid investigations or the OECD’s Base local and worldwide tax rules. In all countries where it has activities, it has Erosion and Profit Shifting (‘BEPS’) project, could impact the Group’s the staff, premises and other assets required to run its business there. future effective tax rate. The responsibility for tax policy and management of tax risks lies with the Chief Financial Officer and the Group Tax & Treasury Director who engage In addition, the Group’s overall rate of tax could be affected by changes regularly with the Board and the Audit Committee on all tax matters. to tax rates in the jurisdictions in which we operate, changes in the blend of where profits are earned, restructuring and reorganisation of our The Group manages the tax that it pays and the risks that arise having businesses and resolution of open issues with authorities. regard to the interests of all stakeholders including investors, customers, staff and the governments and communities in the countries in which The tax rates for this financial year and the expected rates for next year in it operates. Tax risks can arise from changes in law, differences in our main jurisdictions are as follows: interpretation of law and the failure to comply with the applicable rules Statutory Statutory tax rate tax rate and procedures. The Group manages and controls these risks through 2017/18 2016/17 local management, the tax professionals it employs and using advice from UK 19% 20% reputable professional firms. The Group works with tax authorities in a France 34% 34% timely and constructive manner to resolve disputes where they arise. Poland 19% 19%

34 Kingfisher plc | Annual Report 2016/17 Strategic report

35 38 10 31 £m (42) (12) (16) 207 329 546 526 166 692 265 946 483 134 (118) (333) (232) (200) ROCE 13.1% 14.1% 10.2% 12.3% 2015/16 2015/16 (7) (6) 19 76 17 63 £m (67) (23) (46) 546 641 773 750 295 459 (406) (144) (230) (200) 1,016 ROCE 13.3% 14.8% 11.1% 12.5% 2016/17 2016/17

55% 27% 18% CE % of Group Proportion www.kingfisher.com 3.8 1.9 1.2 6.9 Capital (CE) £bn Employed Employed sales 44% 38% 18% of Group Proportion

5.0 4.2 2.0 £bn Sales 11.2 (3) (1) and other (2) Other non-cash items include depreciation and amortisation, share-based compensation charge, share of post-tax results of JVs and associates, pension operating cost and profit/loss on non-property disposals. on non-property and profit/loss cost pension operating and associates, of JVs of post-tax results share charge, compensation and amortisation, share-based include depreciation Other non-cash items in FY 2015/16. company property Disposal of assets includes the disposal of an overseas and issue of shares. and associates JVs from received dividends to B&Q closures, relating disposals), principally property (excluding items cash flow Includes exceptional Net cash flow Opening net cash Other movement including foreign exchange including foreign Other movement Closing net cash Net cash at the end of the period was £641 million (2015/16: £546 million). expenditure. in capital an increase reflecting of £24 million against the prior period, a decrease year, in the of £459 million was generated cash flow Free and maintaining existing on refreshing 44% was invested Of this around was £406 million (2015/16: £333 million). the year for capital expenditure Gross 11% on other which includes supply chain. plan and 7% on the transformation 24% on IT, 14% on new stores, stores, buybacks. and share dividend form of the ordinary in the to shareholders returned £430 million was cash flow, Of free (1) (2) (3) FREE CASH FLOW is set out below: cash flow of free A reconciliation profit Operating UK & Ireland Lease adjusted return on capital employed (ROCE) on capital employed adjusted return Lease and performance our underlying profit reflecting 12.5% this year, 12.3% to by 20 basis points from grew ROCE, metric, leased adjusted returns Our key below: division is analysed ROCE by geographic costs. by transformation offset movements exchange foreign favourable Exceptional items Exceptional Operating profit (before exceptional items) exceptional (before profit Operating Other non-cash items Operating cash flow cash Operating Change in working capital Change in working and provisions Pensions paid Net interest capital expenditure Gross cash flow Free Tax paid Tax Ordinary dividends paid Ordinary buyback Share schemes incentive employee for purchase Share Disposal of B&Q China (net of disposal costs) Disposal of assets France France Other International Total FINANCIAL REVIEW CONTINUED

MANAGEMENT OF BALANCE SHEET AND LIQUIDITY RISK CAPITAL RISK MANAGEMENT AND FINANCING The Group’s objectives when managing capital are: The Group finished the year with £641million of net cash on the balance –– to safeguard the Group’s ability to continue as a going concern and sheet. However, the Group’s overall leverage is more significant when retain financial flexibility in order to continue; including capitalised lease debt that in accordance with accounting standards does not appear on the balance sheet. The ratio of the Group’s –– to provide returns for shareholders and benefits for other stakeholders; lease adjusted net debt (capitalising leases at 8 times annual rent) to and EBITDAR is 1.8 times as at 31 January 2017 (2.0 times at January 2016). At –– to maintain a solid investment grade credit rating of BBB. this level the Group has financial flexibility whilst retaining an efficient cost The Group manages its capital by: of capital. –– continued focus on free cash flow generation; A reconciliation of lease adjusted net debt to EBITDAR is set out below: –– setting the level of capital expenditure and dividend in the context of 2016/17 2015/16(1) current year and forecast free cash flow generation; £m £m –– rigorous review of capital investments and post investment reviews to EBITDA 1,008 941 drive better returns; and Property operating lease rentals 399 402 –– monitoring the level of the Group’s financial and leasehold debt in the EBITDAR 1,407 1,343 context of Group performance and its credit rating. Net cash (641) (546) Property operating lease rentals (8x) (2) 3,192 3,216 Kingfisher Insurance Designated Activity Company (Ireland), a wholly owned subsidiary, is subject to minimum capital requirements as a Lease adjusted net debt 2,551 2,670 consequence of its insurance activities. The Group complied with the Lease adjusted net debt to EBITDAR 1.8 2.0 externally imposed capital requirements during the year. (1) Excludes contribution from China following disposal of controlling 70% stake in April 2015. (2) Kingfisher believes 8x is a reasonable industry standard for estimating the economic value of its DISPOSALS leased assets. On 22 December 2014, Kingfisher announced a binding agreement Kingfisher holds a BBB credit rating with all three rating agencies. for Wumei to acquire a controlling 70% stake in its B&Q China business. Kingfisher aims to maintain its solid investment grade credit rating whilst Gross cash proceeds of £140 million were received in April 2015 following investing in the business where economic returns are attractive and MOFCOM (Chinese Ministry of Commerce) approval. Kingfisher, with the paying a healthy annual dividend to shareholders. After satisfying these agreement of Wumei, exercised its option to dispose of the remaining key aims and taking the economic and trading outlook into account, any 30% economic interest on 23 March 2016. Following regulatory approval, surplus capital would be returned to shareholders. Kingfisher received £63 million of net proceeds in July 2016, completing the transaction. Kingfisher regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash flow forecast PENSIONS for the medium term, determining the level of debt facilities required to At the year end, the Group had a net surplus of £131 million fund the business, planning for repayments of debt at its maturity and (2015/16: £159 million net surplus) in relation to defined benefit pension identifying an appropriate amount of headroom to provide a reserve arrangements, of which a £239 million surplus (2015/16: £246 million against unexpected outflows. surplus) was in relation to the UK scheme. The adverse movement is driven by higher inflation assumptions and a reduction in the discount The Group has a £225 million committed facility that expires in 2021 and rate applied to the scheme liabilities over the year, offset by gains on was undrawn at 31 January 2017. In addition, the Group entered into a the scheme’s assets. This accounting valuation is sensitive to various new £400 million committed facility in the financial year, which expires in assumptions and market rates which are likely to fluctuate in the future. November 2018. This facility was also undrawn as at 31 January 2017. The next significant debt maturity is in May 2018 when the Group is required to repay US Private Placement debt with a notional value of $179 million. The maturity profile of Kingfisher’s debt is illustrated at: www.kingfisher.com/index.asp?pageid=74

36 Kingfisher plc | Annual Report 2016/17 Strategic report 37 equivalent per equivalent 2 www.kingfisher.com reported floor space) by 25% since 2010/11. A breakdown of our 2010/11. A breakdown by 25% since floor space) reported 2 m For information about our approach to human rights and the Modern Slavery about our approach For information Act see page 29. 2011/12. We estimate this could save our customers over £840 million over our customers save this could estimate 2011/12. We bill). energy UK household (based on the average year every efficiency. energy making savings in our business by improving are We such as PV panels generation energy installed renewable will have We by April 2017 with plans distribution centres and four stores at three during and 10 stores distribution centres another three underway for 100% renewable to will be moving 2017. During 2017 our UK operations reducing our carbonto contribution a significant which will make power (CO carbon intensity cut our property have We footprint. carbon footprint is shown in the Directors’ Report on page 89. on page Report in the Directors’ is shown carbon footprint our incorporating way, integrated in an increasingly report aim to We all the and performance environmental social and financial, economic, reporting Integrated our business success. to that contribute factors and decisions in the business and helps investors balanced helps us make society and the business to assess our wider contribution stakeholders on sustainability. of our work value indicesresponsible investment socially Kingfisher is included in two (DJSI) and FTSE4Good. We Sustainability Index Jones the Dow this year, and Forests Climate Project’s in the Carbon Disclosure also participated in many years for listed in 2016. Having been successfully questionnaires year. next inclusion in the index will not be submitting data for the DJSI, we against delivering into our time and resources will be focusing we Instead and targets. our sustainability strategy – 7.7% 6.1% 7.8% 8.7% Yields (3.4)% Poland 12.1% 2015/16 2015/16 1.4 0.8 0.5 0.2 2.9 £bn 8.3% 5.6% (2.7)% France 2015/16 – 7.2% 6.3% UK & 7.6% 5.9% 7.7% (0.9)% Yields Ireland 2016/17 2016/17 3.4 1.7 0.8 0.6 0.3 £bn 2016/17 SUSTAINABILITY one which company, to being a truly sustainable committed Kingfisher is this, we achieve To impact on people and the environment. has a positive chain stage of the value sustainability at every integrate to working are weto the way offer, our customer design and source the way we – from This includes integrating with suppliers. and work run our operations processes. our capital expenditure into sustainability considerations business by giving the for value on sustainability generates Our work preference, opportunities, building customer new revenue to us access and enhancing efficiency and supply chain resilience improving sales of our sustainable home products example, For productivity. This revenues. 28% of total £3.1 billion, around in 2016/17 reached timber and paper in our products. sourced includes 96% responsibly the energy- from 12.8 TWh of energy save helped customers have We us since from purchased and services they have saving products Total % profit Retail leasehold basis Adjustment to RETAIL PROFIT ON A FULLY RENTED BASIS ON A FULLY PROFIT RETAIL and leasehold out of a mix of freehold operates currently The Group our geographic with the mix varying between significantly property, a divisional performance, easily compare more to In order markets. set basis are rented on a fully margins profit summary of the retail out below: France UK Poland Other of £2.7 billion the net book value to This is compared (including in the financial statements (2015/16: £2.4 billion) recorded sheet sale). Balance assets held for and property property investment IFRS. to 2004 on the transition at 1 February frozen were values PROPERTY of which is used most property portfolio, a significant owns Kingfisher purposes internal for was performed purposes. A valuation trading for professional by external valued with the portfolio 2016 in October on a sale and leaseback basis with Based on this exercise, valuers. year end is £3.4 billion at value of property the Kingfisher in occupancy, (2015/16: £2.9 billion). % on leasehold basis Profit Retail Risks

RISK MANAGEMENT OUR APPROACH TO RISK MANAGEMENT Given the scale of our businesses, the Board of Directors recognises that To Identify Our Risks, we start with our strategic pillars and consider the nature, scope and potential impact of our business and strategic what might stop us achieving our ONE Kingfisher plan. The process risks is subject to constant change. As such, the Board has implemented is therefore looking at the risks we face within our strategic planning the necessary framework to ensure that it has sufficient visibility of the period. The approach combines a top-down strategic company-level view principal risks and the opportunity to regularly review the adequacy and and a bottom-up operational view of the risks at Operating Company effectiveness of our mitigating controls and strategies. and functional level. Meetings are held with our Operating Company

RISK MANAGEMENT PROCESS

Group Executive

Operating Companies

HOW DO WE HOW DO WE MONITOR OUR IDENTIFY OUR RISKS RISKS

ONE Kingfisher plan

HOW DO WE HOW DO WE MANAGE OUR ASSESS OUR RISKS RISKS

Management Governance GROUP EXECUTIVE OPERATING BOARD AUDIT COMMITTEE The Group Executive takes COMPANY BOARDS The Board has overall responsibility The Audit Committee takes ownership of the principal risks. The Operating Company boards for our risk management, and for responsibility for overseeing the They are accountable for are accountable for identifying, the level of risk that the company effectiveness of risk management identifying, assessing and assessing and managing the risks is willing to take. and internal control systems, managing the principal risks, and within their Operating Company. including reviewing the process for reviewing and assessing the the company has put in place to Operating Company risks. identify, assess and manage our risks.

38 Kingfisher plc | Annual Report 2016/17 Strategic report 39

Retail Retail Operations www.kingfisher.com Efficiency Operational Operational Digital The Corporate Governance report on page report Governance 52 gives further details on ourThe Corporate processes. governance THIS YEAR’S UPDATE and in light of a strategy set out above, the process Having followed our changes to no material made have we unchanged, that remains principal risks. the as part did consider risk assessment, we of this year’s However, have on our principal risks. We of the EU referendum impact of the result keep and to developments monitor to group working established a Brexit Whilst the principal risks our principal risks and mitigations. under review may impact the that Brexit recognise unchanged, we remain currently made in the statements and this has been reflected face of risk we level the change in risk. regarding of and level the nature also considered has the Board During the year, our business strategies, deliver to accept to prepared are risk that we of risk appetite. statement our internal and approved and has reviewed by high level risk, supported of acceptable levels This describes desired managed to proactively are ensuring that risks risk statements, qualitative by the Board. agreed the level These presentations include the risk assessment for the Operating include the risk assessment for These presentations level the risks and monitor to Committee Company enabling the Audit the risks at Operating considers Audit also Internal in place. of control audit plan. the internal when developing level Company and Group

Offer Unified Unified & Unique Strategic pillars Strategic Organisation of the company Organisation and processes Unifying our offer competitiveness Price Sustainability delivery Digital and format value Investment delivery Technology Efficiency savings in our people Investing Health & Safety Reputation factors Macro-economic we consider the potential financial, reputational, financial, the potential consider Assess Our Risks, we The Operating is assigned at all levels. Manage Our Risks, ownership Risk 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. leadership teams and functional leaders to identify the risks within the identify the to leaders and functional teams leadership held with the our principal risks, discussions are identify To operations. the from The information directors. and non-executive Executive Group at our principal risks. arrive to assessments is also considered operational pillars. the strategic risks link to the principal how shows The table below To risk may that the impact and probability or operational regulatory put in need to we of control assess the level This helps us to materialise. of included an assessment have risks, we each of the principal For place. This assessment is based on the external last year. the change in risk from of the controls and the impact operations, the company’s environment, or decreasing whether the risk is increasing, considered have We in place. unchanged. remains To managing its for and is responsible owns team Company leadership putting appropriate for is responsible team risks. Each leadership own operating are that the controls ensure to and procedures in place controls for our principal risks. followed is The same procedure effectively. the principal risks are Monitor Our Risks, effectively we ensure To Changes a year. twice and Board Executive by the Group reviewed as part considered are risks and mitigation strategies the principal to the risk reviews the Audit Committee During the year, of this review. some of the from presentations and receives assessment process Companies. Operating RISKS CONTINUED

OUR PRINCIPAL RISKS The principal risks to delivering our strategy are set out on the following pages.

1 ORGANISATION OF THE COMPANY 2 UNIFYING OUR OFFER & PROCESSES Organising Kingfisher as a more unified company with a We fail to deliver the benefits of a more unified and unique unified customer offer, rather than a collection of individual offer and standardised activities and processes. businesses, fails to deliver the anticipated benefits.

Strategic pillar Strategic pillar –– Unified & Unique Offer –– Unified & Unique Offer

How our risks have changed How our risks have changed We believe our risk exposure has decreased since last As this project progresses the level of ranges impacted is year. Progress has been made on the organisational increasing and our risk exposure increases. design and we have a coordinated plan in place, with a series of planned changes.

How we manage and monitor the risk How we manage and monitor the risk –– Monthly tracking against key strategic milestones in place. –– Teams with specialised roles to develop and take the best –– Monthly reporting to the plc Board, Group practice and the best products from across the company. Executive, Operating Company Chief Executives and –– Strong project management process in place, including Finance Directors. capturing lessons learned for continuous improvement. –– Programme of strategic updates to the Group Executive –– Monthly tracking and review by the Offer & Supply Chain and the Board planned during the year. board to identify and respond to potential risks. –– Regular meetings with the Operating Company Chief –– Validation and governance processes in place for business Executives to monitor progress, ensure buy in and resolve case approvals of range and procurement decisions. potential issues. –– Clearly defined range and purchasing standards, principles –– A new process has been introduced to deliver the and methodology with guidance and support from transformational change, including tracking alignment, expert leads. dependencies and expectations. –– Performance of the ranges and brands is tracked and strategies updated accordingly. –– A strong sourcing network which is focused on securing company buying opportunities. –– Group implementation task force in place to steer the aspects of 1) merchandising solutions, 2) store implementation, 3) stock clearance, 4) supply and logistics. –– Vendor management process in place which includes vendor selection, risk assessments, monitoring of vendor responses, and communication. –– Systems and data improvements have been identified and are part of the unified IT platform implementation.

40 Kingfisher plc | Annual Report 2016/17 Strategic report 41 Decreasing www.kingfisher.com No change Governance is overseen by the Group Sustainability by the Group is overseen Governance Executive. of the Group a sub-committee Committee, e.g. annual Capacity building and sharing of best practice Company sustainability meetings of Operating network meetings. by monthly WebEx supported teams expert partners. from Advice identify and to stakeholders Engagement with external sustainability risks. mitigate positions and policies to of company review Regular support the sustainability strategy. of sustainability Key and reporting Annual monitoring targets against (KPIs) and progress Indicators Performance Executive. the Group to within sustainability targets towards Ongoing work signed reports Companies, with annual progress Operating level. off at Board of sustainability plans and responsibilities Development & Supply within unified buying functions including Offer and Group resale) of goods for Chain (procurement Resale). of Goods Not For (procurement team Purchasing Unified & Unique Offer – – – – – – – – – SUSTAINABILITY DELIVERY SUSTAINABILITY to not due sustainability targets our deliver to fail We the day-to-day our sustainability plan into integrating of the business. operations How we manage and monitor the risk we How – – – – – – – – How our risks have changed our risks have How to increase continues in this area While the risk exposure legislation, and increased with our changing operations feel this and we to mitigate steps take to continue we unchanged. in the risk remaining that this results Strategic pillar Strategic – Increasing 4 Key: A new pricing strategy and governance has been decided, and governance A new pricing strategy recommended sets & Supply Chain now Offer where ranges, securing the best selling price on all unified prices margin. whilst protecting the to with regards pricing studies undertaken Regular positioning aligned with competition. and price market our and communicate reinforce in pricing to Investment credentials. value insight and analytical tools customer improved Developing and pricing strategies. ranging optimise product to to use of online and mass media tools targeted More perception. price and reinforce communicate Unified & Unique Offer – – – – – – How we manage and monitor the risk we How – – – – – PRICE COMPETITIVENESS competitiveness, price A lack of actual or perceived or discount-based to more particularly when compared to maintain our ability affect would online competitors, share. in a loss of market or may result share market Strategic pillar Strategic – How our risks have changed our risks have How us. This is for of focus area be a key to This continues our review to continue risk as we of increasing an area stabilise to taking the necessary steps are We ranges. this risk. and reduce 3 RISKS CONTINUED

5 DIGITAL AND FORMAT 6 INVESTMENT VALUE We fail to create a culture of innovation in our offer, format Our investments fail to deliver value to the company. and digital channels to stimulate consumer spend and deliver the desired sales growth.

Strategic pillars Strategic pillar –– Unified & Unique Offer –– Operational Efficiency –– Digital –– Retail Operations

How our risks have changed How our risks have changed We are exposed to risk in this area, particularly in failing We do not believe that our risk exposure has increased to keep pace within the digital area, however, we feel from last year, We continue to invest significant capital the steps we have continued to take this year have expenditure in line with our transformation plan and our ensured that we are better positioned to fulfil our controls have been enhanced in this area. digital ambitions.

How we manage and monitor the risk How we manage and monitor the risk –– Digital strategy developed for the Group. –– On-going assessment of opportunities for expansion, in –– Digital priorities programmes underway, Brilliant Basics and terms of both online and bricks and mortar retail, across all customer journeys. the territories and regions in which we operate. –– Digital Forum in place to develop and deliver a unified –– Regular updates are given to the leadership team and strategy for the Group. all decisions are approved in line with our investment –– Plans in place for a digital centre of excellence and digital methodology. delivery, roles, skills and knowledge have been defined, –– Country and market entry strategies are based on the resource recruitment underway. application of a proven operating model and supported by –– The ‘Easier’ unified IT programme is being rolled out across the part of the business with the most relevant experience, the Group to provide the systems and capabilities required capabilities and capacity to successfully lead a market to deliver the foundations for the digital strategy. entry strategy. –– Trial stores identified and guiding principles for these stores –– Proposed acquisition or market entry strategies are subject being developed. to challenge and due diligence from both the leadership team and specialist functions. –– Group Concept Director appointed. –– Due diligence exercises are supported by external and –– Retail concepts and common and unique customer independent advisers when necessary. experience being developed. –– Following an acquisition, integration plans are prepared and monitored at Operating Company and company levels. –– Existing management teams are supplemented with company resources to monitor and assist with the integration. –– All investments are evaluated and monitored via our post-investment review methodology in place across the business. –– The financial performance of investments is monitored ensuring early corrective action can be taken if needed.

42 Kingfisher plc | Annual Report 2016/17 Strategic report 43 Decreasing www.kingfisher.com No change A project team is in place to review categories of spend categories review to is in place team A project savingscost and not only identify the company across way. effective in a more work but also opportunities to whose Group a Steering by supported are teams Project plans, milestones include monitoring responsibilities for each category. and the financial impact the over delivery of targets to committed Initial review earlier than plan,Year 1 has delivered years. three first 3 is 2 and Year Year deliver to plans in place have we being planned. now against budget targets and review reporting Regular and forecast. Programme Excellence Procurement within the processes optimise key launched to function. procurement – – – – – Each Operating Company reviews its cost base and base its cost Company reviews Each Operating savings as part of the planning process. identifies potential as part of the budgeting monitored Identified savings are processes. and forecasting identified a number have As part in IT we of our investment externally. these of benefits and benchmarked is Optimising our Operational pillars One of our strategic Resale For by our Goods Not Efficiency which is driven follows: as are in this area controls Specific opportunity. – – – – – Operational Efficiency Operational – – – – – EFFICIENCY SAVINGS EFFICIENCY SAVINGS and reductions cost identify and maximise potential to fail We efficiency savings. How we manage and monitor the risk we How – – – – Strategic pillar Strategic – How our risks have changed our risks have How based on an initial number were targets The project deliver to in place A plan is now savings. of estimated these savings. Increasing 8 Key: Change control procedure in place with the leadership in place procedure Change control changes. on all functional approval having final team a ‘big bang’ implementation avoids plan The roll-out implemented are increments gradual instead approach, a to a short period, ensuring dual running kept over be identified and any issues to minimum and allowing on. moving before resolved ensure establish learning points and to to in place Process outs. roll future built into these are currently and are in place already are of working Agile ways being enhanced. the deliver to has been introduced A new process alignment, change, including tracking transformational dependencies and expectations. skills that can support have our needs inExisting partners this area. who by ensuring the colleagues knowledge Retaining in the programme involved are established the template or via the local roll-out. team the central through with our in accordance being provided Applications are flexibility which provides architecture, three-tier proposed are tools most likely, ideas are innovative where areas to in the can be interchanged typically agnostic and therefore this is required. event IT function within the overall is integrated Digital IT team management and operations release with common in place. Digital – – – – – – – – – – How we manage and monitor the risk we How – – – – – – – – – TECHNOLOGY DELIVERY TECHNOLOGY in linerequirements the to deliver fails Our unified IT platform the delivery of the enable/support with the plan needed to strategy. company Strategic pillar Strategic – How our risks have changed our risks have How The implementation within B&Q is nearing completion of our in the remainder is commencing and the roll-out in theconfidence have Whilst we Companies. Operating us for the risk is increased process, solution and our roll-out the implementation. to is exposed of the estate as more 7 RISKS CONTINUED

9 INVESTING IN OUR PEOPLE 10 HEALTH & SAFETY We do not make the necessary investment in our people We fail to maintain a safe environment for our customers and to ensure that we have the appropriate capacity, skills store colleagues, which results in a major incident or fatality and experience. that is directly attributable to a failure in our Health & Safety management systems.

Strategic pillars Strategic pillar –– Unified & Unique Offer –– Retail Operations –– Digital –– Operational Efficiency –– Retail Operations

How our risks have changed How our risks have changed We continue to monitor and manage this risk closely. Our Safety network is embedded in the business and While the risk exposure is significant, we have a clear continues to work with the Operating Companies to understanding of the scale of the change and plans in ensure our minimum standards are maintained during place to deliver the model. the transformation.

How we manage and monitor the risk How we manage and monitor the risk –– The Chief People Officer is leading the work to improve our –– The Board reviews and challenges Health & Safety capabilities, ensuring we have effective KPIs and relevant performance, standards and targets across our reward structures. Operating Companies. –– Work is underway to redesign, where required, HR –– Group Health and Safety Committee sets the policy processes, policies and guidelines to ensure they are fit for and standards for the company. purpose and in line with our ambition. Initial focus will be –– Group Minimum Safety Standards with detailed on recruitment, reward, talent and engagement. guidance for identified risks are in place across the –– Remuneration Committee oversees the reward policy. Operating Companies. –– Reviewing our engagement methodology to ensure we –– Dedicated Safety team and responsible Director in each of have an appropriate and timely engagement methodology our Operating Companies to ensure the Health & Safety which enables us to check across all staff our ability to policy is implemented and communicated. drive the changes we need whilst being able to respond to –– The Group Safety Officer monitors compliance and any insights which may impact upon our duty of care as provides help and support to the Operating Companies. an employer. –– Compliance is monitored across our Operating Companies –– Creating a strong pipeline of developing talent through through a programme of self-certification and Health & structured programmes including graduate and high Safety audits, with issues reported through local Audit potential schemes e.g. LEAD programme (Leadership Committees and escalated to the leadership team, Group Exploration and Development) for the development of Audit Committee or Board where necessary. senior leaders. –– Nomination Committee oversees the Board composition and succession planning. –– Continue to invest in development activities for our store- based colleagues and in how we support and recognise the role of our customer advisors across the organisation.

44 Kingfisher plc | Annual Report 2016/17 Strategic report 45 Decreasing www.kingfisher.com No change Retail Operations Retail The provision of supply chain finance programmes to programmes of supply chain finance The provision support suppliers. that provide banking partners of international Portfolio retail cash andreliable local to funding and access flexibility, services. payment processing card a number of financial of cash holdings across Diversification rating. credit short-term institutions with the strongest cash and prudent mix of hedging policies, An appropriate to minimise the impact ofdeposits and debt financing on the company. volatility currency exchange foreign the political and monitors team actively Affairs Government or operate in which we situations in the countries economic may impact our operations. influence and aim to monitor identify, to in place Strategies legislation which may impact the business. changes to policy and direct oversees team Affairs The Government in the UK, resource political engagement with dedicated by local supported Russia, and Belgium, Poland France, Companies and our in our Operating representatives associations in every business trade of key membership market. via the Government process the Brexit monitoring Actively teams alongside UKTax and Finance Treasury, team, Affairs Companies. Operating and French the implications of Brexit, consider has begun to Work the implications of this to high level including presenting and the mechanics clearer As the situation becomes Board. detailed plans will be prepared. more known, are of an exit – – – – – – – – – – MACRO-ECONOMIC FACTORS FACTORS MACRO-ECONOMIC of the global the resilience Uncertainty surrounding may impact geo-political volatility, and increased economy sustainability and the long-term confidence both consumer base. and capabilities of our supplier Strategic pillar Strategic – changed our risks have How still are risk. There of increasing This is an area from the UK’s exit to uncertainties relating a numberof in some geopolitical tensions the EU and heightened of our markets. How we manage and monitor the risk we How – – – – – – – – – Increasing 12 Key: Competition law compliance messaging and training. Competition law compliance manage and oversee to in place group Working Data Protection and Russian the new European legal requirements. individuals must and all key in place Anti-bribery training this training. complete and all the Group hotline throughout Whistleblowing at the local including monitoring up, followed calls are level. Audit Committee in place. policy and training Disclosure – – – – – Both employees and suppliers working for or with for working and suppliers Both employees to our according conduct themselves Kingfisher must as defined of ethics and behaviours minimum standards by our Code of Conduct. with our Code of Conduct compliance for Responsibility Chief Executive. Company with each Operating rests our Operating to available are resources Appropriate and suppliers colleagues that both ensure Companies to with, the Code. of, and comply aware are and each of our Operating in Group teams Legal a form to together and communicate Companies work network. legal compliance at Kingfisher and each ofCommunications teams a form to together Companies work our Operating network. communications support the to in place and procedures Policies legislativemanagement, crisis fraud, ethical, environmental, Specifically; areas. and regulatory – – – – – Retail Operations Retail – – – – – – – How we manage and monitor the risk we How – – – – – – How our risks have changed our risks have How in this area increase the risk to for is a potential There we however, with our transformation, go forward as we and this risk to mitigate in place putting procedures are is no change in the risk. there believe therefore Strategic pillar Strategic – REPUTATION REPUTATION by a major affected are reputation and brand Kingfisher’s issue major corporate or ethical failure, environmental non- or material fraud corporate or crisis, a significant requirements or regulatory with legislative compliance procedures. or custodial in punitive resulting 11 RISKS CONTINUED

VIABILITY STATEMENT GOING CONCERN In accordance with provision C2.2 of the 2014 UK Corporate The directors confirm that, after reviewing expenditure Governance Code, the Directors have considered the commitments, expected cash flows and borrowing facilities, prospects of the company over a period longer than the they have a reasonable expectation that Kingfisher plc and 12 months required by the going concern provision. the Kingfisher group of companies have adequate resources to continue in operational existence. For this reason they The Board has concluded that the period for this review should continue to adopt the going concern basis in preparing be three years, in line with the usual business planning period. these financial statements. Further details of the company’s However, last year the company carried out a strategic review liquidity are available in the Financial Review on pages 30 to 37. covering five years and therefore this year the assessment has been carried out over the remaining four years to 2021. STRATEGIC REPORT APPROVAL The Board has continued to monitor progress against the The Strategic Report is approved for and on behalf of the strategic review this year and has therefore been able to Board by: review sufficient information to form a reasonable expectation as to the company’s longer-term viability. The plan produced Véronique Laury as part of the strategic review provides consolidated plans Chief Executive Officer at both the company and Operating Company level. The plans also consider the company’s cash flows, committed 21 March 2017 funding and liquidity positions, forecast future funding and key financial metrics. Sensitivity analysis of the main assumptions underlying the plans was also carried out. The plan was approved by the Board and year one provides the basis for setting the financial budgets and KPIs that are subsequently used by the Board to monitor performance during the year. In addition, as in previous years, the Board has carried out a robust assessment of the principal risks facing the business, including those that would threaten the business model, future performance, solvency or liquidity. The principal risks are set out on pages 38 to 45. Scenarios have been developed to test the company’s resilience to the occurrence of these risks. Stress testing has also been performed and taken into consideration for the assessment. As a result of the steps taken above, the Directors have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the four-year period of the assessment.

46 Kingfisher plc | Annual Report 2016/17 Our leadership team

2

1 5 3 4

6 7

1. Alastair Robertson 2. Jean-Paul Constant 3. Pierre Woreczek 4. Arja Taaveniku Chief People Officer Chief Sales & Retail Operations Chief Customer Officer Chief Offer & Supply Chain Officer Officer

5. Steve Willett 6. Véronique Laury 7. Karen Witts Chief Digital & IT Officer Chief Executive Officer Chief Financial Officer

www.kingfisher.com 47 BOARD OF DIRECTORS Delivering transformation

LEFT TO RIGHT

Rakhi Goss-Custard Pascal Cagni Karen Witts Anders Dahlvig Non-executive Director Non-executive Director Chief Financial Officer Non-executive Director

48 Kingfisher plc | Annual Report 2016/17 Véronique Laury Clare Chapman Andrew Bonfield Daniel Bernard Mark Seligman Chief Executive Officer Non-executive Director Non-executive Director Chairman Senior Independent Director

www.kingfisher.com 49 BOARD OF DIRECTORS ONE Kingfisher

Daniel Bernard R N Véronique Laury Karen Witts Chairman, Chairman of the Nomination Chief Executive Officer Chief Financial Officer Committee Appointed to the Board in December 2014. Appointed to the Board in October 2012. Joined the Board as Deputy Chairman Expertise and experience: Véronique is a Expertise and experience: Karen is a in May 2006 before being appointed Chairman on 3 June 2009. highly experienced international retailer who seasoned Chief Financial Officer and chartered has worked in the home improvement sector accountant with a strong background in Expertise and experience: Daniel provides for 28 years in France and in the UK. She joined finance and management across a variety of considerable retailing experience and expertise Kingfisher in 2003, after spending 15 years at sectors. Prior to joining Kingfisher, she served as to the Kingfisher Board. From 2010 to 2015 he Leroy Merlin in various commercial roles, and Chief Financial Officer, Africa, Middle East, Asia was Chairman of MAF Retail Group, Dubai. He in her 14 years with the business she has held and Asia Pacific for Vodafone plc and before was Chairman and Chief Executive of Carrefour, several key roles including Chief Executive of that spent 11 years in Finance Director and the Paris-based retail group and world’s second Castorama France, Group Commercial Director, General Management roles at BT. Karen has largest retailer, from 1992 to 2005. Prior to and Commercial Director of B&Q UK & Ireland. also worked in companies including Diageo Carrefour, he was Chief Operating Officer of She became Chief Executive Officer on and Mars. She provides significant current METRO, Germany’s leading international retailer. 8 December 2014. relevant finance expertise to the Board. He was previously a non-executive director of Compagnie de Saint-Gobain until June 2006. Andrew Bonfield A R N Other directorships: Karen is a non‑executive Non-executive Director, Chairman director of Imperial Brands PLC, and Chairman Other directorships: Daniel is President of of the Audit Committee of its Audit Committee. Provestis, his own investment company. He Appointed to the Board in February 2010. has been Senior Advisor of TowerBrook Capital Partners since October 2010. He is the Lead Expertise and experience: Andrew brings Independent Director of Capgemini and is significant current finance experience to the also Honorary Chairman of the HEC Business Kingfisher Board. He was previously Chief School Foundation in Paris and a member of Financial Officer of Cadbury plc and prior to the Board of HEC. that he was Chief Financial Officer of Bristol- Myers Squibb from 2002 to 2007. He was Finance Director of BG Group plc from 2001 to 2002 and Chief Financial Officer of SmithKline Beecham Plc from 1999 to 2000 during an 11‑year period with the pharmaceuticals group. Other directorships: Andrew is Finance Director of National Grid plc. He is Chairman of the Hundred Group of Finance Directors.

50 Kingfisher plc | Annual Report 2016/17 Governance N 51 A

www.kingfisher.com Audit Committee Committee Remuneration Nomination Committee – – – – – – R A N Appointed to the Board in February 2016. in February the Board to Appointed Rakhi is a highlyExpertise and experience: having in digital retailing, director experienced Most recently at Amazon.com. spent 11 years UK Media at Amazon, she was Director, such as books, music ranges for responsible UK Director, She was previously and DVDs. home, for she was responsible where Hardlines, joining Prior to ranges. product and DIY garden and in at TomTom Rakhi held roles Amazon, States. the United in management consultancy Rakhi is a non-executive Other directorships: plc, Intu plc, Rightmove of Schroders director plc. Group and Be Heard plc Properties Rakhi Goss-Custard Director Non-executive N N R A A

Appointed to the Board in December 2009. in December the Board to Appointed brings Anders Expertise and experience: to expertise retailing commercial extensive Executive Chief He was previously the Board. 1999 to from of the IKEA Group and President with the company. 2009, having spent 26 years he was Vice Chief Executive, becoming Prior to 1999 1997 to from of IKEA Europe President 1993 UK from of IKEA and Managing Director 1997. to of is a director Anders Other directorships: Oriflame Cosmetics AB, H&M Hennes & Mauritz AB, and is a member of Johnson AB and Axel Business University of Lund the Advisory Board Bank AB, of Resurs School. He is also a director of the and Chairman a Manger Limited Pret Holding BV. Ikea of Inter Board Appointed to the Board in January 2012. the Board to Appointed Mark provides Expertise and experience: Board the Kingfisher to substantial expertise He was a senior adviserin the field of finance. at Price He began his career Suisse. at Credit in the 30 years and spent over Waterhouse BZW Warburg, at SG including senior roles City, Suisse Credit At Boston. First Suisse and Credit 1999 from he was Deputy Chairman Europe Chairman UK Investment 2005 and later to 2005. 2003 to Banking from Mark serves as an Other directorships: on Takeovers member of the Panel alternate plc as He joined Smiths Group and Mergers. in May director an independent non-executive Bank of Scotland 2016. Mark will join The Royal in April 2017. director plc as a non-executive Dahlvig Anders Director Non-executive Mark Seligman Senior Independent Director N N R

Appointed to the Board in November 2010. in November the Board to Appointed provides Pascal Expertise and experience: in the field of digital with expertise the Board He was formerly and multi-channel retailing. of Apple President Vice Manager, the General Middle-East, India and Africa. His Europe, at Packard includes roles experience previous He held the Allen Hamilton. and Booz Bell, NEC on the board director position of non-executive of Egg Banking plc, the online banking arm of strategy, conducts Prudential plc. He actively capital activities and venture consulting c4v.com. through is an Pascal Other directorships: supervisory of the independent director SA and a member of the of Vivendi board of the Condé Nast-owned of directors board He is also Style.com. website e-commerce of of directors a member of the board Banque Transatlantique. Non-executive Director Non-executive Appointed to the Board in December 2010. in December the Board to Appointed brings Clare Expertise and experience: and expertise from perspective international resource human a series of high-profile Group She was previously roles. leadership Director and Group of BT Director People and the NHS for of Workforce General was also a non-executive She Social Care. plc and Chairman of of TUI Travel director Her previous Committee. its Remuneration HR Director also includes Group experience 2006 and HR Vice 1999 to plc from of Tesco and Central Cola’s West of Pepsi President 1999. 1994 to from operations European Board joined the Clare Other directorships: Inc. in International, of Heidrick & Struggles early 2016, and serves as a Commissioner on Commission. Pay the Low Cagni Pascal Clare Chapman Clare Chairman Director, Non-executive Committee of the Remuneration GOVERNANCE Chairman’s introduction I am pleased to present the Corporate Governance Report for the year ended 31 January 2017, on behalf of the Board.

“I firmly believe that a robust and effective governance framework is essential to support management in delivering the company’s strategy.”

Dear shareholders, Our shareholders also play an important role in supporting the company, I am pleased to present our Corporate Governance Report for the year and the investor community continues to be an influential force in ended 31 January 2017, on behalf of the Board. shaping corporate governance. There are a number of areas of particular focus for shareholders, and boards will continue to face investor scrutiny The role of the Board is to lead the company and to oversee its on their activities. Shareholders provide meaningful contribution to governance. The Board plays a critical role in ensuring that the tone for promote effective governance through open and constructive two-way the company’s culture and values is set from the top, and I firmly believe dialogue with boards, and we place great value on this engagement. that a robust and effective governance framework is essential to support management in delivering the company’s strategy. This is particularly true We have reviewed our governance framework with reference to the UK for Kingfisher as we continue to deliver our ONE Kingfisher strategy. Corporate Governance Code, and a statement of compliance with the Code is set out on the following page. We continue to strive towards the An effective Board must maintain a level of independence and objectivity, very highest standards of governance, and this report provides an insight and have the correct balance of experience, diversity, and skills. It also into how, through its actions, the Board and its committees have fulfilled needs a good understanding of the operations of the business. I am their governance responsibilities. delighted to lead a Board with such independence, experience, diversity and knowledge. These criteria continue to be a focus for the Board’s As mentioned in my earlier statement on page 1, I will be stepping succession planning arrangements. down as Chairman at the conclusion of the AGM. I would like to take this opportunity to thank you, our shareholders, for the support you have During the year, with external support, the Board conducted an provided to me and the Board throughout my time as Chairman. I am independent effectiveness evaluation of the Board, its principal confident that your Board, led by Andy Cosslett, will continue to serve committees, and individual directors. The results of this evaluation the company well and maintain progress in the delivery of the ONE confirmed that the Board, its principal committees, and individual Kingfisher plan over the coming years. More information about Andy directors continue to operate effectively. A few key areas for further and the Nomination Committee’s appointment process, can be found development were identified during the review, and these are set out on page 64. on page 58 of this report. The Board, supported by the Group Company Secretary, will continue to review and seek to improve the company’s governance frameworks and systems. This will be particularly valuable as Daniel Bernard the Board reviews Kingfisher’s delivery against key performance indicators Chairman and strategic milestones of the long-term plan. 21 March 2017

52 Kingfisher plc | Annual Report 2016/17 Governance 53 9 / 10 9 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 10 / 10 Attendance

6 6 6 7 1 2 5 4 10 Tenure Tenure in years www.kingfisher.com Received performance updates from the CEO at every the CEO from updates performance Received plan delivery and retail meeting, including transformation performance. operations updates. competition and received new stores Visited litigation briefings on health and safety, Received pension scheme funding, and corporate matters, developments. governance planning and senior management succession Reviewed values appointments, and considered key performance, and culture. of the the appointment approved and Considered the from recommendation new Chairman following Nomination Committee. – – – – – OPERATIONS OTHER AND PEOPLE GOVERNANCE, – – – – – (1) (1)

All directors attended all scheduled Board meetings during the year. However, Clare and Anders were unable to attend one attend unable to were and Anders Clare However, meetings during the year. all scheduled Board attended All directors prior commitments. additional meeting, called at short due to notice, (1) as at had served on the Board each director the number of years table shows The above Committee year. meetings during the at Board year end, and their attendance the financial each committee. for in the report is shown meeting attendance TENURE AND BOARD ATTENDANCE TENURE AND BOARD Current Directors Current Daniel Bernard Andrew Bonfield Andrew Cagni Pascal Chapman Clare Véronique Laury Véronique Mark Seligman Witts Karen Anders Dahlvig Anders Rakhi Goss-Custard 67% 11% Reviewed the company’s key risks, mitigations and risk appetite. risks, mitigations key the company’s Reviewed every meeting, and at performance financial Considered requirements. financing and liquidity reviewed regularly external key reporting and financial Considered against reviewed were ensuring these communications, feedback and reflected auditors by our external best practice investors. from Held ‘deep-dive’ strategic sessions with management on strategic Held ‘deep-dive’ retail and innovations, including digital strategy topics key chain strategies. and supply offer customer, brand, operations, year against our five performance monitor Continued to plan. strategic Chairman Independent directors non-executive directors Executive – – – – – COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE (THE CODE) CODE GOVERNANCE WITH THE UK CORPORATE COMPLIANCE Reporting Council 2014 Code, published by the Financial to the September Kingfisher was subject year, During the 2016/17 financial of the new Remuneration approval shareholder advised that, following the company report, In last year’s www.frc.org.uk). from (available under long-term grants to in relation D.1.1 with Code Provision non-compliant become would the company at the 2016 AGM, Policy company hasD.1.1., the of Provision exception with the year, the that throughout confirm is pleased to The Board schemes. incentive page 54. set out on details are set out in the Code. Further with all Principles and Provisions complied 2017 BOARD COMPOSITION 2017 BOARD FINANCE AND RISK – – – STRATEGY – – KEY BOARD ACTIVITIES DURING THE YEAR ACTIVITIES KEY BOARD 22% CORPORATE GOVERNANCE AT A GLANCE AT GOVERNANCE CORPORATE GOVERNANCE CONTINUED Compliance with the UK Corporate Governance Code The notes below outline the company’s compliance with the 2014 UK Corporate Governance Code (the Code) for the year ended 31 January 2017. This should be read in conjunction with the Corporate Governance Report.

A copy of the Code is available on the Financial Reporting Council’s website: www.frc.org.uk. The 2016 UK Corporate Governance Code will apply to the financial year ending 31 January 2018. The Board considers that the company has complied with the Code for the whole year ending 31 January 2017, except with regards to Provision D.1.1 in relation to grants under long-term incentive schemes.

A LEADERSHIP B EFFECTIVENESS

A.1 The Board’s role B.1 The Board’s composition B.4 Training and development The Board’s role in leading the The balance of skills, experience, Directors’ induction programmes company and the formal schedule independence, and knowledge on are individually tailored for each of matters reserved to the Board are the Board is the responsibility of appointment. The Chairman annually both summarised on page 56. the Nomination Committee and reviews the development needs of is reviewed annually whenever each of the non-executive directors. A.2 Division of responsibilities appointments are considered. Ongoing development needs are The roles of Chairman and Chief considered when setting the Board The majority of the Board are Executive are separate and forward agenda, including deep-dives, independent non-executive directors, clearly defined. topic briefings and site visits. as shown in the composition chart on A.3 Role of the Chairman page 53. B.5 Provision of information and The Chairman leads the Board and support B.2 Board appointments ensures its effectiveness. The Chairman, supported by the Group The appointment of new directors to Company Secretary, ensures that Daniel Bernard was independent at the Board is led by the Nomination Board members receive appropriate first appointment. The Chairman- Committee, who then make and timely information. All directors designate, Andy Cosslett, is recommendations to the Board. also independent. may seek advice from the Group More detail about succession Company Secretary and may also take A.4 Role of the non-executive planning and the appointment independent advice in relation to their directors process can be found in the duties, at the company’s expense. The Board has a Senior Independent Committee’s report on page 64. Director (SID), Mark Seligman, who B.6 Board and committee may be contacted by shareholders B.3 Time commitments performance and evaluation and other directors as required. The time commitments of non- An externally-facilitated performance executive directors are considered evaluation was completed during The SID’s role in the Chairman’s by the Nomination Committee at the year. More information about the succession is described in the appointment and reviewed annually. evaluation can be found on page Nomination Committee report on 58 and the findings and actions for The Chairman considers new external page 64. each committee are located in the appointments which may impact relevant committee report. Meetings are held between the non- existing time commitments. executive directors in the absence B.7 Re-election of Directors of the executive directors, and in the Executive directors hold no more At the 2016 AGM, all directors were absence of the Chairman. than one external non-executive directorship at a listed entity. subject to either election or re-election. More information on the With the exception of Daniel Bernard, responsibilities of the Chairman, CEO There are no directors whose time all directors will be standing for and SID can be found on page 56. commitments are considered to be a either election or re-election by matter for concern. shareholders at the 2017 AGM.

54 Kingfisher plc | Annual Report 2016/17 Governance 55 www.kingfisher.com E.2 Use of the AGM E.2 Use will be held on The 2017 AGM 13 June 2017. The whole Board the AGM attend to is expected answer to and be available questions. shareholders’ participation, shareholder facilitate To and voting proxy electronic the CREST proxy through voting available.appointment service are by way of a poll taken are All votes cast. votes all shareholder to include E.1 Shareholder engagement E.1 Shareholder Details of engagements with may during the year shareholders on page 59. be found RELATIONS WITH RELATIONS SHAREHOLDERS E D.2 Development ofD.2 Development and Policy Remuneration packages was fully Policy The Remuneration during 2015/16 and, reviewed shareholder extensive following at was approved consultation, The 2016 Annual the 2016 AGM. more contains and Accounts Report the Policy about how information was developed. must beUnder the Code, the Policy for shareholders back to brought than the no later or revision review 2019 AGM. D.1 Level and elements D.1 Level of remuneration. Report Remuneration The Directors’ the work 87 explains on pages 66 to Committee. of the Remuneration by the received The remuneration with the in accordance directors, on is presented Policy Remuneration pages 78-80. Annual Report, As advised in last year’s became non-compliantthe company following D.1.1 with Code Provision of awards of, and grant the approval Share the Kingfisher Alignment under, Plan. Incentive & Transformation that requires D.1.1. Code Provision be phased rather awards long-term block: the in one large than awarded conflicts Incentive Transformation be awith this, as it is designed to a five- cover to single block awarded period. performance year REMUNERATION D C.1 Financial and business reporting C.3 Role and responsibilities of responsibilities and C.3 Role the Audit Committee supportsThe Audit Committee in in its responsibilities the Board risk reporting, corporate to relation controls, management and internal withand manages the relationship The auditors. external the company’s reports regular provides Committee Board. to the The Board sets the company’s risk sets the company’s The Board the Audit and reviews appetite assessment of theCommittee’s of the risk management effectiveness during the controls and internal arereview of this The findings year. included in the Audit Committee 63. on pages 60 to Report C.2 Risk management and systems internal control The Directors’ and Auditor’s The Directors’ of Responsibility Statements on pages 91 and can be found 99 respectively. on the company’s Information can business model and strategy 46. on pages 1 to be found viability statement The Directors’ that the businessand confirmation on can be found is a going concern page 46. ACCOUNTABILITY C GOVERNANCE CONTINUED

BOARD LEADERSHIP Composition of the Board The role of the Board The structure, size and composition of the Board is regularly reviewed The Board’s primary responsibility is to promote the long-term success of to ensure it remains suitable for the needs of the business. The current the company and deliver sustainable shareholder value. The Board has balance of the Board’s skills, experience, independence and knowledge, ultimate responsibility for the management, direction and performance together with regular briefings by executives below Board level, ensures of the company, and leads and controls the company’s business. The that views, perceptions and discussions are not dominated by any one Board is also responsible for ensuring appropriate resources are in place specific view. to achieve its strategy and deliver sustainable performance. Through There is an established, formal, rigorous and transparent procedure for authorities delegated to its committees, the Board directs and reviews the selection and appointment of new directors to the Board, which Kingfisher’s operations within an agreed framework of controls, allowing is described in the Nomination Committee report on page 64. At the risk to be assessed and managed within agreed parameters. The Board Annual General Meeting (AGM) to be held on 13 June 2017, shareholders is collectively accountable to shareholders for the proper conduct and will be asked to approve the re-election of all current directors, with the success of the business. exception of Daniel Bernard, who will not be standing for re-election. The Board’s powers are set out in the company’s Articles of Association, Independence of Non-executive Directors which are available to view on our website, and may be amended by a At its meeting in March 2017, the Board considered the independence special resolution of its members. of each of the non-executive directors (other than the Chairman, who The schedule of matters reserved for the Board includes the was deemed independent by the Board at the date of his appointment) consideration and approval of: against the criteria specified in the Code, and determined that all remain independent. –– the company’s overall strategy, medium-term plans and annual budgets; The appointment terms for each non-executive director are available for –– financial statements and company’s dividend policy, including the inspection at the company’s registered office. These will also be available recommendation of the final dividend; for inspection at the Annual General Meeting. –– major acquisitions, disposals and capital expenditure; Diversity on the Board –– major changes to the capital structure including tax and treasury The company is proud of the level of diversity that exists on its Board. management; and The Board remains committed in its belief that a balanced Board, with a –– major changes to accounting policies or practices. broad range of skills, experience, independence, knowledge and diversity, including gender diversity, is an effective Board. As a company, we encourage diversity and promote a culture of inclusion at all levels of our business. We believe in and are committed to maximising the benefits that this approach provides. Charts demonstrating the gender split at Board level, senior management level, and for all employees across the company can be found on page 65.

Roles of the Chairman, Senior Independent Director, Chief Executive Officer and Group Company Secretary

Chairman Senior Independent Director –– Ensuring that the Board determines the nature, and extent, of –– Acting as a sounding board for the Chairman of the Board, the significant risks the company is willing to take to achieve its providing support for them in the delivery of their objectives. strategic objectives. –– Chairing the Nomination Committee when it is considering the –– Setting the style and tone of Board discussions and setting succession to the role of Chairman of the Board. a plan of Board activity that primarily focuses on strategy, –– Working with the Chairman, other directors and shareholders performance, value creation and accountability. as necessary to resolve any significant issues. –– Ensuring that there is effective and appropriate communication of financial and other information by the company to its shareholders.

Chief Executive Officer Group Company Secretary –– Leading the executive management of the company’s business –– Ensuring good quality information flows from executive –– Maintaining a dialogue with the Chairman on important and management to the Board and its committees. strategic issues facing the company. –– Advising the Board on legal, compliance and corporate governance matters. –– Facilitating inductions and ongoing training for all directors.

The roles and responsibilities of the Chairman, SID and Chief Executive Officer are available from the Company’s website (www.kingfisher.com).

56 Kingfisher plc | Annual Report 2016/17 Governance 57

IT services. to strategy. to DIGITAL & IT DIGITAL better packaging. better STEVE WILLETT ARJA TAAVENIKU ARJA Read more on page 66 more Read www.kingfisher.com and customers’ homes. and customers’ OFFER & SUPPLY CHAIN OFFER & SUPPLY and unified offer of products. of and unified offer products, lower prices, simpler prices, lower products, customer journeys and leveraging and leveraging journeys customer Oversee the linking of reward the linking of reward Oversee and capability, unlocking seamless unlocking and capability, ranges, clearer merchandising and merchandising clearer ranges, new higher quality and sustainable REMUNERATION COMMITTEE delivery, operation and support of all operation delivery, Define and drive the digital strategy to the digital strategy Define and drive Screwfix’s best-in-class digital capability. Screwfix’s deliver industry-leading digital solutions industry-leading deliver Ensure availability, delivering to all stores all stores to delivering availability, Ensure Support ONE Kingfisher with the design, Deliver customer benefits which include customer Deliver Lead and develop the sustainable, unique and develop Lead

PEOPLE in every country. in every future successes. future Read more on page 64 more Read customer experience. customer JEAN-PAUL CONSTANT JEAN-PAUL ALASTAIR ROBERTSON ALASTAIR colleagues to champion the to colleagues Develop the leadership skills the leadership Develop Group Executive Develop engaged and skilled engaged Develop Kingfisher Board Operating Company CEOs to: Company CEOs Operating and succession planning. and succession increase consistency and efficiency consistency and efficiency increase and in all our operations; an outstanding customer deliver online. and store each in experience support all our global activities. NOMINATION COMMITTEE NOMINATION SALES & RETAIL OPERATIONS SALES & RETAIL Oversee Board composition Board Oversee required to deliver the company’s deliver to required Work closely with the Country and Work 1) 2) Create the conditions of leadership the conditions Create Lead the people agenda to effectively effectively the people agenda to Lead Engage all colleagues; recruit, retain and develop the best talent. and develop retain recruit, Engage all colleagues;

KAREN WITTS SUSTAINABILITY Oversee financial Oversee financial Read more on page 60 more Read of everything we do. of everything we governance services. governance CUSTOMER, BRAND, CUSTOMER, AUDIT COMMITTEE AUDIT PIERRE WORECZEK COMMUNICATIONS & COMMUNICATIONS with all key stakeholders. with all key Led by Véronique Laury to create a long-term sustainable business with a strong purpose by developing a purpose by developing sustainable business with a strong a long-term create Laury to by Véronique Led continuous improvement. continuous sustainable business model reporting, audit and risk. reporting, Develop home improvement home improvement Develop its execution in every country. in every its execution and creating the conditions for for conditions the and creating Responsible for developing our developing for Responsible with audit, risk, investor relations, with audit, risk, investor strategy that will create uniqueness and leadership. Deliver that strategy through business plans and milestones. through that strategy Deliver uniqueness and leadership. that will create strategy Lead on sustainability strategy and on sustainability strategy Lead FINANCE & BUSINESS SERVICES FINANCE & BUSINESS customer insights to form the basis form insights to customer Lead the financial and legal agenda Lead health and safety, GNFR and corporate GNFR and corporate health and safety, manage our global corporate reputation manage our global corporate Define and build brand strategy and lead strategy Define and build brand GOVERNANCE STRUCTURE GOVERNANCE GOVERNANCE CONTINUED

BOARD EFFECTIVENESS prepared, tailored to support the Group Executive as they deliver the Board meetings transformation strategic milestones. Transformation delivery and financial The Board holds regular scheduled and supplementary meetings performance reporting has been updated during the year. The Board throughout the year, which are structured to allow open discussion. considered management development reviews and succession plans for At each meeting the Board receives certain regular reports, which key senior management roles, and refreshed its Board-level emergency include an update from the Chief Executive Officer, current trading/ succession plans. finance (including liquidity) and capital expenditure reports from the In autumn 2016, an externally-facilitated process was conducted by Chief Financial Officer, and reports from the Group Company Secretary, Ffion Hague of Independent Board Evaluation to review the performance including governance, legal, insurance and risk updates. Regular updates and effectiveness of the Board, its committees and individual directors. on people, risk, sustainability and public affairs are also provided during Ffion Hague and Independent Board Evaluation each have no other the year. connections with Kingfisher and were therefore considered independent All directors participate in discussions about strategy, trading and financial in accordance with the Code. performance, and risk management of the company. Comprehensive A comprehensive brief was developed with the external assessment team briefing papers are circulated to all directors approximately one week who attended Board and Board committee meetings during September before each meeting. Any director unable to attend a meeting may and November 2016. The team also conducted individual interviews with discuss any issues with the Chairman or the Chief Executive Officer. every Board member and with other key colleagues. Each year the Board holds at least one meeting outside the UK, in a The main areas considered during the evaluation were: country in which the company operates. In 2016/17 the Board held two meetings in France, and used these opportunities to meet senior –– shareholder accountability, relationship and interface; management of the Operating Companies, visit stores in the area, obtain –– strategy; a customer perspective and review local market conditions. –– governance and compliance; –– board focus; The Chairman and non-executive directors meet regularly without the executive directors being present. The Chairman maintains regular –– risk management; contact with the Senior Independent Director. –– succession planning; –– board composition; Board evaluation –– board culture; Following the 2015/16 internally-facilitated board evaluation, the Board undertook to review the forward business agenda and reporting of key –– relationship with senior management; and performance indicators, and renew focus on succession planning and –– decision-making. talent management. Significant improvement was seen in each of these areas during the year. A fully revised forward Board agenda has been

BOARD EVALUATION FINDINGS AND 2017/18 ACTION PLAN

Key Findings Development Plans Board Information Flows It was felt that, whilst Board papers and The Group Company Secretary will lead on information flows had improved, there was still developing the quality and effectiveness of Board some scope to further develop the quality of papers and presentational materials, including information made available to the Board. further work on paper format, length, and content, to support effective decision-making by the Board and its committees.

Board Succession Planning The Board agreed that there were robust Board succession planning, including a review of succession plans in place at executive level, the Board skills matrix, would be a key focus of the although it was felt that succession planning Nomination Committee during the year. for the Board, and particularly for non-executive directors, needed to be a focus during the year ahead.

Contact with Senior The Board felt that it would benefit from further Further contact with key senior management, Management contact with key senior management to further including Operating Company CEOs, has now been enhance its understanding of the key issues and built into the Board Forward Planner for 2017/18. opportunities facing the business.

58 Kingfisher plc | Annual Report 2016/17 Governance 59

kingfisherplc. www.kingfisher.com investment case;investment year plan; and the five ONE Kingfisher business strategy financial and business performance; updates; results, including trading year final and half sustainability; planning; and including succession governance, remuneration. executive – – – – – – – Annual General Meeting Annual General retail engage with our wider, the opportunity to welcomes The Board Meeting. at the Annual General base each year shareholder 13 June 2017, all resolutions be held on Tuesday to the 2017 AGM, At to announced on a poll, and the results shareholders will again be put to They will also be published on our website, Exchange. Stock the London AGM can be Further details about the 2017 the meeting. shortly after at Meeting, which is available of Annual General in the Notice found kingfisher.com. Conflicts of interest authorise and identify, to in place procedures has robust The company and these procedures of interest, or actual conflicts manage potential register of the review Following year. during the effectively operated have confirmed the Board conflicts, and transactional situational of directors’ or which would, aware no situations of which they were were that there company, of the with the interests conflicts rise to give could, potentially other appointments. directors’ other than those that might arise from and if appropriate, reviewed, arise, they are conflicts such potential Where put in are managing such conflicts for by the Board. Processes approved related in any decision is involved director no conflicted ensure to place set out in thekey appointments are other their conflict. Directors’ to on pages 50 and 51. biographies directors’ with shareholders Relations the importance of having acknowledge Kingfisher and the Board existing and with both communication regular lines of and effective and of forms a variety take These engagements shareholders. potential in Europe, roadshows presentations, events, include capital markets facility and operational store Northconferences, America and Asia, Chief the involve relations team, Relations visits. Alongside the Investor Group of the and other members Chief Financial Officer Officer, Executive last year. undertaken meetings were 500 around In total, Executive. and other Director Meetings with the Chairman, Senior Independent Committee) of the Remuneration (e.g. with the Chair directors Board are also offered to our major shareholders each year. year. each to our major shareholders also offered are of on a range engaged with shareholders have we During the year topics including: – – – – – – – guidance, and technical estimates analyst latest annual reports, Results, at kingfisher.com all available are webcasts and archived presentations App. iPad Relations on our Investor and downloaded and can be viewed @ on Twitter can also be followed We experience to perform the functions required of the directors of a listed of the directors the functions required perform to experience may directors whereby procedure is also an agreed There company. in the expense company’s at the advice independent professional take of their duties. furtherance

individual one-to-one meetings with the Chairman, the Chief Executive meetings with the Chairman, the Chief Executive individual one-to-one directors; and all other Chief Financial Officer the Officer, Companies and othermeetings with management of the Operating the company; across managers senior key stores; the company’s visits to site which she hasto committees briefing sessions on the activities of the and been appointed; support the above. to materials reference of key site an online resource – – – – – Induction, information and professional development and professional Induction, information to develop is designed induction programme The Kingfisher directors’ operations of the company’s and understanding knowledge a director’s meet each to is tailored programme comprehensive The and culture. andfeedback to allow and is phased requirements specific director’s activities. of development further customisation Goss-Custard, for Rakhi was created programme induction A tailored included: in 2016. This programme who joined the Board – – – – – at the company’s may be provided courses training external If required, expense. company’s businesses is in specific aspects of the Subsequent training visits. as part of site and regularly when requested directors to provided meetings, for and committee on issues at Board briefed are Directors legalcommercial, relevant briefings on cyber risks, and receiving example to full and timely access have All directors developments. and regulatory ahead of each meeting. information relevant and addresses the Chairman considers with best practice, In accordance that and ensures as a whole, if any, needs of the Board the development and expertise. their individual skills, knowledge updates each director discussions from and feedback reports regular also receives The Board of any and is informed institutional shareholders with the company’s to directors allows by them. This process raised issues or concerns of these shareholders of the views necessary understanding develop a have judge whether investors to and also enables the Board In addition to company’s objectives. of the sufficient understanding to take expected is and briefings, each director planned development take individual needs and to identifying their own for responsibility about informed adequately that they are ensure to necessary steps is Board The director. as a and their responsibilities the company ability and knowledge, requisite the have that all its members confident The results of the evaluation were considered by the Board at its Board by the considered were of the evaluation The results and highlighted meeting in Januarywere 2017. No significant issues the Chairman and its committees, that the Board, indicated the review contribution The effectively. work to continued each of the directors other, with each and their interaction of each director, and commitment directors non-executive by the good, and the challenge offered remained and appropriate. was robust based on the findings of the above 2017/18, Action Plan for The Board will page. The Board in the table on the previous is outlined process, in the and development effectiveness its procedures, review to continue evaluation Board and the Chairman will use the output of the ahead, year during the year. in his individual meetings with directors contribution of each of the directors that the confirmed has The Board should be supportive of and that shareholders be effective to continues the Board. to their re-election AUDIT COMMITTEE REPORT Overseeing effective controls

Dear shareholders, I am pleased to present the Audit Committee Report for the year ended 31 January 2017, on behalf of the Board. Over the following pages we provide insight into the workings of the Audit Committee and its activities in the year. Our report provides an overview of the significant issues the Audit Committee assessed and the Committee’s opinion on the Annual Report when viewed as a whole. We have considered the alternative performance measures used in Kingfisher’s financial reporting, to more clearly convey the underlying performance of the business during the transformation programme. These measures are described on page 61. We continued to receive regular in-depth presentations from the management of Kingfisher’s Operating Companies, providing the Committee with real insight into the business’s challenges, how risks are managed and mitigated, and how effectively our system of AUDIT COMMITTEE MEMBERS internal control is operating. These are all areas of particular focus Joined Attendance while implementing the major change programmes required to deliver Andrew Bonfield (Chairman) 11/02/2010 4 / 4 ONE Kingfisher. These sessions provide us with an opportunity to Anders Dahlvig 16/12/2009 4 / 4 challenge, discuss, and debate issues with management, while sharing our experience. Rakhi Goss-Custard 1/02/2016 4 / 4 Mark Seligman 1/01/2012 4 / 4 We also considered and reviewed the internal control framework we have in place to ensure good practice and high standards in all our business KEY DUTIES & RESPONSIBILITIES support services, including the controls for our legal and financial compliance activities. At the Committee’s request, the Chief Financial Officer and senior In accordance with its terms of reference, the Audit members of the Finance Department attend meetings of the Committee is required, amongst other things, to: Committee. In addition, the external and internal auditors are regular attendees. Our effective working relationship with the wider business has –– review, understand and evaluate the company’s control been maintained through the year. of internal financial risk, and other controls and their associated systems; This year we welcomed Rakhi Goss-Custard to the Committee. The members of the Committee have been chosen to provide the wide range –– monitor and review the effectiveness of the company’s of financial and commercial experience needed to fulfil its duties and internal audit function on an annual basis; the Committee is well-placed to continue this oversight and governance –– oversee the relationship with the external auditor, and role in the year ahead. Details of the members and their attendance at make recommendations to the Board in relation to their Committee meetings during the year are shown to the left. I am grateful appointment, remuneration and terms of engagement; to all the Committee members for their contribution during the year. –– oversee the process for determining whether the Annual Report and Accounts present a fair, balanced and I will be available at the Annual General Meeting to answer any questions understandable assessment of the company’s position about the work of the Committee. and performance, business model and strategy; –– evaluate and approve the going concern assumption Andrew Bonfield and longer-term viability statements; Chairman of the Audit Committee –– agree the scope of the annual audit programme for both the external and internal auditors and review the 21 March 2017 outputs; and –– monitor and review the external auditor’s independence, objectivity and effectiveness. The Committee’s terms of reference were reviewed during the year and, following minor amendment, are considered fit for purpose and reflect best practice. The terms of reference are available on the company’s website (kingfisher.com).

60 Kingfisher plc | Annual Report 2016/17 Governance 61 www.kingfisher.com to determine whether any impairment had been suffered. whether any impairment had been suffered. determine to of goodwill the £2.4 billion carrying value considered The Committee plans and the significant financial strategic four-year based on projections of cash flow the validity reviewed The Committee following volatility, market in light of rates growth and long-term discount assumptions used, including the selection of appropriate the use of sensitivity further challenged through and assumptions were and the US elections. These projections the EU referendum and the exercise this from resulted no impairments of goodwill financial statements, the consolidated 12 to As set out in note analyses. be recognised. cause an impairment to in the assumptions used would possible change that a reasonably not consider did Committee items, and associated and exceptional costs of transformation presentation and the treatment considered The Committee set out in the Financial costs . Transformation such as underlying and adjusted profits measures performance alternative rangeoffer to the unified and unique related included those financial statements 2a of the consolidated note and Review the 5 to and note statement income set out in the consolidated items Exceptional initiative. implementation and the digital strategic which provisions, restructuring Europe continental in the UK and and movements impairments included store financial statements that the inclusion of transformation concluded The Committee and measurement. recognition appropriate for reviewed also were and underlying business performance, of the company’s an indication in providing readers was useful to items and exceptional costs appropriate. were measures performance of the alternative and reconciliation explanation that the prominence, ofcomponent a significant , which at £2.2 billion represent inventories to the principal judgements relating reviewed The Committee policy, which takes stock provisioning of the company’s of the application sheet. This included a review balance the consolidated assessing the net when damage and obsolescence status, shrinkage, or de-listed turn, range as stock such factors consideration into of selling prices future impacts on the estimated considered The Committee date. reporting held at the of inventories value realisable that the stock concluded activities. The Committee and clearance review range plan and associated transformation the company’s appropriate. were recorded provisions , in particular those and business taxes to corporate relating the significant judgements and estimates reviewed The Committee for many transactions are and there jurisdictions in numerous taxes is subject to uncertain tax positions. The company surrounding exposures, management’s assessment of the significant considered is uncertain. The Committee tax determination which the ultimate appropriate. made were and disclosures recorded that the provisions and concluded advisers, external including opinions from taken be satisfied with the judgements to and continues to rebates relating the significant judgements reviewed The Committee reporting. and financial statement income of rebate the recognition to in relation environment and the control – – – – – Fair, balanced and understandable Fair, considers and announcements, and associated financial statements annual and interim the company’s reviews formally The Committee reporting issues and significant judgements financial and their appropriateness, principles, policies and practices significant accounting made, including those summarised above. and balanced fair, as a whole, are taken and Financial Statements, on whether the Annual Report also advises the Board The Committee business model and strategy. position and performance, assess the company’s to the necessary information and provide understandable, legal and meet the latest underlying their production, and controls and the processes that these disclosures, concluded The Committee and understandable. balanced fair, and Accounts are and that the 2016/17 Annual Report company a listed for requirements regulatory Significant financial reporting matters are detailed below: year in the considered the Committee reporting matters The significant financial – – – – – received function and finance of the company’s and recommendations the work considered the Committee these reviews, In conducting work. to their audit relevant observations control on their findings, including any auditor external the company’s from reports FINANCIAL REPORTING AUDIT COMMITTEE REPORT CONTINUED

GOVERNANCE During the year, among other matters, the Committee: Andrew Bonfield is designated as the Committee member with –– considered the going concern and longer-term viability statements, recent and relevant financial experience. All other members of the reviewing the scenarios and risk mitigations which underpin the Audit Committee are deemed to have the necessary ability and sensitivity analysis completed, and considered how these align to experience to understand financial statements. delivery of the strategic plan over the five-year period initially adopted. All members of the Committee receive an appropriate induction. The The impact of both separate and cumulative scenarios occurring, induction programme offered to Rakhi Goss-Custard in 2016 included and the potential mitigating actions, were considered in confirming an overview of the business, its financial dynamics and risks, and access Kingfisher’s expected resilience. Further information is provided in the to the company’s operations and staff including members of the finance, Strategic Report on page 46; internal audit, tax, treasury, legal and company secretariat teams. Ongoing –– considered the internal audit function’s regular reviews of the Unified training is available to all members of the Committee as required. IT Platform to provide the Committee with assurance over the governance, performance and delivery of this programme. This is a The Committee has a standing agenda linked to events in the company’s significant project for the company and the Committee is satisfied financial calendar for consideration at each meeting, and within the that the correct level of control is being maintained. Further reviews annual audit cycle, to ensure that its work is in line with the requirements will be carried out in 2017; and of the Code. At the invitation of the Committee, the Chairman of the –– received presentations from the IT function, focusing on cyber risks Board and the Chief Executive Officer regularly attend meetings, as do the company faces and the mitigations in place. the Chief Financial Officer, the Deputy Chief Financial Officer, the Group Audit and Risk Management Director, Group Financial Controller and the Group internal audit external auditor. Private meetings were also held with the external and The Committee receives updates from the internal audit programme internal auditors at which management were not present. at every meeting. Reports during the year included updates on the The effectiveness of the Committee was considered as part of the Board company’s risk management systems, findings from reviews of these evaluation detailed on page 58. The evaluation found the Committee systems, and reviews of the remit, organisation, annual plan and continues to be seen as rigorous and efficient. The evaluation report resources of the internal audit function. noted improved clarity of reporting to the Committee regarding risk During the year, the Committee reviewed the effectiveness of the internal management, which had been an action identified in the 2015/16 audit function. The review was conducted using an internal questionnaire evaluation, but that continued progress in this area was desirable. with input from the function’s key stakeholders within the company, The risk and controls reporting from the Operating Companies was the external auditors and the Committee. No significant issues were also considered and it was agreed to increase the time allocated to highlighted by the review. these reports. External audit ACTIVITIES OF THE AUDIT COMMITTEE DURING The Committee reviews and makes recommendations to the Board with THE YEAR regard to the re-appointment of the external auditor. In doing so, the Internal controls and risk Committee takes into account auditor independence and audit partner The Committee received and considered reports during the year from the rotation. Deloitte LLP were appointed as external auditor in 2009/10, internal audit function on the work they had undertaken in reviewing and following a formal tender process. Richard Muschamp was appointed lead auditing the company, in order to assess the quality and effectiveness of audit partner following the conclusion of the 2013/14 audit process. the internal control system. During the year, the Committee agreed the approach to and scope of The Committee also received and considered reports from the company’s the audit work to be undertaken by the external auditor, Deloitte LLP. The external auditor, Deloitte LLP, which included any control findings relevant Committee also reviewed and agreed the terms of engagement and fees to their audit. payable in respect of the 2016/17 audit work. Details of the amounts paid to the external auditor for their audit services are given in note 7 to the The Committee considered reports on the output from the company- accounts. In addition, the external auditor provided the Committee with a wide process used to identify, evaluate and mitigate risks and reviewed schedule of each matter on which there was an initial difference between the annual report on the company’s systems of internal control and their them and management in relation to the accounting treatment, and the effectiveness, and reported the results of the review to the Board. No final decisions on these issues. significant weaknesses were identified. The Committee also considered the effectiveness and independence Further information on the company’s risk management and internal control procedures can be found on pages 38-46. of the external auditor. The Committee reviewed the experience and expertise of the audit team, the fulfilment of the agreed audit plan As part of the Committee’s continuing programme to increase its and any variations to it, feedback from the company’s businesses and awareness of the company’s operations and to understand the the contents of the external audit report. The Committee received a implementation of Operating Company control processes, the statement of independence from the auditor, a report describing their Committee received presentations from the senior management of arrangements to identify, report and manage any conflicts of interest, Castorama Poland, Russia and France, Brico Dépôt France and Iberia and reviewed the extent of non-audit services provided to the company. (Spain and Portugal), and from the senior management of Kingfisher’s The Committee confirmed its satisfaction with both the effectiveness Information Technology function. and independence of the external auditor.

62 Kingfisher plc | Annual Report 2016/17 Governance 63 www.kingfisher.com an annual planning process and regular financial reporting, financial and regular an annual planning process on both a monthly year with plan and the previous results comparing basis; and cumulative and Chief Financial Officer the Chief Executive from reports written meeting; to each Board are submitted which Officer the Company management to Operating from reports formal regular in their business and environment on the control Audit Committee as appropriate; the environment maintain or improve to actions taken and of specialist on certain areas the Board to and presentations reports tax and pensions. insurance, risk. These include treasury, and embed improve develop, Companies to with the Operating works their business operations; into and processes risk management tools review to and has the authority the Audit Committee to directly reports part and its businesses; of the company any relevant Companies’ audit of the individual Operating the operation oversees and committees; assurance with objective and the Board the Audit Committee provides Kingfisher. across environment on the control – – – – – – – – the significant risks faced by the company. Such a system is designed Such a system company. by the faced the significant risks business achieve to the risk of failure than eliminate manage rather to assurance and not absolute only reasonable and can provide objectives or loss. misstatement against material Further information regarding our approach to Risk Management is provided our approach to Risk Management regarding Further information Report. on page 38 of the Strategic the risks facing apply judgement in evaluating to Management is required risks that are the determining in its objectives, in achieving the company of those risks in assessing the likelihood bear, to acceptable considered the incidence reduce ability to in identifying the company’s materialising, and in ensuringand impact on the business of risks that do materialise, the to proportionate are particular controls of operating the costs benefit provided. Monitoring the system and monitoring controlling for clear processes are There failings or control any significant and reporting control of internal action. These include: with details of corrective together weaknesses – – – – by the Chief Executive bi-annual certification is provided A formal stating Company, each Operating of Director and Finance Officer confirming and in operation were controls internal that appropriate Any weaknesses policies and procedures. with the company’s compliance Company by Operating reviewed are and the results highlighted are the Audit and Risk Management Director, management, the Group The and the Board. the Audit Committee Deputy Chief Financial Officer, of this checks the results and selectively audit function monitors internal with the consistent made are ensuring that representations exercise, during the year. of its work results that of reviews a planned programme audit function follows The internal risks. The function: the company’s aligned to are – – – – ACCOUNTABILITY, RISK MANAGEMENT AND INTERNAL RISK MANAGEMENT ACCOUNTABILITY, CONTROL and risk management Internal control control, of internal the system for responsibility has overall The Board the and ensure the assets of the company safeguard which is designed to external use and for both internal of the financial information reliability on Risk Management, with the Guidance comply publication, and to and the Reporting Financial and Business and Related Control Internal Code. Governance UK Corporate of the internal the effectiveness reviewed that it has confirms The Board controls compliance and including financial, operational system, control the period with the Code, for and risk management in accordance of these Annual Report of approval the date 2016 to 1 February from 2016/17. and Accounts for and frameworks a set of policies, procedures has approved The Board for the delegation company has procedures The control. internal effective is sought at the approval to ensure significant matters, of authorities for and review regular subject to are These procedures level. appropriate and managing evaluating identifying, for an ongoing process provide The Committee has recommended to the Board that Deloitte LLP be that Deloitte the Board to has recommended The Committee external as the company’s by shareholders re-appointment for proposed during the year, of its work As a result AGM. at the forthcoming auditor with its terms in accordance that it acted has concluded the Committee and objectivity of the the independence and has ensured of reference auditor. external the next timing for the considered the Committee During the year, the by up year-on-year base built The knowledge audit tender. be particularly important to is considered auditor incumbent external change programme. the transformational as the company implements to becontinues auditor external that the is confident The Committee to be in the considered reason it is for this and independent and effective tender LLP until a competitive Deloitte retain to of shareholders interests results. the audit of the 2019/20 financial is held in time for Statutory of the with the provisions compliance confirms The Committee Use (Mandatory Investigation Companies Market Large Audit Services for Responsibilities) and Audit Committee Processes Tender of Competitive Authority. published by the UK Competition and Markets 2014, as Order also LLP are duties, the services of Deloitte their statutory In addition to they either auditor, of their position as external as a result engaged where, audit services. This is non-statutory perform to, placed best must, or are additional review, such as the interim matters to in relation primarily work certain filings and regulatory circulars, shareholder procedures, assurance on the basis is awarded Other work and disposals. business acquisitions tendering. of competitive use of its its policy on the updated the company During the year, is precluded auditor The external non-audit work. for auditor external their compromise in non-audit services engaging that would from their affecting or regulations any laws or violate independence of the Chairman of the The approval auditor. appointment as external non-audit contracts high-value awarding prior to is required Committee planned and performed and the non-audit work auditors, the external to policy on the use of The company’s by the Committee. is monitored on the company’s can be found non-audit work for auditor the external (kingfisher.com). website NOMINATION COMMITTEE REPORT Ensuring balance and diversity

Dear shareholders, I am pleased to present the Nomination Committee Report for the year ended 31 January 2017, on behalf of the Board. The Nomination Committee has an important role to play in evaluating Board composition and ensuring that it remains appropriate for the delivery of the Company’s strategy and business objectives. When I advised the Board that I was considering stepping down, Mark Seligman, the Senior Independent Director, led the process to find my successor, supported by the Nomination Committee. Having completed this process, the Committee is very pleased to have secured a new non-executive Chairman with the calibre, skills and relevant experience of Andy Cosslett. You can read more about the succession process, and the Committee’s approach to Board diversity on the following page. As part of the succession process, we also considered the composition NOMINATION COMMITTEE MEMBERS of each Board Committee. This resulted in Andy Cosslett’s appointment Joined Attendance to this Committee. He will succeed me as Chairman of the Committee at the conclusion of the AGM. Daniel Bernard (Chairman) 24/05/2006 4 / 4 Andrew Bonfield 11/02/2010 4 / 4 During the year, the independence, performance, and contribution of Pascal Cagni, Clare Chapman, Andrew Bonfield and Anders Dahlvig Pascal Cagni 17/11/2010 4 / 4 was reviewed, each having served on the Board for more than six years. Clare Chapman 2/12/2010 4 / 4 Pascal, Clare, Andrew and Anders were not present for the Committee’s (1) Anders Dahlvig 19/12/2009 3 / 4 deliberations. The Committee recommended the Board re-appointment Rakhi Goss-Custard 1/02/2016 4 / 4 of Pascal and Clare for an additional three-year term. The Committee was Mark Seligman 1/01/2012 4 / 4 also satisfied that all non-executive directors continue to be independent in character and judgement, and recommended that all serving (1) Anders was unable to attend a meeting in May 2016 due to a prior commitment. directors are put forward for re-election by shareholders at the AGM. KEY DUTIES & RESPONSIBILITIES The Committee’s terms of reference were also reviewed during the year. The Committee is well-placed for the year ahead. Long-term succession planning at Board level will be a key focus, to ensure Kingfisher retains and attracts the very best talent necessary to succeed in the delivery of the In accordance with its terms of reference, the Nomination transformation plan and beyond. Committee is required to:

–– review the structure, size and composition of the Daniel Bernard Board and make recommendations to the Board, Chairman of the Nomination Committee as appropriate; –– identify the balance of skills, knowledge, diversity and 21 March 2017 experience on the Board and nominate candidates to fill Board vacancies; –– ensure that, upon appointment, all directors undergo an appropriate and tailored induction, and that existing Board members receive the opportunity for training to support their development and contribution to the Board; –– review the time commitment and independence of the non-executive directors; and –– review succession plans with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace. The Committee’s full terms of reference are available on the company’s website (kingfisher.com).

64 Kingfisher plc | Annual Report 2016/17 56% Governance 65

Male Female 44% 61% www.kingfisher.com Male Female TOTAL WORKFORCE (FTE) WORKFORCE TOTAL 39% and 43% of Group Executive members are female). The company is The company female). are members Executive and 43% of Group remainWe Kingfisher. right across that exists of the diversity proud to workforce maximising the benefits of our diverse to committed and sustainable benefits. deliver real 80% N

Male Female SENIOR MANAGEMENT 20% Andy Cosslett, Chairman-designate 1 April 2017. effective the Board to Appointed and of branding in a variety was with Unilever Andy Cosslett’s early career Expertise and experience: before roles international at Cadbury in senior, Schweppes He then spent 15 years roles. marketing by value creating six years, (IHG). Andy was at IHG for Group Hotels InterContinental for CEO becoming change. and cultural transformational significant alongside effecting of its brands the power leveraging instrumental in he was again successfully 2015, where 2012 to from Fitness First for He served as CEO International. Advent for Partner Operating 2015, Andy has also been Since brand. the repositioning Union (RFU) in April 2012 and served Football of the Rugby Andy joined the Board Other directorships: Chairman of He was appointed Cup. World of the 2015 Rugby committee as Chairman of the organising 2016. the RFU in October 56% (JCA) to assist in this search process. A comprehensive role brief was prepared and the search strategy agreed. In developing the In agreed. strategy and the search brief was prepared role A comprehensive process. assist in this search (JCA) to (1) Clare Chapman is a non-executive director of Heidrick and Struggles, which owns JCA. Clare was not involved in decisions regarding the appointment or remuneration of JCA. JCA have no other of JCA. JCA have the appointment or remuneration in decisions regarding was not involved JCA. Clare which owns of Heidrick and Struggles, director Chapman is a non-executive Clare Kingfisher. to relationship (1) Chairman’s succession Chairman’s had been a suitable successor once Board, the Kingfisher from down step to his desire indicated criteria: In 2016, Daniel Bernard Role with JCA Group engaged We during the process. the Nomination Committee led the Senior Independent Director, Mark Seligman, found. Limited role criteria, we considered the skills and experience that the Board would benefit from when overseeing the implementation of the long- the implementation overseeing when benefit from would that the Board experience the skills and considered we criteria, role the to and with due regard criteria assessed on merit against these objective were the candidates ensure to was taken Care strategy. term and background. experience skills, nationality, ethnicity, of gender, its widest definition, including diversity in benefits of diversity and the most suitable of Laury, met initially with Mark Seligman and Véronique A short-list of suitable candidates Selection process: Witts, the Chief and Karen and Audit Committees, Remuneration of the Bonfield, Chairs Chapman and Andrew these met with Clare ahead of our final including Daniel Bernard, of the Board, remaining members also met the candidate The preferred Financial Officer. Andy Cosslett, brings a wealth candidate, The successful candidates. of interested by the calibre was impressed decision. The Committee 1 April 2017. Andy effective and Chairman-designate, director as a non-executive the Board to and was appointed experience of relevant process. handover as part of an orderly of the AGM, of Chairman at the conclusion on the role take will formally key shareholders, and includes meetings and briefing sessions with has been developed, programme induction Induction: A tailored Andy with a broad which will provide Company management teams and Operating functional leaders, members, key Executive Group of our businesses. understanding Male Female BOARD DIVERSITY retaining diversity, to its commitment has continued The Committee nationality and ethnicity, of experience, diversity Board-level strong value of this diversity, the demonstrates Kingfisher’s performance gender. members (44% of Board level Executive at Group which is also replicated CASE STUDY 44% DIRECTORS’ REMUNERATION REPORT Delivering and rewarding value creation

Dear shareholders, I am pleased to present the Directors’ Remuneration Report for the financial year ended 31 January 2017, on behalf of the Board. This is the first report under our new Remuneration Policy (the ‘Policy’), and follows the completion of Year 1 of Kingfisher’s five year transformation strategy. Shareholders engaged with us during 2015/16 as we fundamentally re-designed our executive remuneration arrangements to align reward with the delivery of the outcomes committed to at the Capital Markets Day in January 2016. This has resulted in a much clearer focus on value creation and long-term share ownership as we undergo our transformational journey to become the leading home improvement company in Europe. The Policy received strong support at last year’s Annual General Meeting (‘AGM’) with over 98% of shareholders voting in favour. In this letter, I set out a summary of the key remuneration decisions for REMUNERATION COMMITTEE MEMBERS 2016/17 and how the Policy will be implemented in the coming year. Joined Attendance I also provide a ‘look ahead’ view on other reward matters. The remainder of the report then sets out: Clare Chapman (Chairman) 16/02/2011 5 / 5 Daniel Bernard 03/06/2009 5 / 5 –– an ‘at a glance’ section that provides a quick reference point for the key remuneration decisions taken during the year and how the new Andrew Bonfield 17/06/2010 5 / 5 remuneration structure aligns with our strategy; Mark Seligman 22/01/2016 5 / 5 –– the Annual Report on Remuneration, with details of the pay outcomes in respect of the first year of the Policy and how we intend to implement the Policy for 2017/18; and Contents –– for reference, the Policy as approved by shareholders at the 2016 AGM. 66 Annual Statement from the Chairman of the Remuneration Committee PERFORMANCE IN YEAR 1 68 At a glance Kingfisher delivered a strong performance in the first year of the 70 Annual Report on Remuneration strategy, with all Year 1 strategic milestones substantially met. This 78 Statement of Implementation of the Remuneration Policy excellent outcome was achieved whilst maintaining underlying business for 2017/18 performance and reflects the leadership and capability of both the Group Executive and of colleagues from across the Group. 81 Directors’ Remuneration Policy (for reference) Significant progress has been made on key areas which have provided ABOUT THIS REPORT a solid base for Year 2, when execution of strategy will accelerate. This report has been prepared in compliance with the The Committee recognised both the achievement of 4% unified cost of remuneration disclosures required under the Large and goods sold (COGS) and the delivery of goods not for resale (GNFR), where Medium-sized Companies and Groups (Accounts and Reports) benefits above those anticipated were delivered, sooner than expected. (Amendment) Regulations 2013. The upgrade of the information technology (IT) infrastructure, with the roll-out of the Unified IT platform substantially complete for B&Q and underway for Castorama France, will also serve Kingfisher well as we continue through the next stage of the strategy. The achievement against the strategic objectives did not come without some challenges, including on the clearing of old ranges and managing the volume of operational change. However, management have taken on the key learnings from these, which will be applied in Year 2 and beyond.

66 Kingfisher plc | Annual Report 2016/17 Governance 67 www.kingfisher.com 2017 product range implementation; range 2017 product Digital implementation; implementation; Unified IT platform GNFR; delivery of further benefits from working; of ways effective simpler and more implementation of new, and of our people. motivation – – – – – – LOOKING AHEAD LOOKING designed is well remuneration executive to that our approach believe We and appropriately of shareholders, expectations meet the evolving to plan. Our our transformation deliver to directors the executive rewards thinking on executive a number of aspects of leading incorporates Policy such as the simplification of the annual pay package remuneration, for the period performance bonus; a five-year annual with a reduced holding period on the Alignment and the Incentive Transformation that will continue requirements shareholding and increased Shares; retirement. beyond to apply the have ensuring that all colleagues to also committed are We Enhancing of the transformation. in the success share opportunity to their through and helping all customers and digital proposition our store depends on the engagement and expertise journey home improvement An importantof all colleagues. part of this is ensuring that all colleagues During 2017 the CEO pay. and fair appropriate receive the Group across – including structures of reward a review will undertake and her team will update We the Group. – across ownership share opportunities for Annual Report. year’s in next further on progress all for value and rewarding on delivering and I are focused The Committee our decision-making to apply this focus to and will continue stakeholders, the 2017 to look forward ahead. We in the years reward on executive on the may have any questions you answer as an opportunity to AGM implement it to intend we 1, how in Year implementation of the Policy topics. 2, or any other relevant in Year Clare Chapman Committee Chairman of the Remuneration 2017 21 March Performance measures for the 2017/18 Annual Bonus and the 2017/18 for measures Performance award 2017 Alignment Shares will be assessed against the strategic The 2017/18 annual bonus of the the execution be critical to to by the Board milestones agreed considered are The details of these milestones strategy. transformation Remuneration year’s and will be disclosed in next sensitive commercially around: based but are Report, – – – – – – support executive to will continue award The 2017 Alignment Share the alignment between long-term and strengthen ownership share determined 2017, the Committee For and shareholders. team executive of 80% of salary. grants should again receive and CFO that the CEO personal strong and CFO’s the CEO will be made given These awards will be subject 2016/17 and, as with the 2016 award, over performance of the dividend, maintenance based on the underpin measures robust to Details ratio. EBITDAR net debt to and lease adjusted dividend cover set out on pages 75 and 76 of the Annual Report are of these awards on Remuneration. Salary increases of 2%, which are in line with the wider workforce, in line with the wider workforce, of 2%, which are Salary increases and CFO. to the CEO been awarded 1 April 2017, have from effective pay into the CEO’s move to disclosed our intention previously have We bring the and to years, three the next median over line with the market the FTSE 25 – 75 and to position relative an appropriate pay to CFO’s that requested 2017, the CEO time. For over peer group retail our stated of no more a salary increase the CFO her and award the Committee that the transformation recognising workforce, than that of the broader that this was agreed in its early stages. The Committee remains strategy directors. both executive to a 2% increase and awarded appropriate directors’ align the executive to intention the Committee’s It remains Report, Remuneration as set out in last year’s salaries against the market, This may successfully. proceed to continues of the strategy as execution the over of the workforce the average above in salary increases result period. of the Policy remainder KEY REMUNERATION DECISIONS FOR 2017/18 FOR DECISIONS KEY REMUNERATION Base Salary Long-term incentive plan (LTIP) incentive Long-term (EPS) Share was assessed equally against Earnings Per The 2014 LTIP over the three (KEP) performance Profit Economic and Kingfisher growth meet the period did not over ending 31 January 2017. EPS growth years and so none of that element performance of threshold level the required the period was between the performance over KEP achieved will vest. in 49% set, which will result of performance level target and threshold the for level vesting in an overall This will result of that element vesting. against Achievement of 24.5% of the maximum opportunity. 2014 LTIP on page on Remuneration the Annual Report is set out in these targets the end of to based on performance which will vest 72. The 2015 LTIP, vest. to award LTIP will be the final year, the 2017/18 financial The 2016/17 annual bonus was assessed against the strategic the strategic The 2016/17 annual bonus was assessed against plan. The purpose of the the transformation to linked milestones with the annual of the executives align the focus annual bonus is to and the CEO between been agreed which have objectives strategic all apply to These targets the transformation. as critical to the Board directors. as the executive as well senior management of the Group in therecognised of the business is financial performance The overall Incentive. Transformation of 90% of maximum, reflecting that an award determined The Committee based on delivery awarded be and CFO, the CEO both 72% of salary for detail on the Full milestones. 2016/17 strategic for against targets in can be found milestone against each 2016/17 strategic performance begins on page 70. which on Remuneration, the Annual Report KEY REMUNERATION DECISIONS FOR 2016/17 FOR DECISIONS KEY REMUNERATION Annual bonus awards Financially, the Group results were ahead on all key metrics. Adjusted sales metrics. Adjusted ahead on all key were results the Group Financially, £11.2bn, with retail to currency) up by 8.7% (+2.3% LFL constant were remainedreturns Shareholder constant currency). up 13.5% (+6.1% profit of 12.5%, (ROCE) on capital employed return with lease adjusted strong, of 10.9%. growth earnings per share and adjusted outcomes the reward agreed the Committee performance, this Given on the detail More summarised below. which are CFO, and the CEO for in the decision-making can be found and considerations Committee’s which begins on page 70. on Remuneration, Annual Report DIRECTORS’ REMUNERATION REPORT CONTINUED

AT A GLANCE

The following pages provide a summary of our approach to remuneration, how this approach links to the delivery of our strategy and the award decisions we have taken to date under our new Remuneration Policy.

OUR REMUNERATION PRINCIPLES

Employees as shareholders Prioritising long-term value Supporting our culture Simple and effective share ownership acting as prioritising long-term value creation maintaining fairness through paying people in a way transparent performance pay aligned over short-term a consistent cascade of that motivates them and with shareholders financial goals pay structures in a form they value

Reward 2017/18 2018/19 2019/20 2020/21 2021/22 Strategic Element link

Reviewed annually

Policy Base Set with reference to FTSE 25-75 and the retail peer group. Salary increase effective 1 April. Salary Remuneration in respect of 2016/17 Application of Policy in 2017/18 CEO: £755.0k (7.9% increase) CEO: £770.1k (2% increase) CFO: £575.0k (4.5% increase) CFO: £586.5k (2% increase)

Annual Award

Policy Achievement To focus executives on the achievement of annual strategic objectives critical to the transformation plan. Maximum of 80% of of annual Annual base salary, paid fully in cash and based on performance against annual strategic milestones. strategic Bonus Remuneration in respect of 2015/16 Application of Policy in respect of 2016/17 milestones Award under previous remuneration policy and based on financial Based on strategic milestones resulting in an critical to the delivery of the elements and personal performance, resulting in an outturn of 69.1% outturn of 90% of maximum (72% of salary) for transformation both the CEO and CFO. of maximum for both the CEO and CFO. plan CEO: £967.4k CEO: £537.0k CFO: £760.1k CFO: £411.0k

25% of award: five-year holding period

75% of award: three-year vesting period Two-year post-vest holding period

Policy Alignment To align executives with long-term health of company and shareholder returns through a long-term share award. Maximum Balance sheet Shares of 80% of base salary; 25% of the award vests immediately, with 75% vesting in year three, subject to business health underpin measures. health Remuneration in respect of 2016/17 Application of Policy in 2017/18 Award made in full (80% of salary) in July 2016. Award to be made in full (80% of salary). Award The Committee made the award due to the strong will be granted in April 2017. performance of both the CEO and CFO in 2015/16. The Committee made the award based on the strong performance of both the CEO and CFO in 2016/17.

Five-year performance period

Policy To align executives with shareholders; rewarding executives for the delivery of improved growth and providing shareholder returns through the execution of the transformation plan. Awards granted once every three years, subject to five-year vesting Delivering Transformation long-term period. On target award at 220% of salary for CEO; 200% for CFO. Maximum opportunity of 4x on target award. Incentive benefits for Remuneration in respect of 2016/17 Application of Policy in 2017/18 shareholders Award granted at maximum opportunity following the 2016 AGM. No award to be made in 2017/18. Final vesting of awards is subject to EPS (50%) and ROCE (50%) Single award was granted in July 2016. performance over the five-year transformation period. No further awards will be made under the current Policy.

68 Kingfisher plc | Annual Report 2016/17 Governance 69

Value Value £’000 116.7 273.7 vesting of shares

vesting 33,327 78,197 Number of shares Improve ROCE Improve from 2020/21 from c.£600m capital return Returns to shareholders Returns www.kingfisher.com Granted to create a simple and create to Granted the deliver to incentive strong plan as set out transformation Day inat the Capital Markets January 2016. period performance A five-year aligns with the commitments Day, made at the Capital Markets on focus to enabling executives over a single clear set of targets years. five will be conditions Performance with material aligned directly profitability to improvements in line withand returns, these commitments. The chosen performance EPS and ROCE, are measures years. five after both measured growth balance These measures to align and directly and returns, shareholders. for creation value 24.5% 24.5% £500m sustainable profit uplift£500m sustainable profit – – – – TRANSFORMATION TRANSFORMATION INCENTIVE – – – – (% of max.) Total award award Total

49% 49% KEP measure performance (50% weighting)

0% 0% EPS measure performance (50% weighting) Balance sheet health Balance Maintain dividend cover Control net debt/EBITDAR Control Supports share ownership and ownership Supports share amongst alignment shareholder team. the executive long-term Incentivises and sheet strength balance financial health. based measures Performance on dividend, dividend cover net debtand lease-adjusted with further ratio, EBITDAR to through linkage performance shareholding. long-term must100% of Alignment Shares of five a minimum be held for and of grant, the date from years until the shareholding thereafter is met. requirement – – – – – – – – ALIGNMENT SHARES Efficiency Operational Operational Digital

Strategic transformation Strategic Offer Based on the achievement of key strategic strategic of key Based on the achievement plan. the transformation to linked milestones of key the execution This will incentivise while the strategy, deliver to activities required of the business is financial performance overall Incentive. in the Transformation recognised The new annual bonus is less than half the level the shift to in order structure of the previous performance long-term towards more package and results. the much lower and given simplicity, For the new annual bonus will be paid opportunity, wholly in cash. Unified Unified – – – – VESTING OF LEGACY AWARD MADE UNDER PREVIOUS REMUNERATION POLICY MADE UNDER PREVIOUS REMUNERATION AWARD VESTING OF LEGACY 2014 LTIP directors Executive Laury Véronique Karen Witts Karen & Unique & Unique ANNUAL BONUS ANNUAL – – – – RATIONALE FOR NEW REWARD STRUCTURE NEW REWARD FOR RATIONALE as a Group, as achieve trying supports to are what we that remuneration so structure the remuneration to connected directly goals are Our strategic below: illustrated DIRECTORS’ REMUNERATION REPORT CONTINUED

ANNUAL REPORT ON REMUNERATION The Annual Report on Remuneration outlines how the Committee implemented the Directors’ Remuneration Policy for the financial year ended 31 January 2017. This report, together with the Annual Statement from the Chairman of the Remuneration Committee, will be put to shareholders for approval at the Annual General Meeting to be held on 13 June 2017. Shareholder approval is on an advisory basis only. These reports have been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and include the items required to be disclosed under 9.8.6R and 9.8.8R of the Financial Conduct Authority’s Listing Rules. Where information disclosed has been subject to audit by the Group’s auditor, Deloitte LLP, this is highlighted. SINGLE TOTAL FIGURE OF REMUNERATION FOR THE EXECUTIVE DIRECTORS (audited information) The table below sets out the remuneration of each of the executive directors for the financial year ended 31 January 2017 and the comparative figures for the financial year ended 31 January 2016. 2. Taxable 3. Annual 4. Alignment 1. Base salary benefits Bonus Shares 5. LTIP 6. Pension Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 Executive directors 2016/17 745.8 87.9 537.0 151.1 116.7 93.2 1,731.7 Véronique Laury 2015/16 700.0 228.1 967.4 − − 87.5 1,983.0 2016/17 570.8 29.2 411.0 115.1 273.7 99.9 1,499.7 Karen Witts 2015/16 550.0 29.0 760.1 − − 96.3 1,435.4 2016/17 1,316.6 117.1 948.0 266.2 390.4 193.1 3,231.4 Total 2015/16 1,250.0 257.1 1,727.5 − − 183.8 3,418.4

NOTES TO THE SINGLE TOTAL FIGURE OF REMUNERATION FOR THE EXECUTIVE DIRECTORS (audited information) 1. Base Salary Executive directors’ salaries were increased at the start of the 2016/17 financial year with effect from 1 April 2016. No other reviews took place during the year. As at 1 April 2016 As at 1 February 2015 £’000 £’000 % increase Executive directors Véronique Laury 755.0 700.0 7.9% Karen Witts 575.0 550.0 4.5%

The effective pay date for the annual pay review changed from 1 February 2016 to 1 April 2016. This was to simplify pay administration by moving towards consistency across the Group. As disclosed in last year’s Report on Remuneration, these salary increases were made to move the salary of the CEO toward the market median over time, and to move the salary of the CFO to an appropriate position between the FTSE 25-75 and the retail peer group. Full details are included in the 2015/16 report. The CEO and CFO will receive a 2% increase for 2017. 2. Taxable Benefits The benefits provided to executive directors for both 2016/17 and 2015/16 included car benefit (or cash allowance), private medical insurance, death- in-service cover, financial advice and, where applicable, relocation support. Financial Relocation Life Total Total Car benefit(1) Medical advice support Tax Sharesave assurance 2016/17 2015/16 £’000 £’000 £’000 £’000 advice £’000 £’000 £’000 £’000 Executive directors Véronique Laury 18.1 4.2 – 39.0(2) 24.8(3) – 1.8 87.9 228.1 Karen Witts 22.2 2.2 2.5 – – – 2.3 29.2 29.0 Total 40.3 6.4 2.5 39.0 24.8 0.0 4.1 117.1 257.1

(1) Véronique Laury opted for a company car. Karen Witts opted for the cash allowance. (2) In last year’s Remuneration Report, we advised that the relocation support for the CEO had ended. However, as a result of assistance in respect of an audit by the French tax authorities, which arose because of the CEO’s change in circumstance upon appointment, the Committee determined that it was appropriate to categorise the benefit provided as part of the relocation allowance. The assistance was not anticipated at the time of last year’s Remuneration Report, and was directly related to the CEO’s relocation. This has resulted in a total relocation support of £253,300 which is within the budget provided of £350,000. Note that these figures are inclusive of tax payable on expenses reimbursed. The audit is now complete and no further benefits will be provided under the relocation support. (3) This benefit relates to ongoing annual tax preparation assistance provided to the CEO in the UK and France. This assistance is provided in recognition of the international nature of the CEO’s role and is limited to income tax return preparation required in respect of the CEO’s employment income. Note that this figure is inclusive of tax payable on expenses reimbursed.

70 Kingfisher plc | Annual Report 2016/17 Governance 71 95% 92% 80% 90% 100% Total Total score www.kingfisher.com 35 B&Q store closures successfully completed in 2016/17. completed successfully closures 35 B&Q store further information. page 20, for Report, See Strategic opened within budget. successfully 10 stores working in of savings, and A £30m benefit (consisting a the business) was way across effective simpler and more ahead of budget and plan. delivered Employee engagement score for 2016/17 increased for engagement score Employee 4.20). Maintaining 4.23 out of 5. (Prior year: to marginally during transformational the engagement of colleagues in the Gallupchange can be challenging so a slight increase achievement. is a positive the Group across score The three components have been successfully developed been successfully have components The three year and withinas at the end of the 2016/17 financial the budget. in implemented has been successfully IT unified platform in line with the has begun in Castorama B&Q and roll-out experienced were set. Some minor delays original target in the system of the previous with the decommissioning early in the that this will be completed UK, but it is expected year. 2017/18 financial further information. page 19, for Report, See Strategic Offer organisation now in place with centralised buyingcentralised with in place now organisation Offer teams commercial teams and global range global offices, all established. further information. page 18, for Report, See Strategic been successfully of the six ‘Brilliant Basics’ have Five imminent completion with the sixth due for developed, a minor delay. following further information. page 19, for Report, See Strategic 3.6% of COGS had successfully gone through the unified gone through had successfully 3.6% of COGS year. of the 2016/17 financial at the end process further information. page 18, for Report, See Strategic Achievement

Closure of 30 under-performing stores or stores that or stores stores of 30 under-performing Closure during priorities of the Group no longer fit the strategic 2016/17. which was first programme, closure The B&Q store of 65 stores the closure 2015, targeted in March announced period. the two-year over in total a within Germany, counters trade Establish 10 new Screwfix market. European key consolidating GNFR. efficiency by operational Drive media buying, print and covered have date to Categories mechanical handling equipment, point of sale paper, financial services and shop-fitting. material, Engagement engagement. of employee assess the level To survey annually using Gallup Q12, an employee is measured used are results anonymously. The which is completed tool, also presented and are management inform to to the Board. to To support customers through their home improvement their home improvement through support customers To out and be rolled to yet have The components journey. sensitive. commercially remain therefore the Group’s stage of the implementation of unifying First IT systems. Improve centralised buying throughout our businesses buying throughout centralised Improve reductions. cost efficiencies and drive which will increase to increase technology elements of Kingfisher core Improve to enable higher online and conversion and sales traffic web sales. store Reduce the number of suppliers we use through successful use through we the number of suppliers Reduce process The unified process. implementation of the unified standardise procurement, the efficiency of our will increase costs. reduce to and help offering, our product Detail

Complete closure of c. 15% of closure Complete at B&Q of surplus space counters Open 10 Screwfix in Germany £20m of benefitsDeliver GNFR (goods notfrom 1 and 2 – Waves resale) for completed Employee engagement asEmployee flat or improved First three components of components three First the Home Improvement developed Platform Complete unified ITComplete in B&Q roll-out platform, France and start Castorama roll-out Deliver new ONE Offer new ONE Offer & Deliver Supply Chain Organisation Build ‘Brilliant Basics’ B&Q for platform Achieve at least 3% – 4% at least Achieve of goods sold (COGS) costs Target People (10%) Total achievement Total Operational Efficiency (30%) Digital (30%) Unique & Unified Offer (30%) The Committee considered the annual bonus outcome in view of the performance against the strategic milestones as set out above. It was concluded as set out above. milestones against the strategic in view of the performance the annual bonus outcome considered The Committee the and COGS target of meeting the unified that the achievement it was recognised had been substantially met. In particular, that all milestones the business. transforming to successfully in the Company’s journey forward in a significant step ahead of plan, has resulted delivery of the GNFR target, that a bonus of 72% of salary (90% of the determined not fully met, and therefore were that some milestones also recognised The Committee the for annual bonus the CFO. The and £410,976 for the CEO £536,976 for to This equates directors. the executive to maximum opportunity) be payable of context in the to be appropriate considered was also level in cash. This award year 2016/17 will be paid in April 2017, and will be paid entirely financial 2016/17. through financial performance the Group Strategic Strategic Pillar (Weighting) 3. Annual Bonus of Kingfisher. the transformation critical to that are milestones of strategic on the achievement executives focus bonus is to The purpose of the annual Efficiency; Digital; Operational Unique & Unified Offer; pillars: four the following within milestones was based on strategic The 2016/17 annual bonus and People. during the these targets against achievement the corresponding pillars, each of the four of in respect set that were out the targets sets The table below payout. period ending 31 January 2017 and the resulting DIRECTORS’ REMUNERATION REPORT CONTINUED

4. Alignment Shares In line with our Policy, the Committee determined that personal performance for both the CEO and CFO had been strong throughout the 2015/16 financial year and approved the grant of Alignment Shares at the level of 80% of salary. Further detail on the performance of the executive directors during 2015/16 can be found in last year’s Remuneration Report. 25% of the Alignment Share award vested immediately: the number and value of the shares vested during the year is shown below. Value of shares Number of vested(2) shares(1) £’000 Executive directors Véronique Laury 45,564 151.1 Karen Witts 34,701 115.1

(1) The number of shares shown represents the proportion of the alignment share award granted in July 2016 which vested immediately. (2) Share price being 331.6p, being the closing share price on the date of vesting. 5. LTIP The value of LTIPs shown in the single figure table shows the level of award vesting based on targets set and measured over the relevant reporting period (financial year ended 31 January 2017). The table below sets out the LTIP due to vest in 2017 in respect of the performance period ended 31 January 2017. Original targets (at current FX rates) Outcome no adjustments Start to Measure earn 25% Target 50% Max 100% Achieved Pay out Earnings Per Share (EPS) growth 4.0% 6.5% 11.5% 2.7% 0.0% 2016/17 Kingfisher Economic Profit (KEP) £(23)m £(3)m £71m £2m 49% Total 24.5%

Value of shares Number of Dividend shares Number shares vesting(2) shares awarded accrued(1) vesting £’000 Executive directors Véronique Laury 124,204 11,826 33,327 116.7 Karen Witts 291,423 27,752 78,197 273.7

(1) Estimated number of dividend shares calculated for the final dividend based on the share price as at 31 January 2017. The actual number of dividend shares will be calculated at the point of vesting with reference to the share price when the dividend is made. (2) Calculated using the average closing share price for the last three months of the 2016/17 financial year of 350.0p per share. At the Committee meetings in January and March 2017, the Committee considered whether to make an adjustment to the KEP target to take account of the costs linked to the strategic transformation. These costs were comprised of the transformation costs and the B&Q store closures. Overall, adjusting consistently for the positive and negative impacts of these items would have increased the total vesting of the 2014 LTIP from 24.5% to 26.3% of the maximum opportunity. The Committee concluded that it remained appropriate to retain the formulaic outcome from the measure, and that no adjustment should be made. This resulted in a vesting of 24.5% of maximum for both the CEO and CFO. As explained in previous reports, Kingfisher no longer reports using the KEP measure and so a brief explanation of KEP, together with the table below, has been included to provide transparency on the outcome of this measure in respect of the 2014 LTIP. KEP represents earnings after a charge for the annual cost of capital employed in the business and is derived from the concept of Economic Value Added. Earnings for KEP purposes are reconciled in the table below and exclude exceptional items and property lease rentals. A charge is then deducted by applying the weighted average cost of capital (WACC) to capital employed. For the purposes of consistency both WACC and capital employed are lease-adjusted. Leases are capitalised based on an estimate of their long-term property yields. In order to focus on controllable factors both WACC and long-term property yields are based on those in place when KEP was introduced. KEP calculation Adjusted pre-tax profit £743m See page 31 Share of interest and tax of JVs and associates plus finance costs before exceptional items and FFVR £12m See page 31 Tax at effective tax rate of 26% £(195)m See page 34 (Effective tax rate) See page 36 (Lease rentals) Property operating lease rentals after tax £293m and 34 (Effective tax rate) Adjusted post tax profit for KEP purposes £853m Less capital charge £851m See table opposite KEP £2m

72 Kingfisher plc | Annual Report 2016/17 Governance

% 73 12.5% 17.5% 12.5% 17.5% benefit as a % of salary of base salary Total pension Total 2 point average 2 point average Equivalent cash Equivalent

allowance rate as rate allowance

of net defined benefit

shareholder funds less funds shareholder 2 point average of total of total 2 point average long-term property yield property long-term 2 point average of equity 2 point average country leases divided by pension schemes surplus 93.2 99.9 Total Total net cash (excluding China) net cash (excluding (net of tax at effective rate) (net of tax at effective £’000 2016/17 Yes, in full Yes, www.kingfisher.com into DC Scheme 7.4% annual allowance £851m £(107)m Yes, in excess of the in excess Yes, £5,754m £5,854m employer contributions employer £11,501m Cash allowance in lieu of Cash allowance

93.2 99.9 £’000 No Yes Cash alternative Member of theMember UK DC Scheme

– –

£’000 Employer Employer 14% 20% DC Scheme contributions into the individual is eligible the individual pension scheme to which rate into defined contribution Notional employer contribution employer Notional (1) Salary Sacrifice member contributions into the Kingfisher Defined Contribution pension scheme were made by Karen Witts to the value of £14,999.96. to the Karen Witts were made by the Kingfisher Defined Contribution pension scheme contributions into Salary member Sacrifice Karen Witts Karen Capitalised leases Net pension adjustment capital employed Lease-adjusted WACC Capital charge 6. Pensions (audited information) has director executive pension plan (the ‘DC Scheme’). No contribution join the UK defined eligible to based in the UK are directors Executive pension. a defined benefit right to a prospective with the annual allowance, to during a tax year and member pension contributions employer limit the combined a policy to operates The company opt out of the scheme may choose to In addition, directors monthly cash allowance. a taxable into being directed contribution employer the excess allowance. the lifetime reached they have example, if for completely, is set out below. directors the executive for A summary of the arrangements Capital charge calculation Capital employed PAYMENTS TO PAST DIRECTORS AND LOSS OF OFFICE AND LOSS DIRECTORS PAST TO PAYMENTS (audited information) loss of office. or for past directors no payments to were There DIRECTORS EXECUTIVE OUTSIDE APPOINTMENTS FOR positions. The holding non-executive external holding directors executive is supportive of its the Group of interest, conflicts the rules governing Subject to the agreement, to the Committee’s Subject to Kingfisher. which can be of benefit directors, the executive insight for valuable can provide of such roles these roles. applicable for any fees individual may retain fulfilling this £100,000 per annum for receives plc. Karen Chair at, Imperial Brands of, and the Audit Committee director Witts is a non-executive Karen these fees. She retains role. Executive directors Executive Laury Véronique (1) Pension benefits paid during the year benefits paid during the Pension Executive directors Executive Laury Véronique Notes: was paid as a cash alternative. contribution the full employer meaning that headroom, up the annual allowance took member contributions Witts’ own Karen salary of pension (SMART sacrifice the introduction joining after those directors is applied to This means that a discount the company. basis for neutral on a cost provided are Cash allowances pensions) in 2012. the cash contribution scheme. Accordingly, the defined into pension contribution on employer it is not payable whereas on the cash alternative, payable is national insurance that employer’s the fact for This accounts Witts it is 17.5% of salary. Karen Laury is 12.5% of salary and for Véronique for alternative Karen Witts Karen DIRECTORS’ REMUNERATION REPORT CONTINUED

PERFORMANCE GRAPH The graph below shows Kingfisher’s total shareholder return for the eight years to 31 January 2017, which assumes that £100 was invested in Kingfisher on 1 February 2009. The company chose the FTSE100 Index as an appropriate comparator for this graph, as Kingfisher has been a constituent of that index throughout the period. 350

300

250 Value (£) 200

150

100 2009 2010 2011 2012 2013 2014 2015 2016 2017 Kingfisher FTSE 100

CHIEF EXECUTIVE OFFICER’S REMUNERATION OVER THE LAST EIGHT YEARS The table below sets out the total remuneration of the holder of the office of Chief Executive Officer for the period from 1 February 2009 to 31 January 2017. Original Value Alignment Alignment Value of Original LTIP Value of Bonus % of of bonus Share grant Share % of shares grant level LTIP % of vested CEO’s maximum awarded as a % of maximum vested as a % maximum shares single figure Year Chief Executive Officer awarded(1) £’000 salary(2) vesting(2) £’000 of salary(3) vesting £’000 £’000 2009/10 Sir Ian Cheshire 98.7 1,610.8 – – – 125 44.6 265.9 3,067.8 2010/11 Sir Ian Cheshire 83.8 1,367.6 – – – 200 100.0 2,819.7 5,350.8 2011/12 Sir Ian Cheshire 93.5 1,525.9 – – – 200 98.9 6,083.0 8,628.3 2012/13 Sir Ian Cheshire 30.8 502.7 – – – 200 50.0 1,157.6 2,817.2 2013/14 Sir Ian Cheshire 32.0 532.7 – – – 500 31.1 1,799.4 3,455.4 2014/15(4) Sir Ian Cheshire / Véronique Laury 12.3 202.6 – – – n/a n/a n/a 1,306.1 2015/16 Véronique Laury 69.1 967.4 – – – n/a n/a n/a 1,983.0 2016/17 Véronique Laury 90 537.0 20(5) 100 151.1 200 24.5 116.7 1,731.7

(1) The maximum bonus opportunity was 200% of base salary up to the end of the 2015/16 financial year. The maximum bonus opportunity for 2016/17 was 80% of salary. (2) New element of reward introduced under the Remuneration Policy approved by shareholders at the 2016 AGM. (3) The original LTIP grant shows the award level initially given three years prior to the date the vesting percentage was determined. (4) Sir Ian Cheshire stepped down as Chief Executive Officer on 8 December 2014 and Véronique Laury took over the position on this date. Sir Ian Cheshire’s remuneration in the table is from the start of the financial year up until 8 December 2014, and Véronique Laury’s is from 8 December 2014 to the end of the financial year. The single total figure in the table above shows the combined total remuneration package for both Sir Ian Cheshire and Véronique Laury. (5) This represents 25% of the total Alignment Share award (equivalent to 80% of salary) granted following the 2016 AGM. This portion of the 2016 award vested upon grant. The remaining 75% of this award (equivalent to 60% of salary) will vest in 2019 subject to the underpin measures set out in last year’s Remuneration Report. CHANGE IN THE REMUNERATION OF THE CHIEF EXECUTIVE OFFICER The table below shows how the percentage change in the Chief Executive Officer’s salary, benefits and bonus between 2015/16 and 2016/17 compared with the average percentage change of each of those components for all full-time equivalent employees based in the UK. The UK employee workforce was chosen as a suitable comparator group as the Chief Executive Officer is based in the UK (albeit with a global role and responsibilities) and pay changes across Kingfisher vary widely depending on local market conditions. Chief Executive Officer To 31 January 2017 Percentage change £’000 2016/17 vs 2015/16 All UK Employees Base Salary 745.8 7% 1.5% Taxable Benefits(1) 87.9 -61% 3.3% Annual Bonus(2) 537.0 -44% 18.6% Total 1,370.7 -28% 3.0%

(1) The reduction in the CEO’s taxable benefits from the prior year is due to the bulk of the CEO’s relocation costs being incurred during 2015/16. (2) The reduction in the CEO’s annual bonus is reflective of the reduced maximum bonus opportunity provided under the new Remuneration Policy, approved by shareholders at the 2016 AGM. The maximum bonus opportunity decreased from 200% to 80% under the new Policy.

74 Kingfisher plc | Annual Report 2016/17 Governance

(2) (1) (2) 75 date Final 9.9% 110% 108% salary) change (0.9%) exercise (% of base Percentage Percentage January 2017 January 20 April 2023 20 April 2023 Shareholding 31Shareholding

(5) date 232 1,499 Vesting Vesting 2015/16 350% 250% salary) (% of base requirement requirement 21 April 2019 21 April 2019 Shareholding (1) (4) www.kingfisher.com 230 £’000 380.0 483.7 1,648 of award 2016/17 Face value Face subject to continued 2,682,486 2,109,382 employment performance Unvested and Unvested conditions and (3) shares 105,209 133,902 Number of 156,640 172,251 subject to continued employment Unvested and Unvested

(1)(2) Date Awards over nil cost options nil cost over Awards of grant 45,958 exercised 126,568 23 April 2016 23 April 2016 Vested but not Vested 192,058 110,736

31 Jan 2016 Shares held Shares No of shares No held outright 221,582 118,387 31 Jan 2017 (6) (6) (7) The deferred bonus awards were made under the KISP and were calculated by reference to the average share price for the three dealing days prior to the grant of 361.23p per share. the grant prior to dealing days the three for price share the average to by reference calculated made under the KISP and were were bonus awards The deferred less one day. years period of four an exercise have options. UK awards as nil-cost structured are The awards Includes options granted to Karen Witts under a HMRC-approved ShareSave plan (2,857 shares), which are not in the form of nil-cost options, awards granted to Karen Witts under the KISS 2013 and awards Witts under the KISS Karen to granted options, awards of nil-cost not in the form which are plan (2,857 shares), ShareSave Witts under a HMRC-approved Karen to Includes options granted Witts Laury and Karen both Véronique to granted awards element of the Alignment Share vest also include the immediate Plan (PSP) 2012. These awards Share Witts under the Performance Karen to granted Plan (KASTIP). Incentive Transformation and under the Kingfisher Alignment Share income the estimated to that correspond other than any such shares requirement, the shareholding towards count to considered are be exercised to yet but have vested which have options and awards Nil-cost at 47% of the award). (estimated arise on their exercise that would contributions tax and national insurance FR 2014 and Laury under the KISS Véronique to granted options, awards of nil-cost not in the form are plan (6,011 shares) which ShareSave Witts under an HMRC-approved Karen to Includes options granted Scheme. Share Laury Incentive in both 2015 and 2016 under the Kingfisher Witts and Véronique both Karen to granted bonus shares deferred Incentive and Transformation upon grant) immediately those which vested (excluding 5 May 2015, and the Alignment Shares on granted 2014, the 2015 LTIP on 15 September granted the 2014 LTIP to Relates on 19 July 2016. granted which were awards that the requires The Policy of shareholders. interests alignment with the ensure to build a substantial shareholding director that each executive a requirement introduced we Policy Under the new Remuneration referred the time-based requirement, Therefore, requirement. met the shareholding have until they Policy Remuneration and the previous them under the new Policy to awarded shares retain directors executive directors. the executive is no longer applicable to Report, Remuneration in last year’s to Trust held Trust. The held by the ordinary shares company’s in the interest have an to are deemed Karen Witts Véronique Laury and “Trust”), Trust (the Benefit beneficiaries of the Kingfisher Employee As potential at 31 January 2017. shares 6,455,403 ordinary Plan (SIP). Investment Share under the Kingfisher shares 90 partnership Witts acquired Karen of this report, 2017 and the date 1 February Between The increase year-on-year is mainly driven by foreign exchange movements. On a constant currency basis, the percentage change is 2.9% basis, the percentage currency On a constant movements. exchange by foreign is mainly driven year-on-year The increase by 3%. increased dividend per share ordinary the year-on-year, cash dividend decreased Although the overall Véronique Laury Véronique WittsKaren Karen Witts Karen Name Name directors Executive Laury Véronique (1) (2) 1. Deferred element of the 2015/16 annual bonus 1. Deferred and not to of the company in the employment remain to director the executive is for vest to bonus awards the deferred for The only qualifying condition date. be serving at the vesting notice SHARE AWARDS MADE DURING THE FINANCIAL YEAR SHARE AWARDS (audited information) respect of the Plan (KISP) in Share ended 31 January the year made during 2017 under (1) the Kingfisher Incentive were shares over Options and awards respect of Plan (KASTIP) in Incentive Transformation and element of the 2015/16 annual bonus; and (2) the Kingfisher Alignment Shares share deferred award. Incentive and the Transformation the 2016/17 Alignment Share Executive directors Executive (1) (2) (3) (4) (5) (6) (7) Executive directors are required to build a significant shareholding in the company. Unvested awards are not included when assessing holding are awards Unvested company. in the shareholding build a significant to required are directors Executive the tax liability arising on exercise. account into take to adjusted are included when assessing holdings, but are awards Vested requirements. a summarycompany and of the of the outstanding shares in the ordinary directors executive of the sets out the beneficial interests The table below on 31 January 2017). of a Kingfisher share of 336.2p (being the closing price price based on a share as at 31 January 2017. Calculations are awards share Overall expenditure on pay expenditure Overall dividends paid in the year Total (1) (2) AND SHARE INTERESTS SHAREHOLDINGS DIRECTORS’ EXECUTIVE (audited information) RELATIVE IMPORTANCE OF SPEND ON PAY IMPORTANCE RELATIVE shareholders. with distributions to when compared remuneration importance of spend on employee the relative shows The table below £m DIRECTORS’ REMUNERATION REPORT CONTINUED

2. 2016/17 Alignment Share Award (i) Immediate Vest – no performance conditions Face value of Final Date Number of award(1)( 2) Date exercise Name of grant shares £’000 vested date(3) Executive directors Véronique Laury 19 July 2016 45,564 151,1 19 July 2016 19 June 2026 Karen Witts 19 July 2016 34,701 115,1 19 July 2016 19 June 2026

(1) The award value, at the time of grant, was based on 20% of base salary. (2) The awards were made under the Kingfisher Alignment Share and Transformation Incentive Plan (KASTIP) and the value of the award is based on the share price as at the date of vesting of 331.60p per share. (3) The awards are structured as nil-cost options and have an exercise period of ten years less one month. (ii) Vesting subject to Performance conditions Face value of Final Date of Number of award(2)(3) Performance exercise Name grant shares(1) £’000 period(4) date(5) Executive directors Véronique Laury 19 July 2016 136,692 453,0 31 Jan 2019 19 June 2026 Karen Witts 19 July 2016 104,103 345,0 31 Jan 2019 19 June 2026

(1) Vesting date of 19 July 2019. (2) The award value, at the time of grant, was based on 60% of base salary. (3) The awards were made under the Kingfisher Alignment Share and Transformation Incentive Plan (KASTIP) and were calculated by reference to the share price for the three dealing days prior to the grant of 331.4p per share. (4) The shares will vest subject to performance against the underpin conditions over the period to the end of 2018/19 financial year. (5) The awards are structured as nil-cost options and have an exercise period of ten years less one month. The performance conditions attached to the 2016 Alignment Share Award are as follows. If one condition is not met then up to 50% of the unvested shares would lapse. If both are not met then up to 100% of the unvested shares would lapse. –– Maintenance of the dividend subject to dividend cover being above 1.75x; and –– Maintenance of ratio of adjusted net debt to EBITDAR below 2.5x. 3. Transformation Incentive To create a strong, simple and clear incentive to deliver the strategy over the five year period. Face value Number of of award(2)(3) Performance Final exercise Date of grant shares(1) £’000 period(4) date(5) Véronique Laury 19 July 2016 2,004,828 6,644.0 31 Jan 2021 19 June 2026 Karen Witts 19 July 2016 1,388,050 4,600.0 31 Jan 2021 19 June 2026

(1) Vesting date of 19 July 2021. (2) The awards were made under the Kingfisher Alignment Share and Transformation Incentive Plan (KASTIP) and were calculated by reference to the share price for the three dealing days prior to the grant of 331.4p per share. (3) The awards are structured as nil-cost options and have an exercise period of ten years less one month. (4) The shares will vest subject to performance against ROCE and EPS measures over the period to the end of the 2020/21 financial year. (5) Target award of 220% of salary for the CEO and 200% for the CFO with a 4x multiplier for exceptional performance. This equates to an annualised equivalent of 293% and 267% of salary for the CEO and CFO respectively for exceptional performance. The figures above reflect the maximum value of shares that could vest, i.e. 4x target. The number of shares which shall vest will be amended based on the level of performance against targets. Five-year performance period with performance based 50% each on ROCE and EPS as follows. For threshold performance a multiplier of zero is applied. Payouts occur on a straight-line basis between each of the required EPS and ROCE performance points. EPS Growth (p.a.) 2020/21 ROCE Pay-out Multiple (50% of award) (50% of award) Zero 4% 12% 1x Target 6.5% 13% 2x Target 9% 14% 3x Target 12% 15% 4x Target 16% 17%

76 Kingfisher plc | Annual Report 2016/17 Governance

(2) 77 7.7 n/a Fees 35.9 73.3 82.4 62.4 82.4 62.4 82.4 34.5 £’000 £’000 453.6 825.6 options Gain on 2015/16 exercise of exercise

Fees 82.4 62.4 82.4 62.4 62.4 82.4 £’000 370.1 370.1 365.8 365.8 480.0 914.4 2016/17 shares at dateshares of exercise (p) of exercise Market value of value Market

(1) N www.kingfisher.com R, N R, N A, N A, N A, R, N A, R, N Date of exercise Committee Membership 26/05/2016 26/05/2016 27/09/2016 27/09/2016

Nil Nil Nil 29.9 price £’000 Total exercise exercise Total Nil Nil Nil 290.87 per share (p) per share Exercise price Exercise 9,443 shares 12,553 25,607 10,313 Number of

(1) (1)

Chairman of the Audit Committee Additional Responsibilities Chairman, Chairman of the Nomination Committee Chairman of the Remuneration Committee Chairman of the Remuneration Senior Independent Director Company Share Option PlanCompany Share (CSOP) – 2013 Award Kingfisher Incentive Share Kingfisher Incentive – 2013 Scheme (KISS) CSOP underpin: – 2013 Award KISS Performance Share Plan – Share Performance 2011 A2 (Fr) (2) Indicates which directors served on each Committee during the year: Audit Committee = A; Remuneration Committee = R; Nomination Committee = N. = R; Nomination Committee Committee = A; Remuneration Audit Committee during the year: served on each Committee which directors Indicates of £49,500. the Chairman’s office of running the cost towards which also includes a contribution Provestis, a service company, through is paid his fees Daniel Bernard The CSOP is an HMRC-approved plan, where gains on exercise are subject to capital gains tax. The CSOP awards are underpinned by a KISS award over the same number of shares. At the time of exercise, sufficient the time of exercise, At the same number of shares. over award underpinned by a KISS are capital gains tax. The CSOP awards subject to are gains on exercise plan, where The CSOP is an HMRC-approved CSOP excess The exercised. is subsequently Kingfisher and the CSOP award paid to are £30,000). The proceeds (up to of the CSOP award option price meet the total to exercised are CSOP underpin shares value as the capital gain on the CSOP) then lapse. to the same (which by definition are underpin shares the period. over of dividends accrued of the CSOP plus the value fund the exercise This is made up of the £29,997.42 used to Karen Witts Karen (1) (2) Daniel Bernard SINGLE TOTAL FIGURE OF REMUNERATION FOR THE NON-EXECUTIVE DIRECTORS NON-EXECUTIVE THE FOR FIGURE OF REMUNERATION SINGLE TOTAL (audited information) directors to non-executive payable Fees figures year ended 31 Januarycomparative during the financial 2017 and the director of each non-executive sets out the remuneration The table below in the other than those incurred expenses for directors non-executive made to no payments were ended 31 January the year 2016. During the year, for of their appointments. course ordinary Dilution limits with In accordance satisfy awards. that may be issued to shares number of newly-issued plans set limits on the share company’s of the The terms a ten-year capital over under 10% of the issued share dilution under all plans to overall Association, these limits restrict the Investment from guidance plans. period on executive period, with a further of 5% in any ten-year limitation shares. satisfied by newly-issued plan are under the ShareSave granted Only those awards under discretionary granted awards these calculations. These include from excluded are shares satisfied by market-purchased are which Any awards and Transformation and the Alignment Share during the year, directors by the executive exercised been which have plans, including those awards during 2016/17. granted awards Incentive ended 31 January in the year held or utilised 2017. were shares No treasury (1) (2) Name directors Executive Laury Véronique SCHEME INTERESTS EXERCISED DURING THE FINANCIAL YEAR DURING THE FINANCIAL EXERCISED SCHEME INTERESTS (audited information) Andrew Bonfield Andrew Pascal Cagni Pascal Chapman Clare Dahlvig Anders Rakhi Goss-Custard Mark Seligman Total DIRECTORS’ REMUNERATION REPORT CONTINUED

NOTES TO THE SINGLE TOTAL FIGURE OF REMUNERATION FOR THE NON-EXECUTIVE DIRECTORS (audited information) Fees Fees paid to the Chairman and non-executive directors for 2016/17 and 2015/16 are shown below. No benefits are provided except for a store discount card of up to 20%. Fees £’000 As at 1 February 2016 As at 1 February 2015 % increase Chairman 480.0 453.6 5.8% Non-executive director fee 62.4 62.4 n/a Senior Independent Director 20.0 20.0 n/a Chairman of Audit Committee 20.0 20.0 n/a Chairman of Remuneration Committee 20.0 20.0 n/a

Non-executive directors’ shareholdings The table below sets out the current shareholdings of the non-executive directors (including beneficial interests) as at 31 January 2017. The company does not operate a share ownership policy for the non-executive directors, but encourages non-executive directors to acquire shares on their own account. Number of shares Number of shares held outright as at held outright as at 31 January 2017(1) 31 January 2016 Daniel Bernard 131,592 124,646 Andrew Bonfield 10,000 10,000 Pascal Cagni 30,570 30,570 Clare Chapman 6,990 6,990 Anders Dahlvig 75,000 75,000 Rakhi Goss-Custard 6,124(2) 0 Mark Seligman 15,000 15,000

(1) There have been no changes to the beneficial interests of the non-executive directors between 1 February 2017 and 20 March 2017. (2) Rakhi Goss-Custard acquired her interest in these shares through her spouse. STATEMENT OF IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2017/18 Implementation of Remuneration Policy for executive directors in 2017/18 Base Salary Implemented in line with policy. As at As at Base Salary £’000 1 April 2017 1 April 2016 % increase Véronique Laury 770.1 755.0 2.0 Karen Witts 586.5 575.0 2.0

We have previously disclosed our intention to move the CEO’s pay into line with the market median over the next three years, and to bring the CFO’s pay to an appropriate position between the FTSE 25-75 and the retail peer group over time. For 2017, the CEO requested that the Committee award her and the CFO no more than the average increase to the broader workforce, recognising that the transformation strategy remains in its early stages. The Committee agreed that this was appropriate and awarded a 2% increase to both executive directors. It remains the Committee’s intention to realign the executive directors salaries against the market, as set out in last year Remuneration Report, as execution of the strategy continues to proceed successfully. This may result in salary increases above the average of the workforce over the remainder of the policy period. Benefits Implemented in line with policy. Pension Implemented in line with policy.

78 Kingfisher plc | Annual Report 2016/17 Governance 79 www.kingfisher.com 2017 product range implementation – including unified COGS; implementation – including unified range 2017 product platforms; other home improvement and including implementation of the ‘Brilliant Basics’ platform Digital implementation – systems; unified roll-out of – Unified IT implementation year 2017/18; the financial for on benefit delivered – including measures (GNFR) implementation resale Goods not for working; and of ways effective simpler and more – including the implementation of new, model Operating journey. our transformational through move as we employees – motivating People 1.75 times; and being above dividend cover to of the 10.1p dividend subject maintenance 2.5 times. below EBITDAR net debt to of lease adjusted of ratio maintenance – – – – – – – – Annual Bonus in line with policy. Implemented a maximum opportunityThe annual bonus will have of 80% of salary. as set the delivery transformation of the to critical milestones number of strategic of a judged based on the achievement The annual bonus will be out below: – – – – – – consideration. into will also be taken performance financial Group not are and accordingly sensitive commercially are 2017/18 for targets and the detail of the annual bonus measures In the opinion of the Committee, year. disclosed. These will be disclosed next 23. on pages 21 to Report set out in the Strategic milestones the operational aligned to are The targets Alignment Shares in line with policy. Implemented will be awards 2016/17 and so Alignment Share throughout and CFO of both the CEO performance personal the strong recognised The Committee is set out below: director each executive for performance A summary of the personal of 80% of salary in line with policy. made at the level deliver to forward the Group take model to of a new operating the development through: performance personal strong Laury demonstrated Véronique team; the of the wider leadership well as her strong as Executive, of the Group recruitment and development completion of the plan; the the five-year delivery of and, the continued in line with expectations; the transformation, delivery through of the ongoing business and operational maintenance milestones. the strategic line the delivery of front team; of the Finance and development her leadership through: performance personal strong Witts demonstrated Karen first stage of delivery the of the the transformation; implementing the towards steps the first takes as the Group to the Group, critical results, financial the sustained future facilitate model which will of the operating to the development contribution her (GNFR) benefits; and through resale goods not for of the business. performance year of the five the course the underlying health of the business over maintaining to relate awards the Alignment Share for The underpin conditions of the three-year the duration which will apply throughout the 2017/18 awards, for underpin conditions the end of 2020/21. The period, to strategy period are: vesting – – award 100% of the unvested not met, then up to lapse. If both are would shares 50% of the unvested is not met, then up to If one underpin condition lapse. would plan. against the capital return and progress business performance deduction considering the appropriate will determine The Committee vest. due to next the award will apply to annually and any reduction against the underpin will be considered Performance plans, then the Committee investment of acceleration Board-approved due to is exceeded ratio EBITDAR net debt to that the lease-adjusted In the event (in whole or part) delaying vesting by a further to consider would year the Committee In these circumstances, vesting. allow to may apply discretion sustainability of performance. ensure DIRECTORS’ REMUNERATION REPORT CONTINUED

Transformation Incentive Implemented in line with policy. No new Transformation Award will be made until 2019/20. IMPLEMENTATION OF REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS IN 2017/18 Fees As at As at Fees £’000 1 February 2017 1 February 2016 % increase Chairman(1) 480.00 480.0 n/a Non-executive Director fee 63.7 62.4 2% Senior Independent Director fee 20.0 20.0 n/a Chairman of the Audit Committee 20.0 20.0 n/a Chairman of the Remuneration Committee 20.0 20.0 n/a

(1) The Chairman’s fee includes a contribution to office costs of £49,500. The Board considered the fees paid to the non-executive directors in January 2017 and decided to apply an increase of 2%, effective 1 February 2017. The non-executive directors abstained from the discussion when their fees were considered. SERVICE CONTRACTS/LETTERS OF APPOINTMENT Date of service contract/letter of Expiry of current Length of service appointment term at 31 January 2017 Daniel Bernard 24/05/2006 30/06/2018 10 years Andrew Bonfield 11/02/2010 31/01/2019 6 years Pascal Cagni 17/11/2010 16/11/2019 6 years Clare Chapman 2/12/2010 01/12/2019 6 years Anders Dahlvig 16/12/2009 31/01/2019 7 years Rakhi Goss-Custard 1/02/2016 31/01/2019 1 year Véronique Laury 8/12/2014 12 months rolling 2 years Mark Seligman 1/01/2012 01/12/2017 5 years Karen Witts 1/10/2012 12 months rolling 4 years

THE REMUNERATION COMMITTEE The Committee has delegated authority from the Board over the company’s remuneration framework and policy. The Committee reviewed its terms of reference, in addition to its remuneration framework and principles in November 2016. These were subsequently approved by the Board at its meeting in January 2017. Under its updated terms of reference, the Committee is responsible for: –– determining and making recommendations to the Board on the Group’s framework and policy for executive remuneration and its costs; –– determining individual remuneration and benefits for the executive directors, other members of the Group Executive, the Chairman of the Board and the Group Company Secretary; –– exercising the powers delegated to it by the Board in relation to the company’s all-employee and long-term incentive share plans; –– setting and overseeing the selection and appointment process of remuneration advisers to the Committee; –– monitoring external remuneration trends and market conditions, and receive reliable, up to date, information on remuneration elsewhere within our stated peer group; and –– reporting to shareholders on an annual basis on the work of the Committee. The Committee Chair reports to the Board on the Committee’s activities at the Board meeting immediately following each meeting.

80 Kingfisher plc | Annual Report 2016/17 Governance 81 5/5 5/5 5/5 5/5 8,423,734 Attendance 46,532,822 Shares on whichShares votes were withheld were votes From 75.38% 77.06% 03/06/2009 17/06/2010 22/01/2016 16/02/2011 capital voting www.kingfisher.com Proportion of share Proportion

Votes against Votes (and % of votes cast) (and % of votes 22,137,385 (1.29%) 12,394,027 (0.71%)

Votes for Votes (and % of votes cast) (and % of votes 1,690,379,201 (98.71%) 1,738,232,749 (99.29%) approving the final proposed Remuneration Policy, having considered feedback received from major investors and voting bodies, and agreeing thevoting bodies, and agreeing and major investors from received feedback considered having Policy, Remuneration the final proposed approving in June 2016; at our AGM approval schemes rules, for new share Executive; of the Group and the other members directors the executive bonus outturn for the 2015/16 agreeing plan; under the new share Awards Incentive and Transformation of the Alignment Share the grant approving award; of the 2014 LTIP the vesting considering year; the 2016/17 financial the annual bonus for for targets the performance agreeing in the Chairman’s fee; an increase and approving reviewing all colleagues; and for pay structure and appropriate a fair provide to project in the Group’s on progress Reward Group from updates receiving Secretary. Company and the Group Executive of the Group the new members for package the remuneration approving – – – – – – – – The Annual Report on Remuneration, together with the Chairman’s statement, will be subject to an advisory vote by shareholders at the AGM on at the AGM by shareholders an advisory vote will be subject to with the Chairman’s statement, together on Remuneration, The Annual Report 13 June 2017. Clare Chapman Committee Chairman of the Remuneration 2017 21 March Directors’ Remuneration Policy Remuneration Directors’ Resolution on Remuneration Annual Report Daniel Bernard Bonfield Andrew Mark Seligman Interim the Head People Officer, Chief Officer, meetings. The Chief Executive Committee may also attend not members who are directors Non-executive was No individual meetings held during the year. at Committee attendees regular were advisors remuneration and the Committee’s Reward of Group discussed. were or benefits remuneration when their own present Meeting at the Annual General Voting Remuneration and the Directors’ an advisory vote was put to on Remuneration Meeting on 15 June 2016, the Annual Report the Annual General At as follows: were of the votes The results a binding vote. was put to Policy During the financial year ended 31 January 2017, the following external advisors provided services to the Committee. Unless otherwise stated, the Unless otherwise stated, to the Committee. services provided advisors external following year ended 31 JanuaryDuring the financial 2017, the to be, objectivecontinues was, and received that the advice firmly believes and the Committee with the Group, no other connection have advisors and independent. LLP (PwC) PricewaterhouseCoopers PwC process. is a member of the tender a robust 2013 following on 1 February as its principal advisors PwC by the Committee appointed were with executive PwC consultants). the Committee provided remuneration executive body for (the professional Consultants Group Remuneration PwC paid to during 2016/17 were plans. The fees share and executive of employee the operation to relating including advice advice, remuneration conducted the Committee evaluation, Board facilitated basis. As part of the externally on a time and expenses incurred were £192,800. These fees that and objective and it was determined from considered received provides PwC PwC was As part advice of this, the of its effectiveness. a review the Committee. to independent advice Advisors to the Committee Advisors Activities during the year during 2016/17 included: by the Committee considered The significant matters – – – – – – – – COMMITTEE COMPOSITION COMMITTEE year ended 31 January during the financial 2017. members the following comprised The Committee Chapman (Chairman) Clare DIRECTORS’ REMUNERATION REPORT CONTINUED

DIRECTORS’ REMUNERATION POLICY The Remuneration Policy (the ‘Policy’) is set out in this section. The Policy was approved by shareholders at the 2016 AGM, held on 15 June 2016. The full Policy has been included for reference purposes. The Board has no present intention to amend the Policy before it is next due to be put to shareholders for approval at our AGM in 2019. The Committee will, however, continue to monitor the suitability of the Policy and where a material change is considered, the company will consult with major shareholders prior to submitting to all shareholders for approval. The Policy is also available on the company’s corporate website, kingfisher.com. Future Policy Table

Base salary Element and purpose Maximum opportunity Base salary reflects the individual’s role, experience and contribution to the company Maximum increase of 8% per annum. and is set at levels that support the recruitment and retention of executive directors Increases awarded each year will be set out in the Statement of Implementation of the calibre required by the company. of Policy. Operation Assessment of performance Base salaries are set with reference to two primary comparator groups; i) FTSE 25 – Individual performance is an important factor considered by the Committee when 75 excluding financial services organisations, and ii) FTSE 100 retailers and privately reviewing base salary each year. held retailers which are considered to be of a similar size and market capitalisation to the company. The Committee also takes account of pay levels at other large European retailers. Alternative peer groups may need to be referenced depending on the business circumstances or domicile of individual executive directors outside the UK. Base salaries are paid monthly in cash.

Benefits Element and purpose Maximum opportunity Benefits are provided to assist executive directors in the performance of their roles Maximum levels of benefit provision are: and are designed to be competitive and cost effective. –– Car allowance £25,000 per annum Operation –– Private medical insurance on a family basis The company may provide pension contributions (set out below), a company car –– Life assurance cover of 4x base salary (see notes) or cash alternative, an allowance for financial planning, medical insurance, and life –– Financial planning at £2,500 per annum assurance cover. Other benefits may be provided from time to time if considered reasonable and appropriate by the Committee, such as relocation allowances, and The cost of providing insurance benefits varies according to premium rates so will be explained in the next Annual Report on Remuneration. there is no formal maximum monetary value. The company pays the cost of providing benefits on a monthly basis or as required Any relocation allowance will be limited to 50% of base salary (inclusive of any tax for one-off events such as financial planning advice. payable on expenses reimbursed) Store discount may be offered to all directors on the same basis as offered to other Store discount of up to 20% is offered. company employees. Assessment of performance None.

Pension Element and purpose Maximum opportunity To provide retirement benefits, support retirement planning, and provide Maximum employer contribution into a defined contribution scheme of 14% of a competitive fixed pay package. base salary or a cash alternative of 12.5% of base salary. Operation For Karen Witts, in line with historic opportunity levels, the defined contribution rate Pension provision for executive directors is by way of contributions to a defined is 20% of base salary and the cash alternative rate is 17.5% of base salary. contribution scheme or cash allowance. Assessment of performance None.

82 Kingfisher plc | Annual Report 2016/17 Governance 83

www.kingfisher.com 50% EPS – compound annual growth to 2020/21 to annual growth 50% EPS – compound in 2020/21 – performance 50% ROCE maintenance of the dividend subject to a dividend cover test; and test; cover a dividend of the dividend subject to maintenance EBITDAR. net debt to of lease adjusted assessment of the ratio – – – – If both are not met then up to 100% of the unvested shares would lapse. would shares 100% of the unvested not met then up to If both are the will apply to and any reduction each year considered will be Performance vest. due to next award company’sto align with the order in years varyThe specific metrics may in future financial metrics, which will be set out include objective will always but strategy, on Remuneration. in each Annual Report prospectively due is exceeded ratio EBITDAR net debt to that the lease adjusted In the event plans then the Remuneration of investment acceleration a Board-approved to In these circumstances vesting. allow to may apply discretion Committee sustainability ensure by a further to may delay vesting year the Committee of performance. Assessment of performance against theyears five over based on performance will vest granted Awards measures: performance following – – and and returns growth balance been chosen to have measures The performance sustainable delivery of performance. ensure the above of performance such that a level calibrated are targets The performance the maximum 4x achieve to in order is required Day commitments Capital Markets multiple payout. Assessment of performance year in order to year varyweightings may and from targets The specific measures, year. each over strategy with the company’s align to under the year goals over will be dependent on the company’s The measures incentivise to milestones strategic measurable the key link to and directly review of the strategy. on the execution focus to executives align with the announced to each year calibrated are targets The performance plan. strategic not disclosed at the start of the financial set are targets The actual performance no longer Where sensitive. be commercially to considered as they are year, will be disclosed and outcomes targets performance sensitive, commercially the payment of bonuses. following Assessment of performance sheet and balance ensure to underpin conditions two have Alignment Shares business health: – – of the in the context be robust to calibrated are targets The performance plan. strategic announced lapse. would shares 50% of the unvested is not met then up to If one condition

Maximum opportunity and CEO is 220% of salary for years three every once granted award The on-target directors. other executive and any CFO 200% for performance. exceptional for can vest times target A maximum multiplier of four is applied. of zero a multiplier performance threshold For during this policy period. director each executive will be made to Only one award Operation vesting period and a five-year subject to years, three every once granted are Awards period. year performance the five throughout conditions performance stretching which vest. of the shares in respect payable are Dividend equivalents if the pure outcome adjust the vesting to has the discretion The Committee in light of overall result an appropriate produce to is not felt application of a formula will Any adjustment made using this discretion performance. underlying company Annual award of 80% of salary. of 80% of salary. Annual award Incentive Transformation Element and purpose shareholders for and returns growth improved deliver to executives incentivise To market and provide executives retain plan. To the transformation by executing reward. total competitive and the interests aligned with shareholder are conditions Performance Day. at the January 2016 Capital Markets investors made to commitments on Remuneration. Annual Report in the following be explained the to as set out in the notes Malus and clawback applies under circumstances policy table. the policy table. to as set out in the notes apply provisions Change of control Maximum opportunity Element and purpose and with shareholder health of the company long-term with the align executives To underpinning business subject to award share a long-term by providing returns reward. total while ensuring competitive health conditions, Operation performance. good personal annually subject to awarded are Alignment Shares alignment an immediate create to immediately vest 25% of the Alignment Shares of grant. the date from years five but must be held for with shareholders to the achievement subject years, three after vests 75% of the award The remaining year a two subject to under this portion vesting are of an underpin. Awards holding period. Malus and that vest. of the shares in respect payable are Dividend equivalents the policy table. to as set out in the notes clawback applies under circumstances the policy table. to apply as set out in the notes provisions Change of control Maximum opportunity is 80% of base salary. The maximum Annual Bonus award 25% is set on an annual basis but will not exceed of payment at threshold The level of maximum. Alignment Shares Operation the end of the and paid in cash after the year over earned Annual Bonuses are over against targets based on performance relate, to which they year financial the year. in light of overall adjust the bonus outcome to has the discretion The Committee will be explained adjustment made using this discretion Any underlying performance. on Remuneration. Annual Report in the following the to notes as set out in the Malus and clawback applies under circumstances policy table. Annual Bonus Element and purpose set objectives annual strategic or exceed achieve to directors executive incentivise To at the startyear. of each financial by the Committee DIRECTORS’ REMUNERATION REPORT CONTINUED

Chairman and non-executive director fees Element and purpose Maximum opportunity To attract and retain a Chairman and non-executive directors of the highest calibre. Aggregate annual fees paid to the Chairman and non-executive directors are Operation limited by the company’s Articles of Association, which may be varied by special The fees paid to the Chairman are determined by the Remuneration Committee, resolution of the shareholders. The current limit contained within the Articles of while the fees of the non-executive directors are determined by the Board with Association is £1.75 million as approved at the 2014 AGM. Contributions towards affected persons absenting themselves from the discussions as appropriate. the cost of running the Chairman’s office will not exceed £60,000 per annum and are included within the aggregate fees set out above. The Committee reviews the Chairman’s fees annually. The Chairman’s fees are determined with reference to time commitment and Assessment of performance relevant benchmark market data. None. Contributions are made towards the cost of running the Chairman’s office. The Board determines non-executive directors’ fees under a policy which seeks to recognise the time commitment, responsibility and technical skills required to make a valuable contribution to an effective Board. A base fee is paid to all non-executive directors and additional fees are also paid to the Senior Independent Director and the Chair of each of the Audit and Remuneration Committees. Chairman and membership fees may be introduced for current and new committees. Appropriate benefits may be provided from time to time as required. The Board may annually review fees paid to non-executive directors against those in similar companies and takes into account the time commitment expected of them. Fees are paid monthly wholly in cash. The Chairman and the non-executive directors do not participate in any of the company’s performance-related pay programmes and do not receive pension benefits.

All-employee share plans Element and purpose Maximum opportunity Executive directors may participate in all-employee share plans on similar terms as The maximum monthly limit for the Sharesave plan is currently £500 per month. other employees. The maximum monthly amount an individual may invest in partnership shares Operation under the SIP is currently £150 per month. In particular UK-based executive directors may participate in a tax approved The SIP also allows the award of free and matching shares up to the limits set by all-employee scheme (Sharesave) under which they make monthly savings the Government. over a period of three or five years, that may be used to buy Kingfisher shares The company may increase the amounts that can be saved or invested under at a discounted price when the scheme matures. They may also choose to the Sharesave and SIP plans in line with any increases authorised by the UK withdraw their savings at the end of the savings period or at any time during Government for approved plans. the savings contract. Assessment of performance UK-based executive directors may also participate in the Share Incentive Plan (SIP). None. Designed to promote employee share ownership, the SIP enables participants to make monthly investments in Kingfisher shares.

84 Kingfisher plc | Annual Report 2016/17 Governance 85 www.kingfisher.com Policy and operation Policy When hiring a new executive director, or making internal promotions to the Board, the Committee will apply the same policy as for existing executive executive existing policy as for will apply the same the Committee Board, the to promotions or making internal director, When hiring a new executive Remuneration. Report on Annual explained in the next will be offered the package for The rationale Policy. in the Remuneration as detailed directors, the new to is transitioned as the executive be honoured to appointment may continue made prior to any commitments promotions, internal For may be made in the policy period, an award grant Incentive Transformation the after an individual is promoted Where arrangements. remuneration may Awards Policy. to the limits set out in the role, subject reflecting their new at an opportunity cycle the in-flight level onto the executive bring to to promotion. prior granted awards consideration into will take remaining portionvesting period. Any award of the the reflect to be pro-rated in line with the new been adapted policy which have recruitment with the principles of the previous is consistent The policy below structure. remuneration remuneration. and current skills, experience based on their best candidate the recruit to level Base salary be set at an appropriate would would be in line with normal policy. Benefits provision in which territory in the the practice of normal market reflective benefits or other benefits relocation may also receive the executive appropriate Where employed. is director executive be in line with normal policy. would provision Pension in line with the normal policy. Incentive and Transformation be made under the Annual Bonus, Alignment Shares would awards Incentive the in-flight onto executive to bring the may be made in the policy period, an award grant Incentive Transformation the an individual joins after Where the portion period served. of vesting for be pro-rated may Awards the limits set out in the policy. subject to cycle employer. their current an individual leaving through forfeited value reflect may be made to awards buy-out awards, normal incentive In addition to Awards awards. replacement in any forgone value of awards and timing, the nature, reflect aim to would the Committee is required, award If a buy-out Where by the Committee. or any other method as deemed appropriate Incentive Transformation Shares, Alignment may be made in cash, shares, conditions performance awards, the forfeited applied to conditions performance Where awards. with share will be replaced awards possible, share accordingly. will be discounted size or the award award the replacement will be applied to of the other elements of the new the value account into also take would the Committee of any buy-out value In establishing the appropriate package. remuneration bewould maximum. Any awards a formal not subject to are awards buy-out however, the company, to minimise the cost aim to would The Committee than those being replaced. valuable no more broadly Base salary Benefits Pension Incentive awards awards Buy-out Area Overall Notes to the policy table Malus and clawback enable the company These provisions Incentive. and Transformation of the Annual Bonus, Alignment Shares in respect Malus and clawback may operate of or vesting the cash bonus payout following value the relevant recover or to levels and vesting nil) the payout to (including, if appropriate, reduce to under the vesting following years a period of two payment and for following years a period of three the cash bonus for Clawback will apply to shares. reputational damage, serious of financial misstatement, event in the effect take could These provisions Incentive. and Transformation Alignment Shares in individual cases. misconduct or material Change of control Incentive and Transformation Alignment Shares conditions. performance subject to will normally vest awards share of a change of control, In the event and the which is set out in the “Service contracts good leavers for basis in line with the treatment on a time pro-rated will normally be reduced awards Policy. Remuneration section of this Directors’ loss of office” policy on payment for outstanding awards. rollover to with an acquirer e.g. if it is agreed is inappropriate, that such a reduction consider may alternatively The Committee discretion. at the Committee’s may be reduced Other awards Shareholding requirements Shareholding build to required are directors executive the long-term, over and shareholders of executives of the interests the alignment ensure To a significant shareholding. director. any other executive and 250% for the CEO is 350% of salary for requirement The shareholding thetowards count to considered are exercise to yet has executive the but that vested which have awards owned and nil-cost beneficially All shares not included in the assessment are Policy, Remuneration under the previous awarded bonus shares, a notional post-tax basis. Deferred on shareholding period. year deferral at the end of the three executive to the ownership of beneficial until the transfer requirement of the shareholding 50% of vested retain post-tax Alignment Shares, 100% of vested retain to required are directors is met, executive requirement Until the shareholding Policy. Remuneration under the previous granted awards from that vest 50% of post-tax shares and retain shares, Incentive post-tax Transformation is met. until the requirement Incentive the Transformation from 100% of post-tax shares retain would that executives It is expected for requirement of the shareholding This will be 100% years. two apply for to will continue requirements the shareholding Upon leaving the company, departure. year after for the second requirement year and will be 50% of the shareholding the first Approach to recruitment remuneration to recruitment Approach DIRECTORS’ REMUNERATION REPORT CONTINUED

Discretions The Committee retains certain discretions in relation to the Annual Bonus Plan which are set out in full in the plan rules, which include but are not limited to: –– the determination of and timing of any bonus payment; –– the impact of a change of control or restructuring; and –– any adjustments required as a result of a corporate event (such as a transaction, corporate restructuring event, special dividend or rights issue). Discretions set out as part of this Remuneration Policy provide the Committee with discretion in certain matters regarding the administration and operation of the Alignment Shares and Transformation Incentive (as set out in the corresponding plan rules approved by shareholders), including, but not limited to the following: –– any adjustments to performance conditions or awards required as a result of a corporate event (such as a transaction, corporate restructuring event, special dividend or rights issue); and –– minor administrative matters to improve the efficiency of the operation of the plans or to comply with local tax law or regulation. In relation to the Annual Bonus Plan, Alignment Shares, and Transformation Incentive, and in line with the plan rules, the Committee retains the ability to amend the performance conditions and/or measures in respect of any award or payment if one or more event(s) occur which would lead the Committee to consider that it would be appropriate to do so, provided that such an amendment would not be materially less difficult to satisfy than the unaltered performance condition would have been but for the event in question. Should the Committee use any of the discretions set out above, these would, where relevant, be disclosed in the next Annual Report on Remuneration. The views of major shareholders may also be sought. Discretion in relation to the company’s All-Employee Share Plans (Sharesave and Share Incentive Plan) would be exercised within the parameters of the HMRC approved plan status and the Financial Conduct Authority’s Listing Rules. Legacy Awards In-flight awards made before the adoption of this Policy will continue in line with the approved policy under which they were granted. Further details of these awards can be found within the Remuneration Policy approved at the 12 June 2014 AGM and included within the 2013/14 Annual Report and Accounts. Differences in remuneration policy for all employees The remuneration structure for members of the Group Executive follows the same approach as for the executive directors but with a lower maximum opportunity as appropriate. The Transformation Incentive is granted only to the executive directors and members of the Group Executive. For the next tier of management below the Group Executive, the remuneration structure consists of base salary, benefits, pension, bonus, and Alignment Shares. Performance measures are tailored to reflect the relevant position of the individual and the relevant part of the business in which they operate. All other employees are entitled to base salary and benefits and may also receive bonus, pension, profit share and share awards which vary according to local jurisdiction and market practice. The maximum provision and incentive opportunity available are determined by the seniority and responsibility of the role. Statement of consideration of employment conditions elsewhere in the company The Chief People Officer is invited to present to the Committee on the proposals for salary increases for the employee population generally and on any other changes to the Group’s Remuneration Policy. The Chief People Officer consults with the Committee on the KPIs for the executive directors’ bonuses and the extent to which these should be cascaded to other employees. The Committee has oversight of all long-term incentive awards across the Group. The Committee is provided with data on the remuneration structure for all individuals in Kingfisher’s leadership team which includes Operating Company CEOs and Group function directors. The Committee approves the policy on share award levels for all employees and uses this information to ensure that there is consistency of approach across Kingfisher. The Group did not consult with employees when drafting the Directors’ Remuneration Policy. Statement of consideration of shareholder views The Committee consulted extensively with the company’s largest shareholders and their representative bodies leading up to the 2016 AGM on our proposed Directors’ Remuneration Policy.

86 Kingfisher plc | Annual Report 2016/17 Governance 87 3,500 3,000 £3,239 47% 2,500 £1,908 2,000 20% www.kingfisher.com 1,500 15% 25% Value of package (£’000) 15% 1,000 £739 16% Maximum Fixed pay elements plus maximum Annual Fixed and Alignment Shares, received, Bonus are vests. Incentive maximum Transformation 80% of to equivalent are Alignment Shares base salary. Annual Bonus maximum performance in a bonus of 80% of salary. resulting achieved maximum Incentive Annualised Transformation in a 4x resulting achieved performance is 293% of The annualised value multiplier. and 267% of salary for the CEO salary for the CFO. 3% 6% 14% 1% 2% 4% 500 19% 31% 82% 0 Below Target threshold KAREN WITTS Maximum 5,000 £4,465 4,000 On-target Fixed pay elements plus target Annual Bonus pay elements plus target Fixed and target Alignment Shares received, are vests. Incentive Transformation 80% of to equivalent are Alignment Shares base salary. is performance Annual Bonus on-target in a bonus of 50% of salary. resulting achieved, on- Incentive Annualised Transformation in a 1x resulting achieved performance target is 73% of salary The annualised value multiplier. the CFO. and 67% of salary for the CEO for 49% 3,000 £2,559 22%

15% 2,000 26%

Value of package (£’000) 15% £943 16% 4% 2% 11% 1,000 3% 1% 1% nual Bonus Alignment Shares Transformation Incentive Base Salary Benefits Pension An 18% 31% 86% 0

Below Target RONIQUE LAURY É threshold Below threshold Below pay elements Only the fixed benefits and pension) (base salary, received. are of the package the Annual for targets Minimum performance not are Incentive Bonus and Transformation no payments will be made therefore achieved, will lapse. and awards the unvested for The underpin requirement is not met and the pre-grant Alignment Shares is not achieved. requirement Maximum V Performance scenarios Performance Notes: for the CFO. p.a. and 5% CEO for the p.a. 8% the period, i.e. over awarded are based on an assumption that the maximum salary the policy period salaryover increases the average Base salary reflects complete. Véronique Laury now which is for relocation support excluding the remuneration table of in the single figure recorded during 2015/16 as received based upon benefits Benefits: Estimate of salary in line with policy. as a percentage Shown Pension: will be that there no recognition in by three Incentive Transformation been annualised by dividing the have above The figures years. three in the first will be granted Award One Transformation Incentive: Transformation (2018/19). (2017/18) and three two in years award and thecomprises both the Alignment Shares compensation variable Long-term comprises the annual bonus. compensation variable benefits and pension. Short-term base salary, comprises remuneration Fixed Incentive. Transformation Illustration of the application of the Remuneration Policy of the application of the Remuneration Illustration based on the remuneration director each executive for remuneration future total of the potential estimates The tables and charts provide below shown. are scenarios, performance different based on three director, each executive for outcomes them in 2016/17. Potential to opportunity granted or dividends received. appreciation price share account into do not take These scenarios DIRECTORS’ REMUNERATION REPORT CONTINUED

Service contracts and policy on payment for loss of office

Provision Policy Notice period 12 months’ notice by either the director or the company. Non-compete During employment and for 12 months after leaving. Executive directors Resignation Contractual No payments on departure will be made on termination, even if by mutual agreement the notice period is cut short. Termination payment Departure not in the case of resignation For the period of notice served, the executive director may continue to receive their monthly base salary, benefits and pension. During this time, at the discretion of the company, they may continue their duties or be assigned garden leave. For the period of notice not served, the executive director may receive a payment in lieu of notice. This would be delivered by continuing to pay their monthly base salary over this period and would be subject to mitigation. No other payments should be due on departure. Settlement agreement The Committee may agree payments it considers reasonable in settlement of legal claims. This may include an entitlement to compensation in respect of their statutory rights under employment protection legislation in the UK or in other jurisdictions. The Committee may also include in such payments reasonable reimbursement of professional fees in connection with such agreements. Treatment of No payments under any incentive plans will be made in the event of the Committee determining the departing individual to be defined as incentives for a bad leaver. bad leavers Leaver provisions Bonus payments may be receivable at the normal date, pro-rated for time, and taking into account performance achieved. for Annual Bonus The Committee retains the ultimate discretion to make bonus payments and determine the basis upon which they are made and their value for good leavers taking into account the individual circumstances of the departure. Alignment Shares The default position is that awards will lapse upon cessation of employment. for good leavers If the Committee is of the view that performance has been good, discretion may be applied for the shares to vest. The shares would continue to be subject to the normal underpin condition and would be released according to the normal timeframe but not subject to the holding period provided that the shareholding requirement is met. Awards made in the 12 months prior to departure may be pro-rated based on the proportion of the 12 months from grant that has been served. Where the participant ceases to be employed as a result of death, then the award will vest shortly after the company is notified, pro-rated for time, and take into account the Committee’s assessment of performance achieved to that date. The Committee may decide, acting fairly and reasonably, that any adjustment set out above to reduce the vesting of the award would be inappropriate. Transformation Awards will vest on the normal date, pro-rated for time, and will take into account performance achieved. Incentive for good The Committee retains discretion to further reduce the awards granted to reflect any personal performance issues. leavers Where the participant ceases to be employed as a result of death, then the award will vest shortly after the company is notified, pro-rated for time, and taking into account the Committee’s assessment of performance achieved to that date. The Committee may decide, acting fairly and reasonably, that any adjustment set out above to reduce the vesting of the award would be inappropriate. Shareholding Upon leaving the company, the shareholding requirement will continue to apply for two years. requirements The shareholding requirement will be 100% of the shareholding requirement for the first year and 50% for the second year after departure. Shareholding requirements will no longer apply in the case of death. At their discretion, the Committee may apply the same treatment in cases of ill-health. Chairman and non- Non-executive directors are appointed under letters of engagement. Executive Appointments have historically been for an initial period of three years and invitations to act for subsequent three year terms are subject to directors Contractual a review of performance, and take into account the need to progressively refresh the Board. Termination payment 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. The company has no obligation to pay compensation when the appointment terminates.

88 Kingfisher plc | Annual Report 2016/17 Governance 89 47.3 2016/17 153,553 212,592 366,145 Total value of value Total £392,810.82 £165,713.41 £558,524.23 dividends waived dividends

51.9 2015/16 156,062 246,775 402,837 (100%) (99.67%) 5,676,457 5,098,874 (% of holding) 53.3 No of shares waived waived of shares No www.kingfisher.com 2014/15 146,807 258,392 405,199 56.3 2013/14 164,173 230,760 394,932.89

61.0 2010/11 Baseline 157,590 247,775 405,365 Interim 2016/17 Interim to year for Total 31 January 2017 DIVIDENDS 6.92p) a final dividend of 7.15p (2015/16: recommend The directors (2015/16: £157m) £160 million to amounting share per ordinary as at the on the register shareholders be paid on 19 June 2017 to to with the interim 2017. This, together close of business on 5 May amounting to share, 3.18p) per ordinary dividend of 3.25p (2015/16: in 2016, results paid on 11 November £73 million (2015/16: £72m), Januaryyear ended 31 the financial 2017 of dividend for ordinary a total £233 million amounting to share, ordinary 10.4p (2015/16: 10.1p) per (2015/16: £229m). (the Limited, Wealth Nominees Trust, Benefit The Kingfisher Employee in respect by the company dividends payable the following waived Trust) held by it. shares of the ordinary Dividend Final 2015/16 (paid June 2016) (paid November 2016) equivalent from activities for which the company is responsible. Details of our is responsible. which the company activities for from equivalent 2 46 46 92 Page 22-23 47-88 26-27 130-131 e) 2

of floor space 2 emissions for the year ended 31 January 2017 are provided below. Our Sustainability Report contains further contains details and will be published in June 2017. Our Sustainability Report below. provided ended 31 January the year 2017 are emissions for by 2020. 1 and 2 emissions in scope a 25% reduction is for of 2010/11. Our target against the baseline year an 10% reduction achieved have We Gas Emissions (tonnes of CO Greenhouse Methodology: impacts: our material Our data covers Agency (IEA) emissions factors. Energy (DEFRA) and International using UK government been calculated Our GHG emissions have heat and of electricity, the purchase 1 and 2). Our GHG emissions from scopes road (i.e. by delivery fleets and business travel use, dedicated energy property emissions from emissions further 3 emissions and market-based contains data including on scope using a location-based method. Our Sustainability Report been calculated have steam heat and steam. of electricity, the purchase from of 2010/11. is set out against a baseline year Our target scope under our reported 3 are venture joint our Koçtaş Companies. Emissions from all our Operating data, covers Gas Our Sustainability data, including our Greenhouse investments). emissions (category GHG emissions from combustion of fuel and operation of facilities (scope 1) (scope of facilities of fuel and operation combustion GHG emissions from GREENHOUSE GAS EMISSIONS of CO (GHG) emissions in tonnes gas our annual greenhouse report We STRATEGIC REPORT STRATEGIC Performance Key which sets out the company’s Report, The Strategic and a Financial Responsibility, on Corporate a statement Indicators, and is by reference 46, is incorporated detailed on pages 1 to is Review, part of this report. form deemed to Disclosure Developments Future Financial Instruments and Financial Risk Management Going Concern Viability Statement & Development People of Responsibility Statement Directors’ with the Companies in accordance has been prepared This report Governance with the UK Corporate Act 2006, and in compliance under the Financial requirements Code (the Code) and its disclosure and Transparency the Disclosure and Conduct Authority’s Listing Rules (DTRs). Rules 2) (scope heat and steam of electricity, the purchase GHG emission from = 25% reduction) 1 and 2 GHG emissions (2020 target scope Total GHG emissions per m The Directors present their report for the financial year ended the financial for their report present The Directors 31 January 2017. within the Annual has been included elsewhere which Other information, by this report into and is incorporated to, but which is relevant Report, as per the table below: can be found reference, DIRECTORS’ REPORT DIRECTORS’ eachfrom including Reports Report, Governance Corporate Committee Board DIRECTORS’ REPORT CONTINUED

DIRECTORS AUTHORITY TO ALLOT SHARES The members of the Board as at the date of this report and their At the 2016 AGM, shareholders approved a resolution authorising biographical details are set out on pages 48 to 51. the directors to allot shares up to an aggregate nominal value of £119,460,128. As at the 20 March 2017, the directors had issued Janis Kong retired from the Board with effect from 1 February 2016 1,200,057 shares. All shares were issued to satisfy awards under and Rakhi Goss-Custard was appointed to the Board with effect from the ShareSave Plan. 1 February 2016. Shareholders also approved a resolution authorising the directors to DIRECTORS’ INDEMNITY ARRANGEMENTS allot shares up to a nominal amount of £238,920,257 in connection Each director and former director who served on the Board during with a rights issue. As at 20 March 2017, the directors had not used this the 2016/17 financial year had the benefit of qualifying third-party authority. The company will seek to seek to renew these authorities at deeds of indemnity. The company has also purchased and maintained the 2017 AGM. Directors’ and Officers’ liability insurance throughout 2016/17. Neither the indemnities nor the insurance provides cover in the event that the These resolutions were in line with guidance issued by the Investment director concerned is proved to have acted fraudulently. Association. The directors have no present intention to issue ordinary shares, other than in relation to employee share incentive schemes. SHARE CAPITAL These resolutions remain in force until the conclusion of the 2017 AGM. All of the company’s issued ordinary shares are fully paid up and rank equally in all respects. AUTHORITY TO PURCHASE OWN SHARES At the 2016 AGM, shareholders approved a resolution permitting the The rights and obligations attaching to the company’s ordinary shares, company to make purchases of its own shares to a maximum number of in addition to those conferred on their holders by law, are set out in the 228,060,245 ordinary shares, representing just under 10% of the issued company’s Articles of Association, and are available from the company’s share capital as at 15 April 2016. This resolution remains in force up to the website. The holders of ordinary shares are entitled to receive the conclusion of the 2017 AGM. company’s Annual Reports and Accounts, to attend and speak at general meetings, to appoint proxies and to exercise voting rights. There are no As at 20 March 2017, the directors had, pursuant to this authority, restrictions on the transfer of ordinary shares or on the exercise of voting purchased 28,617,972 shares under buyback programmes. All shares rights attached to them, except (i) where the company has exercised its purchased under this authority to date have been cancelled. right to suspend their voting rights or to prohibit their transfer following The company will seek to renew this authority at the 2017 AGM, in line the omission of their holder or any person interested in them to provide with our commitment to return c.£600 million of capital to shareholders, the company with information requested by it in accordance with Part announced at our Capital Markets Day in January 2016. 22 of the Companies Act 2006 or (ii) where their holder is precluded from exercising voting rights by the Financial Conduct Authority’s Listing Rules MAJOR SHAREHOLDINGS or the City Code on Takeovers and Mergers. As at 20 March 2017, the company had been notified of the following interests in its shares. The information below was calculated at the date Details of the company’s issued share capital are set out in note 11 on on which the relevant disclosures were made in accordance with the page 151 to the consolidated financial statements. DTRs, however the number of shares held by each may have changed The company has a Sponsored Level 1 American Depositary Receipt since the company was notified. (“ADR”) programme in the United States. Each ADR represents two Number Kingfisher ordinary shares. of ordinary % of total shares held voting rights BlackRock, Inc.(1) 168,337,223 7.38% Mondrian Investment Partners Limited 112,274,595 5.00% The Capital Group Companies, Inc.(2) 113,093,646 4.99%

(1) Part of the shares held by BlackRock, Inc. are in the form of ADRs. (2) The Capital Group Companies, Inc. holds its shares through its group companies and funds.

90 Kingfisher plc | Annual Report 2016/17 Governance 91

www.kingfisher.com (as defined by section 418 of the Companies Act 2006) of which(as defined by section 418 of the Companies Act so far as he or she is aware, there is no relevant audit information is no relevant there she is aware, as he or so far and unaware; are auditors the company’s taken have that he or she ought to all the steps has taken each director of any relevant aware himself or herself make to in order as a director are auditors establish that the company’s and to audit information of that information. aware – – ANNUAL GENERAL MEETING GENERAL ANNUAL 13 June 2017 be held on Tuesday, Meeting will Our 2017 Annual General London 3 Kingdom Street, Paddington, London Novotel at the Hotel at 2.00pm. W2 6BD, at the meeting is conducted be to A full description of the business website the company’s from available of AGM, set out in the Notice (kingfisher.com). AUDITORS TO OF INFORMATION DISCLOSURE of this report of approval at the date is a director who Each person that: confirms – – of the Board order By Moore Paul Secretary Company Group 2017 21 March the £225 million credit facility dated 25 March 2015 between the 2015 between 25 March dated facility the £225 million credit agent) and the banks named HSBC Bank plc (as the facility company, that in the event such a provision which contains as lenders, therein fund a new any lender shall not be obliged to of a change of control wish to notify the agent that they if they so require, and may, drawing, of that lender the commitment whereupon their commitment cancel with accrued outstanding loans, together and all their will be cancelled due and payable; immediately will become interest, the 2016 between 29 November dated facility the £400 million credit agent) and the banks named HSBC Bank plc (as the facility company, that in the event such a provision which contains as lenders, therein fund a new any lender shall not be obliged to of a change of control wish to notify the agent that they if they so require, and may, drawing, of that lender the commitment whereupon their commitment cancel with accrued outstanding loans, together and all their will be cancelled and due and payable; immediately will become interest, to issued pursuant notes, Placement the US$179 million US Private to 24 May 2006 by the company dated agreement purchase a note such that in the event a provision institutions, which contains various to an offer make to is required the company of a change of control, the principal prepay to notes Placement of the US Private the holders accrued. with interest together amount of the notes – – – There are a number of agreements that take effect, alter or terminate or alter effect, that take a number of agreements are There bid, such a takeover following of the company upon a change of control (‘MTN’) documentation, Note Medium Term as bank loan agreements, None of these plans. share employee debt and placement private impact on thetheir potential terms of be significant in deemed to are for: except business of Kingfisher as a whole – – – would that or officer with any director in place no agreements are There from resulting or employment loss of office for compensation provide incentive share of the company’s that provisions except a takeover, under such schemes to granted schemes may cause options and awards on a takeover. vest SIGNIFICANT AGREEMENTS – CHANGE OF CONTROL SIGNIFICANT AGREEMENTS POLITICAL DONATIONS year made no political donations during the The company any political donations in make to not intend (2015/16: £nil), and does the future. seek to will continue the company As is our policy and practice, donations or incur make enable us to annually to approval shareholder EU political parties, other political organisations to relation in expenditure basis to is on a precautionary This candidates. or independent election set out in the provisions relevant of the breach unintentional any avoid Companies Act 2006. DIRECTORS’ STATEMENT OF RESPONSIBILITY

RESPONSIBILITY FOR PREPARING FINANCIAL STATEMENTS The directors are responsible for keeping adequate accounting records The directors are responsible for preparing the Annual Report and the that are sufficient to show and explain the company’s transactions and financial statements in accordance with applicable law and regulations. disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements UK company law requires the directors to prepare financial statements for comply with the Companies Act 2006. They are responsible for each financial year. Under that law the directors are required to prepare safeguarding the assets of the company and hence for taking reasonable the Group Financial statements in accordance with International Financial steps for the prevention and detection of fraud and other irregularities. Reporting Standards (“IFRS”) as adopted by the European Union and Article 4 of the IAS Regulations and have elected to prepare the parent The directors are responsible for the maintenance and integrity of the company financial statements in accordance with United Kingdom corporate and financial information included on the company’s website. Generally Accepted Accounting Practice (United Kingdom Accounting Legislation, regulation and practice in the United Kingdom governing the Standards and applicable law) including FRS 101 “Reduced Disclosure preparation and dissemination of financial statements may differ from Framework”. Under s.393 of the Companies Act 2006, the directors must legislation, regulation and practice in other jurisdictions. not approve the accounts unless they are satisfied that they give a true RESPONSIBILITY STATEMENT and fair view of the state of affairs of the company and of the profit or loss The directors confirm that to the best of their knowledge: of the company for that period. –– the financial statements, prepared in accordance with the relevant In preparing the parent company financial statements, the directors are financial reporting framework, give a true and fair view of the assets, required to: liabilities, financial position and profit or loss of the company and the –– select suitable accounting policies and then apply them consistently; undertakings included in the consolidation taken as a whole; –– make judgements and accounting estimates that are reasonable –– the strategic report includes a fair review of the development and and prudent; performance of the business and the position of the company and the –– follow applicable UK Accounting Standards (except where any undertakings included in the consolidation taken as a whole, together departures from this requirement are explained in the notes to the with a description of the principal risks and uncertainties they face; and parent company financial statements); and –– the Annual Report and financial statements, taken as a whole are fair, –– prepare the financial statements on the going concern basis unless it is balanced and understandable and provide the information necessary inappropriate to presume that the company will continue in business. for shareholders to assess the company’s performance, business model and strategy. In preparing the group financial statements in accordance with IAS 1, “Presentation of Financial Statements”, the directors are required to: By order of the Board –– select suitable accounting policies and then apply them consistently; –– present information, including accounting policies, in a Paul Moore Group Company Secretary manner that provides relevant, reliable, comparable and understandable information; 21 March 2017 –– provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial performance; and –– make an assessment of the group’s ability to continue as a going concern.

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www.kingfisher.com the Directors’ confirmation on page 38 that they have carried out they have on page 38 that confirmation a the Directors’ including the Group, of the principal risks facing assessment robust performance, its business model, future threaten those that would or liquidity; solvency 45 that describe those risks and explain on pages 38 to the disclosures being managed or mitigated; they are how about the financial statements 2 to in note statement the Directors’ adopt the going concern to it appropriate whether they considered them and their identification of any in preparing basis of accounting a do so over to continue ability to the Group’s uncertainties to material of the financial of approval date the period of at least 12 months from or statements; assessed they have how on page 46 as to explanation the Directors’ done so and what period they have over of the Group, the prospects and their statement be appropriate, to that period why they consider will that the Group expectation a reasonable they have whether as to due and meet its liabilities as they fall in operation continue be able to disclosures of their assessment, including any related the period over any necessary qualifications or assumptions. to attention drawing – – – – OF THE PRINCIPAL RISKS THAT WOULD THREATEN THE WOULD THREATEN RISKS THAT OF THE PRINCIPAL OF THE GROUP OR LIQUIDITY SOLVENCY INDEPENDENCE Council’s Ethical with the Financial Reporting comply to required are We independent of the Group we are that and confirm Auditors for Standards responsibilities in accordance our other ethical fulfilled have and that we Group the of independent are we that confirm We with those standards. responsibilities in accordance fulfilled our other ethical have and we any of the not provided we have also confirm We with those standards. to in those standards. non-audit services referred prohibited MISSTATEMENT OF RISKS OF MATERIAL OUR ASSESSMENT those are described below misstatement The assessed risks of material the allocation of on our audit strategy, effect that had the greatest team. of the engagement the efforts in the audit and directing resources under that, while not required has requested The Audit Committee include in our we on Auditing (UK and Ireland), Standards International respect of these assessed riskskey observations in any significant report misstatement. of material GOING CONCERN AND THE DIRECTORS’ ASSESSMENT DIRECTORS’ AND THE GOING CONCERN the Directors’ reviewed have we by the Listing Rules As required basis of of the going concern the appropriateness regarding statement statements financial the Group 2 to within note contained accounting of the Group viability the longer-term on statement and the directors’ on page 46. report within the strategic contained add or to anything material have whether we state to required are We to: in relation to attention draw – – – – attention to nothing material to add or draw we have that confirm We adoption with the Directors’ agreed We matters. of these in respect not identify any did and we basis of accounting of the going concern or events because not all future such material uncertainties. However, the as to is not a guarantee this statement can be predicted, conditions as a going concern. continue ability to Group’s . recognition of supplier rebates; recognition impairment and lease based provisioning; store impairment of goodwill; and taxation; and exceptional of classification and presentation items. adjusted inventory valuation and provisions; valuation inventory – – – – – – – – – – – identified with any new risks are Within this report, – primarily on all audit scope our Group focused We head office. entities and the Group significant trading principal business units the These locations represent 97% of revenue, 99% of the Group’s for and account account taking into tax after before profit the Group’s and 95% of the costs, sourcing the allocation of central net assets. Group’s of the ONE Kingfisher the commencement Following new underlying metrics, we and the Group’s strategy, classification and risk around included a new key have items. and adjusted of exceptional presentation The key risks that we identified in the current year were:year identified in the current risks that we The key are the same as the prior year and any risks which are identified with was year used in the current that we The materiality on the basis of profit £37 million which was determined items. tax and exceptional before the financial statements give a true and fair view of the state of thefair view of the state a true and give the financial statements as at 31 January 2017 and of the and of the Company’s affairs Group’s ended; year then for the profit Group’s in prepared been properly have financial statements the Group (IFRS) as Standards Financial Reporting with International accordance Union; by the European adopted in prepared been properly have the Company financial statements Accounting Accepted Kingdom Generally with United accordance and Framework”; Disclosure FRS 101: “Reduced including Practice, with the in accordance been prepared have the financial statements the Group of the Companies Act 2006 and, as regards requirements Regulation. Article 4 of the IAS financial statements, – – – – Significant changes in our approach Materiality Scoping Key risks Key SUMMARY OF OUR AUDIT APPROACH OF OUR AUDIT SUMMARY OPINION ON FINANCIAL STATEMENTS OF KINGFISHER PLC STATEMENTS OPINION ON FINANCIAL In our opinion: – – – – consolidated comprise the audited we have that The financial statements of comprehensive statement the consolidated statement, income in equity, of changes and Company statements the consolidated income, cash sheets, the consolidated and Company balance the consolidated forto 15 and 1 for the Group to 37 1 notes related and the statement flow the Company financial statements. applied in the that has been reporting framework The financial is applicable law and IFRS financial statements of the Group preparation reporting framework Union. The financial by the European as adopted of the Company financial that has been applied in the preparation Standards Kingdom Accounting applicable law and United is statements including FRS Practice), Accounting Accepted Generally Kingdom (United Framework”. Disclosure 101: “Reduced INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGFISHER PLC THE MEMBERS REPORT TO AUDITOR’S INDEPENDENT INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGFISHER PLC CONTINUED

Inventory valuation and provisions Risk description How the scope of our audit responded to the risk As at 31 January 2017, the value of inventory held by the Group Our audit focused on whether the valuation of year-end inventory was was £2,173 million as disclosed in note 18 to the financial in line with IAS 2. This included challenging judgements taken regarding statements. obsolescence and net realisable value provisions. Assessing the valuation of inventory is an area of significant We obtained assurance over the appropriateness of management’s judgement. There is significant management judgement in assumptions applied in calculating the value of inventory provisions by: estimating the eventual selling price of items held, as well as –– critically assessing the Group’s inventory provisioning policy, with specific assessing which items may be slow-moving or obsolete. consideration given to aged inventory; As detailed in the Strategic Report on page 18, Kingfisher has –– verifying the existence and condition of inventory by attending a sample started rationalising the number of stock keeping units (SKUs) of inventory counts throughout the year across all in scope components, within the business as part of their plans to unify their offer. including those at 16 distribution centres and 57 retail stores; This adds additional complexity to assessing the level of –– checking the value of a sample of inventory to confirm it is held at the inventory which will become obsolete and the expected net lower of cost and selling price, through comparison to vendor invoices and realisable value (NRV) of inventory which will be sold. current sales prices; and –– recomputing provisions recorded to verify that they are in line with Group The Group’s principal accounting policy on inventory is on page policy and IAS 2. This was done in conjunction with IT specialists for some 109 and the sources of estimation uncertainty for inventory is components where a manual recomputation was not possible. on page 111. Judgements relating to inventory and stock provisioning policy are a significant issue considered by the Audit Committee as discussed on page 61. Key observations The results of our audit work were satisfactory and we concur with the judgements around the level of provisions for inventory held.

Recognition of supplier rebates Risk description How the scope of our audit responded to the risk The Group receives significant amounts of supplier incentives, We tested that amounts recognised were accurate and recorded in the discounts, and rebates, and recognises these as a deduction in correct period based on the contractual performance obligations by cost of sales. obtaining and reviewing a sample of contracts with suppliers to assess the conditions required for rebate income to be recognised and verified whether These agreements largely comprise of volume-based rebates or not these had been met. based on percentage levels agreed for the calendar year, but also include arrangements with a greater degree of judgement We circularised a sample of suppliers to give assurance that the such as advertising and marketing support. Given the materiality arrangements recorded were accurate and complete and, where of the volume-based rebates these have been the focus of outstanding balances were significant at the year end, to confirm the our work. amounts owed. Where responses were not received, we completed alternative procedures such as obtaining rebate contracts, understanding Assessing the timing of recognition of the reduction in cost of the contractual terms and recomputing the rebate earned. sales earned from suppliers, including adherence to contractual terms, is an area of complexity requiring both a detailed For volume-based agreements, we recalculated the rebates due based on understanding of the contractual arrangements themselves shipments in the year and contractual terms. For other rebates, we also as well as complete and accurate source data to apply the focussed on the timing of recognition of the rebate income based on the arrangements to. contractual performance obligations. The majority of rebates agreements are subject to netting We recomputed the level of volume rebate earned but not recognised, in agreements with the supplier. However, as detailed in note 19 to particular challenging the key assumption of stock turn in the volume rebate the financial statements, there are £287 million of rebate debtors in stock adjustment. recorded at year end. Our audit assessed the recoverability of rebate debtors by assessing the The Group’s principal accounting policy for rebates is on page Group’s right to receive the rebate. Where there were netting agreements 107 and the sources of estimation uncertainty for rebates are on we agreed that there was a sufficient creditor against which to deduct page 112. the rebate due and reviewed post year end debit notes; where there was not a netting agreement we reviewed post year end cash receipts to give assurance that the rebate was recoverable. Key observations The results of our testing were satisfactory and we consider the disclosures given around supplier rebates to provide a reasonable understanding of the types of rebate income received and the impact on the Group’s balance sheet as at 31 January 2017.

94 Kingfisher plc | Annual Report 2016/17 Accounts 95 www.kingfisher.com checking the mechanical accuracy of the impairment models; accuracy checking the mechanical each for reviews the impairment to applied rates assessing the discount data which our benchmarks of market to the rates country and comparing specialists; valuation with assessed in conjunction were data; economic to rates growth forecast comparing level; at a store budgeting accuracy the historical considering namely forecast in use computation, the value inputs into challenging key our both past performance, by reviewing and margin sales growth for and the rationale initiatives strategic of the Group’s understanding performance of past store challenged the level assumptions. We future at the appropriate whether assumptions applied were critically assess to level; store party third to property of freehold possession value the vacant agreeing methodology the inputs and valuation challenging reports, valuation applied; and held in line with IAS 36. are properties that freehold verifying – – – – – – – How the scope of our audit responded to the risk How Store impairment of impairment, we assets with indicators and store properties freehold For models and calculations by: challenged the impairment – – – – – – – Lease based provisioning be considered identify leases which could to procedures performed We under lease, currently the properties reviewed we example, – for onerous vacant or underutilised, or where and identified those which may be an leads to income rental sublet whether the estimated are properties contract. onerous country-specific discount rates; discount country-specific operating and general staff payroll including rent, costs, store and costs; growth. contribution forecast – – – Store impairment and lease based provisioning impairment Store Risk description The Group operates nearly 1,200 stores across 10 countries across nearly 1,200 stores operates The Group portfolio. property freehold leasehold and a diverse giving rise to plant and As at 31 January of property, 2017 the value million, as disclosed in was £3,589 equipment held by the Group the financial statements. 14 to note aspects or judgemental complex technically several are There across based provisioning impairment and store of store that cash flow note We set out below. which are the Group, all are values impairment modelling and property forecasting, judgemental. inherently Store impairment store the financial statements, 14 to As detailed in note in the year. been recorded impairments of £10 million have of carrying an assessment valuesA judgement arises in forming impairment. potential assets for and store stores of freehold assumptions applied by management in their store The key are: impairment reviews – – – uses the Group the financial statements, 2 to As detailed in note less costs value fair approximate to possession valuations vacant impairment. sell when considering to Lease based provisioning the Group the financial statements, 26 to As detailed in note obligations following lease onerous to relating holds provisions in B&Q. As described of stores of the closure the announcement some outsourced the Group Review, on page 20 of the Strategic and party a lease liability transaction, via a third to lease exits provision. included in the total these leases are for provisions this assumptions applied by management in estimating The key and periods and likelihood the length of void to relate provision income. of sub-tenancy level plant policy on property, principal accounting The Group’s of estimation and equipment is on page 108 and the sources impairment is on page 111. uncertainty for Key observations Key of impairment level the overall and that range, within an acceptable that the assumptions applied in the impairment models were concluded We was reasonable. recognised INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGFISHER PLC CONTINUED

Impairment of goodwill Risk description How the scope of our audit responded to the risk As at 31 January 2017, the value of goodwill held by In order to address this key audit risk we audited the assumptions used in the Group was £2,399 million, as disclosed in note 12 to the the impairment model for goodwill. Our work included: financial statements. –– considering the projected future cash flows, understanding variances The goodwill within the Group arose via business combinations. between the forecast and actual results for the year ended 31 January 2017 and comparing the forecast performance to the remaining four Determining the appropriate carrying value of goodwill requires years of the Group’s five year plan and supporting workings; management to make significant estimates including the operating cash flow projections, discount rates and long term –– assessing whether management’s cash flow forecasts only include cash growth rates applied. flows as allowed by IAS 36; –– comparing the long-term growth rates for each cash generating unit to The goodwill attributable to cash generating units (CGUs) is economic forecasts; reviewed for impairment using a value in use model, as described –– working with our internal valuation specialists, who assisted in computing in note 12 to the financial statements. an independent assessment of the discount rates used and assessing As detailed on page 15 to the annual report, the Group’s five year management’s methodology used in calculating the discount rates applied plan, of which the year ended 31 January 2017 was the first year, by benchmarking against those companies in the same or similar sectors; aims to deliver £500 million of sustainable profit uplift by the –– assessing the appropriateness of the sensitivities applied by management end of year five. A risk arises that cash flow projections used to to the impairment testing model and whether the scenarios represented support the valuation of goodwill are not in compliance with IAS reasonably possible changes in key assumptions. We performed further 36. This standard requires that future cash flows do not include sensitivities based on recent trading activity and our understanding of the inflows or outflows that (a) are expected to arise from a future future prospects to identify whether these scenarios could give rise to restructuring to which an entity is not yet committed or (b) are further impairment; improving or enhancing the asset’s performance. –– considering CGU allocation in light of the Group’s new strategy and The Group’s principal accounting policy on goodwill and concluded that there have not been any triggers which would require intangible assets is on page 108 and the sources of estimation a reallocation of the CGUs; uncertainty on impairment is on page 111. –– checking the arithmetic accuracy of the impairment model; and –– considering the adequacy of the Group’s disclosure in respect of its The carrying value of goodwill is a significant issue considered by goodwill impairment testing and whether the disclosures about the the Audit Committee as discussed on page 61. sensitivity of the outcome of the impairment assessment to reasonably possible changes in key assumptions properly reflected the risks inherent in such assumptions. Key observations The results of our testing were satisfactory and concluded that the assumptions used in the impairment model are within the acceptable range. Based on sensitivity analysis performed using a reasonably possible change in assumptions, no impairment was identified.

Taxation Risk description How the scope of our audit responded to the risk We engaged tax specialists who considered the significant taxation Due to the estimation uncertainty in respect of settlements with exposures across the Group, and challenged the estimates and judgements tax authorities around the world, assessing the Group’s exposure made by management when calculating the income tax payable in each to significant tax risks and the appropriate level of provision to territory and the associated provisions held. recognise is a judgemental area. In assessing the provisions we have considered the tax environment in the The Group’s principal accounting policy on taxation is on page significant territories in which the Group operates, the outcome of past 109 and the sources of estimation uncertainty for taxation is on settlements and the status of tax audits. page 112. The tax specialists reviewed correspondence with taxation authorities in The significant judgement and estimates relating to corporate significant locations, as well as reviewing the opinions or other support and business taxes is a significant issue considered by the Audit received from external counsel and other advisers where management has Committee as discussed on page 61. relied on them to make assumptions on the level of taxation payable. Key observations The results of our testing were satisfactory and we identified no material exceptions to the provisions recorded.

96 Kingfisher plc | Annual Report 2016/17 Accounts 97 www.kingfisher.com How the scope of our audit responded to the risk How We evaluated the design and tested the implementation of controls around implementation of controls the the design and tested evaluated We items. exceptional costs and classification of transformation both individually inclusion of items, of the the appropriateness evaluated We items. and exceptional costs within transformation and in aggregate, of definition with the Group’s consistency also considered We from guidance and latest items and exceptional costs transformation reviewed we items, exceptional Council. For the Financial Reporting consistency for items management’s application of the policy on exceptional periods. accounting with previous supporting documentation. to these items also agreed We by management or identified either highlighted all items, assessed We as one-off but regarded of our audit, which were the course through not material that these are ensure included within underlying earnings to or in the aggregate. either individually, within the financial statements whether the disclosures also assessed We items. these of nature the understand to reader the for detail sufficient provide we discussed in calculating underlying profits, all adjustments recorded For and anyAudit Committee with the of the item the appropriateness considerations. disclosure Classification and presentation of exceptional and adjusted items exceptional of Classification and presentation Risk description As explained on page 31, the Group is separately reporting is separately on page 31, the Group As explained ended 31 January the year 2017 from costs’ ‘transformation of the ONE Kingfisher the additional costs which represent has included underlying The Group programme. transformation measure. as a new profit profit pre-tax within and income of costs and consistency The presentation determinant is a key items and exceptional costs transformation underlying quality of the Group’s in the assessment of the earnings. within non-GAAP and costs of income The presentation IFRS only requiring under IFRS is judgemental, with measures The exceptional items. of material presentation the separate disclosed and are be non-recurring to expected are items There or incidence. size by virtue of their nature, separately or exceptional whether the definition of an is a risk around applied consistently and is is appropriate cost transformation each year. and items exceptional established definitions of has The Group policy on principal accounting The Group’s costs. transformation is on page 106 and the judgementsuse of non-GAAP measures policy is on page 112. made in applying the accounting incurred ended 31 January the year 2017, the Group For of £44 million along with a net exceptional costs transformation of £17 million.credit whether an in determining Management judgement is required costs or is definition of transformation Group’s meets the item and non-recurring. exceptional and costs of transformation and presentation The treatment by the Auditconsidered is a significant issue items exceptional as discussed on page 61. Committee Key observations Key items in the financial of these disclosure related costs, and the transformation items and exceptional satisfied that the amounts classified as are We appropriate are statements, The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed on page 61. by the Audit Committee considered with the significant issues in conjunction should be read The description of risks above we do not and forming our opinion thereon, as a whole, and in of our audit of the financial statements in the context addressed were These matters opinion on these matters a separate provide INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGFISHER PLC CONTINUED

OUR APPLICATION OF MATERIALITY AN OVERVIEW OF THE SCOPE OF OUR AUDIT We define materiality as the magnitude of misstatement in the financial Our Group audit was scoped by obtaining an understanding of the Group statements that makes it probable that the economic decisions of and its environment, including Group-wide controls, and assessing the a reasonably knowledgeable person would be changed or influenced. risks of material misstatement at the Group level. We use materiality both in planning the scope of our audit work and in Based on that assessment, we focused our Group audit scope primarily evaluating the results of our work. on all significant trading entities and the Group head office, and including Based on our professional judgement, we determined materiality for the B&Q UK, Castorama France, Brico Dépôt France, Castorama Poland, financial statements as a whole as follows: Castorama Russia, Screwfix UK, Brico Dépôt Spain, Brico Dépôt Group materiality £37 million (2015/16: £34 million) Romania and the Koçtaş joint venture. These locations represent the Basis for determining 5% (2015/16: 5%) of profit before taxation, principal business units and account for 99% (2015/16: 99%) of the materiality before exceptional items as defined in note 2 Group’s revenue, 97% (2015/16: 98%) of the Group’s profit before tax to the Group financial statements; this is below after taking into account the allocation of central sourcing costs, and 95% 1% (2015/16: below 1%) of equity. (2015/16: 98%) of the Group’s net assets. The entities which are out of our scope are primarily individually insignificant cost entities and other Rationale for the This basis provides a consistent year-on-year smaller operations. benchmark applied approach excluding one-off gains and losses, and is considered to be a relevant performance The locations in scope were selected to provide an appropriate basis for measure to the Group’s stakeholders. undertaking audit work to address the risks of material misstatement identified above. Our audit work at these locations was executed at We agreed with the Audit Committee that we would report to levels of materiality applicable to each individual entity which were lower the Committee all audit differences in excess of £1.5 million than Group materiality and ranged from £2.4 million to £17.5 million (2015/16: £0.7 million), as well as differences below that threshold (2015/16: £1.4 million to £17.5 million). that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified At the Group level we also tested the consolidation process and carried when assessing the overall presentation of the financial statements. out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to audit or audit of specified account balances. HOW WE WORK CLOSELY WITH COMPONENT AUDITORS The Group audit team continued to follow a programme of planned visits that has been designed so that the Senior Statutory Auditor visits locations considered the most significant each year. For the remaining Profit before tax locations where Group audit work is performed, but no visit is carried and exeptionals out, the Senior Statutory Auditor has discussed and challenged the key £742 million areas of judgement with the lead audit partner of the component in the current year and a senior member of the Group audit team has visited the location. In the current year the Group audit team have made 17 visits to component sites and a senior member from the Group audit team has visited each component at least once. Profit before tax and exceptional items Group materiality We also held planning briefings, attended by the component auditors from each of the locations discussed above, at which we discussed Group materiality developments in the Group relevant to our audit, including risk £37 million assessment and audit procedures to respond to the risks identified. Component materiality range OPINION ON OTHER MATTERS PRESCRIBED BY THE £2.4 million to £17.5 million COMPANIES ACT 2006 In our opinion, based on the work undertaken in the course of the audit: Audit Committee reporting threshold £1.5 million –– the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; –– the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and –– the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Directors’ Report.

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www.kingfisher.com

Chartered Accountants and Statutory Auditor and Statutory Accountants Chartered London 2017 21 March This report is made solely to the company’s members, as a body, in as a body, members, the company’s solely to is made This report Act 2006. Our 16 of the Companies 3 of Part with Chapter accordance the company’s to might state so that we has been undertaken audit work them in an auditor’s to state to required are we those matters members law, by permitted the fullest extent no other purpose. To and for report other than the anyone to responsibility or assume do not accept we our audit work, for as a body, members and the company’s company formed. have the opinions we or for report, for this financial statements of the audit of the Scope and disclosures about the amounts obtaining evidence An audit involves that reasonable assurance give to sufficient in the financial statements whether misstatement, material from free are the financial statements the This includes an assessment of: whether or error. caused by fraud and the Company’s the Group’s to appropriate policies are accounting applied and adequately been consistently and have circumstances estimates of significant accounting disclosed; the reasonableness of the financial presentation and the overall made by the directors; all the financial and non-financial read addition, we In statements. inconsistencies identify material to in the annual report information to identify any information and financial statements with the audited inconsistent based on, or materially incorrect materially that is apparently the of performing by us in the course acquired with, the knowledge or misstatements material of any apparent aware become audit. If we our report. the implications for consider we inconsistencies Richard Muschamp FCA Auditor Senior Statutory and on behalf of Deloitte LLP for

materially inconsistent with the information in the audited financial in the audited with the information inconsistent materially or statements; inconsistent based on, or materially incorrect materially apparently of performing course in the acquired of the Group with, our knowledge our audit; or otherwise misleading. we have not received all the information and explanations we require require we and explanations the information all not received have we our audit; or for or by the Company, not been kept have records accounting adequate branches from not been received audit have our for adequate returns us; or by not visited with the not in agreement are the Company financial statements and returns. records accounting – – – – – – Respective responsibilities of directors and auditor of directors responsibilities Respective the of Responsibility, Statement fully in the Directors’ more As explained of the financial statements the preparation for responsible are directors responsibility Our fair view. a true and being satisfied that they give and for in an opinion on the financial statements audit and express is to on Auditing Standards law and International with applicable accordance on Quality Standard with International also comply We (UK and Ireland). aim to audit methodology and tools Our 1 (UK and Ireland). Control understood effective, are procedures that our quality control ensure include our dedicated and systems and applied. Our quality controls and independent partner reviews. team review standards professional Our duty to read other information in the Annual Report other information Our duty to read are we on Auditing (UK and Ireland), Standards Under International in the annual if, in our opinion, information you to report to required is: report – – – identified have whether we consider to required are we In particular, during the audit acquired our knowledge between any inconsistencies is the annual report that they consider statement and the directors’ and whether the annual report and understandable balanced fair, the to communicated that we matters discloses those appropriately been disclosed. have should consider which we audit committee Corporate Governance Statement Governance Corporate part of the review to also required are we Under the Listing Rules the Company’s compliance to relating Statement Governance Corporate have Code. We Governance of the UK Corporate with certain provisions our review. arising from nothing to report not identified any such inconsistencieswe have that confirm We or misleading statements. Directors’ remuneration Directors’ if in our report to also required are Under the Companies Act 2006 we not been have remuneration of directors’ opinion certain disclosures be audited to Report Remuneration made or the part of the Directors’ have We and returns. records with the accounting is not in agreement these matters. arising from nothing to report MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY REPORT BY TO WE ARE REQUIRED ON WHICH MATTERS EXCEPTION records and accounting received Adequacy of explanations if, in you to report to required are 2006 we Under the Companies Act our opinion: – – – matters. of these in respect nothing to report have We

Consolidated income statement Year ended 31 January 2017

2016/17 2015/16 Before Exceptional Before Exceptional exceptional items exceptional items £ millions Notes items (note 5) Total items (note 5) Total Sales 4 11,225 – 11,225 10,441 – 10,441 Cost of sales (7,050) – (7,050) (6,545) – (6,545) Gross profit 4,175 – 4,175 3,896 – 3,896 Selling and distribution expenses (2,758) 21 (2,737) (2,666) (308) (2,974) Administrative expenses (687) (5) (692) (567) (15) (582) Other income 19 7 26 26 157 183 Share of post-tax results of joint ventures and associates 16 1 – 1 3 – 3 Operating profit 750 23 773 692 (166) 526 Finance costs (21) (6) (27) (22) – (22) Finance income 13 – 13 8 – 8 Net finance costs 6 (8) (6) (14) (14) – (14) Profit before taxation 7 742 17 759 678 (166) 512 Income tax expense 9 (143) (6) (149) (167) 67 (100) Profit for the year 599 11 610 511 (99) 412

Earnings per share 10 Basic 27.1p 17.8p Diluted 27.0p 17.8p Adjusted basic 24.4p 22.0p Adjusted diluted 24.3p 22.0p Underlying basic 25.9p 22.0p Underlying diluted 25.8p 22.0p

Reconciliation of non-GAAP underlying and adjusted pre-tax profit: Underlying pre-tax profit 787 686 Transformation costs before exceptional items (44) – Adjusted pre-tax profit 743 686 B&Q China operating loss – (4) Financing fair value remeasurements (1) (4) Exceptional items 17 (166) Profit before taxation 759 512

The proposed final dividend for the year ended 31 January 2017, subject to approval by shareholders at the Annual General Meeting, is 7.15p per share.

100 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

1 2 – 8 (7) (8) (3) 11 24 19 (25) (50) (14) 101 398 412 101 2015/16 5 2 – (7) (1) 52 11 (39) (60) (50) 390 381 342 952 610 2016/17 www.kingfisher.com

27 Notes www.kingfisher.com 33 33 t t -employment benefits t -sale financial assets assets financial -sale r

Consolidated Consolidated statement of comprehensive income 2017 January 31 ended Year

Total items that may be reclassified subsequently to profit or loss Total items that will not be reclassified subsequently or to profit loss subsequently not be reclassified will that items Total Other comprehensive incomefor the year Total comprehensive incomefor the year Profit for the year year the for Profit

Fair value gains inventories to transferred Gains Available-fo Fair value gains statemen income to Transferred Tax on may that items be reclassified differences Currency translation Group associates and Joint ventures statemen income to Transferred hedges Cash flow on pos (losses)/gains Actuarial reclassified not be will that on items Tax

£ millions 4) 4) – ( ( 166) 100) ( ( 99) 412 15) (582) ( ( items items (note 5) (note 5) Total 2015/16 2015/16 ng, is 7.15p per share. Exceptional Exceptional 22.0p 22.0p

17.8p 17.8p

686

686

512 22.0p 22.0p 3 – 3 8 – 8 26 157 183 157 26 (14) – (14) (22) – (22) 692 (166) 692 526 511 511 678 (166) 678 512 (567) (567) (167)67 items items 3,896 – 3,896 Before (2,666) (308) (2,974) (6,545) (6,545) – (6,545) 10,441 – 10,441 exceptional ) 1 – (1) 26 17 13 (14) (44 (27) 743 787 773 759 610 759 (692) (149) the Annualthe General Meeti 25.9p 25.8p 27.1p 27.0p 4,175 24.3p 24.4p (2,737) (7,050) 11,225 7 – – – – – (6) (5) (6) (6) 21 23 11 17 items (note 5) Total 2016/17 Exceptional oval by shareholders at 1 (8) 19 13 (21) 750 599 742 (687) (143) items 4,175 (2,758) (7,050) Before Before 11,225 exceptional exceptional : t 4 6 7 9 16 10 Notes dend for the year ended 31 January 2017, subject appr to year 31 January ended the dend for

c

c 2016/17 Report Annual | plc Kingfisher

c 100 statement income Consolidated 2017 January 31 ended Year and associates associates and The proposed The divi final £ millions Adjusted pre-tax profit China operating B&Q loss Underlying pre-tax profit Transformation exceptionalcosts items before Financing fair valueremeasurements items Exceptional Profit before taxation diluted Underlying Reconciliation ofnon-GAAP underlying and adjustedpre-tax profi Diluted basi Adjusted expenses distribution Selling and expenses Administrative Cost of sales Basi Other income of joint ventures results of post-tax Share Operating profit costs Finance Earnings per share Sales year the for Profit costs Net finance Profit before taxation diluted Adjusted basi Underlying profit Gross income Finance expense tax Income

Consolidated statement of changes in equity Year ended 31 January 2017

Attributable to equity shareholders of the Company Own Other Non- Share Share shares Retained reserves controlling Total £ millions capital premium held earnings (note 29) Total interests equity At 1 February 2016 361 2,218 (24) 3,637 (6) 6,186 – 6,186 Profit for the year – – – 610 – 610 – 610 Other comprehensive income for the year – – – (39) 381 342 – 342 Total comprehensive income for the year – – – 571 381 952 – 952 Share-based compensation – – – 15 – 15 – 15 New shares issued under share schemes – 3 – – – 3 – 3 Own shares issued under share schemes – – 7 (6) – 1 – 1 Purchase of own shares for cancellation (note 28) (9) – – (150) 9 (150) – (150) Purchase of own shares for ESOP trust – – (6) – – (6) – (6) Dividends (note 11) – – – (230) – (230) – (230) At 31 January 2017 352 2,221 (23) 3,837 384 6,771 – 6,771

At 1 February 2015 369 2,214 (26) 3,652 11 6,220 10 6,230 Profit for the year – – – 412 – 412 – 412 Other comprehensive income for the year – – – 11 (25) (14) – (14) Total comprehensive income for the year – – – 423 (25) 398 – 398 Disposal of B&Q China (note 33) – – – – – – (10) (10) Share-based compensation – – – 11 – 11 – 11 New shares issued under share schemes – 4 – – – 4 – 4 Own shares issued under share schemes – – 18 (17) – 1 – 1 Purchase of own shares for cancellation (note 28) (8) – – (200) 8 (200) – (200) Purchase of own shares for ESOP trust – – (16) – – (16) – (16) Dividends (note 11) – – – (232) – (232) – (232) At 31 January 2016 361 2,218 (24) 3,637 (6) 6,186 – 6,186

102 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

6) 6) 5 6 7 ( ( 25 23 56 53) 87) 24) 62 70 66) 69) 11 43 ( ( ( ( ( 179) 333) 208) 860) 138) 361 276 568 730 246 103 ( ( ( ( ( 103 2,218 3,212 9,694 3,508) 6,186 2,397 1,957 2,369) 2,648) 3,392 3,637 6,186 6,302 ( ( ( 2015/16 6 8 – – – 24 23 36 28 54 (23) (14) (50) (99) (26) (63) 352 308 551 384 795 239 (141) (723) (184) (282) (108) 2,221 3,589 6,771 2,399 2,173 3,561 3,837 6,771 6,672 (3,462) (2,495) (2,739) 10,233 2016/17 www.kingfisher.com

4 16 28 20 14 15 21 21 12 13 18 19 23 22 29 22 25 26 20 23 26 34 17 27 27 25 23 19 Notes www.kingfisher.com signed on its behalf by: by: behalf its on signed Directors on 21 March 2017 and March Directors on 21 Karen Witts Witts Karen Chief Financial Officer

t t

t r payables r payables r receivables

y

y -term deposits deposits -term t -employment benefits -employment benefits t t éronique Laury Share capital Share premium ESOP trus held in Own shares Investment property property Investment Investments in joint ventures and associates associates and ventures joint in Investments B&Q China investmen

The financial statements were The of by Board financial the approved V Officer Chief Executive Equit Total liabilities liabilities Total Net assets Non-current liabilities Total assets Current liabilities Trade and othe Other payables Current assets Consolidated Consolidated balance sheet 2017 At 31 January £ millions Non-current assets Goodwill assets Other intangible equipmen and plant Property, Inventories Trade and othe assets Derivative Shor Borrowings

Current tax assets Current tax assets Total equit Total Current tax liabilities Current tax liabilities

Other reserves reserves Other Borrowings tax liabilities Deferred Provisions Pos earnings Retained Pos Cashcash and equivalents liabilities Derivative Provisions Assets held for sale sale for held Assets Deferred tax assets tax assets Deferred Derivative assets assets Derivative Other receivables 3 1 (6) 16) 14) 10) 15 ( ( ( 200) 232) 952 610 342 ( ( (150) (230) Total Total equity 6,186 6,771 – – – – – – – – – – – 10) ( Non- interests controlling

– 4 –1 – 4 1 3 1 (6) 11 – 11 14)– 16)– 15 ( ( 232)– 412 –412 412 200)– 952 952 610 610 342 342 ( ( (150) (230) 6,186 6,771 – 6) 6,186 – 6,186 – – – – – – 9 – – – – – – ( (6) 25) 25) 398 – 398 ( ( 381 381 384 Other Other reserves (note 29) Total – – – – – (6) 11 11 17) 15 ( (39) 200)232) 8 412 423 610 571 ( ( (150) (230) 3,837 3,637 earnings Retained Retained – – – – – – – – 7 – – – – – – – (6) 18 16) 24) 3,637 26) 3,652 11 6,220 10 6,230 ( ( ( (23) (24) held Own Own shares – – 4 – – – – – – – 3 – – – – – – – – Share 2,221 2,218 premium Attributable to equity shareholders of the Company Company the of shareholders equity to Attributable – – – – 8) – – – – – – – – – – – – – ( (9) 352 361 Share capital

361 2,218

369 2,214

r r

t t

r r 2016/17 Report Annual | plc Kingfisher for theyea t At 31 January 2017 At 31 January 2016 Total comprehensive incomefor the year At 1 February 2016 Total comprehensive incomefor the year At 1 February 2015

102 Consolidated statement of changes in equity 2017 January 31 ended Year yea the Profit for for income yea Other the comprehensive Profi for income yea Other the comprehensive £ millions New shares issued under share schemes Own shares issuedunder share schemes 28) (note cancellation for shares own of Purchase trus ESOP for shares own of Purchase 33) (note China of B&Q Disposal

Own shares issuedunder share schemes 28) (note cancellation for shares own of Purchase trus ESOP for shares own of Purchase (note 11) Dividends compensation Share-based

New shares issued under share schemes compensation Share-based (note 11) Dividends

Consolidated cash flow statement At 31 January 2017

£ millions Notes 2016/17 2015/16 Operating activities Cash generated by operations 31 925 931 Income tax paid (144) (118) Net cash flows from operating activities 781 813

Investing activities Purchase of property, plant and equipment and intangible assets 4 (406) (333) Disposal of property, plant and equipment, investment property and property held for sale 20 25 Disposal of property company 33 – 18 Disposal of B&Q China: 33 Proceeds (net of costs and cash disposed) 63 102 Deposit repaid – (12) Decrease/(increase) in short-term deposits 70 (22) Interest received 5 3 Dividends received from joint ventures and associates – 5 Net cash flows from investing activities (248) (214)

Financing activities Interest paid (10) (12) Interest element of finance lease rental payments (2) (3) Repayment of bank loans (2) (1) Repayment of fixed term debt (47) – Receipt on financing derivatives 10 – Capital element of finance lease rental payments (12) (13) New shares issued under share schemes 3 4 Own shares issued under share schemes 1 1 Purchase of own shares for ESOP trust (6) (16) Purchase of own shares for cancellation (200) (200) Ordinary dividends paid to equity shareholders of the Company (230) (232) Net cash flows from financing activities (495) (472)

Net increase in cash and cash equivalents and bank overdrafts, including amounts classified as held for sale 38 127 Cash and cash equivalents and bank overdrafts, including amounts classified as held for sale, at beginning of year 654 527 Exchange differences 103 – Cash and cash equivalents and bank overdrafts at end of year 32 795 654

104 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

105 105 e in issue but not yet yet not but issue in e www.kingfisher.com , the current leasing standard, standard, leasing , the current unting policies is set out below. out is set below. unting policies by the use of valuations for certain of valuationsuse for by the www.kingfisher.com accounted for as operating leases, with with leases, for operating as accounted cted that the new standard will have a standard will the new thatcted p is currently being assessed and is p rsedes IAS 39 ‘FinancialInstruments: the Group financial statements, except except statements, Group financial the interpretations which ar which interpretations effective are not expected to have a material impact on the consolidated consolidated on the impact material have a to expected not are effective statements. financial the under prepared have been statements financial The consolidated modified as convention, cost historical benefits. and post-employment payments share-based instruments, financial acco principal of the Group’s A summary The preparation of financial statements in accordance with IFRS requires requires IFRS with accordance in statements financial of preparation The It requires also and assumptions. estimates accounting the use of certain the of applying process in the judgement its exercise to management accounting critical The areas involving policies. accounting Group’s consolidated the to significant are which judgements, and estimates financial statements,outlined are in note 3. The amendments to IAS 7, ‘Statement of Cash Flows’ will require the Group Group the require will Flows’ Cash of 7, ‘Statement IAS to The amendments to disclosechanges in liabilities associated with financing activities, including movements resulting from both cash flows and non-cash changes. supe Instruments’ 9, IFRS ‘Financial the for requirements some changes and Measurement’ and Recognition of impairment instruments, of financial classification and measurement level A high accounting. of hedge elements certain and assets financial it is not expected and undertaken, has been of standard the assessment that it will have a material effect on for additional required disclosures relating to hedge accounting. accounting. hedge to relating disclosures required additional for IFRS 15, ‘Revenue from Contracts withCustomers’ supersedes IAS 18 revenue to approach principles-based a establishes and ‘Revenue’ of recognising concept on based the measurement and recognition in As described are satisfied. obligations performance when revenue at the recognised is revenue the Group’s of the majority below, (d) 2 note not expe is it sale, therefore of point or nature timing or the amount, statements on financial effect its material by Group. the recognised of revenue by endorsed been yet not has It IAS 17 ‘Leases’. supersedes 16 ‘Leases’ IFRS to in relation lessee are changes significant The most Union. the European and asset right-of-use a recognise will lessee the 16 IFRS Under accounting. currently leases for all liability a lease those and months) 12 than (less period a short for of leases exception the the of term the over depreciated be will The asset value. of low for items period. same the over on the liability will be charged interest lease, whilst The Group anticipates that the adoption ofIFRS 16 will have a significant on the impact an including statements, financial primary on the impact operating profit, profitbefore tax, totalassets and totalliabilities lines. The impact of the standardon the Grou The of its effect. estimate a full to provide yet it is not practicable therefore undiscounted amountoperating ofthe Group’s lease commitments at under disclosed IAS 17 31 January 2017 was (see billion £3.4 note 35). and standards new Other

me statement and me statement th Customers’ (effective from the from the (effective Customers’ th erefore the consolidated financial financial the consolidated erefore have been prepared in accordance in accordance prepared have been set set out have below. These policies idiaries, joint ventures and associates idiaries, joint ventures Europe. The nature of the Group’s is set out in the Strategic Report on Report Strategic the in out set is

consolidated inco consolidated (effective from the Group’s 2018/19 the Group’s 2018/19 (effective from IFRS 9, ‘Financial Instruments’ Instruments’ IFRS 9, ‘Financial IFRS 15, ‘Revenue wi Contracts from year). financial Group’s the 2019/20 (effective from IFRS 16, ‘Leases’ Amendments to IAS 7, ‘Statement of Cash Flows’ (effective from the year); financial 2017/18 Group’s financial year); and year); financial 2018/19 Group’s

a. Basis of preparation joint its subsidiaries, of Company, the statements financial The consolidated in as disclosed except 31 January, up to made are associates and ventures of the 3 note in and statements financial consolidated of the 16 note year is The current financial statements. financial separate Company’s The or ‘2016/17’). year’ (‘the 2017 January 31 ended year calendar the 2016 January 31 ended year calendar the is year financial comparative The or prior (‘the year’ ‘2015/16’). 2 POLICIES PRINCIPAL ACCOUNTING Theprincipal accounting policies applied in the preparation of these consolidatedfinancial statements are stated. otherwise unless presented, to the years applied consistently been related notesrepresent results forcontinuing operations, there being no presented. years the in operations discontinued consider enquiries, made appropriate having plc, of Kingfisher The directors operational in continue to Group the for exist resources that adequate concern going the adopt to is appropriate it therefore, that, and existence basis in preparing the consolidated financial statements for the year ended 46. page on Strategic Refer Report the to 31 January 2017. statements financial consolidated The (together ‘the Group’) supply home improvement products and services services and products improvement home supply Group’) ‘the (together in mainly located channels, other and stores of retail a network through continental and Kingdom the United principaloperations activities its and by the European as adopted Standards Reporting Financial with International ofCompanies ActUnion the 2006 applicable and those (‘IFRS’) to parts th and IFRS under reporting companies – – – Notes Notes to the consolidated financial statements 1 INFORMATION GENERAL subs its Company’), (‘the plc Kingfisher 46. pages 1 to on the listed is and Kingdom United the in incorporated is Company The is 3 Sheldon office registered of its The address Exchange. Stock London of undertakings A full list of related 6PX. W2 London Paddington, Square, of the note 15 in given is offices registered their and Company the statements. financial separate Company’s Theseconsolidated financial statements have been approved for issue 2017. March on 21 of Directors Board by the EU IAS legislation. 4 of with Article the statements comply are which or interpretations, amendments standards, new are no There January 2017, 31 ended year financial the time for first the for mandatory Group. the for relevant and material that are the following statements, financial of these of authorisation At the date these in applied not been have ich wh interpretations, and standards new cases some in (and effective yet not but issue in were statements, financial EU): the by adopted not yet been had –

3 5 4 1 – – – (1) (3) 25 18 (12) (22) (13) (16) (12) 127 527 654 813 931 102 (472) (232) (214) (200) (118) (333) 2015/16

5 3 1 – – – (2) (2) (6) 38 70 20 10 63 (10) (47) (12) 654 654 795 795 781 781 925 925 103 103 (495) (230) (248) (200) (144) (406) 2016/17

4 32 31 33 33 Notes cluding classified amounts as held for sale,

t uipment and intangible assets intangible uipment and

t t ventures and associates t ventures -term deposits deposits -term t

r ase) in shor of fixed of deb term fixed t 2016/17 Report Annual | plc Kingfisher Proceeds (net of costs and cash disposed) (net of costs cash Proceeds and disposed) Deposit repaid Deposit repaid Net increase in cash and cash equivalents and bank overdrafts, including amounts classified as held for sale Net cash flows from financing from flows Net activitiescash Cash and cash equivalents and bank overdrafts, in overdrafts, bank and cash equivalents Cash and yea of at beginning Interest received received Interest fromDividends received join activities Financing paid Interest payments rental lease finance of element Interest Repaymentof bank loans Repaymen Ordinary dividends paid to equity shareholders of the Company Net cash flows from investing activities activities investing from flows Net cash Net cash flows from operating activities activities operating from flows Net cash Cash and cash equivalents and bank overdrafts at end of year 104 Consolidated cash flow statement 2017 At 31 January £ millions Operating activities operations by Cash generated derivatives on financing Receipt payments rental lease of finance element Capital New shares issued under share schemes Own shares issuedunder share schemes trus ESOP for shares own of Purchase Purchase of own shares for cancellation cancellation for shares of own Purchase Exchange differences activities Investing Purchase of property, plant and eq sale for held property and property investment equipment, and plant property, of Disposal company of property Disposal of China: B&Q Disposal Income tax paid paid tax Income Decrease/(incre NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 PRINCIPAL ACCOUNTING POLICIES CONTINUED The effective tax rate is calculated as continuing income tax expense Use of non-GAAP measures excluding tax on exceptional items and adjustments in respect of prior In the reporting of financial information, the Group uses certain measures years and the impact of changes in tax rates on deferred tax, divided by that are not required under IFRS, the generally accepted accounting continuing profit before taxation excluding exceptional items. principles (‘GAAP’) under which the Group reports. Kingfisher believes that adjusted sales, retail profit, underlying pre-tax profit, adjusted pre-tax profit, Net cash comprises cash and cash equivalents and short-term deposits effective tax rate, underlying earnings per share and adjusted earnings per less borrowings and financing derivatives (excluding accrued interest). It share provide additional useful information on performance and trends to excludes balances classified as assets and liabilities held for sale. shareholders. These and other non-GAAP measures, such as net cash, are b. Basis of consolidation used by Kingfisher for internal performance analysis and incentive The consolidated financial statements incorporate the financial statements compensation arrangements for employees. The terms ‘retail profit’, of the Company, its subsidiaries, joint ventures and associates. ‘exceptional items’, ‘transformation costs’, ‘underlying’, ‘adjusted’, ‘effective tax rate’ and ‘net cash’ are not defined terms under IFRS and may therefore (i) Subsidiaries not be comparable with similarly titled measures reported by other Subsidiaries are all entities (including structured entities) over which the companies. They are not intended to be a substitute for, or superior to, Group has control. The Group controls an entity when the Group is exposed GAAP measures. to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Retail profit is defined as continuing operating profit before central costs, the Group’s share of interest and tax of joint ventures and associates, Subsidiaries acquired are recorded under the acquisition method of transformation costs, exceptional items and amortisation of acquisition accounting and their results included from the date of acquisition. The intangibles. It includes the sustainable benefits of the transformation results of subsidiaries which have been disposed are included up to the programme. 2015/16 comparatives exclude B&Q China’s operating results. effective date of disposal. Central costs principally comprise the costs of the Group’s head office The consideration transferred for the acquisition of a subsidiary is the before transformation costs. fair values of the assets transferred, the liabilities incurred and the equity The separate reporting of non-recurring exceptional items, which are interests issued by the Group. The consideration transferred includes the presented as exceptional within their relevant income statement category, fair value of any asset or liability resulting from a contingent consideration helps provide an indication of the Group’s ongoing business performance. arrangement. Acquisition-related costs are expensed as incurred. The principal items which are included as exceptional items are: Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the – non-trading items included in operating profit such as profits and losses acquisition date. On an acquisition-by-acquisition basis, the Group on the disposal, closure or impairment of subsidiaries, joint ventures, recognises any non-controlling interest in the acquiree either at fair value associates and investments which do not form part of the Group’s or at the non-controlling interest’s proportionate share of the acquiree’s net trading activities; assets. Subsequent to acquisition, the carrying amount of non-controlling – profits and losses on the disposal of properties and impairment losses interests is the amount of those interests at initial recognition plus the on non-operational assets; and non-controlling interests’ share of subsequent changes in equity. Total – the costs of significant restructuring, including certain restructuring comprehensive income is attributed to non-controlling interests even costs of the Group’s five year transformation programme launched in if this results in the non-controlling interests having a deficit balance. 2016/17, and incremental acquisition integration costs. The excess of the consideration transferred, the amount of any The term ‘adjusted’ refers to the relevant measure being reported for non-controlling interests in the acquiree and the acquisition-date fair continuing operations excluding exceptional items, financing fair value value of any previous equity interests in the acquiree over the fair value remeasurements, amortisation of acquisition intangibles, related tax items of the identifiable net assets acquired is recorded as goodwill. If this is and prior year tax items (including the impact of changes in tax rates on less than the fair value of the net assets of the subsidiary acquired in the deferred tax). 2015/16 comparatives exclude B&Q China’s operating results. case of a bargain purchase, the difference is recognised directly in the Financing fair value remeasurements represent changes in the fair value income statement. of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying amount of borrowings and other hedged items Intercompany transactions, balances and unrealised gains on transactions under fair value hedge relationships. Financing derivatives are those that between Group companies are eliminated on consolidation. Unrealised relate to hedged items of a financing nature. losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of acquired The term ‘underlying’ refers to the relevant adjusted measure being subsidiaries have been changed where necessary to ensure consistency reported before non-exceptional transformation costs. Non-exceptional with the policies adopted by the Group. transformation costs represent the short-term additional costs that arise (ii) Joint ventures and associates only as a result of the transformation programme launched in 2016/17, which either because of their nature or the length of the period over which Joint ventures are entities over which the Group has joint control. Joint they are incurred are not considered as exceptional items. These costs control is the contractually agreed sharing of control of an arrangement, principally relate to the unified and unique offer range implementation which exists only when decisions about the relevant activities require the and the digital strategic initiative. The separate reporting of such costs (in unanimous consent of the parties sharing control. The equity method is addition to exceptional items) helps provide an indication of the Group’s used to account for the Group’s investments in joint ventures. underlying business performance, which includes the sustainable benefits Associates are entities over which the Group has the ability to exercise of the transformation programme. significant influence but not control, generally accompanied by a shareholding of between 20% and 50% of the voting rights. The equity method is used to account for the Group’s investments in associates.

106 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

rate 107 107 Year end 2015/16 2015/16 rate 5.78 5.78 1.381.52 1.31 1.42 94.54 107.52 Average erating leases is erating rate www.kingfisher.com 5.03 1.16 1.26 75.72 Year end end Year the percentage rebate applicable applicable rebate percentage the external rental income and gains gains income and rental external s have a right toreturn purchased www.kingfisher.com 2016/17 rate rate 5.28 5.28 1.21 1.21 1.34 and arranging an operating lease are lease are operating an and arranging al income from op al income from 87.98 87.98 Average Average as thoserelated to advertising andmarketing, Russian Rouble Russian Polish Zloty (iv) Principal rates of exchange against Sterling Sterling against exchange of rates Principal (iv) f. Dividends f. Dividends they paid to the are Company’s when recognised are dividends Interim by approved are they when recognised are dividends Final shareholders. the Company’s shareholders. e. Rebates Rebates e. rebates volume-related comprise mainly suppliers from received Rebates are rebates volume-related Contractual inventories. of purchase on the on purchased based units are accrued as the is probable it where period, rebate the over purchases total to forecast reliably. estimated be can amounts the and received be will rebates earned. once recognised only and not anticipated are rebates Discretionary sheet balance at the held still but purchased inventories to relating Rebates is of inventories cost the that so value carrying the from deducted date are of Cost to the credited are rebates Such rebates. of net applicable recorded when goods sold. the are statement in income sales line the Other rebates received, such the when statement in the income line of Cost sales to are credited the fulfilled. have been conditions relevant Euro Dollar US d. recognition Revenue Salesrepresent the supplyofhome improvement products andservices. Group, the within companies between made transactions exclude Sales and trade of returns, net are and taxes sales-related other Tax, Added Value staff discounts. the at recognised is generally products of in-store to sales relating Revenue point of cash receipt. Where customer on based is recognised returns for liability a refund, a for in exchange goods sale the which in period in the revenue against offset and trends historic was made. Where awardcredits such as vouchersor loyalty points are provided aspart of thesales transaction, the amount allocated to thecredits is deferred and its fulfils Group the and redeemed are credits when the recognised obligations tosupply the awards. the when either recognised sales are services, and products For delivered has service the when income, installation for or, delivered been has product only represent services and products delivered from Sales performed. been in-store to relates majority as the sales Group’s of the component a small of products. purchases of comprised primarily is Other income Rent of disposal oron assets. losses Initial lease. of relevant the term the over basis on a straight-line recognised direct costs incurred in negotiating on a recognised and asset leased of the amount carrying the to added term. lease the over basis straight-line slated into the into slated ised in other in other ised it, and its share of post-acquisition post-acquisition of its share it, and ch exchange differences are initially are differences ch exchange date. Profits and losses of overseas of overseas and losses date. Profits ion or are designated and effective and effective or designated ion are currencies are tran income is recogn and associates, are recognised in a and associates, are and of borrowings otherand currency denominated in Sterling, denominated and not e gain or loss on disposal. e cumulative post-acquisitionmovements are uctuate significantly. soeliminated unless the transaction provides

functional currency at the exchange rates prevailing on the date of the of the date on the prevailing rates at the exchange currency functional where rates monthly average or,transaction practical reasons, at for not fl rates do exchange Su hedges. or cash flow net investment equity. in deferred companies Group (iii) at the in Sterling expressed are subsidiaries overseas of sheets balance The sheet balance the at exchange of rates the for rates exchange average at Sterling in expressed are subsidiaries period. Exchange differences arisingon theretranslation of foreign operations, including joint ventures component of equity. separate of the the retranslation arising from differences exchange On consolidation, entities, foreign in investment net Goodwill andfair value adjustments arisingon the acquisitionof a foreign and entity foreign of the liabilities and assets as treated are entity Goodwill date. sheet balance at the of exchange rates the at translated arising prior to 1 February 2004 is c. currencies Foreign (i) currencies functional and Presentation Theconsolidated financial statementsare presented in Sterling, which is the Group’s presentation currency. Items includedin the financial statementsof primary of the currency the using measured are entities Group’s of the each economic environment in which theentity operates (i.e. its functional currency). (ii) Transactions and balances Transactions denominated inforeign are currencies in foreign denominated liabilities and assets Monetary date. sheet the balance at exchange of rates at the Sterling into translated Exchange differenceson monetary items are taken to the income statement.Exceptions to this are wheremonetary the items form partof the net in investment a operatforeign equity. to taken are investments, of such hedges as designated instruments since recorded differences exchange such sold, is operation When a foreign in the recognised are IFRS) to of transition the date (being 2004 1 February income statementas part of th retranslated. subsequently Under the equity method, investments are initially recognised at cost. at cost. recognised are initially method, investments equity the Under in the is recognised or losses profits of The post-acquisition share Group’s income statement within operating prof movements in othercomprehensive Th income. comprehensive policies Accounting transferred. of the asset of an impairment evidence to necessary where changed been have associates and ventures of joint Group. by the adopted the policies with consistency ensure an date the from discontinued is of accounting method equity The toonceases be a joint or venture associate, is the date that investment which the Group ceases to have joint control or significant influence over sale. as held for date it or on the is classified the investee Group’s the When investment. of the amount carrying the against adjusted long-term other any including interest, its exceeds or equals losses of share has it unless losses, further any recognise not does Group the receivables, venture joint the of behalf on payments made or obligations incurred or associate. ventures joint its and Group the between transactions on gains Unrealised interest. of the Group’s extent e th eliminated to and associates are losses al Unrealised are nce is recognised directly in the nce is recognised directly in ves (excluding accrued interest). It aring of control of an arrangement, arrangement, of an of control aring to non-controlling interests even even interests to non-controlling oportionateofthe share acquiree’s net e carrying amount of non-controlling non-controlling of amount e carrying g interests having a deficit balance. balance. a deficit having interests g on excluding exceptional items. items. exceptional on excluding p controls an entity when theGroup is exposed are measured initially at their fair values measured initially at at the are The effective tax rate is calculated as continuing income tax expense expense income tax as continuing is calculated rate tax The effective of prior respect in adjustments and items exceptional on tax excluding by divided tax, deferred on rates tax in changes of impact the and years taxati before profit continuing deposits short-term and equivalents cash and cash comprises cash Net derivati financing and borrowings less sale. held for and liabilities as assets classified balances excludes b. Basis of consolidation statements financial the incorporate statements financial consolidated The and associates. ventures joint its subsidiaries, of Company, the (i) Subsidiaries Subsidiaries areentities all (including structured entities)over which the The Grou control. Group has to,or hasrights to,variable returns from its involvement with theentity and has the ability to affectthose returns through itspower over the entity. of method the acquisition under recorded are acquired Subsidiaries The of acquisition. date the from included results their and accounting the up to included are disposed been have which subsidiaries of results date of effective disposal. Theconsideration transferred for the acquisitionof a subsidiary is the equity the and incurred liabilities the transferred, assets of the fair values the includes transferred consideration The Group. by the issued interests consideration contingent from a resulting liability or asset of any fair value as incurred. are expensed costs Acquisition-related arrangement. assumed liabilities contingent and liabilities and acquired assets Identifiable in a business combination acquisition date. On an acquisition-by-acquisition basis, the Group value fair at either acquiree in the interest non-controlling any recognises or at thenon-controlling interest’spr assets. Subsequent to acquisition, th the plus recognition initial at interests those of amount the is interests Total in equity. changes of subsequent share interests’ non-controlling attributed is income comprehensive non-controllin in if the this results of amount any the transferred, of consideration the The excess fair acquisition-date the and the acquiree in interests non-controlling value the fair over acquiree the in interests equity previous of any value is If this goodwill. recorded as is net assets acquired identifiable of the less than the fair valueof the net assets of thesubsidiary acquired in the ofcasethe differe purchase, a bargain income statement. Intercompany transactions,balances andunrealised gains on transactions Unrealised on consolidation. eliminated are companies Group between of an evidence provides transaction the unless eliminated also are losses of acquired policies Accounting of asset the transferred. impairment subsidiarieshave been changed where necessary to ensureconsistency Group. by the adopted the policies with (ii) Joint ventures and associates Joint control. joint has Group the which over entities are ventures Joint controlcontractuallyis the sh agreed the require activities the relevant about decisions when only exists which unanimous consent of the parties sharing control. The equity method is ventures. joint in Group’s investments the for account to used exercise to the ability has Group the which over entities are Associates significant influence but notcontrol, generally accompanied by a The equity rights. of the voting 50% and 20% of between shareholding method is used to account for the Group’s investments in associates. ation costs. e B&Q China’s operating results. NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL ude B&Q China’s operating results. t-term additional costs that arise that arise costs additional t-term nt of subsidiaries, joint ventures, ventures, joint subsidiaries, nt of properties and impairment losses g, including certain restructuring g, including certain restructuring relevant income statement category, category, statement income relevant sformation programme launched in ion, the Group uses certain measures measures certain the uses Group ion, provide an indicationof the Group’s isition integr x of joint ventures and associates, associates, and ventures x of joint tion programme launched in 2016/17, launched in 2016/17, tion programme 2016/17 Report Annual | plc Kingfisher non-trading items included in operating profit such as profits and losses losses and profits as such profit operating in included items non-trading or impairme closure on the disposal, Group’s of the part do form not which investments and associates trading activities; profits and losses on the disposal of on non-operational assets; and restructurin of significant costs the ofcosts the Group’s five yeartran acqu incremental and 2016/17,

106 NOTES TO THE CONSOLIDATEDFI 2 CONTINUED POLICIES ACCOUNTING PRINCIPAL measures non-GAAP of Use informat financial of reporting the In accounting accepted generally the IFRS, under required not are that that believes Kingfisher reports. Group the which under (‘GAAP’) principles profit, pre-tax adjusted profit, pre-tax underlying profit, retail sales, adjusted per earnings adjusted and per share earnings rate, underlying tax effective to trends and performance on information useful additional provide share such are net cash, as measures, non-GAAP These and other shareholders. incentive and analysis performance internal for by Kingfisher used profit’, ‘retail The terms employees. for arrangements compensation ‘effective ‘adjusted’, ‘underlying’, costs’, ‘transformation items’, ‘exceptional therefore may and IFRS under terms defined not are cash’ ‘net and tax rate’ reported by other titled measures with similarly not be comparable companies.They are not intended to be a substitute for,or superior to, measures. GAAP costs, central before profit operating continuing as is defined profit Retail ta of interest and Group’s share the of acquisition and amortisation items exceptional costs, transformation transformation of the benefits sustainable the includes It intangibles. exclud comparatives 2015/16 programme. head office of the costs the Group’s comprise principally costs Central costs. transformation before Theseparate reporting of non-recurring exceptional items, which are their within exceptional as presented performance. business ongoing Group’s of the indication an provide helps are: items as exceptional included are which items The principal – – – for reported being measure relevant the to refers ‘adjusted’ term The value fair financing items, exceptional excluding operations continuing items tax related intangibles, of acquisition amortisation remeasurements, on rates tax in changes of impact the (including items tax year and prior deferred excl tax). 2015/16 comparatives Financing fair valueremeasurements represent changes in the fair value ofby fair value offset financing derivatives, excluding interest accruals, items hedged other of borrowings and amount carrying to the adjustments that are those derivatives Financing relationships. hedge value fair under nature. of a financing items hedged to relate being measure adjusted relevant the to refers ‘underlying’ The term Non-exceptional costs. transformation non-exceptional before reported shor the represent costs transformation transforma of the result a as only which either because of their nature or the length of the period over which they areincurred are notconsidered as exceptional items.These costs range implementation offer unique and the unified to relate principally (in costs such of reporting separate The initiative. strategic digital the and helps items) exceptional to addition benefits sustainable the includes which performance, business underlying programme. of transformation the NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 PRINCIPAL ACCOUNTING POLICIES CONTINUED (ii) Depreciation g. Intangible assets Depreciation is provided to reflect a straight-line reduction from cost (i) Goodwill to estimated residual value over the estimated useful life of the asset Goodwill represents the future economic benefits arising from assets as follows: acquired in a business combination that are not individually identified and separately recognised. Such benefits include future synergies expected Freehold land not depreciated from the combination and intangible assets not meeting the criteria for Freehold and long leasehold buildings over remaining useful life separate recognition. Short leasehold land and buildings over remaining period of the lease Goodwill is carried at cost less accumulated impairment losses. Goodwill Fixtures and fittings between 4 and 20 years is not amortised and is tested annually for impairment at country level, Computers and electronic equipment between 3 and 5 years representing the lowest level at which it is monitored for internal Motor cars 4 years management purposes, by assessing the recoverable amount of each cash Commercial vehicles between 3 and 10 years generating unit or groups of cash generating units to which the goodwill relates. The recoverable amount is assessed by reference to the net present Long leaseholds are defined as those having remaining lease terms of more value of expected future pre-tax cash flows (‘value-in-use’) or fair value less than 50 years. Asset lives and residual values are reviewed at each balance costs to sell if higher. The discount rate applied is based upon the Group’s sheet date. weighted average cost of capital with appropriate adjustments for the risks associated with the relevant cash generating unit or groups of cash (iii) Impairment generating units. When the recoverable amount of the goodwill is less than At each reporting date an assessment is performed as to whether there are its carrying amount, an impairment loss is recognised immediately in the any indicators that property, plant and equipment, including the Group’s income statement which cannot subsequently be reversed. Gains and stores, may be impaired and, should such indicators exist, the assets’ losses on the disposal of an entity include the carrying amount of goodwill recoverable amounts are subsequently estimated. The recoverable amount relating to the entity sold. is assessed by reference to the net present value of expected future pre-tax (ii) Computer software cash flows (‘value-in-use’) of the relevant cash generating unit or fair value less costs to sell if higher. For poorly performing stores, a vacant possession Where software is not an integral part of a related item of computer valuation basis is used to approximate the fair value less costs to sell. The hardware, it is classified as an intangible asset. discount rate applied is based upon the Group’s weighted average cost Costs that are directly associated with the acquisition or production of of capital with appropriate adjustments for the risks associated with the identifiable software products controlled by the Group, which are expected relevant cash generating unit. Any impairment in value is charged to the to generate economic benefits exceeding costs beyond one year, are income statement in the period in which it occurs. recognised as intangible assets. Capitalised costs include those of software (iv) Disposal licences and development, including costs of employees, consultants and The gain or loss arising on the disposal or retirement of an asset is an appropriate portion of relevant overheads. determined as the difference between the sales proceeds and the carrying Costs associated with identifying, sourcing, evaluating or maintaining amount of the asset and is recognised in the income statement. Sales of computer software are expensed as incurred. land and buildings are accounted for when there is an unconditional exchange of contracts. Software under development is held at cost less any provisions for impairment, with impairment reviews being performed annually. (v) Subsequent costs Subsequent costs are included in the related asset’s carrying amount or Amortisation commences when the software assets are available for use recognised as a separate asset, as appropriate, only when it is probable that and is over their estimated useful lives of two to ten years. future economic benefits associated with the item will flow to the Group h. Property, plant and equipment and the cost of the item can be measured reliably. (i) Cost All other repairs and maintenance are charged to the income statement in Property, plant and equipment held for use in the business are carried at the period in which they are incurred. cost less accumulated depreciation and any provisions for impairment. i. Leased assets Properties that were held at 1 February 2004 are carried at deemed cost, Where assets are financed by leasing agreements which give rights being the fair value of land and buildings as at the transition date to IFRS. approximating to ownership, the assets are treated as if they had been All property acquired after 1 February 2004 is carried at cost less purchased outright. The amount capitalised is the lower of the fair value accumulated depreciation. of the leased asset or the present value of the minimum lease payments during the lease term at the inception of the lease. The assets are depreciated over the shorter of the lease term or their useful life. Obligations relating to finance leases, net of finance charges in respect of future periods, are included, as appropriate, under borrowings due within or after one year. The finance charge element of rentals is charged to finance costs in the income statement over the lease term. All other leases are operating leases and the rental payments are generally charged to the income statement in the period to which the payments relate, except for those leases which incorporate fixed minimum rental uplift clauses. Leases which contain fixed minimum rental uplifts are charged to the income statement on a straight-line basis over the lease term. 108 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

109 109 www.kingfisher.com the amount of the tax benefit that that tax benefit of the amount the bases used in the computation of computation used in the bases For uncertain tax positions, on the tax positions, For uncertain that the temporary difference that will e recorded in the income statement, taxation as reported in the income in the income as reported taxation ve been paid. The contributions The contributions paid. ve been www.kingfisher.com ing the balance sheet liability method. method. liability sheet the balance ing based on taxable profit for the year. year. for the profit on taxable based available against which deductibleavailable nsive income, as appropriate. appropriate. as income, nsive me as they arise. arise. me as they Actuarial gains and losses arising from experience adjustments and adjustments experience from arising losses and gains Actuarial or toassumptions credited are charged statement in the changes actuarial of comprehensive inco payment no further has Group the schemes, contribution defined For obligations once the contributions ha are due. they when expense benefit employee an as recognised are (ii) Share-based compensation compensation share-based equity-settled, several The operates Group for exchange in received services employee of the value fair The schemes. is and expense as an is recognised shares or deferred options of grant the calculatedusing Black-Scholes and stochasticmodels. The total amount to fair the to reference by determined is period vesting the over be expensed of impact the excluding granted, shares or deferred of options value the to adjusted is charge the of value The conditions. vesting non-market any non-market to due vesting options of levels actual and expected reflect conditions. vesting n. Taxation n. Taxation and payable tax currently m of the the su represents Income tax expense is payable currently tax. Tax deferred there and jurisdictions numerous in taxes income to subject is Group The are many transactions for which the ultimate tax determination is uncertain course of business. ordinary during the it information of relevant the knowledge have full basis that tax authorities outflowof an in aggregate, that, probable is it whether is determined economic resources willoccur following investigation.The potentialimpact is tax positions uncertain of the examination tax authority’s relevant of the of the best estimate to make measured may be lost, for which provisions are then recorded. Where the final final the Where recorded. then are provisions which for lost, be may initially were which amounts from the different is matters of these outcome deferred tax and income the tax impact will such differences recorded, provisions in the period in which such determination is made. These ar years prior of respect in adjustments or directly otherin comprehe fromprofit differs profitTaxable before taxable are which or expense of income items it excludes because statement deductible. or taxable never are or which years other in or deductible on differences or recoverable payable be to expected tax the tax is Deferred the financial in liabilities and of assets amounts carrying the between statements and the corresponding tax us for is accounted and taxable profit temporary taxable all for recognised generally are liabilities tax Deferred it is that extent the to recognised are tax assets Deferred differences. be profits will taxable probable that tax Deferred utilised. be can losses tax unused or differences temporary the from arises difference the temporary if recognised not are liabilities tax assets Deferred combination. business in a goodwill of recognition initial the from arises difference temporary if the recognised not are and liabilities initialrecognition (other than in a businesscombination) of other assets and liabilitiesin a transaction which affectsneither the taxableprofit nor taxable for recognised are liabilities tax Deferred profit. accounting the joint ventures in subsidiaries, on investments arising temporary differences of the reversal the control to Group is able the and associates, except where probable it is and difference temporary future. foreseeable in the reverse not siness in bringing in bringing siness ities. The assets of each of these events or conditions resulting in normal course of bu ndition. Costs of inventories include include of inventories Costs ndition. te. Where construction is completed cost net realisable and onvalue, a will be paid and which have terms to to terms have which and paid be will . Investment properties are carried at cost less carried are properties . Investment

expected selling prices being lower than cost. The carrying of value cost. The carrying than lower being prices selling expected inventoriesreflects known and expected lossesof product in theordinary course of business. (i) benefits Post-employment The Group operates various defined benefit and definedcontribution local by required are of which some employees, its for schemes pension an defines which scheme a pension is scheme benefit A defined legislation. on retirement. receive will which employee an benefit of pension amount the which under scheme pension is a scheme contribution A defined cases In all entity. into a separate pays fixed contributions Group usually is fund separate a schemes, required legally the of some than other accumulatedliabil meet the accruing to maturity approximating to the terms of the related pension liability. the transfer from other comprehensive income of any gains or losses on or losses gains of any income comprehensive other from transfer the qualifying cash flow hedgesrelating topurchases. ordinary in the price selling estimated the represents value realisable Net sale. the make to necessary costs estimated the less business of course Writedowns torealisable net value aremade forslow moving, display, other and items obsolete or damaged m. benefits Employee companies insurance by managed or trusts under held either are funds assets. Group’s from the separate entirely and are of defined in respect sheet in balance the recognised or liability The asset of value present the less assets of scheme value the fair is schemes benefit date. The defined at sheet balance the obligation benefit the defined benefitobligation is calculated annually by independent actuariesusingthe benefit of defined the The present value method. unit credit projected obligation is determined bydiscounting theestimated futurecash outflows are denominated bonds which corporate of high quality rates interest using currencyin the in whichbenefits the goods to their present location and co and location present goods to their l. Inventories l. Inventories Inventories are carried at the lower of cost basis. average weighted cost the in determining are deducted received rebates and Trade discounts overheads attributable appropriate includes Cost inventories. of of purchase and directin the incurred expenditure depreciation and provision for impairment. Depreciation isprovided on a consistent basiswith that applied toproperty, plant andequipment. k. costs borrowing of Capitalisation Interest on borrowings to finance theconstruction ofproperties held as property on the work starts date the from capitalised is assets non-current get to necessary are which activities the all substantially when date to the are comple for use ready the property j. property Investment Investment property is property held by the Group to earn rental income or appreciation forcapital interest. capitalising when separately considered is part each in parts, relief. tax for allowance any before capitalised is Interest Where a lease is taken out for land and buildings combined, the buildings the buildings combined, buildings land and for is taken out a lease Where meets the if it as a finance lease capitalised may be the lease of element be cases most in will element land the lease, but for a finance criteria are not payments lease contracted lease. If the as an operating classified based is made split the contract, lease in the and buildings land split between of the lease. at the inception the land and buildings of values on the market Incentives received or paid to enterinto lease agreements arereleased to term. lease over the basis on a straight-line statement the income

tween 3 and 10 years 3 and 10 tween be 4 years not depreciated not depreciated between 3 and 5 years 3 and between between 4 and 20 years 20 and 4 between in the income statement. Sales of t with the item will flow to the Group Group flow to the will the item with al or retirement of an asset is (ii) (ii) Depreciation from cost reduction a straight-line reflect to is provided Depreciation of the asset life useful estimated over value the residual to estimated as follows: land Freehold Freehold and long leasehold buildings overremaining useful life and buildings land Short leasehold fittings and Fixtures of lease the period remaining over Computers and electronicequipmen i. Leased assets Where assets are financed by leasingagreements which give rights approximating toownership, the assets are treated as if theyhad been value the fair of lower the is capitalised The amount outright. purchased payments lease minimum of value or the present the asset of leased the are The assets lease. of the inception at the term lease the during life. useful their or term of lease the shorter over the depreciated Obligations relating to finance leases, net offinance charges respect in of within due borrowings under appropriate, as included, are periods, future to is charged of rentals element charge The or one year. finance after term. the lease over statement income in the costs finance generally are payments the rental and leases operating are leases All other payments the which to period in the statement the income to charged uplift rental minimum fixed incorporate which leases those for except relate, to are charged uplifts rental minimum contain fixed which Leases clauses. term. lease over the basis on a straight-line statement the income Motor cars Commercial vehicles Long leaseholds are defined as those having remaining lease terms of more more of terms lease remaining having those as defined are Long leaseholds balance at each reviewed are values residual and lives Asset 50 years. than sheet date. Impairment (iii) are there whether to as performed is assessment an date reporting At each any indicators thatproperty, plant andequipment, including the Group’s the assets’ exist, indicators such should and, impaired be may stores, amount The recoverable estimated. are subsequently amounts recoverable pre-tax future expected of value present net the to reference by assessed is cash flows(‘value-in-use’) of therelevant cash generatingunit or fair value lesscosts to sell ifhigher. For poorly performing stores, a vacant possession The sell. costs to less value fair the approximate to used is basis valuation cost average weighted Group’s the upon is based applied rate discount the with associated risks the for adjustments appropriate with capital of the to charged is value in impairment Any unit. generating cash relevant occurs. it in which the period in statement income Disposal (iv) dispos on the arising or loss The gain and carrying proceeds the the sales between difference as the determined recognised asset and is ofamount the unconditional is an when there for are accounted buildings land and contracts. of exchange (v) costs Subsequent or amount carrying asset’s related the in included costs are Subsequent recognised as a separateasset, as appropriate,only when it is probable that associated futureeconomic benefits reliably. can be measured and of the item cost the in statement the income to charged are maintenance and repairs other All the period in which they are incurred. nergies expected expected nergies NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL at cost less any provisionscost for at include future sy future include ssessed by reference to the net present present net the to reference by ssessed and anyprovisions for impairment. uary 2004 are carried at deemed cost, deemed carried at are 2004 uary as an intangible asset. an intangible as benefits exceedingcosts beyondone year, are 2016/17 Report Annual | plc Kingfisher h. Property, plant and equipment and equipment plant h. Property, (i) Cost at carried are business the in for use held equipment and plant Property, depreciationless accumulated cost held at 1 Febr were Properties that IFRS. to date transition as at the buildings and of land value fair the being costcarried less at is 2004 propertyFebruary afterAll acquired 1 accumulated depreciation. 108 NOTES TO THE CONSOLIDATEDFI 2 CONTINUED POLICIES ACCOUNTING PRINCIPAL g. assets Intangible (i) Goodwill from assets arising benefits economic the future represents Goodwill acquired in business a combination that arenot individually identified and benefits Such recognised. separately from thecombination andintangible assets notmeeting thecriteria for recognition. separate Goodwill losses. impairment accumulated less cost at carried is Goodwill is not amortised and is tested annuallyfor impairmentcountry at level, internal for is monitored it level lowest at which the representing cash each of amount recoverable the assessing by purposes, management goodwill the which to units generating of cash groups unit or generating recoverable is a The amount relates. or less fair value (‘value-in-use’) flows cash pre-tax future of expected value Group’s the upon based is applied rate discount The higher. if sell to costs risks for the adjustments appropriate with capital of cost average weighted cash of or groups unit generating cash relevant the with associated than less is goodwill of the amount recoverable the When units. generating itscarrying amount, an impairmentloss is recognised immediately in the and Gains reversed. be subsequently cannot which statement income of goodwill amount carrying the include of an entity on disposal losses the relating to theentity sold. (ii) software Computer computer of of a related item part integral software is notWhere an classified it is hardware, orof production directly associated thatCosts acquisition the with are expected are which Group, the by controlled products software identifiable to economic generate software of those include costs Capitalised assets. intangible as recognised and consultants of employees, costs including development, and licences overheads.an appropriate of relevant portion maintaining or evaluating sourcing, identifying, with Costs associated as incurred. are expensed software computer underSoftware development is held impairment, withimpairment reviews being performed annually. use for available are assets software the when commences Amortisation and is over their estimateduseful lives of two to tenyears. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2 PRINCIPAL ACCOUNTING POLICIES CONTINUED (i) Cash and cash equivalents The carrying amount of deferred tax assets is reviewed at each balance Cash and cash equivalents include cash in hand, deposits held on call sheet date and reduced to the extent that it is no longer probable that with banks and other short-term highly liquid investments with original sufficient taxable profits will be available to allow all or part of the asset maturities of three months or less. to be recovered. (ii) Borrowings Current and deferred tax are calculated using tax rates which have been Interest-bearing borrowings are recorded at the proceeds received, net of enacted or substantively enacted by the balance sheet date and are direct issue costs and subsequently measured at amortised cost. Where expected to apply in the period when the liability is settled or the asset borrowings are in designated and effective fair value hedge relationships, is realised. adjustments are made to their carrying amounts to reflect the hedged risks. Finance charges, including premiums payable on settlement or redemption Current and deferred tax are charged or credited to the income and direct issue costs, are amortised to the income statement using the statement, except when they relate to items charged or credited to other effective interest method. comprehensive income, in which case the current or deferred tax is also recognised in other comprehensive income. (iii) Other investments (including short-term deposits) Other investments may include equity investments (where the Group does Current and deferred tax assets and liabilities are offset against each other not have control, joint control or significant influence in the investee), short- when they relate to income taxes levied by the same tax jurisdiction and term deposits with banks and other investments with original maturities of when the Group intends to settle its current tax assets and liabilities on a more than three months. Any dividends received are recognised in the net basis. income statement. Investments classified as ‘available-for-sale financial Operating levies, such as certain revenue, property and payroll-based taxes, assets’ under IAS 39, ‘Financial Instruments: Recognition and Measurement’, are not treated as income tax and are included within operating profit. The are initially measured at fair value, with subsequent changes in fair value timing of recognition of a liability to pay an operating levy is determined by recorded in other comprehensive income. On disposal, the accumulated the event identified under the relevant legislation that triggers the fair value adjustments recognised in other comprehensive income are obligation to pay the levy. recycled to the income statement. o. Provisions and contingent liabilities (iv) Trade receivables Provisions are recognised when the Group has a present legal or Trade receivables are initially recognised at fair value and are subsequently constructive obligation as a result of past events, it is more likely than measured at amortised cost less any provision for bad and doubtful debts. not that an outflow of resources will be required to settle the obligation (v) Trade payables and the amount can be reliably estimated. Provisions are not recognised Trade payables are initially recognised at fair value and are subsequently for future operating losses. measured at amortised cost. If the effect of the time value of money is material, provisions are (vi) Derivatives and hedge accounting determined by discounting the expected future cash flows at a pre-tax rate Where hedge accounting is not applied, or to the extent to which it is not which reflects current market assessments of the time value of money and, effective, changes in the fair value of derivatives are recognised in the where appropriate, the risks specific to the liability. Credits or charges arising income statement as they arise. Changes in the fair value of derivatives from changes in the rate used to discount the provisions are recognised transacted as hedges of operating items and financing items are within net finance costs. recognised in operating profit and net finance costs respectively. Contingent liabilities are possible obligations arising from past events, Derivatives are initially recorded at fair value on the date a derivative whose existence will only be confirmed by future uncertain events that are contract is entered into, and are subsequently carried at fair value. The not wholly within the Group’s control, or present obligations where it is not accounting treatment of derivatives and other financial instruments probable that an outflow of resources will be required or the amount of classified as hedges depends on their designation, which occurs at the the obligation cannot be reliably measured. If the outflow of economic start of the hedge relationship. The Group designates certain financial resources is not considered remote, contingent liabilities are disclosed instruments as: but not recognised in the financial statements. – a hedge of the fair value of an asset or liability or unrecognised firm p. Financial instruments commitment (‘fair value hedge’); Financial assets and financial liabilities are recognised on the Group’s – a hedge of a highly probable forecast transaction or firm commitment balance sheet when the Group becomes a party to the contractual (‘cash flow hedge’); or provisions of the instrument. Financial assets are derecognised when the – a hedge of a net investment in a foreign operation (‘net investment hedge’). contractual rights to the cash flows from the financial asset expire or the Group has substantially transferred the risks and rewards of ownership. Fair value hedges Financial liabilities (or a part of a financial liability) are derecognised when For an effective hedge of an exposure to changes in fair value, the hedged the obligation specified in the contract is discharged or cancelled or expires. item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry being recorded in the income Financial assets and liabilities are offset only when the Group has a currently statement. Gains or losses from remeasuring the corresponding hedging enforceable legal right to set off the respective recognised amounts and instrument are recognised in the same line of the income statement. intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Cash flow hedges Changes in the effective portion of the fair value of derivatives that are designated as hedges of future cash flows are recognised directly in equity, with any ineffective portion being recognised immediately in the income statement where relevant. If the cash flow hedge of a firm commitment or 110 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

111 111 www.kingfisher.com ble amount of an assetor cash a s in associates and joint ventures joint ventures s in associates and assumptions which have a significant haveassumptions a significant which www.kingfisher.com to the carrying amount of assets and and of assets amount carrying to the rable. Computer softwareunder 3 JUDGEMENTS AND ESTIMATES ACCOUNTING CRITICAL requires IFRS under statements financial of consolidated The preparation the Group to make estimates and assumptions that affect the application of continually are judgements and Estimates amounts. reported and policies factors other and experience on historical based are and evaluated reasonable be to believed that are events of future expectations including estimates. these from differ may results Actual circumstances. the under financial of the preparation in the applied judgements significant The statements, along withand estimates riskofcausing adjustment a material below. are discussed year, next financial the within liabilities Sources of estimation uncertainty assets other and goodwill of Impairment are assets its that ensure to procedures applies Group the required, As by procedures, The amount. recoverable their than more no at carried their nature, require estimates and assumptions to be made. The most outsignificant are set below. The Group isrequired under IFRS, on at least an annual basis, to test thetesting this of part As sufferedhas impairment. whether any goodwill determined been have units generating cash of amounts recoverable based on value-in-usecalculations. The useof thismethod requires the continuing the from arise to expected flows cash of future estimation discount of suitable choice and the unit generating cash of the operation of the value present the calculate to order in rates growth and long-term these from significantly vary could outcomes Actual flows. cash forecast estimates. Further information on the impairment tests undertaken, is in note 12. given the key assumptions, including are reviewed assets intangible other and equipment and plant Property, their that indicate circumstances in changes or if events for impairment recove be not may amount carrying for review a When annually. impairment for is assessed development recovera the is conducted, impairment sell to costs less value of fair higher the as determined is unit generating assumptions of management’s calculated on basis the and value-in-use, and estimates. is there whether assess to required is Group the date, reporting At each that investment its evidence objective recoverable of the investments’ estimates This requires may be impaired. flows. cash of future share Group’s of the values present including amounts, Inventories this value, realisable net cost and of lower at the carried are As inventories customers to of goods price sales eventual of the the estimation requires the estimating when is applied of judgement degree high A future. in the turn, stock as such factors of inventories of value carrying the on impact range and obsolescence damage, shrinkage, status, or delisted range regularly are of inventories and condition age quantity, The activity. review counts inventory and reviews range of part as assessed and measured undertaken throughout theyear and across the Group.Refer to note 18for further information. requiring offer, its product unifying started Group has year, the During the removed being ranges of certain value net realisable the over judgements business. from the an assessment mprehensive income thehedging instrument expiresor classified as held for sale are are sale held for as classified nsive income are recycledincome through nsive are ngible assets are not depreciated not depreciated are assets ngible ial asset or liability, amounts deferred deferred amounts or liability, asset ial s s demonstrates and tax assets and assets arising from from arising assets and tax assets n is regarded as met only when the met only as n is regarded value with unrealised gains or losses gains or losses unrealised with value ting, the Group documents in advance advance in documents Group the ting, gnised in other co in other gnised comprehensive income. If the Group ised, the associated gainsor losses on t or disposal group is available for is available disposal groupor t

q. Assets and liabilities held for sale sale q. for held liabilities and Assets if their sale held for as classified are groups and disposal assets Non-current than rather transaction a sale through recovered be will amounts carrying conditio This use. continuing through relevant the to according measured are which benefits, employee accounting policy. inta and equipment and plant Property, sale is highly probable and the asse the and probable sale is highly are that terms to only subject condition present its in sale immediate assets. of such sales for customary and usual Managementmustcommitted be to thesale, which should be expected to of date the from year one within sale completed a as recognition for qualify sale. for held as classification and disposal groupsNon-current assets measured at the lower ofcarrying amount and fair value lesscosts to sell. deferred assets, financial This excludes method equity the use to ceases The Group sale. for held as classified once or an venture a joint in interest an on which date the from of accounting sale. for held as classified becomes associate in an interest Net investment hedges Net investment through operations in foreign investments net hedges Group the Where of the retranslation on the or losses gains the borrowings, currency foreign borrowings recognised are in other forecast transaction results in the recognition of a non-financial asset or asset of a non-financial recognition the in results transaction forecast recogn it is time at the then, liability, in period same the in statement income the in recognised are in equity or loss. profit net affects item hedged the which of the portion effective the instrument, hedging as the derivatives uses any with ineffective income, comprehensive in other is recognised hedge and Gains statement. income in the immediately recognised being portion losses accumulated in other comprehe operation. of the foreign disposal on statement the income accoun hedge for qualify to In order hedging the and hedged being item the between relationship the also document The Group instrument. instrument, hedging the and item hedged the between relationship of the on an effective highly be and will has been hedge the that shows which period each at is re-performed testing The effectiveness basis. ongoing effective. highly remains the hedge that end to ensure when discontinued is accounting Hedge is transferred to income the statement. host or other instruments financial in other embedded Derivatives contracts are treated as separate derivatives when theirrisks and characteristics not closelyare related to those of host contracts, and the at fair not carried are host contracts statement. in income the reported in included are equity in recognised been previously had that derivative the For hedges or liability. asset of non-financial the measurement the initial of a financ in recognition the that result is sold, terminatedor exercised,or nolonger qualifies forhedge accounting. is instrument hedging the on loss or gain cumulative any time, that At forecast probable highly the until income comprehensive other in retained transaction occurs. If a hedged transaction is no longer expected to occur, the net gain orcumulative reco loss ges in the fair value of derivatives of derivatives value fair the ges in e fair value of derivatives that are that are of derivatives e fair value come. On disposal, the accumulated accumulated the disposal, On come. s and other financial instruments instruments financial other s and a hedge of the fair value of an asset or liability or unrecognised firm commitment (‘fair value hedge’); a hedge of a highly probable forecast transaction or firm commitment (‘cash flowhedge’); or a hedge of a net investment hedge’). in a foreign operation (‘net investment

(i) Cash and cash equivalents call on held deposits hand, cash in include cash equivalents Cash and original with investments liquid highly short-term other and banks with maturities of three months or less. (ii) Borrowings net of received, at proceeds recorded the are borrowings Interest-bearing Where cost. at amortised measured subsequently and costs issue direct relationships, hedge value fair effective and designated in are borrowings risks. the hedged reflect to amounts carrying their made to are adjustments Finance charges, including premiums payable on settlement or redemption the using statement the income to are costs, amortised and issue direct effective interest method. deposits) short-term (including investments Other (iii) does the Group (where investments equity may include Other investments short- investee), in the influence or significant control joint control, not have of maturities original with investments other banks and with term deposits in the recognised are received dividends Any three months. than more financial as ‘available-for-sale classified Investments statement. income Measurement’, and Recognition Instruments: ‘Financial 39, IAS under assets’ value fair in changes subsequent with value, fair at measured initially are in comprehensive other in recorded income are comprehensive in other recognised fair adjustments value statement. income to the recycled Trade receivables (iv) subsequently are and value at fair recognised initially are receivables Trade debts. doubtful and bad for provision any less cost amortised at measured (v) Trade payables subsequently and are value fair at recognised initially are payables Trade measured at amortisedcost. accounting hedge and Derivatives (vi) is not it which to extent the or to applied, not is accounting hedge Where the in recognised are derivatives of value the fair in changes effective, income statementas they arise. Chan are items financing and items operating of hedges as transacted costs respectively. finance and net profit in operating recognised derivative a date on the value at fair recorded initially are Derivatives The value. at fair carried subsequently are and into, entered is contract accountingtreatment of derivative occurs at the which designation, their on depends hedges as classified financial certain designates The Group relationship. hedge of start the as: instruments – – – For an effective hedge of an exposure to changes in fair value, the hedged hedged in the value, fair to changes of exposure hedge an For effective an being risk the to attributable value in fair changes for is adjusted item hedged withcorresponding the entrybeing recorded in theincome hedging corresponding the remeasuring or Gains losses from statement. statement. income of the line same the in recognised are instrument Cash hedges flow of th portion effective in the Changes equity, in directly recognised are flows cash of future hedges as designated income in the immediately recognised being portion ineffective with any or of a commitment hedge cash firm flow If the relevant. where statement Fair value hedges hedges value Fair NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL of the time value of money and, and, money of value time the of e current orcurrent deferred e tax is also required to settle the obligation the obligation to settle required will be required or the amount of or amount the will be required ed by the same tax jurisdiction and and jurisdiction tax same by the ed ed using tax rates which have been been have which rates tax using ed ged or credited to the income to the or credited income ged 2016/17 Report Annual | plc Kingfisher p. instruments Financial Group’s on the recognised are liabilities financial and assets Financial contractual the to a party becomes the Group when sheet balance the when derecognised are assets Financial instrument. of the provisions or the expire asset financial the from flows cash the to rights contractual ownership. of rewards and risks the transferred substantially has Group when derecognised are liability) of a financial (or a part liabilities Financial expires. or cancelled or is discharged contract the in specified obligation the currently a has the Group when only offset are liabilities and assets Financial amounts and recognised off respective right to set the legal enforceable the and settle asset the realise or to a net basis, on settle to either intends simultaneously. liability 110 NOTES TO THE CONSOLIDATEDFI 2 CONTINUED POLICIES ACCOUNTING PRINCIPAL balance each at reviewed is tax assets of deferred amount carrying The that probable extent that it is no longer to the reduced sheet date and asset of the or part all to allow available be will profits taxable sufficient to be recovered. calculat tax are deferred and Current and are date sheet balance the by enacted or substantively enacted asset the or settled is liability when the the period in apply to expected is realised. char tax are deferred and Current statement, except when they relate to items charged or credited to other th case in income, which comprehensive income. comprehensive in other recognised other each against offset are liabilities and tax assets deferred and Current to relate when income levi they taxes on a liabilities and current tax assets its settle to intends Group when the net basis. Operatinglevies, suchcertain as revenue, property andpayroll-based taxes, The profit. operating within included are and tax income as treated not are by determined is levy operating an pay to liability of a recognition of timing the triggers that legislation relevant the under identified event the obligation to pay the levy. liabilities o. contingent and Provisions or legal a has present Group when the recognised are Provisions constructive obligation asresult a ofpast events, itismore likely than an outflownot that of resources be will not recognised are Provisions estimated. be reliably can and the amount losses. operating for future are provisions is material, of money value of time If effect the the determined by discountingthe expected futurecash flows at a pre-taxrate which reflects current market assessments arising or charges Credits the liability. to specific the risks where appropriate, from changes in the rateused to discount theprovisions arerecognised costs. within net finance events, past from arising obligations are possible liabilities Contingent are that events uncertain future by confirmed be only will existence whose not it is where obligations or present control, Group’s the within wholly not of resourcesoutflow an probable that of outflow economic If the measured. reliably be cannot the obligation are disclosed liabilities contingent remote, considered is not resources statements. in the financial recognised but not NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Post-employment benefits CONTINUED The present value of the defined benefit liabilities recognised on the Rebates balance sheet is dependent on a number of market rates and assumptions Rebate income received from suppliers represents a material element of including interest rates of high quality corporate bonds, inflation and gross profit, with a large number of agreements with varying terms existing mortality rates. The net interest expense or income is dependent on the across our operating companies. interest rates of high quality corporate bonds and the net deficit or surplus position. The market rates and assumptions are based on the conditions at Volume-based rebates represent the significant majority of these rebates. the time and changes in these can lead to significant movements in the Where the percentage rate of such rebates depends on the volumes estimated obligations. To help the reader understand the impact of purchased, forecasts are required, particularly at interim periods, of full changes in the key market rates and assumptions, a sensitivity analysis (usually calendar) year purchases. Forecasts are informed by historical is provided in note 27. trading patterns, current performance and trends. However, this judgement is reduced significantly for full year reporting, due to the Group’s January Judgements made in applying accounting policies financial year end. Exceptional items and transformation costs Other types of rebates, such as contributions towards marketing and The Group separately reports exceptional items and transformation costs advertising activities, represent a smaller element of the Group’s overall in order to calculate adjusted and underlying results, as it believes these rebate income. These require judgement on the timing of recognition, in measures provide additional useful information on underlying performance particular assessing when any corresponding conditions have been fulfilled. and trends to shareholders. Judgement is also required over the recoverability of receivables relating to Judgement is required in determining whether an item should be classified rebates. The amount of rebates due from suppliers at the balance sheet as a non-exceptional transformation cost, exceptional item or included date is disclosed in note 19. within underlying results. The Group’s definitions of exceptional items and transformation costs are outlined in note 2 (a). Income taxes The Group is subject to income taxes in numerous jurisdictions in which it operates and there are many transactions for which the ultimate tax determination is open to differing interpretations during the ordinary course of business. Significant judgement may therefore be required in determining the provision for income taxes in each of these territories. Where it is anticipated that additional taxes are probable, the Group recognises liabilities for the estimate of any potential exposure. These estimates are continually reassessed, and where the final outcome of these matters is different from the initially recorded amount, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. These adjustments in respect of prior years are recorded in the income statement or directly in other comprehensive income, as appropriate, and are disclosed in the notes to the accounts. Refer to notes 9, 25 and 36 for further information. Restructuring provisions The Group carries a number of provisions in relation to historical and ongoing restructuring programmes. The most significant part of the provisions is the cost to exit stores and onerous property contracts. The ultimate costs and timing of cash flows are dependent on exiting the property lease contracts on the closed stores and subletting surplus space. Significant assumptions are used in making these calculations, in particular the nature, timing and value of mitigating the lease costs, including void periods and level of sublease income, and changes in these assumptions and future events could cause the value of these provisions to change. Refer to note 26 for further information. During the year, the Group entered into a lease liability transaction with a third party to dispose of a number of UK leases following the closure of these stores. The residual lease liability for these properties remains with the Group, and therefore the related onerous lease provisions continue to be recorded.

112 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

5) 4) – ( ( (5) 45) 14) 23 ( ( (44) (48) (14) 113 113 219) 166) 847 773 641 759 ( ( (155) 2,399 6,771 3,886

11,225 11,225 (8) 454 801 www.kingfisher.com

110 10,441

2,397 546 6,186 526 512 62

144 144 606 606 1,191 www.kingfisher.com OtherInternational OtherInternational Other International International Other Other International International Other 2015/16 2015/16 2015/16 2015/16 2016/17 2016/17 353 1,410 4,254 326 311(4) 113 746 358 1,264 1,313 476 347 3,400 4,853 3,786 987 705 10,331 1,416 4,979 UK & Ireland& UK France Poland Other Total UK & Ireland& UK France Poland Other Total UK & IrelandUK & France Poland Other Total UK & IrelandUK & France Poland Other Total

t Operating profit Net cash Net cash

Exceptional items items Exceptional Goodwill £ millions Segment assets B&Q China investmen Segment assets liabilities Central Net finance costs costs Net finance Balance sheet £ millions Transformation exceptionalcosts items before Sales Retail profit costs Central £ millions Adjusted sales B&Q China sales Net finance costs costs Net finance £ millions Adjusted sales B&Q China sales Sales Retail profit costs Central 4 ANALYSIS SEGMENTAL statement Income associates and ventures of joint tax and of interest Share Profit before taxation

B&Q China operatingB&Q loss items Exceptional Goodwill Net cash Net assets Share of interest and tax of joint ventures and associates and ventures of joint tax and of interest Share Operating profit Profit before taxation Central liabilities liabilities Central Net assets ld be classified ether an itemether shou an as a non-exceptional transformation cost, exceptional item or included and items of exceptional definitions The Group’s results. within underlying note 2 (a). outlined in are costs transformation Judgements made in applying accounting policies policies accounting applying in made Judgements Exceptional items and transformation costs costs transformation and items exceptional reports separately The Group these as it believes results, underlying and adjusted calculate in order to performance on underlying information useful additional provide measures and trends to shareholders. Judgementrequired is in determiningwh Post-employment benefits benefits Post-employment on the recognised liabilities of benefit the defined value The present balance sheet is dependenton numberof a marketrates and assumptions and inflation bonds, corporate of high quality rates interest including on the dependent is or income expense net interest The rates. mortality or surplus deficit bonds net the and corporate high of quality rates interest at conditions the on are based assumptions and rates market The position. in the movements to significant lead can these in changes and time the estimated obligations. To help the reader understand the impact of analysis a sensitivity assumptions, and rates market key in the changes 27. in note is provided ables relating to relating ables NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL on the timing of recognition, in ificant majority of these rebates. majority ificant verability ofverability receiv provisions continue to be recorded. leases following the closure of these closure the following leases e most significant part of the part of the e most significant or directly in other comprehensive and trends. However, this judgement judgement this However, and trends. ese properties remains with the Group, with the remains properties ese te of any potential exposure. These exposure. of any potential te 2016/17 Report Annual | plc Kingfisher 112 NOTES TO THE CONSOLIDATEDFI 3 JUDGEMENTS AND ESTIMATES ACCOUNTING CRITICAL CONTINUED Rebates fromRebate income received suppliers represents a material element of existing terms varying with agreements of number large a with profit, gross across our operating companies. the sign represent rebates Volume-based on volumes the depends rebates rate of such percentage Where the of full periods, interim at particularly required, are forecasts purchased, historical by informed are Forecasts purchases. year calendar) (usually current patterns, trading performance January Group’s the to due reporting, year full for significantly is reduced year end. financial and marketing towards contributions as such rebates, of types Other advertising activities, representsmaller a element of the Group’soverall judgement require These income. rebate particular assessing when any corresponding conditions have been fulfilled. Judgement is alsorequired over thereco sheet balance the at suppliers from due rebates of amount The rebates. 19. note in disclosed date is taxesIncome which in jurisdictions numerous in taxes income to subject is The Group tax ultimate the which for transactions many are there and it operates ordinary the during interpretations differing to open is determination in be required therefore may judgement Significant course of business. determining the provision for income taxes in each of these territories. Where it is anticipated that additional taxes are probable, the Group for estima the liabilities recognises of these outcome final the where and reassessed, continually are estimates will differences such amount, recorded initially from the different is matters impact the incometax anddeferred tax provisions in theperiod in which years prior of respect in adjustments These made. is such determination income statement in are recorded the to accounts. and are disclosed the income,notes as appropriate, in the information. further for 36 and 25 9, notes to Refer provisions Restructuring and historical to relation in of provisions number a carries Group The Th programmes. restructuring ongoing The contracts. property onerous and stores exit cost to the is provisions the on exiting dependent are of cash flows and costs timing ultimate space. surplus subletting stores and closed on the contracts lease property Significant assumptions areused inmaking thesecalculations, in particular including costs, void lease the of mitigating and value timing the nature, assumptions these in changes and income, sublease of level and periods change. to provisions of these value the cause could events and future information. further for 26 note to Refer transaction the Group a lease liability with the year, During entered into a of UK of a number to dispose third party for th liability lease The residual stores. lease related onerous the and therefore NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

4 SEGMENTAL ANALYSIS CONTINUED Other segmental information 2016/17 Other International UK & Ireland France Poland Other Central Total Capital expenditure 215 95 45 34 17 406 Depreciation and amortisation 132 80 20 19 2 253 Impairment losses 3 6 2 3 – 14 Non-current assets (1) 3,307 2,063 599 350 24 6,343

2015/16 Other International UK & Ireland France Poland Other B&Q China Central Total Capital expenditure 156 121 31 24 1 – 333 Depreciation and amortisation 131 76 16 16 – 1 240 Impairment losses 24 8 – 23 – – 55 Non-current assets (1) 3,229 1,899 515 284 – 6 5,933

(1) Non-current assets comprise goodwill, other intangible assets, property, plant and equipment, investment property and investments in joint ventures and associates.

The operating segments disclosed above are based on the information reported internally to the Board of Directors and Group Executive, representing the geographical areas in which the Group operates. The Group only has one business segment being the supply of home improvement products and services. The ‘Other International’ segment consists of Poland, Spain, Portugal, Germany, Russia, Romania and the joint venture Koçtaş in Turkey. Poland has been shown separately due to its significance. Central costs principally comprise the costs of the Group’s head office before transformation costs. Central liabilities comprise unallocated head office and other central items including pensions, insurance, interest and tax. 5 EXCEPTIONAL ITEMS £ millions 2016/17 2015/16 Included within selling and distribution expenses UK & Ireland and continental Europe restructuring 21 (305) Brico Dépôt Romania impairment – (3) 21 (308) Included within administrative expenses Transformation exceptional costs (5) – Brico Dépôt Romania impairment – (15) (5) (15) Included within other income Profit on disposal of B&Q China 3 143 Profit on disposal of property and other companies – 13 Profit on disposal of properties 4 1 7 157 Included within net finance costs UK & Ireland and continental Europe restructuring (6) – (6) – Exceptional items before tax 17 (166) Exceptional tax items (6) 67 Exceptional items 11 (99)

Current year exceptional items include a £21m net credit (2015/16: £305m charge) relating to the B&Q store closure programme in the UK and the closure of loss-making stores in France and other countries in continental Europe. In addition, a £6m exceptional interest charge relating to the reduction in discount rate used to measure the overall UK restructuring provision was recognised. The net credit principally arises due to savings on B&Q store exit costs as compared with the original restructuring provisions recognised, and the reversal of a restructuring provision following the announcement that one of the B&Q stores originally earmarked for closure would remain open, offset mainly by store asset impairments relating to the closure of additional loss-making stores in continental Europe.

114 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

3) 3 5 8 ( (3) (8) (3) (4) (1) (14) (22) 115 115 2015/16 7 6 (2) (2) (1) (7) (5) 13 (14) (10) (27) 2016/17 ssue costs of borrowings borrowings of costs ssue , offset by a net gain from from gain a net by , offset in discount rate used to www.kingfisher.com mation. In the prior year a a year In the prior mation. new offer and supply ico DépôtRomania business. www.kingfisher.com ll and certain stores in the Br the in certain stores and ll (2015/16: £9m income) and amortisation of i £9m income) amortisation and (2015/16: ccrued interest, of £10m (2015/16: £5m gain) £5m (2015/16: of £10m interest, ccrued e year relating to the initial costs of setting up the Group’s Group’s up of costs the initial setting to the relating e year ns includes a £6m exceptional charge relating to the reduction reduction relating to the charge a £6m exceptional ns includes ng to the impairment of goodwi impairment the ng to rrowings and cash (2015/16: of loss).£9m £9m se a net loss on derivatives, excluding se excluding a a net loss on derivatives, of the Group’s controlling 70% stake. stake. 70% controlling of the Group’s rest income accrued on derivativesof £8m -term deposits deposits -term t

t

of £nil (2015/16: £1m). £1m). (2015/16: £nil of Financing fair compri remeasurements value Netfinance costs includes inte net interest debt Fixed term Cashcash and equivalents andshor 6 COSTS NET FINANCE £ millions loans bank and overdrafts Bank deb term Fixed Transformation exceptional costs of £5m have been recorded in recorded th been have of £5m costs exceptional Transformation chain organisation. infor further for 33 note to refer – China B&Q in stake 30% remaining Group’s the of disposal on recognised was £3m of A profit on disposal recorded was £143m of profit relati recorded was £18m of loss exceptional prior an year, In the of bo value carrying the to fair adjustments value provisio on of discount unwinding the to relating charge The £7m provision. UK restructuring overall the measure

Net interest income on defined benefit pension schemes pension benefit on defined income interest Net income Finance Finance costs Finance leases leases Finance Financing fair valueremeasurements Unwinding ofUnwinding discount on provisions Other interest payable payable interest Other – – 3) – 1 ( 13 67 99) 15) 15) 14 ( ( ( 157 143 166) 308) 305) 406 253 ( ( ( 6,343

2015/16

2 – 4 7 3 – – – (5) (6) (6) (6) (5) 24 17 21 21 11 17 oducts and services. services. and oducts

the UK and the 2016/17 cutive, representing the pen, offset mainly by ge relating to the reduction in 3 in Turkey. Poland has been has been Poland Turkey. in recognised, and the reversal of of reversal and the recognised, 34 19 se unallocated head office and and office head se unallocated 350 350

2 23 – 55 – 45 20 599 2016/17 tments in joint ventures and associates. associates. and ventures joint in tments 2015/16 2015/16 B&Q store closure programme in programme closure store B&Q – 6 sts. Central liabilitiescompri 95 80 2,063 International Other OtherInternational 3 215 132 1,899 515 284 – 6 5,933 3,307

n reported internally to the Board of Exe and Group Directors Board the n reported internally to UK & Ireland & UK France Poland Other Central Total £305m charge) relating to the the to relating charge) £305m the B&Q stores originally earmarked for closure would remain o remain would closure for earmarked originally B&Q stores the 24 8 office before transformationco 156 121 31 24 1 – 333 131 76 16 16 – 1 240 costs as compared with the original restructuring provisions restructuring original compared the costs with as

Ireland& UK France Poland Other China B&Q Central Total

,property, plant and equipment, investment property and inves ditional loss-making stores incontinental Europe.

g g NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL ns, insurance, interest and tax. and tax. interest ns, insurance,

t t

nistrative expenses 3,229

(1) (1) 2016/17 Report Annual | plc Kingfisher Non-current assets Non-current assets Capital expenditure Depreciation and amortisation expenditure Capital Depreciation and amortisation losses Impairment Impairment losses losses Impairment Non-current assets

Profit on disposal of property and other companies companies other and property of disposal on Profit properties of disposal on Profit within costs finance net Included Europecontinental restructurin and Ireland UK & Includedwithin other income B&Q China of on disposal Profit Current year a include items exceptional credit (2015/16: £21m net char interest exceptional £6m a In addition, Europe. continental in countries other and France in stores of loss-making closure recognised. was provision UK restructuring overall the to measure used rate discount exit on B&Q store to savings due arises The net credit principally of one that announcement the following provision restructuring a store asset impairments relating to the closure of ad closure to the relating impairments store asset Exceptional tax items tax items Exceptional items Exceptional Brico Dépôt Romania impairmen Romania Dépôt Brico admi within Included other central items including pensio including items central other impairmen Romania Dépôt Brico Exceptionalbefore items tax 114 NOTES TO THE CONSOLIDATEDFI 4 CONTINUED SEGMENTAL ANALYSIS information Other segmental assets intangible other (1) goodwill, comprise assets Non-current informatio on the are based above disclosed segments operating The pr improvement home of supply the being segment business one has only Group The operates. Group the in which areas geographical Koçtaş venture joint the and Romania Russia, Germany, Portugal, Spain, Poland, of consists segment International’ The ‘Other to its significance. due separately shown head the Group’s of costs the comprise principally costs Central 5 ITEMS EXCEPTIONAL £ millions Included within selling and distribution expenses Europecontinental restructurin and Ireland UK & Transformation exceptional costs costs exceptional Transformation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

7 PROFIT BEFORE TAXATION The following items of revenue have been credited in arriving at profit before taxation:

£ millions 2016/17 2015/16 Sales 11,225 10,441 Other income 26 183 Finance income 13 8 Revenue 11,264 10,632

The following items of expense/(income) have been charged/(credited) in arriving at profit before taxation:

£ millions 2016/17 2015/16 Operating lease rentals Minimum lease payments – Property (1) 399 411 Minimum lease payments – Equipment 32 29 Sublease income (1) (6) 430 434 Rental income received on investment property (2) (4) Amortisation of intangible assets (2) 58 49 Depreciation of property, plant and equipment and investment property: Owned assets 187 180 Held under finance leases 8 11 Impairment of goodwill – 15 Impairment of intangible assets 4 3 Impairment of property, plant and equipment and investment property 10 37 (Gain)/loss on disposal: Land and buildings, investment property and property held for sale (4) (1) Fixtures, fittings and equipment 8 4 Write down to net realisable value of inventories 37 38 Write down to recoverable value of trade and other receivables 4 4

(1) Excludes rentals provided against as part of exceptional restructuring provision (see note 26). (2) Of the amortisation of intangible assets charge, £1m (2015/16: £1m) and £57m (2015/16: £48m) are included in selling and distribution expenses and administrative expenses respectively.

Auditor’s remuneration £ millions 2016/17 2015/16 Fees payable for the audit of the Company and consolidated financial statements 0.4 0.3 Fees payable to the Company’s auditor and their associates for other services to the Group: The audit of the Company’s subsidiaries pursuant to legislation 1.2 1.1 Audit fees 1.6 1.4 Audit-related assurance services 0.1 0.1 Other assurance services 0.2 0.1 Non-audit fees 0.3 0.2 Auditor’s remuneration 1.9 1.6

Details of the Group’s policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than another supplier and how the auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report on page 62. No services were provided pursuant to contingent fee arrangements.

116 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

7 5 – 8 4 (1) (7) (3) 13 71 76 25 11 14 0.4 0.8 2.5 9.4 117 117 228 13.1 (117) (110) (100) 1,227 1,499 2015/16 2015/16 2015/16 2015/16 6 9 35 73 71 77 23 15 22 16 10 0.4 1.2 5.0 6.7 (66) (11) (56) 259 13.3 (155) (166) (149) 1,342 1,648 2016/17 2016/17 2016/17 2016/17 www.kingfisher.com Other than as set out in the out the in as set than Other www.kingfisher.com tion Report on pages 66 to 88. 66 to 88. tion Report on pages ment during the year (2015/16: £nil). £nil). (2015/16: the year ment during mbers of the Board of Directors and the Group Executive. Executive. Group the and of Directors Board of the mbers t out in the Directors’ outt Remunera in Directors’ the been no transactions with key manage with no transactions been

r r

r

-term employee benefits t -employment benefits -employment benefits: t t Defined contribution Defined benefit (service cost) cost) (service benefit Defined Adjustments in respect of prior years years of prior respect in Adjustments

Directors’ Remuneration Report,have there Income tax expense Current tax on profits for yea the Deferred tax Current yea rates tax in changes of respect in Adjustments £ millions UK corporation tax Current tax on profits for yea the Overseas tax The Group defines key management personnel as being those me those being as personnel management key defines The Group se is remuneration Directors’ the to respect with detail Further 9 EXPENSE TAX INCOME Remuneration of key management personnel personnel key management of Remuneration £ millions Shor Pos Number thousands Stores Administration associates. and ventures joint Group’s the by employed those excludes employed persons of number The average

8 DIRECTORS AND EMPLOYEES £ millions salaries and Wages costs Social security Pos employed of persons number Average

Termination benefits compensation Share-based Share-based compensation compensation Share-based Employee benefit expenses Adjustments in respect of prior years years of prior respect in Adjustments Adjustments in respect of prior years years of prior respect in Adjustments 8 4 4 3 (6) (1) (4) 38 29 49 37 11 15 0.1 0.3 0.1 0.2 1.1 1.4 1.6 183 180 411 434 10,441 10,632 2015/16 2015/16 2015/16

4 8 4 8 – (1) (4) (2) 26 13 37 32 58 10 0.1 0.1 0.4 0.4 0.2 0.2 0.3 0.3 1.2 1.2 1.6 1.6 1.9 1.9 187 187 399 399 430 430 11,225 11,225 11,264 2016/17 2016/17 2016/17 provided pursuant to nother supplier and how the stribution expenses and administrative expenses expenses and administrative expenses stribution dit services, the reasons why the auditor was used rather than a than rather used was auditor the why reasons the services, dit 16: £1m) and £57m (2015/16: £48m) are included in selling and di and selling in included are £48m) £57m (2015/16: and 16: £1m) NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL

t (1)

t (2) -related assurance services services assurance -related 2016/17 Report Annual | plc Kingfisher t respectively. respectively. Minimum lease payments – Property payments lease Minimum Sublease income Sublease Owned assets Owned assets Held under finance leases sale for held property and property investment buildings, Land and Minimum lease payments – – Equipmen payments lease Minimum The auditof theCompany’s subsidiaries pursuant to legislation Fixtures, fittings and equipmen and fittings Fixtures, Auditor’s remuneration £ millions statements financial consolidated and Company of the audit the for payable Fees 116 NOTES TO THE CONSOLIDATEDFI 7 TAXATION BEFORE PROFIT taxation: before profit at in arriving credited been have revenue of items following The £ millions Sales Other income income Finance Revenue taxation: before profit at in arriving charged/(credited) been have of expense/(income) items following The £ millions rentals lease Operating 26). note (see provision restructuring exceptional (1) of as part against provided rentals Excludes (2) Of the amortisation of intangible assets charge, £1m (2015/ Other assurance services services assurance Other Write down to net realisable value of inventories receivables other of and trade value Write down recoverable to Depreciation of property, plant and equipment and investment property: Impairment of goodwill assets of intangible Impairment property and investment and equipment plant of property, Impairment on disposal: (Gain)/loss Fees payable to Company’s the auditor and their associates forother services to theGroup: Non-audit fees fees Non-audit Auditor’s remuneration property on investment received income Rental Audit fees fees Audit Audi Details of the Group’s policy on the use of auditors for non-au for of auditors use on the policy Group’s of the Details were services No 62. on page Report Committee Audit the out in set are safeguarded were objectivity and independence auditor’s fee arrangements. contingent Amortisation of intangible assets of intangible Amortisation NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

9 INCOME TAX EXPENSE CONTINUED Factors affecting tax charge for the year The tax charge for the year differs from the standard rate of corporation tax in the UK of 20% (2015/16: 20%). The differences are explained below:

£ millions 2016/17 2015/16 Profit before taxation 759 512 Profit multiplied by the standard rate of corporation tax in the UK of 20% (2015/16: 20%) (152) (102) Share of post-tax results of joint ventures and associates – 1 Net (expense)/income not (deductible)/chargeable for tax purposes (5) 26 Deferred tax assets utilised not previously recognised – 8 Temporary differences: Net gains on property – 1 Losses not recognised (2) (6) Foreign tax rate differences (40) (38) Adjustments in respect of prior years 15 11 Adjustments in respect of changes in tax rates 35 (1) Income tax expense (149) (100)

The effective tax rate on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 26% (2015/16: 26%). Exceptional tax items for the year amount to a charge of £6m, of which a £1m credit relates to prior year items. In 2015/16 exceptional tax items amounted to a credit of £67m, of which a £1m credit was relating to prior year items.

The effective tax rate calculation is presented in the Financial Review on page 34. The overall tax rate for the year is 20% (2015/16: 20%). This predominately reflects enacted rate reductions in both the UK and France, due to have full effect in 2020/21, which have resulted in deferred tax credits in the year, as well as the release of prior year provisions which have either been agreed with tax authorities, reassessed, or time expired. In addition to the amounts charged to the income statement, tax of £13m has been credited directly to other comprehensive income (2015/16: £nil), of which a £5m credit (2015/16: £18m credit) is included in current tax and a £8m credit (2015/16: £18m charge) is included in deferred tax and principally relates to post-employment benefits. Future changes in tax rates The UK corporation tax rate reduced in the prior year from 21% to 20% with effect from 1 April 2015, and has been legislated to fall to 19% from 1 April 2017 and then again to 17% from 1 April 2020. The Spanish tax rate reduced from 30% to 28% from 1 January 2015, and fell again from 28% to 25% from 1 January 2016. The surcharge in France that had previously increased the applicable rate to 38% was not renewed in the 2016 Finance Bill. From 1 January 2016, the applicable rate in France is 34.43%. New legislation enacted in the year will reduce the applicable rate in France to 28.92%. This reduction in rate will be progressively introduced from 2017, and will be substantively applicable to Kingfisher Group companies from 1 January 2020.

118 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

– – – – – 72 3.3) 0.1) 3.3) 0.1) ( ( ( ( 119 119 160 232 pence 2015/16 Earnings Earnings per per share 73 157 230 shares average millions 2016/17 ’s shares during the year year the shares’s during Weighted Weighted number of 2015/16 2015/16 for the purpose of this of this purpose the for www.kingfisher.com Annual General Meeting Meeting General Annual l ordinary shares. These These shares. l ordinary

1) 1) 4 0.2 – 8 4 0.2 – – – – 4 0.2 4 0.2 y the weighted average average weighted y the ( ( 76) 76) ( ( 166 7.2 166 7.2 509 2,319 22.0 412 2,311412 2,319 17.8 412 2,311 17.8 17.8 509 2,311412 2,319 22.0 17.8 509 2,311 22.0 509 2,319 22.0 www.kingfisher.com Earnings Earnings £ millions – – – – 2.0 2.0 0.1 0.1 (0.1) (0.8) (0.8) (2.0) (2.0) (0.5) (0.5) 25.8 27.1 27.0 27.1 25.9 27.0 24.4 24.3 by shareholders at the pence Earnings Earnings per share share per 7 2,263 2,256 2,263 2,256 2,256 2,263 2,256 2,263 shares shares average average millions Weighted Weighted number of 2016/17 e is subject approval to 1 1 – – – – – 44 44 (17) (17) (43) (43) (11) (11) 584 610 610 610 584 610 551 551 Earnings £ millions y r theyear attributable toequity shareholdersof theCompany b 3.25p per share (31 January 2016: 3.18p per share) 3.18p 2016: (31 January share per 3.25p d 31 January 2016 of 6.92p per share (31 January 2015: 6.85p per share) per 6.85p 2015: (31 January share per 6.92p of 2016 January 31 d dend for the year ended 31 January 2017 of 7.15p per shar of 7.15p 2017 year 31 January ended the dend for

Exceptional items before tax tax before items Exceptional Exceptional items before tax tax before items Exceptional Tax on exceptional and prior year items year items and prior Tax on exceptional year items and prior Tax on exceptional

The proposed The divi final 11 DIVIDENDS DIVIDENDS 11 £ millions Compan the of shareholders equity to paid Dividends of January 2017 ended 31 year the for dividend Interim Tax on transformation costs before exceptional items exceptional before costs on transformation Tax Underlying diluted earnings per share fo profit the dividing by calculated is share per earnings Basic Transformation exceptionalcosts items before which trust’) (‘ESOP trust Plan Ownership Share the Employee in held those excluding year, the during issue in of shares number cancelled. as treated are calculation potentia dilutive of all conversion assume to is adjusted shares of number average weighted the share, per earnings diluted For Company of the price market average the than is less price exercise the both where employees to granted options share represent met. been have conditions performance and related any ende the year for dividend Final statements. financial in these liability as a included not been has and Transformation exceptionalcosts items before items exceptional before costs on transformation Tax Underlying basic earnings per share Diluted earnings per share Basic earnings per share share per earnings Basic Effect of options dilutive share Diluted earnings per share share per earnings Basic 10 PER SHARE EARNINGS China operatingB&Q loss China operatingB&Q loss

Financing fair valueremeasurements share per earnings basic Adjusted Financing fair valueremeasurements share per earnings diluted Adjusted Tax on financing fair value remeasurements remeasurements fair value on financing Tax remeasurements fair value on financing Tax 8 1 1 (1) (6) 26 11 (38) 512 (100) (102) 2015/16

– – – (5) (2) 15 35 (40) 759 759 (149) (152) e (2015/16: £nil), of £nil),e (2015/16: 2016/17 l again from 28% to 25% 25% to from 28% l again 16 Finance Bill. From From Bill. 16 Finance erred tax and principally principally and tax erred fall to 19% from from 19% to fall r items. In 2015/16 2015/16 In r items. s from 1 January 2020. 2020. 1 January s from tax rates on deferred tax tax rates on deferred tax are explained below: below: explained are France to This 28.92%. 015/16: 20%).This predominately ly to other comprehensive incom tax credits in the year, as well well as year, the in credits tax resulted in have which deferred reassessed,or time expired. om 1 April to and has been legislated 2015, a charge of £6m, of which a £1m credit relates to prior yea to prior relates £1m credit a of of which charge £6m, a tax rate reduced from 30% to 28% from 1 January 2015, and fel 2015, and 1 January from to 28% 30% from reduced rate tax tax and a £8m credit (2015/16: £18m charge) is included in def charge) in is included £18m (2015/16: credit £8m a tax and of £13m has been credited direct credited been has of £13m increased the applicablerate to38% wasnot renewed in the 20 to have full effect in 2020/21, effect full have in to cluding prior year tax adjustments and the impact of changes in of changes and impact the year tax adjustments cluding prior agreed with with tax authorities,agreed corporation tax in the UK The differences of 20%). (2015/16: 20% which a £1m credit was relating to prior year items. items. year prior to relating was credit a £1m which prior year from 21% to 20% with effect fr effect with prior 20% 21% to from year NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL ce is 34.43%. New legislation enacted in the year will reduce the applicable rate in rate applicable the reduce will year the in enacted legislation New 34.43%. is ce ntures and associates and associates ntures not previously recognised charge for the year not (deductible)/chargeable for tax purposes not (deductible)/chargeable -tax results of joint ve results -tax t 2016/17 Report Annual | plc Kingfisher Net gains on property on property Net gains recognised not Losses as the release of prior year provisions which have either been have either which provisions of year as prior the release In addition to the amountscharged to theincome statement, tax current is included in credit) £18m (2015/16: credit which a £5m benefits. post-employment to relates is 26% (2015/16: 26%). Exceptional tax items for the year amount to amount year the for items tax Exceptional 26%). (2015/16: is 26% exceptional tax items amounted to a credit of £67m, of of £67m, credit a to amounted items tax exceptional (2 is 20% year for the rate tax The overall Review on page 34. Financial in the is presented rate calculation tax The effective due France, UK and the reductions in both reflects rate enacted The effective tax rate on profit before exceptional items and ex and items exceptional before on profit rate tax effective The Income tax expense expense tax Income Share of pos Net (expense)/income Net (expense)/income utilised assets tax Deferred Temporary differences: rate differences Foreign tax years of prior respect in Adjustments rates tax in changes of respect in Adjustments 118 NOTES TO THE CONSOLIDATEDFI 9 CONTINUED EXPENSE TAX INCOME tax Factors affecting of rate standard the from differs year the for charge The tax £ millions taxation Profit before 20%) (2015/16: of 20% UK tax in the corporation of rate standard the by multiplied Profit rates in tax changes Future The UK corporation tax rate reduced in the The Spanish 2020. 1 April from 17% to again then and 2017 1 April previously had France that in surcharge The 2016. from 1 January Fran in rate applicable the 1 January 2016, reduction in rate will be progressively introduced from 2017, and will be substantively applicable to Kingfisher Group companie Group Kingfisher to applicable substantively be and will 2017, from introduced progressively be will rate in reduction NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

12 GOODWILL £ millions Cost At 1 February 2016 2,412 Exchange differences 2 At 31 January 2017 2,414

Impairment At 1 February 2016 (15) At 31 January 2017 (15)

Net carrying amount At 31 January 2017 2,399

Cost At 1 February 2015 2,414 Disposals (2) At 31 January 2016 2,412

Impairment At 1 February 2015 – Charge for the year (15) At 31 January 2016 (15)

Net carrying amount At 31 January 2016 2,397

In the prior year, an impairment loss of £15m was recognised relating to all the goodwill in the Brico Dépôt Romania business, which forms part of the ‘Other International’ reporting segment. Impairment tests for goodwill Goodwill has been allocated for impairment testing purposes to groups of cash generating units (‘CGUs’) as follows: £ millions UK France Poland Romania Total At 31 January 2017 Cost 1,796 522 81 15 2,414 Impairment – – – (15) (15) Net carrying amount 1,796 522 81 – 2,399

At 31 January 2016 Cost 1,796 520 81 15 2,412 Impairment – – – (15) (15) Net carrying amount 1,796 520 81 – 2,397

The recoverable amounts of the CGUs have been determined based on value-in-use calculations. These calculations are considered to have been valued using level 3 inputs as defined by the fair value hierarchy of IFRS 13, ‘Fair Value Measurement’.

120 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

3.1 121 121 10.6 7.3 2.3 e through a unified unified a e through s to exceed their ptions used for for used ptions ate for retail businesses businesses retail for ate 2015/16 2015/16 2016/17 rmance expectations and rmance roved offer and price offer and price roved ramme. They assume www.kingfisher.com . reflect operational leverage leverage operational reflect , leases and equity, weighted weighted equity, and , leases does notconsider that a ied, unique and ied, unique leading offer spend. 2.9 2.3 3.1 8.4 8.2 8.6 UK UK France Poland 8.4 8.4 3.2 3.2 UK France Poland www.kingfisher.com nefits of the ‘ONE Kingfisher’ plan, including creating including a unif plan, Kingfisher’ of the ‘ONE nefits covering a four-year period. These are based on both past perfo past both on based are These period. a four-year covering deemed significant are the UK, France and Poland. The key The key assum Poland. and UK, France are the significant deemed owth rate which does not exceed the long-term average growth r growth average long-term the exceed not does which rate owth efficiencies, in particular from unifying goods not for resale sh flows, is calculated using of sh calculated is cost combination a the offlows, debt ing plans and certain elements of the Group’s transformation prog transformation Group’s the of elements certain and plans ing plementation costs. Higher assumed operating profit percentages er than recent experience and market growth expectations, driven largely largely by an imp driven expectations, growth market and experience recent er than tal gearing. A risk adjustment is also made for the country in which the CGU operates CGU which country in the the is also made forA risk adjustment tal gearing.

-term growth rate -term growth rate g g nnual % rate nnual rate % nnual % rate nnual rate % Lon value-in-use calculations are set out below. Discount rate Lon A Discount rate A The groups of CGUs for which the carrying amount of goodwill is of goodwill amount carrying the which for CGUs of groups The Assumptions plans strategic approved on based are projections flow cash The be certain reflect projections The development. market future for

reinvestment. Assumed margin percentage improvements reflect a lower cost of goods sold from leveraging the Group’s buying scal buying Group’s the leveraging from goods sold cost of a lower reflect improvements percentage margin Assumed reinvestment. im and clearance by range offset partially will be which offer, and optimising operational efficiency. For further details, refer to the Strategic Report. Report. Strategic to the refer details, further For efficiency. operational optimising and external factors both deration consi into take projections Sales percentages. profit operating and margin growth, sales are plans strategic the in drivers Key trad expectations, suchmarket such and internal factors as as are high thatcountry sales increases in each from increased sales as well as cost savings through operational operational through cost savings as as well sales from increased a gr using calculated are period four-year this beyond flows Cash operating in the samecountries as the CGUs. and plan, transformation of the benefits projected of the elimination including analysis, sensitivity a reviewed has Board The CGU of the amounts carrying the cause would calculations the in used value-in-use assumptions the in change possible reasonably amounts. recoverable ca future used discount cost of capital, to average The weighted according to an estimate of the CGU’s capi as used are follows: rates growth long-term and rates discount nominal risk adjusted The pre-tax – 2 (2) (15) (15) (15) (15) (15) 2,397 2,414 2,412 2,412 2,414 2,399 2,414 2,399

– 15 (15) to have been valued valued have been to which forms part of the ‘Other ‘Other of the part forms which

– (15)– (15) – 81 81 – – 522 522 – – UK France Poland Romania Total 1,796 520 81 15 2,412 1,796 520 81 2,397 – 1,796 1,796 to all the goodwill in the Brico Dépôt Romania business, the Brico Dépôt Romania in all the goodwill to en determined based on value-in-use calculations. These calculations are considered NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL £15m was recognised relating relating recognised £15m was

t t

r

t t 2016/17 Report Annual | plc Kingfisher

t t Net carrying amount 2016 At 31 January of priorimpairment loss In the an year, Net carrying amoun Net carrying £ millions 2017 At 31 January Cos 120 NOTES TO THE CONSOLIDATEDFI GOODWILL 12 £ millions Cost At 1 February 2016 Exchange differences 2017 At 31 January Impairment At 1 February 2016 2017 At 31 January Net carrying amount 2017 At 31 January Cost At 1 February 2015 Disposals 2016 At 31 January Impairment At 1 February 2015 Charge for theyea Impairment tests forgoodwill Goodwill has beenallocated forimpairment testingpurposes to groupsofcash generating units(‘CGUs’) as follows: Impairmen Net carrying amoun Net carrying The recoverable amounts of the CGUs have be have CGUs of the amounts recoverable The Measurement’. Value 13, ‘Fair IFRS of hierarchy value fair the by as defined 3 inputs level using At 31 January 2016 2016 At 31 January segment. reporting International’ Impairmen 2016 At 31 January Cos NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

13 OTHER INTANGIBLE ASSETS Computer £ millions software Other Total Cost At 1 February 2016 610 12 622 Additions 92 – 92 Disposals (2) – (2) Exchange differences 8 2 10 At 31 January 2017 708 14 722

Amortisation At 1 February 2016 (339) (7) (346) Charge for the year (57) (1) (58) Impairment losses (4) – (4) Disposals 2 – 2 Exchange differences (7) (1) (8) At 31 January 2017 (405) (9) (414)

Net carrying amount At 31 January 2017 303 5 308

Cost At 1 February 2015 542 12 554 Additions 71 – 71 Disposals (1) – (1) Disposal of subsidiaries (2) – (2) At 31 January 2016 610 12 622

Amortisation At 1 February 2015 (290) (6) (296) Charge for the year (48) (1) (49) Impairment losses (3) – (3) Disposals 1 – 1 Disposal of subsidiaries 1 – 1 At 31 January 2016 (339) (7) (346)

Net carrying amount At 31 January 2016 271 5 276

Additions in the current and prior year primarily related to the development of the unified IT platform, which will be amortised over its estimated useful life of 10 years as it becomes available for use in the operating companies. None of the Group’s other intangible assets have indefinite useful lives.

122 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

(6) (3) 41 78 (17) (10) 392 202 318 123 123 (195) (105) (222) 5,943 5,458 3,589 (2,354) (2,246) – – – (3) 27 52 (71) 129 178 201 894 (154) (187) tal Europe 2,760 2,617 (1,866) (1,816) Fixtures, Fixtures, equipment Total stores as the net present as the net present stores fittings and fittings www.kingfisher.com

4 9 13 (1) (6)(1) (7) (6) (6) (7) (3) 14 24 38 10 38 48 86 174 260 34 29 63 14 24 26 (17) (42) (149)(17) (19) (191) (36) (13) (42) (55) (41) (34) (35) 263 263 117 117 (430) (1,816) (2,246) (380) (1,680) (2,060) (488) (430) 2,841 2,617 5,458 2,411 801 3,212 2,787 2,476 5,263 3,183 2,695 2,841 pendent external valuers) if higher. www.kingfisher.com buildings buildings Land and and Land et valuations performed by inde performed et valuations ese were based on a determination of recoverable amounts of the amounts of the of recoverable on a determination based were ese £36m) of which £8m (2015/16: £36m) related to£36m) UK continen the £36m) (2015/16: of and which £8m t carrying amount t carrying e less costs to sell (using mark (using sell less costs to e cluded above at ne

r r

31 January 2016 2016 31 January t At 31 January 2016 2016 At 31 January At 31 January 2017 2017 At 31 January Transfers to investment property property to investment Transfers Exchange differences 2016 At 31 January Exchange differences At 31 January 2017 2017 At 31 January Impairment losses losses Impairment Disposals Exchange differences 2016 At 31 January Impairment losses losses Impairment Disposals Exchange differences 2017 At 31 January exceptional restructuring programmes as described in note 5. Th 5. in note described as programmes restructuring exceptional At 31 January 2016 2016 At 31 January 2017 At 31 January A (2015/16: ofrecordedlosses £10m were in the year Impairment Assets in the courseof construction included abovenet at carryingamount Assets held underfinance leasesin Net carrying amount Depreciation Additions Additions 2017 At 31 January Cost At 1 February 2015 Additions Disposals sale for held to assets Transfers At 1 February 2015 Charge for theyea Net carrying amount Depreciation At 1 February 2016 At 1 February 2016 14 PLANT PROPERTY, EQUIPMENT AND £ millions Cost Disposals property to investment Transfers At 1 February 2016

Charge for theyea of future pre-taxvalue(‘value-in-use’) or cash fair flows valu 2 (8) (4) (2) 92 10 (58) 622 308 722 (346) (414)

5 2 – – – – (1) (7) (1) (9) 12 14

1 – 1 1 – 1 2 8 d over its estimated useful life of life useful its estimated d over (3) – (3) (3) (1) – – (1) (1) – (2) (2) (4) (2) (7) 71 – 71 92 (48) (1) (49) (57) 271 271 5 276 542 542 554 12 610 622 12 610 610 303 303 708 708 (339) (7) (346) (290)(6) (296) (339) (405) software software Other Total Computer Computer platform, which will be amortise be will which platform, e development of the unified IT of e development unified the NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL

r r 2016/17 Report Annual | plc Kingfisher Impairment losses losses Impairment losses Impairment Disposals of subsidiaries Disposal 2016 At 31 January Net carrying amount 2016 At 31 January th to related primarily year prior and current in the Additions 10 years as it becomes available for use in the operating companies. companies. operating in the use for available becomes as it 10 years lives. useful indefinite have assets intangible other the Group’s of None At 1 February 2016 At 1 February 2016 Additions Disposals Amortisation At 1 February 2016 Charge for theyea 122 NOTES TO THE CONSOLIDATEDFI 13 OTHER INTANGIBLE ASSETS £ millions Cost Disposals Exchange differences 2017 At 31 January Net carrying amount 2017 At 31 January Cost At 1 February 2015 Additions Disposals of subsidiaries Disposal 2016 At 31 January Amortisation At 1 February 2015 Charge for theyea Exchange differences 2017 At 31 January NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

14 PROPERTY, PLANT AND EQUIPMENT CONTINUED The cumulative total of capitalised borrowing costs included within property, plant and equipment , net of depreciation, is £27m (2015/16: £27m). Land and buildings are analysed as follows:

2016/17 2015/16 Long Short £ millions Freehold leasehold leasehold Total Total Cost 2,625 148 410 3,183 2,841 Depreciation (211) (30) (247) (488) (430) Net carrying amount 2,414 118 163 2,695 2,411

Included in land and buildings is leasehold land that is in effect a prepayment for the use of land and is accordingly being amortised on a straight-line basis over the estimated useful life of the assets. The net carrying amount of leasehold land included in land and buildings at 31 January 2017 is £127m (2015/16: £135m). The Group does not revalue properties within its financial statements. A valuation exercise is performed for internal purposes annually in October by independent external valuers. Based on this exercise the value of property is £3.4bn (2015/16: £2.9bn) on a sale and leaseback basis with Kingfisher in occupancy. The key assumption used in calculating this is the estimated yields. Property, plant and equipment market valuations are considered to have been determined by level 3 inputs as defined by the fair value hierarchy of IFRS 13, ‘Fair Value Measurement’. For poorly performing stores, a vacant possession valuation basis is used to approximate the fair value less costs to sell when reviewing for impairment. 15 INVESTMENT PROPERTY £ millions Cost At 1 February 2016 37 Transfers from property, plant and equipment 3 Disposals (4) At 31 January 2017 36

Depreciation At 1 February 2016 (12) At 31 January 2017 (12)

Net carrying amount At 31 January 2017 24

Cost At 1 February 2015 41 Transfers from property, plant and equipment 17 Disposals (21) At 31 January 2016 37

Depreciation At 1 February 2015 (11) Impairment losses (1) At 31 January 2016 (12)

Net carrying amount At 31 January 2016 25

A property valuation exercise is performed for internal purposes annually as described in note 14. Based on this exercise the fair value of investment property is £36m (2015/16: £37m). All the investment property market valuations are considered to have been determined by level 3 inputs as defined by the fair value hierarchy of IFRS 13, ‘Fair Value Measurement’.

124 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

3 1 (4) (1) (5) (3) (1) 23 28 62 23 23 (20) 125 125 2015/16 – – – – 2016/17 2015/16 2015/16 Class of of Class recognising on a profit recognising www.kingfisher.com

4) 3 12 1 4 3 7 1 8 shares ownedshares activity Main ( (1) 11 12 23 40) (53)20) (93) 20 251 63 22 114 ( ( 150 11 161 (143) (10) (153) Joint

www.kingfisher.com ventures ventures Associates Total 1 1 6 – (5) 23 21 99 (11) (86) 169 (163)

1 1 2 1 – – – (9) France Ordinary 49% Finance Turkey Ordinary 50% Retailing 14 10 59 (47) of business held % interest Principal place Principal 2016/17 associates (2015/16: £nil). associates (2015/16: £nil). 9 5 – – – (5) 19 40 (11) (39) 159 (154) Joint ventures Associates Total ments in joint ventures and joint ventures in ments ntures and associates are shown below: and associates are ntures

(1)

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-tax results -tax results (1) t t Yapi Marketleri Ticaret A.S. Ticaret Marketleri Yapi

ş Koçta Crealfi S.A. Profit before taxation taxation Profit before Share of post-tax results Share of net assets Dividends Exchange differences 2016 At 31 January Exchange differences 2017 At 31 January Non-current liabilities Operating profi Operating details. further for 33 note – see of £3m disposal 17 ASSETS FINANCIAL AVAILABLE-FOR-SALE £ millions B&Q China investmen year, the during investment the of disposed Group The value. held at fair was which China, B&Q in interest a 30% held The Group Net finance costs costs Net finance expense tax Income Sales Share of pos associates: and ventures joint to relating amounts Aggregate £ millions Non-current assets assets Current Operating expenses Principal joint venture December. 31 to prepared are (1) companies these of statements financial The No goodwill amount goodwill is of No in carrying included invest the At 1 February 2015 16 16 AND ASSOCIATES JOINT VENTURES IN INVESTMENTS £ millions At 1 February 2016 Share of pos ve joint significant Group’s of the Details Current liabilities

Principal associate Principal 3 (1) (4) 41 17 37 25 37 36 24 (21) (11) (12) (12) (12) Total 2015/16

2,841 (430) 2,411 (488) 3,183 2,695 3 inputs as defined by by defined as 3 inputs are considered are to have basis with Kingfisher in in Kingfisher with basis m (2015/16: £27m). £27m). m (2015/16: rming stores, a vacant annually October in by airvalue of investment ortised on a straight-line basis basis straight-line a on ortised nuary 2017 is £127m 410 410 163 163 (247) Short Short leasehold Total

(30) 2016/17 148 118 Long leasehold determined by level been determined have ered to land and is accordingly being am being accordingly and is land (211) 2,625 2,414 Freehold ents. A valuation exercise is performed for internal purposes purposes internal for is performed exercise A valuation ents. ount of leasehold land included in land and buildings at 31 Ja buildings land and in included land leasehold of ount thinproperty, plant and equipment ,of net depreciation,is £27 ffect a prepayment for use of the ffect a prepayment stment property market valuations are consid are valuations property market stment

t t NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL 2016/17 Report Annual | plc Kingfisher £ millions Land and buildings are analysed as follows: follows: as are analysed buildings Land and 124 NOTES TO THE CONSOLIDATEDFI 14 PLANT PROPERTY, EQUIPMENT AND CONTINUED wi costs included borrowing of capitalised total The cumulative Cost 15 PROPERTY INVESTMENT £ millions Cost At 1 February 2016 Transfers from property, plant and equipmen Disposals 2017 At 31 January Depreciation At 1 February 2016 2017 At 31 January Net carrying amount 2017 At 31 January Cost At 1 February 2015 Transfers from property, plant and equipmen Disposals 2016 At 31 January Depreciation At 1 February 2015 losses Impairment 2016 At 31 January Net carrying amount 2016 At 31 January f the exercise on this Based 14. note in described as annually purposes internal for performed is exercise valuation A property property All the inve (2015/16: is £37m). £36m Measurement’. Value of IFRS 13, ‘Fair hierarchy value the fair Depreciation Net carrying amount Included in land and buildings is leasehold land that is in e in is that land leasehold is buildings and land in Included over the estimated useful life of the assets. The net carrying am The net carrying of the life assets. useful the estimated over £135m). (2015/16: The Group does not revalue properties withinits financial statem leaseback and sale on a £2.9bn) (2015/16: is £3.4bn of property value the exercise this on Based valuers. external independent valuations market equipment and plant Property, yields. this the estimated is in calculating used The key assumption occupancy. been determined by level 3 inputs as definedby the fair valuehierarchy ofIFRS 13, ‘Fair ValueMeasurement’. Forpoorly perfo possession valuation basisused is to approximate the fair value less costs to sell whenreviewing for impairment. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

18 INVENTORIES £ millions 2016/17 2015/16 Finished goods for resale 2,173 1,957

Included within finished goods for resale is a deduction for rebates to reflect inventories that have not been sold at the balance sheet date. The cost of inventories recognised as an expense and included in cost of sales for the year ended 31 January 2017 is £6,449m (2015/16: £5,986m). 19 TRADE AND OTHER RECEIVABLES £ millions 2016/17 2015/16 Non-current Prepayments 7 5 Property receivables 1 1 Other receivables – 1 8 7

Current Trade receivables 65 65 Provision for bad and doubtful debts (5) (7) Net trade receivables 60 58 Property receivables 3 2 Prepayments 131 124 Rebates due from suppliers 287 313 Other receivables 70 71 551 568

Trade and other receivables 559 575

The fair values of trade and other receivables approximate to their carrying amounts. Refer to note 24 for information on the credit risk associated with trade and other receivables. 20 CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS £ millions 2016/17 2015/16 Cash at bank and in hand 209 220 Other cash and cash equivalents 586 510 Cash and cash equivalents 795 730

Other cash and cash equivalents comprise bank deposits and investments in money market funds, fixed for periods of up to three months. The fair values of cash and cash equivalents approximate to their carrying amounts. The Group enters into multi-currency net overdraft facilities and cash pooling agreements with its banks. These agreements and similar arrangements generally enable the counterparties to offset overdraft balances against available cash in the ordinary course of business and/or in the event that the counterparty is unable to fulfil its contractual obligations.

£ millions 2016/17 2015/16 Short-term deposits – 70

Short-term deposits comprised bank deposits with original maturities of between three and 12 months. The fair values of short-term deposits approximate to their carrying amounts.

126 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

8 2 53 50 76 48 12 34 244 122 317 614 138 137 179 127 127 1,339 2,422 2,369 2015/16 2015/16 2015/16 6 3 – – – 50 11 14 31 198 232 138 694 147 184 2,545 1,431 2,495 ed at floating rates rates at floating ed 2016/17 2016/17 www.kingfisher.com with an effective interest ar end. ar end. agreement for thepurchase www.kingfisher.com revocable closed season buyback timate of futurereturns at the ye of timatesales re within 12 months of the balance sheet date. These are arrang are These date. sheet balance of the 12 months re within 2015/16: three years) and are arranged at fixed rates of interest of rates fixed at arranged are years) and three 2015/16: a liability arising underir an arising a liability for customerreturns, for es the representing

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rate of 1.1% (2015/16: 1.6%). 1.6%). rate (2015/16: of 1.1% of interest. of interest. ( years Non-current bank of maturity two loans have an average Borrowings loans and Bank overdrafts matu loans Current bank on demand. repayable are overdrafts Bank Non-current loans Bank Bank overdrafts overdrafts Bank 22 BORROWINGS BORROWINGS 22 £ millions Current Non-current Accruals and other payables payables other and Trade otherAccruals payables include allowance and

21 PAYABLES TRADE AND OTHER £ millions Current payables Trade security social Otherand taxation Deferred income shares own to purchase Contract carrying their amounts. to approximate other payables and of trade values The fair to related year in the own shares prior to purchase The contract of theCompany’s own shares. deb term Fixed

Accruals and other payables loans Bank leases Finance deb term Fixed Finance leases leases Finance

1 7 1 5 2 (7) 70 65 58 71 220 510 730 124 313 568 575 1,957 2015/16 2015/16 2015/16 2015/16

1 8 7 3 – – (5) 65 60 70 209 209 586 795 131 131 287 551 559 2,173 2016/17 2016/17 2016/17 2016/17 months. The of months. fair values similar arrangements arrangements similar 015/16: £5,986m). £5,986m). 015/16: erm deposits approximate orin event the that the redit risk associated with trade risk trade redit associated with nce sheet date. date. sheet nce dinary course of business and/ year ended 31 January 2017 is £6,449m (2 2017 is £6,449m ended 31 January year ments in money market funds, fixed for periods of up to three of up three to periods for fixed funds, market money in ments against available cash in the or in the cash available against eir carrying amounts. Refer to note 24 for information on the c on the information for 24 note to Refer amounts. carrying eir cluded in cost of sales for the for the of sales cost in cluded with original maturities of between three and 12 months. The fair values of short-t values The fair months. 12 three and between of maturities original with NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL expense and in -term deposits deposits -term 2016/17 Report Annual | plc Kingfisher t counterparty is unable to fulfil its contractual obligations. obligations. its contractual to fulfil is unable counterparty Short-term deposits comprised bank deposits to their carrying amounts. Property receivables Property receivables Other receivables Current Trade receivables debts doubtful and bad for Provision receivables. other and cash and cash equivalents approximate to their carrying amounts. and agreements These banks. its with agreements pooling cash and facilities overdraft net multi-currency into enters The Group balances overdraft offset to counterparties the enable generally £ millions Shor 126 NOTES TO THE CONSOLIDATEDFI 18 INVENTORIES £ millions resale for goods Finished the bala at sold been not have that inventories reflect to rebates for a deduction is resale for goods finished within Included recognised an as The cost of inventories 19 RECEIVABLES TRADE AND OTHER £ millions Non-current Prepayments 20 DEPOSITS AND SHORT-TERM EQUIVALENTS CASH AND CASH £ millions Cash at bank and in hand Other cash and cash equivalents Cashcash and equivalents invest and deposits bank comprise equivalents cash and cash Other Net trade receivables Property receivables Prepayments Rebates due from suppliers Other receivables Trade and other receivables receivables approximateother to th and of trade values The fair NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

22 BORROWINGS CONTINUED 2016/17 2015/16 Principal Effective Carrying Carrying outstanding Maturity date Coupon interest rate amount £m amount £m US Dollar Private Placement $68m 24/05/16 (1) 6.3% 6.3% – 48 US Dollar Private Placement $179m 24/05/18 (1) 6.4% 6.4% 147 137 147 185

(1) $247m swapped to floating rate Sterling based on 6-month LIBOR plus a margin using a cross-currency interest rate swap of which $68m matured in May 2016.

The Group values its US Dollar Private Placement (“USPP”) on an amortised cost basis, adjusted for fair value gains and losses (based on observable market inputs) attributable to the risk being hedged in designated and effective fair value hedge relationships. The carrying amounts of the USPP have been impacted both by exchange rate movements and fair value adjustments for interest rate risk. At 31 January 2017, the cumulative effect of interest rate fair value adjustments is to increase the Group’s USPP carrying amounts by £6m (2015/16: £12m increase). The USPP contains a covenant requiring that, as at the end of each semi-annual and annual financial reporting period, the ratio of operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding 12-month period. The Group has complied with this covenant for the year ended 31 January 2017. Finance leases The Group leases some of its buildings and fixtures and equipment under finance leases. The average lease term maturity for buildings is six years (2015/16: six years) and for fixtures and equipment is two years (2015/16: two years). Certain building leases include a clause to enable upward revision of the rental charge to prevailing market conditions. Future minimum lease payments under finance leases, together with the present value of minimum lease payments, are as follows:

2016/17 2015/16 Present Present value of Minimum value of Minimum £ millions payments payments payments payments Less than one year 11 12 12 14 One to five years 22 27 21 26 More than five years 9 13 13 17 Total 42 52 46 57 Less amounts representing finance charges (10) (11) Present value of minimum lease payments 42 46

The interest rates inherent in the finance leases are fixed at the contract date for the lease term. The weighted average effective interest rate on the Group’s finance leases is 8.2% (2015/16: 8.6%).

Fair value £ millions 2016/17 2015/16 Bank overdrafts – 76 Bank loans 9 11 Fixed term debt 153 192 Finance leases 49 56 Borrowings 211 335

Fair values of borrowings have been calculated by discounting cash flows at prevailing interest and foreign exchange rates. This has resulted in level 2 inputs as defined by the fair value hierarchy of IFRS 13, ‘Fair Value Measurement’.

128 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

(6) (6) (6) 43 99 56 27 10 93 43 56 56 93 129 129 2015/16 2015/16 2015/16 35 90 54 20 54 55 64 36 64 (26) (26) (10) (26) or as hedges, since or as ing the year. the year. ing 2016/17 2016/17 2016/17 ves which are not closely closely not are which ves quivalent amount of quivalent -counter derivatives. derivatives. -counter et basis and set-off set-off and basis et www.kingfisher.com ance sheet positions. positions. sheet ance loating rate liabilities. rate liabilities. loating ese include short-term short-term include ese the fair value hierarchy. hierarchy. value fair the entical assets or liabilities. assets entical e fair value measurements are are measurements value e fair by the fair value hierarchy of of hierarchy value by the fair www.kingfisher.com e purchases occur th when during inventories to transferred be ll en transferred to inventories for contracts which matured dur matured en which to contracts transferred inventories for recast inventory purchases. At 31 January 2017, the Sterling e 2017, January purchases. At 31 inventory recast and credit credit risk. and vatives and none of these contracts has any embedded derivati embedded has any contracts of these none vatives and e been any transfers of assets or liabilities between levels of levels between of or liabilities assets transfers e been any racts that convert US Private Placement fixed rate debt into f manage the credit and settlement risks associated with over-the with associated risks settlement credit and the manage ent offset the retranslation of the balance sheet positions. Th positions. sheet of balance the retranslation the offset ent ntracts is £679m (2015/16: £504m). These have not been accounted These have (2015/16: is f not been £504m). ntracts £679m accounted s arising from the instruments and adjusted for credit risk. Thes risk. credit for adjusted and the instruments from s arising sh amount to £44m (2015/16: £63m net derivative (2015/16: assets). net derivative £63m sh to £44m amount p is not required to account for these separately. separately. these for account to required not p is e associated fair value gains and losses wi gains fair e associated value terest, foreign exchange s hedge currency exposures ofs hedge currency exposures fo sets in theevent that either party isunable to fulfill itscontractual obligations.

foreign exchange contracts. deri embedded for contracts significant all reviewed has The Group Grou the therefore and contract host the to related counterparties to with agreements netting entersinto The Group At 31 January 2017, the Sterling equivalent amount of such co such of amount equivalent the Sterling 2017, At 31 January statem income in the derivatives of the movements value the fair Non-designated hedges The Group has entered intocertain derivatives to providea hedge against fluctuations in theincome statement arising from bal Fair value hedges hedges value Fair Fair value hedges comprise cross currency interest rate swap cont Cash hedges flow contract exchange foreign Forward Derivative assets Derivative assets flow cash future discounting by calculated are values The fair £174m). (2015/16: is £142m contracts such of amount equivalent the Sterling 2017, At 31 January Foreign exchange contracts £ millions Foreign exchange contracts liabilities Derivative The Group holds the following derivative financial instruments at fair value: value: at fair instruments financial derivative following holds the The Group £ millions rate swaps interest Cross currency Fair value hedges hedges Fair value hedges Cash flow Non-current assets 23 DERIVATIVES 23 DERIVATIVES is: date sheet balance at the designation hedge by derivatives of value net fair The £ millions (2015/16: is Th £504m). such contracts £774m the next (2015/16: Gains of 12 months. gains of have be £60m £50m)

Non-designated hedges hedges Non-designated assets Current Current liabilities

These netting agreements and similar arrangements generally enable the Group and its counterparties to settle cash flows on a n on a flows cash settle to counterparties its Group and the enable generally arrangements similar and agreements netting These as available against liabilities all made using observable market rates of in rates market observable using all made All the derivatives held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined defined as 2 inputs level by determined values fair have to considered are fair value at Group by the held derivatives All the IFRS 13, ‘FairValue Measurement’, representing significant observableinputs other than quotedprices in activemarkets for id There are nonon-recurring fairvalue measurements nor have ther At 31 January 2017, net derivative assets included in net ca included in assets derivative net 2017, At 31 January 11 76 56 192 335 2015/16 2015/16 Carrying payments Minimum amount £m 48 137 185

9 – – 49 153 153 211 Fair value value Fair 147 147 147 147 e risk. At 31 January Present value of 2016/17 payments payments Carrying ldings is six years (2015/16: ldings is (2015/16: six years 15/16: £12m 15/16: increase). complied with thiscovenant amount £m £m amount of operating profit to net profit of operating s has resulted in level 2 inputs 2 inputs level in resulted has s 46 (11) 46 57 13 17 21 26 12 14 2015/16

(based on observable market market on observable (based upward revision of the rental of rental the revision upward tive interest rate on the Group’s Group’s on the rate interest tive 42 52 13 27 12 (10) 6.3% 6.4% Effective Effective payments payments Minimum Minimum interest rate rate interest 9 42 22 11 2016/17 hich $68m matured in May 2016. May 2016. in matured hich $68m 6.3% 6.4% 2016/17 value of Present Present payments (1) (1) 24/05/16 24/05/18 $68m $179m Principal Principal change rate movements and fair value adjustments for interest rat interest for adjustments fair value and movements rate change outstandingdate Maturity Coupon nts is to increase the Group’s USPP carrying amounts by £6m (20 £6m by amounts carrying USPP Group’s increase the to is nts each semi-annual and annual financial reportingperiod, ratio the the contract date for the lease term. The weighted average effec average weighted The term. lease the for date contract the plus a plus using interest margin a rate cross-currency swap of w NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL

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t 2016/17 Report Annual | plc Kingfisher The interest rates inherent in the finance leases are fixed at are fixed leases finance in the inherent rates The interest 8.6%). (2015/16: finance leases is 8.2% Less amounts representing finance charges charges finance representing Less amounts payments lease of minimum value Present Total More than five years One to five years years five One to £ millions overdrafts Bank loans Bank deb term Fixed 128 NOTES TO THE CONSOLIDATEDFI 22 CONTINUED BORROWINGS Placemen Private US Dollar (1) floating to$247m swapped SterlingonLIBOR rate based 6-month losses and gains value fair for adjusted basis, cost amortised on an (“USPP”) Placement Private Dollar US its values The Group relationships. hedge value fair and effective in designated hedged being to risk the attributable inputs) ex by both impacted been have USPP of the amounts carrying The fairrate value adjustme of interest cumulative effect 2017, the of end at the that, as requiring a covenant contains USPP The has Group The period. 12-month preceding the 1 for 3 to than less be should not items, exceptional excluding payable, interest for 31 ended January year the 2017. leases Finance bui for maturity term lease The average leases. finance under equipment and and fixtures buildings of its some leases The Group sixyears) and for fixtures and equipment is twoyears (2015/16: two years).Certain building leases includeclause a to enable charge to prevailing market conditions. follows: are as payments, lease of minimum value the present with together leases, finance under payments lease minimum Future yea one than Less £ millions US Dollar Private Placemen Private US Dollar Finance leases leases Finance Borrowings Fair valuesofborrowings havebeen calculated by discountingcash flowsprevailing at interest and foreign exchange rates.Thi Measurement’. Value 13, ‘Fair IFRS of hierarchy value fair the by as defined

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23 DERIVATIVES CONTINUED Offsetting of derivative assets and liabilities: Net amounts of Gross amounts of Gross amounts derivatives derivatives not Gross amounts of offset in the presented in the offset in the recognised consolidated consolidated consolidated £ millions derivatives balance sheet balance sheet balance sheet Net amount At 31 January 2017 Derivative assets 90 – 90 (26) 64 Derivative liabilities (26) – (26) 26 – At 31 January 2016 Derivative assets 99 – 99 (6) 93 Derivative liabilities (6) – (6) 6 –

24 FINANCIAL RISK MANAGEMENT Kingfisher’s treasury function has primary responsibility for managing certain financial risks to which the Group is exposed. The Board reviews the levels of exposure regularly and approves treasury policies covering the use of financial instruments required to manage these risks. Kingfisher’s treasury function is not run as a profit centre and does not enter into any transactions for speculative purposes. In the normal course of business, the Group uses financial instruments including derivatives. The main types of financial instruments used are fixed term debt, bank loans and deposits, money market funds, interest rate swaps, commodity swaps and foreign exchange contracts. Interest rate risk Borrowings arranged at floating rates of interest expose the Group to cash flow interest rate risk, whereas those arranged at fixed rates of interest expose the Group to fair value interest rate risk. The Group manages its interest rate risk by entering into certain interest rate derivative contracts which modify the interest rate payable on the Group’s underlying debt instruments, principally the fixed term debt. Currency risk The Group’s principal currency exposures are to the Euro, US Dollar, Polish Zloty and Russian Rouble. The Euro, Polish Zloty and Russian Rouble exposures are operational and arise through the ownership of retail businesses in France, Spain, Portugal, Germany, Ireland, Poland and Russia. In particular, the Group generates a substantial part of its profit from the Eurozone, and as such is exposed to the economic uncertainty of its member states. The Group continues to monitor potential exposures and risks, and consider effective risk management solutions. It is the Group’s policy not to hedge the translation of overseas earnings into Sterling. In addition, the Group has significant transactional exposure arising on the purchase of inventories denominated in US Dollars, which it hedges using forward foreign exchange contracts. Under Group policies, the Group companies are required to hedge committed inventory purchases and a proportion of forecast inventory purchases arising in the next 12 months, and this is monitored on an ongoing basis. Kingfisher’s policy is to manage the interest rate and currency profile of its debt and cash using derivative contracts. The effect of these contracts on the Group’s net cash position is as follows: Sterling Euro US Dollar Other £ millions Fixed Floating Fixed Floating Fixed Floating Fixed Floating Total At 31 January 2017 Net cash before fair value adjustments and financing derivatives (24) 90 (27) 120 (142) 544 – 42 603 Fair value adjustments to net cash – – – – (6) – – – (6) Financing derivatives – (619) – 432 150 – – 81 44 Net cash (24) (529) (27) 552 2 544 – 123 641

At 31 January 2016 Net cash before fair value adjustments and financing derivatives (32) 188 (23) 26 (174) 461 – 49 495 Fair value adjustments to net cash – – – – (12) – – – (12) Financing derivatives – (437) – 259 187 5 – 49 63 Net cash (32) (249) (23) 285 1 466 – 98 546

130 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

2) 5 5 3 1 ( 33 24 131 131 costs hedges (costs) 2015/16 2015/16 Increase Income/ cash flow flow cash Derivative Net finance Net finance 5 8 6 1 (5) 21 43 costs (costs) hedges hedges 2016/17 2016/17 Income/ Increase ates. cash flow cash s and receivables, due to to due receivables, s and rs used to hedge forecast Derivative www.kingfisher.com the purchases occur. See Net Net finance

on profit from the retranslation retranslation the from on profit of the years then ended. In In ended. then years of the ing activities, hedge accounting accounting hedge activities, ing ngfisher, are borrowings, deposits deposits borrowings, are ngfisher, derivative cashderivative flow hedges www.kingfisher.com icant market risks impacting Ki d foreign exchange rates.d foreign exchange e dates and is not necessarily representative representative is not necessarily and e dates rrency assets and liabilities, there is no significant impact impact significant no is there liabilities, and assets rrency et variables on the carrying amount of trade and other payable other of and amount trade on carrying the et variables dges results from retranslation of forward purchases of US US of Dolla purchases of forward from retranslation results dges ins and losses are deferred in other comprehensive until income comprehensive in other are deferred ins and losses currency risks,currency being the signif It has been prepared on the basis that the Group’s debt, hedg Group’s debt, the that basis on the prepared been has It ity of net finance costs (reflecting the impact on profit) and and on profit) impact the (reflecting costs net finance of ity the analysis relates to the position at thos position to the relates the analysis

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r and derivatives.The following analysisillustrates the sensitiv rates an in changes interest to income) comprehensive other on impact the (reflecting Othe US Dollar purchases of inventories. The associated fair value ga value US The associated purchases fair inventories. Dollar of details. further for 23 note mark in of movements impact the excludes analysis The sensitivity tax. of effect the before and are sensitivity, low the associated January and 31 2017 at 31 January positions the reflecting constant, remain contracts tive deriva and of debt proportion currency foreign and designations, 2016 respectively. As a consequence, The impact of changes in foreign exchange rates on cash flow he effective. fully are hedges all that is assumed it analysis sensitivity the preparing r exchange foreign and rates interest in change opposite and equal of an event in the reversed be would above shown effects The £ millions Effect of 10% appreciation in foreign exchange rates on derivative cash flow hedges US against Sterlin Dollar Due to the Group’s hedging arrangements and offsetting foreign cu foreign and offsetting arrangements hedging Due to the Group’s £ millions costs finance net on rates interest in rise 1% of Effect Sterlin Financial instruments principally affected by interest rate and and rate interest by affected principally instruments Financial

of financial instruments. instruments. of financial US Dollar against Euro US against Euro Dollar othe US against Dollar Euro US Dolla – – (6) 12) 44 64 ( 641 603 – 81 42 123

6 (6) 93 26 (26) policies, the Group Group the policies, ext 12 months, and ext 12 months, and

– – – – – – gfisher’s treasury functionis Other Other ussia. ussia. offset in the ncertainty of its member consolidated consolidated ixed rates of interest expose expose rates interest of ixed uments used are fixed term term fixed are used uments balance sheet balance sheet amount Net he Board reviews the levels of of the levels reviews he Board derivatives not fect of these contracts on the on the contracts of these fect t transactional exposure arising Gross amounts of (6) 99 90 (26) – – – 544 544 derivatives Floating Fixed Floating Total consolidated consolidated balance sheet Net amounts of amounts Net of presented in the 2 (6) 12) – – – – ( 174) 461 –49 495 US Dollar Dollar US 150 ( (142) d Russian Rouble exposures exposures Rouble d Russian an Zloty Polish The Euro, uble. cast inventory purchases arising in the n the in arising purchases inventory cast offset in the the in offset consolidated consolidated balance sheet – – Gross amounts Gross amounts 259 187 5 – 49 63 120 432 552 (6) 99 90 (26) – – – – recognised derivatives Euro Euro 23) 26 23) 285 1 466 – 98 546 ( ( (27) (27) Gross amounts of es inFrance, Spain, Portugal, Germany, Ireland,Poland and R p to cash flow interest rate risk, whereas those arranged at f arranged those whereas risk, rate interest flow cash p to risks, and consider effective risk management solutions. solutions. management risk effective consider and risks, from the Eurozone, and as such is exposed to the economic u economic the to exposed is such as and Eurozone, the from ruments including derivatives. The main types of financial instr of financial types main The derivatives. including ruments profile of its debt and cash using derivative contracts. The ef contracts. derivative using and cash of debt its profile rate swaps, commodity swaps and foreign exchange contracts. contracts. exchange and foreign commodity swaps rate swaps, – 90 437) 249) ( ( (529) (619)

ventory purchases and a proportion of fore – – – 32)188 32) ( ( (24) (24) NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL Fixed Fixed Floating Fixed Floating Fixed Sterling derivatives derivatives g 2016/17 Report Annual | plc Kingfisher this is monitored on an ongoing basis. basis. on ongoing an monitored is this currency rate and interest the is to manage policy Kingfisher’s as follows: is position cash net Group’s are operational and arise through the ownership of retail business of its profit part a substantial generates Group the In particular, and exposures potential monitor to continues The states. Group It is the Group’spolicy not tohedge the translationof overseas earnings into Sterling.In addition, the Group has significan Group Under contracts. exchange foreign forward using hedges it which Dollars, US in denominated inventories of purchase on the in committed hedge to required are companies

Net cash Net cash Fair value adjustments to net cash cash net to adjustments value Fair – – Financing derivatives derivatives Financing Derivative liabilities liabilities Derivative Financing derivatives derivatives Financing Net cash debt, bank loans and deposits, money market funds, interest interest funds, market money deposits, and loans debt, bank 2017 At 31 January Net cash before fair value adjustments derivatives and financing cash net to adjustments value Fair 130 NOTES TO THE CONSOLIDATEDFI 23 CONTINUED DERIVATIVES liabilities: and assets derivative of Offsetting £ millions 2017 At 31 January assets Derivative 2016 At 31 January assets Derivative 24 MANAGEMENT RISK FINANCIAL T exposed. is Group the which to risks financial certain managing for responsibility has primary function treasury Kingfisher’s Kin risks. these manage to required instruments of the use financial covering policies treasury and approves regularly exposure purposes. speculative for into transactions any enter not does not run and centre as a profit inst financial uses Group the business, of course normal In the risk rate Interest Grou the expose interest of rates at floating arranged Borrowings the modify which contracts ivative der rate interest certain into entering by risk rate interest its manages Group The risk. rate interest value fair to Group the debt. term fixed the principally instruments, debt underlying Group’s on the payable rate interest Currency risk Ro Zloty and Russian Polish llar, US Do Euro, the to are exposures currency principal The Group’s £ millions £ millions Net cash before fair value adjustments and financin 2016 At 31 January Derivative liabilities liabilities Derivative NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24 FINANCIAL RISK MANAGEMENT CONTINUED Liquidity risk The Group regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash flow forecast for the next four years, determining the level of debt facilities required to fund the business, planning for repayments of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows. The following table analyses the Group’s non-derivative financial liabilities and derivative assets and liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. It excludes trade and other payables and short term foreign exchange contracts due to the low associated liquidity risk. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest) and as such may differ from the amounts disclosed on the balance sheet. Less than More than £ millions 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total At 31 January 2017 Bank loans (3) (2) (2) (1) (1) – (9) Fixed term debt (9) (147) – – – – (156) Finance leases (12) (8) (8) (6) (5) (13) (52) Derivatives – receipts 9 147 – – – – 156 Derivatives – payments (1) (98) – – – – (99)

At 31 January 2016 Bank overdrafts (76) – – – – – (76) Bank loans (3) (3) (1) (2) (1) – (10) Fixed term debt (57) (8) (130) – – – (195) Finance leases (14) (9) (7) (5) (5) (17) (57) Derivatives – receipts 57 8 130 – – – 195 Derivatives – payments (38) (1) (98) – – – (137)

At 31 January 2017, the Group had undrawn revolving committed facilities of £225m due to mature in March 2021 and £400m due to mature in November 2018. The facilities both contain a covenant requiring that, as at the end of each annual and semi-annual financial reporting period, the ratio of operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding 12-month period. The Group has complied with this covenant for the year ended 31 January 2017. Credit risk The Group deposits surplus cash with a number of banks with strong short-term credit ratings and with money market funds which have AAA credit ratings and offer same-day liquidity. A credit limit for each counterparty is agreed by the Board covering the full value of deposits and the fair value of derivative contracts. The credit risk is reduced further by spreading the investments and derivative contracts across several counterparties. At 31 January 2017, the highest total cash investment with a single counterparty was £63m (2015/16: £63m). The Group’s exposure to credit risk at the reporting date is the carrying value of trade and other receivables, cash at bank, short-term deposits and the fair value of derivative assets. No further credit risk provision is required in excess of the normal provision for bad and doubtful debts as the Group has a low concentration of credit risk in respect of trade receivables. Concentration of risk is limited as a result of low individual balances with short maturity, spread across a large number of unrelated customers. At 31 January 2017, trade and other receivables that are past due but not provided against amount to £62m (2015/16: £62m), of which £3m (2015/16: £1m) are over 120 days past due. Refer to note 36 for details on guarantees provided by the Group. Capital risk Capital risk management disclosures are provided in the Financial Review on page 36. 25 DEFERRED TAX £ millions 2016/17 2015/16 Deferred tax assets 28 11 Deferred tax liabilities (282) (333) (254) (322)

132 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

7 3 3) – 8 ( 63 99 13 73 (88) (37) (13) 162 277 162 133 133 (254) (322) 6) – 2 – – ( (4) (6) 2 6 10)16) (314) (314) ( ( 61 81 (85) (37) 142 256 142 ly. her innote 5, the vast pply to Group companies. flows relating to rent, rent, to relating flows the remaining £54m the wouldbe tax to pay total ed for closure would would closure ed for ed forward indefinitely. ed forward indefinitely. www.kingfisher.com

ture capital gains. 2 – e profits. A deferred tax asset A deferred e profits. compared with the original – 1 4 6 related to restructuring oup entered into a lease oup entered into (2) (17) 9 (18) diction and when the Group Group the when and diction (108) shortfall and long-term idle idle long-term and shortfall (116) Post- ses are losses arising in Portugal Portugal arising in are losses ses benefits benefits Other Total ated onerous lease provisions provisions lease onerous ated

www.kingfisher.com 1 1 2 – (3) employment 20 21 18 20 – – – 1 9 6 – Onerous property contracts contracts Restructuring Total 16 Tax Tax losses g programmes as detailed furt detailed as g programmes available for offset against against offset fu for available – 7 (1) 79 41 32 (10) asset has been recognised in respectasset has been of 3) – introducedchanges of result a as year largely by the in theicantly French 1 ( (7) 24 (96) (114) property Provisions Gains on – 1) – xt one to twelve years. Other unrecognised losses may be carrimay be unrecognised losses years. xt one to Other twelve e provisions are based on the present value of future cash out cash of future value on present are based the e provisions ( 15 (24) 15 tities. Included in unrecognised tax los in unrecogniseds in the relevant entities. Included 13 d continental Europe restructurin (18) (144)(129) (91) (115) 28 43 4 4 (101) (101) (136) (114) 41 9 (116) (6) (322) (136) (141) x losses of £96m (2015/16: £96m) £96m) (2015/16: £96m of losses x areearnings continually the As ventures. reinvested joint and subsidiaries byof overseas gs sses of £135m (2015/16: £103m) available for offset against futur (2015/16: £103m)offset available forsses of against £135m tion to some employee redundancy costs. During the year, the Gr depreciation Accelerated tax tax Accelerated fference has decreased signif has fference 16: £45m) of such losses.deferred No tax (6) 4 8 5

t t release of £37m was recorded in the year reflecting primarily savings on B&Q store as savings costs primarily exit in reflecting year recorded the of was £37m release

t

r

At 31 January 2016 (restated) 2016 At 31 January Reclassifications Reclassifications (Charge)/credit to other comprehensive income income comprehensive other to (Charge)/credit Exchange differences 2017 At 31 January Unwinding of discount and change in discount rate rate in discount and change of discount Unwinding Credit/(charge) to other comprehensive income of £7m (2015/16: £5m) which can be carried forward only in the in carried only ne forward can which be of (2015/16: £5m) £7m ta capital unused has also Group the sheet date, At the balance earnin unremitted on the recognised is tax liability deferred No there on which remitted could be which Earnings future. foreseeable the in on them payable be to expected is tax Group, no the £3,630m).£179m (2015/16: The total temporary di government thatmeans surtax a of on 3% of 100% gross dividend distributions paid byFrench entities isno longer expected to a An amendment has been made to the prior year categorisation to reflect the nature of the deferred tax balances more appropriate those exclude provisions Such rents. at above-market subsidiaries of on acquisition acquired properties with along properties, Th provisions. in the restructuring are included which programmes Within theonerous property contracts provisions, the Grouphas provided against future liabilities forproperties sublet at a Current liabilities Current liabilities 26 PROVISIONS 26 PROVISIONS £ millions At 1 February 2016 Release to income statemen has been recognised in respect (2015/ of £81m profit of stream future (2015/16:unpredictability the £58m) to due Non-current liabilities At theAt balancehas trading lo the sheet tax unused date, Group At 1 February 2015 (as reported) reported) (as 2015 February 1 At (restated) 2015 February 1 At (Charge)/credit to income statemen £ millions (restated) At 1 February 2016 Credit/(charge) to income statemen Deferred tax assets and liabilities are offset against each other when they relate to income taxes levied by the same tax juris tax same the by levied taxes income to relate they when other each against offset are and liabilities assets tax Deferred basis. net a on liabilities and assets tax current its settle to right, enforceable legally the has and intends,

Exchange differences Utilised in yea the Utilised Exchange differences At 31 January 2017 2017 At 31 January rates and service charges net of sublease income. income. of sublease net charges service and rates UK an of the costs estimated the include provisions Restructuring addi in costs, property idle to future relates of which majority rel the with stores, of these closure the following leases remaining of the dispose to party third with a transaction liability A recognised. to be continuing provisions recognised, and the reversal of a provision following the announcement that one of the B&Q stores originally earmark originally stores B&Q the of one that announcement the following provision of a reversal the and recognised, provisions open. remain (9) 11 (99) (52) 156 (322) (333) (156) 2015/16

– – – – 28 (13) (254) (282) mature in mature 5 years 5 years Total 2016/17 have AAA credit ratings ratings credit AAA have hich £3m More than porting period, the ratio ratio the period, porting term foreign exchange term foreign

– – (76) – – (195) – – 195 – – (137) – – – es. At 31 January 2017, the 2017, January es. At 31 ows (including interest) and (1) (5) onth The period. Group has w concentration of credit risk risk credit of w concentration nd the fair value of derivative of derivative value the fair nd hort-term deposits and the fair fair the and deposits hort-term maturity and identifying an an identifying and maturity pread across a large number of number a large across pread ntmaturity groupings based on – – – – – – – (1) (6) – – – – (2) (8) r receivables, cash at bank, s at bank, cash r receivables, – (2) (8) (98) 147 (147) 9 (3) (3) (1) (2) (1) – (10) (9) (3) (1) 57 8 130 cilities of in March £225m due of due cilities 2021 and mature to to £400m (14) (9) (7) (5) (5) (17) (57) (38) (1) (98) (76) (12) at, as at the end of each annual and semi-annual financial re financial semi-annual and annual of each end as at the at, 1 year 1-2 years 2-3 years 3-4 years 4-5 years l maturity date. It excludes trade and other payables and short payables and other trade It excludes date. l maturity disclosed in the table are the contractual undiscounted cash fl cash undiscounted contractual the are table in the disclosed Less than Less than e carrying value of trade othe and trade of value carrying e NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL t for each counterparty is agreed by the Board covering the full value of deposits of deposits a value the full covering by is the Board agreed counterparty t each for ngle counterparty was £63m (2015/16: (2015/16: was £63m). ngle counterparty £63m (57) (8) (130) t t 2016/17 Report Annual | plc Kingfisher

Capital risk risk Capital 36. page on Review Financial in the provided are disclosures management risk Capital 25 DEFERRED TAX £ millions tax assets Deferred tax liabilities Deferred 132 NOTES TO THE CONSOLIDATEDFI 24 CONTINUED MANAGEMENT FINANCIAL RISK risk Liquidity the for forecast flow cash udent pr a preparing involves This activities. its fund to required facilities debt and cash of the level reviews regularly The Group nextfour years, determining thelevel of debt facilitiesrequired to fund thebusiness, planning for repayments of debt at its outflows. unexpected against reserve a provide to headroom of amount appropriate releva into liabilities and assets derivative and liabilities financial non-derivative Group’s the analyses table The following contractua the to date sheet at the balance period remaining the contracts due to the low associated liquidityThe risk. amounts sheet. balance on the disclosed the amounts from differ may as such £ millions 2017 At 31 January loans Bank Credit risk which funds market money with and ratings credit ng short-term stro with banks of number a with cash surplus deposits Group The Bank loans loans Bank deb term Fixed leases Finance – receipts Derivatives – payments Derivatives fa committed revolving undrawn had Group the 2017, At 31 January requiring th covenant contain a both The facilities 2018. November ofoperating profit to net interestpayable, excluding exceptional items, should not be less than to 3 1 for thepreceding 12-m 2017. year 31 January for ended the covenant this complied with Derivatives – payments – payments Derivatives 2016 At 31 January overdrafts Bank Finance leases leases Finance Fixed term deb term Fixed and offer same-day liquidity. A credit limi counterparti several across contracts derivative and investments the by spreading further is reduced risk credit The contracts. si a with investment cash total highest th is date reporting the at risk credit to exposure Group’s The assets. of derivative value lo has a Group as the debts doubtful and bad for provision normal of the excess in required is provision risk credit further No s maturity, short with balances individual low of result d as a of risk is limite Concentration receivables. of trade in respect unrelated customers. w of £62m), (2015/16: £62m to amount provided against not but due past are that receivables other and trade 2017, January 31 At due. days past are over £1m) (2015/16: 120 Refer tonote 36 for detailson guarantees provided by theGroup. Derivatives – receipts – receipts Derivatives NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

26 PROVISIONS CONTINUED For the B&Q UK onerous leases, the weighted average remaining lease term to earliest exit, before any surrenders, assignment or mitigation through subleases, is nine years. The provisions have been discounted to reflect the time value of money and the risks associated with the specific liabilities. The ultimate costs and timing of cash flows related to the above provisions are largely dependent on exiting the property lease contracts and subletting surplus space. 27 POST-EMPLOYMENT BENEFITS The Group operates a variety of post-employment benefit arrangements covering both funded and unfunded defined benefit schemes and defined contribution schemes. The most significant defined benefit and defined contribution schemes are in the UK. The principal overseas defined benefit schemes are in France, where they are mainly retirement indemnity in nature. Defined contribution schemes Costs for the Group’s defined contribution pension schemes, at rates specified in the individual schemes’ rules, are as follows:

£ millions 2016/17 2015/16 Charge to operating profit 23 25

From July 2012, an enhanced defined contribution pension scheme was offered to all UK employees. Eligible UK employees have been automatically enrolled into the scheme since 31 March 2013. Defined benefit schemes The Group’s principal defined benefit arrangement is its funded, final salary pension scheme in the UK. This scheme was closed to new entrants from April 2004 and was closed to future benefit accrual from July 2012. The scheme operates under trust law and is managed and administered by the Trustee on behalf of members in accordance with the terms of the Trust Deed and Rules and relevant legislation. The Trustee Board consists of ten Trustee directors, made up of five employer-appointed directors, one independent director and four member-nominated directors. The Trustee Board delegates day-to-day administration of the scheme to the Group Pensions Department of Kingfisher plc. The main risk to the Group is that additional contributions are required if investment returns and demographic experience are worse than expected. The scheme therefore exposes the Group to actuarial risks, such as longevity risk, currency risk, inflation risk, interest rate risk and market (investment) risk. The Trustee Board regularly reviews such risks and mitigating controls, with a risk register being formally approved on an annual basis. The assets of the scheme are held separately from the Group and the Trustee’s investment strategy includes a planned medium-term de-risking of assets, switching from return-seeking to liability-matching assets. Other de-risking activities have included the scheme acquiring an interest in a property partnership, as set out further below, and entering into a medically underwritten annuity policy. A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee and the last full valuation was carried out as at 31 March 2016. Following this valuation and in accordance with the scheme’s Statement of Funding Principles, the Trustee and Kingfisher have agreed annual employer contributions of £37m from April 2017. The contribution schedule has been derived with reference to a funding objective that targets a longer-term, low risk funding position in excess of the minimum statutory funding requirements. This longer-term objective is based on the principle of the scheme reaching a point where it can provide benefits to members with a high level of security, thereby limiting its reliance on the employer for future support. The Company monitors the scheme funding level on a regular basis and will review with the scheme Trustee at future valuations the continued appropriateness of the repayment schedule currently in place. The Trust Deed provides Kingfisher with an unconditional right to a refund of surplus assets assuming the full settlement of plan liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business the Trustee has no rights to unilaterally wind up, or otherwise augment the benefits due to members of, the scheme. Based on these rights, any net surplus in the UK scheme is recognised in full. UK scheme interest in property partnership In 2010/11, the Group established a partnership, Kingfisher Scottish Limited Partnership (‘Kingfisher SLP’), as part of an arrangement with the UK scheme Trustee to address an element of the scheme deficit and provide greater security to the Trustee. The partnership interests are held by the Group and by the scheme, the latter resulting from investments of £78m and £106m made by the Trustee in January and June 2011 respectively. These investments followed Group contributions of the same amounts into the scheme. In accordance with IAS 19, ‘Employee Benefits’, the investments held by the scheme in Kingfisher SLP do not represent plan assets for the purposes of the Group’s consolidated financial statements. Accordingly, the reported pension position does not reflect these investments. UK property assets with market values of £83m and £119m were transferred, in January 2011 and June 2011 respectively, into the partnership and leased back to B&Q plc. The Group retains control over these properties, including the flexibility to substitute alternative properties. The Trustee has a first charge over the properties in the event that Kingfisher plc becomes insolvent. The scheme’s partnership interest entitles it to the majority of the income of the partnership over the 20-year period of the arrangement. The payments to the scheme by Kingfisher SLP over this term are reflected as Group pension contributions on a cash basis. At the end of this term, Kingfisher plc has the option to acquire the Trustee’s partnership interest in Kingfisher SLP. The Group has control over the partnership and therefore it is consolidated in these Group financial statements. Accordingly, advantage has been taken of the exemptions provided by Regulation 7 of the Partnerships (Accounts) Regulations 2008 from the requirements for preparation, delivery and publication of the partnership’s accounts.

134 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

– 4 5) 8) 4) 2) ( ( ( ( 135 135 2,476) ( – 6) – 1) 5 2) 6)1) (8) – (78) 2) (2) ( ( ( ( ( ( 82) 112 87) 159 97) (2,703) 87) 159 ( ( ( ( 102) ( selling and distribution distribution and selling ive income. income. ive 2015/16 2015/16 2015/16 2015/16 2015/16 2015/16 2015/16 2015/16 www.kingfisher.com 2) 4) 2) 6) 1 ( ( ( ( 77) ( 2,606) 2,374) ( ( www.kingfisher.com 246 246

6

– 36 1 37 16 3 19 194 194

4 6 6 12 – 7 7 UK Overseas Total UK Overseas Total 2 6 8 246 246

– UK Overseas Total UK Overseas Total – 78 1 79 2,620 15 2,635 33 2 35 200 1 201 (2,374) (102) (2,476)

7 4 6 9 (9) (4) (7) (9) 38 13 96 59 (10) (50) (12) (57) (86) 131 131 159 159 131 131 (640) 3,256 (3,125) (3,125) (3,125) (3,125) (2,476) (2,476) 2 2 7 9 7 1 – – – (7) (2) (4) (1) (7) (2) (3) 18 (10) (87) (12) (108) (126) (108) (126) (102) 2016/17 2016/17 2016/17 2016/17 9 6 4 2 – – (4) (2) (9) (3) (2) 36 60 95 UK Overseas Total UK Overseas Total UK Overseas Total UK Overseas Total (46) (57) (84) 239 246 239 (637) 3,238 (2,999) (2,999) (2,374) m charge) and £4m charge (2015/16: £3m charge) are included in included are charge) £3m (2015/16: charge £4m and charge) m r

r

t t t

Administration costs costs Administration income/(expense) Net interest year end of at schemes in surplus/(deficit) Net Exchange differences Contributions paid by employe paid Contributions Net actuarial (losses)/gains Exchange differences

Current service cos service Current adjustments – experience gains/(losses) Actuarial Movements in the present value of defined benefit obligations are as follows: follows: as are obligations benefit defined of value present the in Movements £ millions of yea beginning at obligations benefit of defined Present value Net surplus/(deficit) in schemes schemes in Net surplus/(deficit) year of beginning at schemes in surplus/(deficit) Net cos service Current paid Benefits Fair value of scheme assets assets of scheme value Fair as follows: are or deficit surplus the in Movements £ millions Of the net charge to operating profit, a £9m charge (2015/16: £9 (2015/16: charge £9m profit, a operating charge to Of the net £ millions obligations benefit of defined Present value Current service cos service Current costs finance net to (credited)/charged Amounts Income statement £ millions profit to operating charged Amounts Net interest (income)/expense

Actuarial losses – changes in demographic assumptions in demographic – changes losses Actuarial Interest expense expense Interest assumptions in financial – changes (losses)/gains Actuarial year of end at obligations benefit of defined Present value statement to income Total (credited)/charged Administration costs costs Administration expenses and administrative expenses respectively. Actuarial gains and losses have been reported in the statement of comprehens of statement in the reported been have losses and gains Actuarial respectively. expenses administrative and expenses sheet Balance 25 2015/16 23 and defined defined and terms of the o the Group Pensions Pensions o the Group n automatically automatically n 2016/17 e investments followed followed e investments sets, switching from y the scheme in in scheme y the partnership and leased leased and partnership delivery and publication ed as Group pension Group pension ed as as defined benefit benefit as defined mitigation through rgets a longer-term, low longer-term, a rgets greed annual employer appropriatenessof the orse than expected. expected. than orse iple of the scheme reaching to new entrants from pointed directors, one reported pension position position pension reported dvantage has been taken of has been taken dvantage held by the Group and by the by and Group the by held al basis. The assets of the of the The assets al basis. the specific liabilities. liabilities. the specific an liabilities in the event of a jority ofjority the incomeof the ugment the benefits due to to due benefits the ugment t full valuation was carried out carried was valuation t full : operty partnership, as set out out set as partnership, operty or futuresupport. The Company ngement with the UK scheme rest in Kingfisherrest in SLP. s. The Trustee has has charge a Trustee first The s. risk andmarket (investment) risk. irements for preparation, y June 2011 respectively. Thes and g formally approved on an annu approved g formally reference to a funding objective that ta that objective reference a funding to ary 2011 and June 2011 respectively, into the the into respectively, June 2011 2011 and ary

by the Trustee on behalf of members in accordance with the with accordance in members of Trustee on behalf the by ) Regulations 2008 from the requ the Regulations 2008 from ) made by the Trustee made in Januar rols, with a risk register bein register risk a rols, with stment strategy includes a planned medium-term de-risking of as de-risking medium-term a planned includes strategy stment tes specified in the individual schemes’ rules, are as follows as are rules, schemes’ individual in the specified tes ewwith the schemeTrustee at future valuations thecontinued as as longevity risk, currency risk, inflation risk, interest rate nsolidated in these Group financial statements. Accordingly, a Accordingly, statements. financial Group these in nsolidated defined contribution schemes are in the UK. The principal overse principal UK. The are in the schemes contribution defined e greater security to the Trustee. The partnership interests are are interests partnership The Trustee. the to security greater e vitieshave included the schemeacquiring an interest in a pr to reflect the time value of money and the risks associated with with associated risks and the money of value time the reflect to ed directors. The Trustee Board delegates day-to-day administration of the scheme t of the scheme administration day-to-day The Trustee Board delegates ed directors. ntribution schedule has been derived with derived been has schedule ntribution directors, made up of five employer-ap up of five made n. The Trustee Board consists of directors, Trustee ten NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL contracts and subletting lease property the exiting on dependent largely are provisions above the to related s of the Partnerships (Accounts £83m and £119m were transferred, in Janu transferred, were £119m and £83m

t rrently in place. 2016/17 Report Annual | plc Kingfisher UK scheme interest in property partnership arra an of part as SLP’), (‘Kingfisher Partnership Limited Scottish Kingfisher partnership, a established Group the In 2010/11, provid and deficit scheme of the an element address to Trustee 134 NOTES TO THE CONSOLIDATEDFI 26 CONTINUED PROVISIONS or assignment surrenders, any before exit, to earliest term lease remaining average weighted the leases, onerous UK B&Q For the discounted have been The provisions years. is nine subleases, 27 BENEFITS POST-EMPLOYMENT schemes benefit defined and unfunded funded both covering arrangements benefit of post-employment a variety The operates Group and benefit defined The most significant schemes. contribution schemes contribution Defined ra at schemes, pension contribution defined Group’s the Costs for £ millions Chargeoperating to profi Defined benefit schemes closed was scheme This UK. in the scheme pension salary final funded, its is arrangement benefit defined principal The Group’s fromaccrual July 2012. benefit closed future to April2004 and was administered and law is managed and trust under operates The scheme From July 2012, an enhanced defined contribution pension scheme was offered to all UK employees. Eligible UK employees have bee have UK employees Eligible employees. UK all to offered was scheme pension contribution defined enhanced an 2012, From July 2013. March scheme since 31 the into enrolled return-seeking to liability-matching assets. Other de-risking acti de-risking Other assets. liability-matching to return-seeking The Trustee Board regularly reviews such risks and mitigating cont mitigating risks and such reviews regularly Board Trustee The inve Trustee’s the and Group the from separately held are scheme The ultimate costs and timing of cash cash of flow costs and The ultimate timing space. surplus nature. in indemnity retirement mainly are they where France, in are schemes legislatio relevant Trust Rules and and Deed member-nominat four and director independent plc. of Kingfisher Department w are experience demographic and returns if investment required are contributions additional is that Group the to risk main The such risks, actuarial to the Group exposes therefore scheme The £106m and of £78m investments from resulting latter scheme, the Groupcontributions of the same amounts into the scheme. In accordancewith IAS 19, ‘Employee Benefits’, the investments held b the Accordingly, statements. financial consolidated Group’s of the the purposes for assets plan represent not do SLP Kingfisher doesnot reflect these investments. UK propertyvalues of with market assets back toB&Q plc. The Groupretains control over these properties, including flexibility the to substitute alternativepropertie ma the to it entitles interest partnership The scheme’s insolvent. becomes plc Kingfisher that event in the the properties over partnership over the 20-year period of the arrangement. The payments to the scheme by Kingfisher SLP over this term are reflect contributionson cash a basis. At the endof this term, Kingfisherplc has theoption to acquire theTrustee’s partnership inte co it is therefore and partnership the over control has Group The provided 7 Regulation by exemptions the accounts. partnership’s of the further below, andentering into medically a underwritten annuity policy. las the and Trustee the for actuary independent an by years three every out carried is scheme the of valuation actuarial full A March 2016. as at 31 have a and Kingfisher the Trustee Principles, of Funding Statement scheme’s the with in accordance and valuation this Following co The April 2017. from of £37m contributions risk fundingposition inexcess of minimum the statutory fundingrequirements. This longer-termobjective is based on theprinc a pointwhere it can provide benefits tomembers with high a levelof security,thereby limiting itsreliance onthe employer f revi will and basis on a regular level funding scheme the monitors cu schedule repayment of pl settlement full the assuming assets surplus of refund a to right unconditional an with Kingfisher provides Trust Deed The plan wind-up. Furthermore, in the ordinary course of business the Trustee has no rights to unilaterally wind up, or otherwise a in full. recognised is UK scheme the in surplus net any rights, on these Based scheme. of, the members NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

27 POST-EMPLOYMENT BENEFITS CONTINUED The present value of UK scheme defined benefit obligations is 66% (2015/16: 62%) in respect of deferred members and 34% (2015/16: 38%) in respect of current pensioners. The weighted average duration of the UK scheme obligations at the end of the year is 19 years (2015/16: 20 years). Movements in the fair value of scheme assets are as follows:

2016/17 2015/16 £ millions UK Overseas Total UK Overseas Total Fair value of scheme assets at beginning of year 2,620 15 2,635 2,800 15 2,815 Administration costs (4) – (4) (4) – (4) Interest income 93 – 93 83 – 83 Actuarial gains/(losses) – actual return less interest income 588 – 588 (217) – (217) Contributions paid by employer 36 2 38 36 1 37 Benefits paid (95) (1) (96) (78) (1) (79) Exchange differences – 2 2 – – – Fair value of scheme assets at end of year 3,238 18 3,256 2,620 15 2,635

The fair value of scheme assets is analysed as follows:

2016/17 2015/16 £ millions UK Overseas Total % of total UK Overseas Total % of total Government bonds (1) 1,616 – 1,616 49% 1,155 – 1,155 44% Corporate bonds 849 – 849 26% 779 – 779 30% Derivatives (94) – (94) (3%) (129) – (129) (5%) UK equities 61 – 61 2% 57 – 57 2% Overseas equities 281 – 281 9% 295 – 295 11% Property 28 – 28 1% 25 – 25 1% Annuity 217 – 217 7% 180 – 180 7% Cash and other 280 18 298 9% 258 15 273 10% Total fair value of scheme assets 3,238 18 3,256 100% 2,620 15 2,635 100%

(1) Including LDI repurchase agreement liabilities. All UK scheme assets have quoted prices in active markets, except for £397m (2015/16: £331m) of property, annuity and other assets. On 11 December 2015, the scheme entered into a medically underwritten annuity policy with a major insurance company for certain pensioner liabilities, thereby removing the longevity risk associated with these members. To reduce volatility risk a liability driven investment (LDI) strategy forms part of the Trustee’s management of the UK defined benefit scheme’s assets, including government bonds, corporate bonds and derivatives. The government bond assets category in the table above includes gross assets of £3.0bn (2015/16: £2.8bn) and associated repurchase agreement liabilities of £1.4bn (2015/16: £1.6bn). Repurchase agreements are entered into with counterparties to better offset the scheme’s exposure to interest and inflation rates, whilst remaining invested in assets of a similar risk profile. Interest rate and inflation rate derivatives are also employed to complement the use of fixed and index-linked bonds in matching the profile of the scheme’s liabilities. The estimated amount of total contributions to be paid to the UK and overseas pension schemes by the Group during the next financial year is £37m. Principal actuarial valuation assumptions The assumptions used in calculating the costs and obligations of the Group’s defined benefit pension schemes are set by the Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the sensitivity analysis. The UK scheme discount rate is derived using a single equivalent discount rate approach, based on the yields available on a portfolio of high-quality Sterling corporate bonds with the same duration as that of the scheme liabilities.

2016/17 2015/16 Annual % rate UK Overseas UK Overseas Discount rate 2.7 1.5 3.6 1.8 Price inflation 3.6 2.0 3.1 2.0 Rate of pension increases 3.3 – 2.9 – Salary escalation n/a 2.4 n/a 2.4

136 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

– – (9) 137 361 352 137 87.4 87.5 88.6 86.8 2015/16 Ordinary Ordinary £ millions share capital share 2 2 (56) (8) (58) Increase by £96m Increase 90.7 88.3 88.8 87.1 2,350 369 2,296 361 shares 2,296 2,240 millions ordinary 2016/17 experience of the of the experience mptions have been been have mptions Number of Number of actuarial assumptions, actuarial £200m (2015/16: (2015/16: £200m) £200m www.kingfisher.com lt of an irrevocable closed closed irrevocable lt of an rice inflation would be inflation rice a. for bothmales and females.

Increase/decrease by £46m Increase/decrease Increase/decrease by £48m Increase/decrease Decrease/increase by £57m Decrease/increase ction model data published by Impact on Impact definedbenefiton obligation www.kingfisher.com r resulting from changes to key by 0.1% by 0.1% crease by 0.1% crease l funding valuations. The base mortality assu The mortality base valuations. l funding Change inassumption Change expectancy by one yea expectancy Increase/de Increase/decrease Increase/decrease Increase/decrease of the Company’s own shares own of Company’s forthe cancellation at costa of deducted from equity in the previous financial year as a resu year a as financial previous in the from equity deducted 2015 improvements subject to a long-term rate of 1.25% p. of 1.25% rate subject a long-term to 2015 improvements timated impact on theobligation e impacts on the obligations of changesin discount rate p and Increase in life Increase time to time in connection with triennia with connection in time to time wance is in line with CMI pence per share. share. per pence 7 / 5 ich was in place as at 31 January 2016 – see note 21. 21. note – see 2016 at 31 January as place ich was in pensioners are expected to live (60 now)

n

Female Male Male Female Male Male

– – – – ssumptio Rate of pension increases increases pension of Rate Mortality Mortality Age to which future pensioners are expected to live (60 in 15 years’ time) 15 years’ (60 in live to expected are pensioners future which Age to Ordinary shares have a par value of 15 value a par have shares Ordinary Purchase of own shares for cancellation cancellation for shares of own Purchase At 1 February 2015 cancellation for shares of own Purchase significantly offset by movements in the fair value of the scheme assets. assets. scheme of the value fair in the movements by offset significantly 28 CAPITAL SHARE At 1 February 2016 New shares issued under share schemes 2017 At 31 January New shares issued under share schemes 2016 At 31 January Price inflation inflation Price abov the strategy, investment matching Due to the asset-liability The following sensitivity analysis for the UK scheme shows the es shows scheme UK the for analysis sensitivity The following A rate Discount Years toAge whichcurrent For the UK scheme, the mortality assumptions used for IAS 19 purposes have been selected with regard to the characteristics and characteristics the to regard with selected been have purposes 19 IAS for used assumptions mortality the scheme, UK the For membershipof the scheme as assessed from constant. assumptions other all holding whilst

derived using an analysis of current mortality rates carried out by Club Vita for the Trustee and the CMI life expectancy proje expectancy life CMI the and Trustee the Vita for Club out by carried rates mortality current of analysis an using derived The latterprofession. allo the UK actuarial follows: as are members UK scheme of expectancy life for The assumptions as part of its capital returns programme. Of this £200m, £50m was was £50m £200m, Of this programme. returns capital of its as part wh agreement season buyback During the year the Group purchased 58 million (2015/16: 56 million) (2015/16: 58 million purchased Group the year During the – – 6: 38%)6: in respect of pensioner liabilities, liabilities, pensioner d into with d with into oss assets of £3.0bn of £3.0bn oss assets ncial year is £37m. is £37m. year ncial 2015/16 2015/16 se assumptionscan lead ectors after consultation consultation after ectors 3.1 2.0 2.9 3.6 1.8 n/a 2.4 UK Overseas 2015/16 tfolio of high-quality Sterling Sterling high-quality of tfolio of the scheme’s liabilities. liabilities. scheme’s of the – – (4) – (4) (4) 36 1 37 83 – 83 – UK UK Overseas Total (78) (1) (79) 2015/16 2015/16 similar risk profile. Interest rate rate Interest profile. risk similar 2.0 2.0 1.5 1.5 2.4 2.4 (217)– (217) 2,62015 2,635 2,800 15 2,815 reements are entere reements are 5725 – 57 – 25 2% 1% 2 UK Overseas Total % of total 3.3 3.6 2.7 (4) UK Overseas 129) – (129) (5%) 258 15 273 10% 779295 – 779180 30% – 295 –180 11% 7% 38 93 2016/17 n/a ( (96) 1,155 – 1,155 44% 2,620 15 2,635 100% 588 3,256 2,635 2 2 – – – (1) 18 15 9% 2% 1% 9% 7% (3%) 26% 49% 100% benefit scheme’s assets, assets, scheme’s benefit of UK defined the s management £1.6bn). Repurchase ag Repurchase £1.6bn). 2016/17 – (4) 36 61 28 93 UK Overseas Total (94) (95) 298 588 849 281 217 ets. assets. other of property, and annuity £331m) 2015/16: 3,238 1,616 2,620 3,256 tten tten annuity policy with a major for company certain insurance – – – – – – – government bond assets category in the table above includes gr includes above table the in category assets bond government 18 18 2016/17 ons are based on the conditions at the time and changes in the in changes and time the at conditions the on based are ons and overseas pension schemes by the Group during the next fina next the during Group by the schemes pension overseas and discount rate approach, based on the yields available on a por available yields on the based approach, rate discount the end of the year is 19 years (2015/16: 20 years). years). 20 (2015/16: years is 19 yearend of the the rategy forms part of the Trustee’ part rategy forms ons 62%) (2015/16: is 66% in respect of deferred members (2015/1 and 34% 28 61 UK UK Overseas Total of % total (94) 280 280 281 281 217 849 849 1,616 3,238

r agreement liabilities of £1.4bn (2015/16: (2015/16: of £1.4bn liabilities agreement

NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL oyed to complement the use of fixed and index-linked bonds in matching the profile profile the matching in bonds index-linked and of fixed use the complement to oyed

r UK scheme obligations at UK scheme obligations at defined obligati benefit ed prices in active markets, except for £397m ( £397m for except markets, active in prices ed

r

(1)

r nsioners. 2016/17 Report Annual | plc Kingfisher nnual % rate nnual rate % counterparties to better offset the scheme’s exposure to interest and inflation rates, whilst remaining invested in assets of a of in assets invested remaining whilst rates, inflation and interest to exposure scheme’s the offset better to counterparties also rate empl derivatives are and inflation UK the to paid be to contributions total of amount estimated The Rate of pension increases increases Rate of pension (2015/16: £2.8bn) and associated repurchase £2.8bn) (2015/16: Price inflation On 11 December 2015, the scheme entered into a medically underwri the scheme entered a medically into 2015, On 11 December members. with these risk associated longevity the removing thereby st (LDI) investment driven risk a liability volatility To reduce The and derivatives. bonds corporate bonds, government including The fair value of scheme assets is analysed as follows: follows: as is analysed assets scheme of value The fair Total fairvalue of scheme assets Administration costs costs Administration Benefits paid paid Benefits Principal actuarial valuation assumptions assumptions valuation actuarial Principal Dir the set by are schemes pension benefit defined Group’s of the obligations and costs the calculating in used The assumptions with independent professionally qualified actuaries. The assumpti analysis. sensitivity in the illustrated as obligations, estimated in the movements to significant equivalent a single using derived is rate discount UK scheme The corporatebonds with thesame duration as thatof thescheme liabilities. A Discount rate Salary escalation 136 NOTES TO THE CONSOLIDATEDFI 27 CONTINUED BENEFITS POST-EMPLOYMENT of UK scheme present value The current pe of the duration average The weighted follows: as are assets scheme of value fair the in Movements yea of beginning at assets of scheme value Fair of yea end at assets of scheme value Fair bonds Government (1) LDI repurchase agreement Including liabilities. quot scheme assets have UK All Overseas equities equities Overseas Annuity Actuarial gains/(losses)– actualreturn less interest income Derivatives Derivatives Property othe and Cash Contributions paid by employe paid Contributions UK equities £ millions Interest income income Interest £ millions Corporate bonds Exchange differences NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

29 OTHER RESERVES Translation Cash flow Available-for- £ millions reserve hedge reserve sale reserve Other Total At 1 February 2016 (205) 25 2 172 (6) Currency translation differences Group 390 – – – 390 Joint ventures and associates (1) – – – (1) Cash flow hedges Fair value gains – 52 – – 52 Gains transferred to inventories – (60) – – (60) Available-for-sale financial assets Fair value gains – – 5 – 5 Transferred to income statement – – (7) – (7) Tax on items that may be reclassified – 2 – – 2 Other comprehensive income for the year 389 (6) (2) – 381 Purchase of own shares for cancellation – – – 9 9 At 31 January 2017 184 19 – 181 384

At 1 February 2015 (194) 41 – 164 11 Currency translation differences Group 1 – – – 1 Joint ventures and associates (3) – – – (3) Transferred to income statement (7) – – – (7) Cash flow hedges Fair value gains – 24 – – 24 Gains transferred to inventories – (50) – – (50) Available-for-sale financial assets Fair value gains – – 2 – 2 Tax on items that may be reclassified (2) 10 – – 8 Other comprehensive income for the year (11) (16) 2 – (25) Purchase of own shares for cancellation – – – 8 8 At 31 January 2016 (205) 25 2 172 (6)

The ‘other’ category of reserves represents the premium on the issue of convertible loan stock in 1993, the merger reserve relating to the acquisition of Darty in 1993 and the capital redemption reserve. 30 SHARE-BASED PAYMENTS 2016/17 2015/16 Weighted Weighted average average Number of exercise Number of exercise options price options price thousands £ thousands £ Outstanding at beginning of year 26,532 1.13 26,578 1.05 Granted during the year (1) (2) 17,543 0.56 11,760 0.91 Forfeited during the year (3,900) 0.97 (4,076) 0.95 Exercised during the year (3,481) 1.14 (7,730) 0.61 Outstanding at end of year 36,694 0.87 26,532 1.13 Exercisable at end of year 1,332 1.26 1,601 0.57

(1) The charge to the income statement for the years ended 31 January 2017 and 31 January 2016 in respect of share-based payments includes the first year’s charge of the 2017 Kingfisher Incentive Share Plan (‘KISP’) Deferred Bonus Award and 2016 KISP Deferred Bonus Award grants respectively, based on the cash bonus for the year. Since grants under the KISP Deferred Bonus Award are made following the year end to which the first year of charge relates, it is not possible to give the number of options granted until after the year end. (2) The weighted average exercise price for options granted during the year represents a blend of nil price Transformation Incentive awards, Alignment Share awards, KISP awards and discounted Sharesave options (see below).

138 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

£ Fair 139 3.32 3.03 3.32 2.96 2.97 4.19 3.52 3.61 2.65 2.63 2.91 2.81 3.10 3.74 3.61 3.16 3.54 3.63 139 value – – – – – – – – – – – – – – – – – – % rate -based payment payment -based Risk free Risk ion pricing models. year, rather than at thedate www.kingfisher.com £3.15 and a weighted average average a weighted £3.15 and – – – – – – – – – – – – – – – – – – % yield www.kingfisher.com Dividend Dividend (3) the date of vesting. Expiry of the overseas Alignment Share Share Alignment overseas of the Expiry of date the vesting. – – – – – – – – – – – – – – – – – – %

s from the date of grant. For the Transformation Incentive award award Incentive Transformation the For of grant. the date s from volatility Expected Expected price (plus reinvested dividends) immediately prior to the grant of the of the grant to the prior immediately dividends) reinvested (plus price (2) 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 10 10 10 life years have exercise prices ranging from nil to from ranging exercise priceshave Expected Expected £ – – – – – – – – – – – – – – – – – – price Exercise . On that basis, the weighted average share price during the the during price share average weighted the basis, that . On 31 January 2017 (2015/16: £11m) relating to equity-settled share equity-settled relating to £11m) 2017 (2015/16: January 31 £ ed by independent valuers using Black-Scholes and stochastic opt stochastic and Black-Scholes using valuers ed by independent at grant Share price KISP,and KISSPSP schemes the in UK, the expiry dateyear is 7 grant Date of Date tions outstanding at the end of the year year of the the end at outstanding tions 19/07/16 3.32 25/04/12 2.96 19/07/16 3.32 17/06/11 2.65 23/04/15 3.52 28/10/10 2.39 1.87 5.5 37.3% 2.3% 1.9% 0.39 26/10/1126/10/1119/10/12 2.6419/10/12 2.6422/10/13 2.8522/10/13 1.99 2.8521/10/14 1.99 3.7421/10/14 2.17 3.5 3.7422/10/15 2.17 5.5 2.9422/10/15 3.15 3.5 39.1% 2.9401/11/16 3.15 5.5 37.6% 3.5101/11/16 2.52 3.5 25.9% 3.51 2.52 2.9% 0.9% 5.5 37.6% 3.64 2.81 2.9% 1.4% 3.5 23.3% 3.64 2.81 3.3% 0.4% 5.5 33.6% 0.54 3.06 3.3% 0.9% 3.5 23.8% 0.42 3.06 2.5% 0.9% 5.5 24.5% 0.45 2.5% 1.6% 3.5 22.4% 0.49 3.4% 1.1% 5.5 23.1% 0.49 3.4% 1.5% 22.9% 0.59 2.9% 0.8% 23.5% 0.35 2.9% 1.2% 0.31 2.8% 0.4% 0.48 2.8% 0.7% 0.41 0.44 0.39

11/04/13 2.97

(1) and Alignment Share award the expiry date is 10 years from the date of grant. Expiry of overseas KISS schemes is 6 months from from is KISS months 6 schemes overseas of Expiry of grant. the date from is years expiry date 10 the award Share and Alignment award is 3 years fromthe dateof grant. award, over the same period as the vesting period of each award, adjusted by expectations of future volatility. volatility. of future by expectations adjusted award, of each period vesting as the period the same over award, (2) (2) For the schemes. UK the on based disclosed is life Expected (1) The Kingfisher Incentive Share Scheme (‘KISS’) includes the Company Share Option Plan (‘CSOP’) element of the KISS awards. awards. KISS the of element (‘CSOP’) Plan Option Share Company the includes (‘KISS’) (1) Scheme Share Incentive Kingfisher The 19/07/16 3.32 Shares Alignment The inputs of the principal schemes into these models are as follows: as follows: are models these into schemes principal of the The inputs 15/09/14 3.16 Sharesave 21/10/11 2.63 Kingfisher Incentive Share Share Incentive Kingfisher Scheme Awards Bonus Deferred Information on the share schemes is given in note 12 of the Company’s separate financial statements. statements. financial separate Company’s of the note 12 in given is schemes share on the Information the basis throughout year on a regular exercised have been Options op The £3.54). (2015/16: of exercise, is £3.53

Transformation Incentive Incentive Transformation Kingfisher Incentive Share Plan – – Plan Share Incentive Kingfisher 23/04/14 21/04/16 Plan Share Performance 4.19 3.61 03/05/12 16/10/12 25/04/13 2.91 22/10/13 2.81 Awards Incentive Term Long 3.10 3.74 05/05/15 03/07/14 20/10/15 International and UK 3.54 3.61 3.63 (3) Expected volatility was determined for each individual award, by calculating the historical volatility of the Group’s share Group’s of the volatility historical (3) the by calculating award, each for individual was determined volatility Expected transactions. transactions. is determin shares deferred and options share of value The fair remaining contractual life life of (2015/16: years 5.4 contractual remaining 4.2 years). ended year in the of £15m expense a total recognised The Group £ 2 5 9 (6) (1) (7) 50) 52 ( (60) 381 384 390 price average exercise Weighted

9 – – – – – – – – 172 172 181 181 2015/16 2015/16 1,601 0.57 4,076) 0.95 7,730) 0.61 ( ( options options 26,532 1.13 26,578 1.05 11,760 0.91 thousands thousands Number of Number of ting to the acquisitionof

2 – 2 – 8 8 – – 1 – (3) – – (7) – – – 2 5 – – – – – – – (2) (7) £ sale sale reserve Other Total 0.87 1.26 1.13 0.56 0.97 1.14 Available-for- price nus for the year. Since grants under the KISP Deferred KISP the Deferred under grants Since year. for the nus – – – – – 2 – – – – – average average ts includes the first year’s charge of the 2017 Kingfisher Kingfisher 2017 the of charge year’s first the ts includes (6) exercise exercise 24 – 24 – 25 19 52 (50) (60) Weighted options granted until after the year end. ntive awards, Alignment Share awards, KISP awards and awards KISP awards, Share Alignment awards, ntive Cash flow flow Cash hedge reserve – – – – – – – – – – (3) (2) 10 – – 8 (1) 2016/17 (11) (16) 2 (25) – 390 389 184 (194) 41 – 164 11 (205) 25 2 172 (6) (205) 1,332 (3,900) (3,481) options 36,694 26,532 17,543 reserve thousands Number of Number Translation Translation issue of convertible loan stock in 1993, mergerthe reserve rela Deferred Bonus grants Award onrespectively, based the cash bo January 2017 and 31 January 2016 in respect of share-based paymen of share-based in respect January 2016 and 31 January 2017 NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL (7)

t t

r represents the premium on the on the the premium represents

r

r r (1) (2) -sale financial assets assets financial -sale assets financial -sale r r 2016/17 Report Annual | plc Kingfisher IncentivePlanShare 2016 KISP Bonus Award and (‘KISP’) Deferred Bonus Award are made following the year end to which the first year of charge relates, it is not possible to give the number of number the give to possible not it is relates, charge of year first the which to end year the following made are Award Bonus discounted Sharesave options (see below). below). (see options Sharesave discounted Group1 Group Fair value gains Fair value gains Joint ventures and associates and Joint ventures statemen income to Transferred Transferred to income statemen income to Transferred Fair value gains Joint ventures and associates and Joint ventures Gains transferred to inventories inventories to Gains transferred The ‘other’ category of reserves reserve. redemption capital 1993 and the in Darty Exercisable at endof yea Exercised during the during yea Exercised of yea at end Outstanding Granted during theyear Forfeited during the year year the during Forfeited 30 SHARE-BASED PAYMENTS of yea Outstanding at beginning (1) Theto thefor charge income the 31 statement years ended 138 NOTES TO THE CONSOLIDATEDFI 29 OTHER RESERVES (2) The weighted average exercise price for options granted during the year represents a blend of nil price Transformation Ince of nil price Transformation a blend represents the year (2) during granted options for price exercise average weighted The Other comprehensive incomefor the year At 31 January 2017 Currency differences translation Currency differences translation Available-fo inventories to Gains transferred Tax on may that items be reclassified hedges Cash flow Fair value gains Available-fo hedges Cash flow Tax on may that items be reclassified cancellation for shares of own Purchase At 1 February 2015 £ millions At 1 February 2016 Other comprehensive incomefor the year cancellation for shares of own Purchase At 31 January 2016

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

31 CASH GENERATED BY OPERATIONS £ millions 2016/17 2015/16 Operating profit 773 526 Share of post-tax results of joint ventures and associates (1) (3) Depreciation and amortisation 253 240 Impairment losses 14 55 Loss on disposal of property, plant and equipment, investment property and property held for sale 4 3 Profit on disposal of B&Q China (3) (143) Profit on disposal of property and other companies – (13) Share-based compensation charge 15 11 (Increase)/decrease in inventories (46) 56 Decrease/(increase) in trade and other receivables 62 (36) Increase in trade and other payables 4 27 Movement in provisions (125) 233 Movement in post-employment benefits (25) (25) Cash generated by operations 925 931

32 NET CASH £ millions 2016/17 2015/16 Cash and cash equivalents 795 730 Bank overdrafts – (76) Cash and cash equivalents and bank overdrafts 795 654 Short-term deposits – 70 Bank loans (9) (10) Fixed term debt (147) (185) Financing derivatives 44 63 Finance leases (42) (46) Net cash 641 546

£ millions 2016/17 2015/16 Net cash at beginning of year 546 329 Net increase in cash and cash equivalents and bank overdrafts, including amounts classified as held for sale 38 127 (Decrease)/increase in short-term deposits (70) 22 Repayment of bank loans 2 1 Repayment of fixed term debt 47 – Receipt on financing derivatives (10) – Capital element of finance lease rental payments 12 13 Cash flow movement in net cash 19 163 Adjustment for cash classified as held for sale (B&Q China) – 57 Exchange differences and other non-cash movements 76 (3) Net cash at end of year 641 546

140 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

6 7 3 (4) 38 39 90 13 67 63 (67) 141 141 416 1,366 1,726 3,508 2015/16 2015/16 2015/16 – 36 34 82 12 427 1,393 1,598 3,418 uiring a controlling uiring a controlling 2016/17 2016/17 2016/17 er leasing. er leasing. £18m and a profit of and a profit £18m r which rental payments payments rental r which l of £143m (includingl of £143m £7m onsideration of £67m, of £67m, onsideration terms, escalation clauses clauses escalation terms, www.kingfisher.com www.kingfisher.com opertycompany for proceeds of ness to Wumei Holdings Inc. for a gross c a gross Inc. for Holdings Wumei ness to such as those concerning dividends, additional debt and furth debt and additional dividends, concerning as those such also completed the sale of also completed the a pr sale her comprehensive income) in respect of Wumei Holdings Inc. Inc. acq of Holdings Wumei respect in income) comprehensive her and leasehold properties respectively. Lease arrangements unde lease agreements with lease varying agreements under equipment and plant and ses r non-cancellable operating leases are as follows: as follows: are leases operating r non-cancellable expected to be received is £62m (2015/16: £70m). £70m). (2015/16: is £62m received expected be to for by the Group amount to £31m (2015/16: £46m). by the Group (2015/16: to for amount £31m or usage are not significant for the Group. Group. the for not significant usage are or -sale reserve -sale for proceeds of £nil and a loss of £3m. of £3m. and a loss proceedsfor £nil of r maining 30% interest in B&Q China busi the

r r

are contingent upon sales, other performance arrangements by lease imposed restrictions are There corporate no The totalof futureminimum operating subleasereceipts commitments Capital not provided but contracted Capital commitments £ millions yea one than Less years five One to £ millions yea one than Less years five One to are follows: as leases operating non-cancellable under receivable rentals minimum future total Undiscounted ofcurrency accumulated recycled ot from translationdifferences company a UK sale of the with £16m, along rights. and renewal The Group is also a lessor and sub-lessorof space withfreehold More than five years Assets held for sale sale for held Assets UK. the in properties freehold of £6m comprised sale for held assets year, prior the In COMMITMENTS 35 commitments lease Operating retail stores, warehou offices, various lessee ofThe Group is a In the prior year, the Group received gross proceeds of £140m (before disposal costs of £6m) and recognised a profit on disposa on profit a recognised and of £6m) costs disposal (before £140m of proceeds gross received Group the year, prior In the 34 SALE ASSETS HELD FOR £ millions Proceeds costs Disposal Fair valueof investment disposed 33 DISPOSALS DISPOSALS 33 of its re disposed Group the On 5 July2016, follows: as analysed is of £3m disposal on profit The 582m. of RMB equivalent Sterling the being £ millions Net disposal proceeds Fair value gains transferredfrom available-fo More than five years

Exceptional profit on disposal Undiscounted total future minimum rentals payable unde payable rentals minimum future total Undiscounted 70% stake in the B&Q China business. In the prior year, the Group Group the year, prior In the business. China B&Q the in 70% stake 3 1 – – (3) (3) 63 70 55 27 11 56 36) 13) 22 13 57 (76) ( ( (46) (10) (25) 143) 546 931 240 526 730 654 233 546 127 163 329 (185) ( 2015/16 2015/16 2015/16 4 4 – – 2 – – (9) (1) (3) 44 14 15 62 38 47 12 19 76 (42) (25) (46) (70) (10) 641 641 925 925 253 253 773 773 795 795 641 641 546 546 (147) (125) 2016/17 2016/17 2016/17

NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL ntures and associates ntures -term deposits deposits -term t ade and other receivables -employment benefits t ld for sale

t -tax results of joint ve results -tax t 2016/17 Report Annual | plc Kingfisher -term deposits deposits -term t Financing derivatives derivatives Financing leases Finance Net cash Bank loans loans Bank Cash generated by operations Depreciation and amortisation losses Impairment property investment equipment, and plant property, of disposal on Loss and property he B&Q China of on disposal Profit 140 NOTES TO THE CONSOLIDATEDFI 31 BY OPERATIONS CASH GENERATED £ millions Operating profit Share of pos 32 CASH NET £ millions Cashcash and equivalents overdrafts Bank Cash and cash equivalents and bank overdrafts Shor

Profit on disposal of property and other companies companies other and property of disposal on Profit Share-based compensation charge charge compensation Share-based (Increase)/decrease in inventories Decrease/(increase) in tr payables other and trade in Increase in provisions Movement Movement pos in Fixed term deb term Fixed Net increase in cash and cash equivalents and bank overdrafts, including including overdrafts, and bank cash cash equivalents and in Net increase classifiedamounts as held for sale (Decrease)/increase in shor Repaymentof bank loans of debt term fixed Repayment derivatives on financing Receipt payments rental lease of finance element Capital Cash flow movement in net cash China) (B&Q sale for held as classified cash for Adjustment otherExchange differences and movements non-cash Net cash at end of year Net cash at beginning of year

£ millions NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

36 CONTINGENT LIABILITIES The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees, only £1m (2015/16: £1m) would crystallise due to possible future events not wholly within the Group’s control. The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are considered likely to arise on the basis of current information and legal advice. The Group files tax returns in many jurisdictions around the world and at any one time, various tax authorities are undertaking reviews of these returns. Applicable tax laws and regulations are subject to differing interpretations and the resolution of a final tax position can take several years to complete. Where it is considered that future tax liabilities are more likely than not to arise, an appropriate provision is recognised in the financial statements. 37 RELATED PARTY TRANSACTIONS During the year, the Company and its subsidiaries carried out a number of transactions with related parties in the normal course of business and on an arm’s length basis. The names of the related parties, the nature of these transactions and their total value are shown below:

2016/17 2015/16 £ millions Income Receivable Income Receivable Transactions with Koçtaş Yapi Marketleri Ticaret A.S. in which the Group holds a 50% interest Commission and other income 1.0 0.4 1.2 0.1 Transactions with Crealfi S.A. in which the Group holds a 49% interest Provision of employee services 0.1 – 0.1 – Commission and other income 6.4 0.3 5.7 0.3 Transactions with the Kingfisher Pension Scheme Provision of administrative services 1.3 0.1 1.2 0.1

Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists in force with non-related parties. The remuneration of key management personnel is disclosed in note 8. Other transactions with the Kingfisher Pension Scheme are disclosed in note 27.

142 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

3) 1) 1) 4) ( ( ( ( 24 63 24) 48) 13 42 ( ( 137) 361 154 724 143 143 ( (142) 5,897 6,813 3,341 4,359) 2,218 2,618 6,868 5,897 3,582 ( (4,553) (4,411) 10,450 2015/16 7 – – (1) (5) 37 13 54 (23) (17) 352 129 733 (147) (152) 6,208 2,221 6,819 6,863 2,925 6,886 6,208 7,036 (7,714) (7,544) (7,562) 13,922 2016/17 www.kingfisher.com

3 4 7 5 6 9 7 7 6 9 8 11 10 Notes www.kingfisher.com signed on its behalf by: by: behalf its on signed Karen Witts Witts Karen Chief Financial Officer Directors on 21 March 2017 and March Directors on 21

t r receivables r payables

y -employment benefits t éronique Laury

V Officer Chief Executive The Company’s profit for the year was £680m (2015/16: £482m). £482m). (2015/16: £680m was year profit for the Company’s The statements were The of by Board financial the approved Equity Equity Borrowings liabilities Total Net assets Share capital Non-current liabilities Total assets Current liabilities Current assets Company Company balance sheet 2017 At 31 January £ millions Non-current assets in subsidiary Investment Pos Trade and othe assets Derivative Trade and othe Borrowings Share premium ESOP trus held in Own shares

Current tax assets Current tax assets Cashcash and equivalents Provisions Provisions Other reserves reserves Other Retained earnings earnings Retained Derivative liabilities liabilities Derivative tax liabilities Deferred Derivative assets assets Derivative

Total equit Total – e of business arm’s of and on an e antees, only £1m £1m only antees, 1.2 0.1 0.1 5.7 0.3 1.2 0.1 2015/16 Income Receivable reviews of these returns. returns. of these reviews

– ists in force with with in ists force sconsidered are likely to ariseon 0.4 0.4 0.3 0.3 0.1 0.1 e several years to complete. complete. to years e several the financial statements. statements. the financial 1.0 0.1 6.4 1.3 2016/17 Income Receivable t t mberof transactions withrelated partiesin the normalcours s basis. Goods are sold or bought on the basis of the price l price of the basis on the or bought sold are Goods basis. s rld and at any one time, various tax authorities are undertaking are authorities tax various time, one any at and rld rpretations and the resolution of a final tax position can tak can of a position tax final resolution the and rpretations dinary course of business and provision is made where liabilitie where made is provision and of business course dinary events not wholly within the Group’s control. control. Group’s the within wholly not events which thea 50% Groupholds interes NANCIAL STATEMENTS CONTINUED CONTINUED STATEMENTS NANCIAL nsion Scheme are disclosed in note 27. note in are disclosed Scheme nsion Yapi Marketleri Ticaret A.S. in A.S. Ticaret Yapi Marketleri ş 2016/17 Report Annual | plc Kingfisher Commissionother and income Provision of employee services Commissionother and income Provisionof administrative services Transactions withCrealfi S.A. in which the Group holds49% a interes Applicable tax laws and regulations are subject to differing inte differing to subject are regulations and laws tax Applicable 142 NOTES TO THE CONSOLIDATEDFI 36 LIABILITIES CONTINGENT guar these Of business. of course ordinary in the parties third to provided be to guarantees certain for arranged has Group The future possible to due crystallise would £1m) (2015/16: or in the arising litigation and claims to subject is The Group the basis of current information and legal advice. wo around the jurisdictions many in returns tax files The Group 37 TRANSACTIONS RELATED PARTY out a nu carried subsidiaries its and Company the year, the During length basis.The names of therelated parties, thenature of these transactions and their total value areshown below: Koçta with Transactions Transactions with the Kingfisher Pension Scheme Scheme Pension Kingfisher the with Transactions cost-plu on a parties related with negotiated usually are Services parties. non-related 8. in note is disclosed personnel management of key The remuneration Pe with the Kingfisher Other transactions £ millions Where it is considered that future tax liabilities are more likely than not to arise, an appropriate provision is recognised in recognised is provision an appropriate arise, to not than more likely are liabilities tax future that considered is it Where

Company statement of changes in equity Year ended 31 January 2017

Share Share Own shares Retained Other Total £ millions capital premium held earnings reserves(1) equity At 1 February 2016 361 2,218 (24) 2,618 724 5,897 Profit for the year – – – 680 – 680 Other comprehensive income for the year (note 10) – – – (2) – (2) Total comprehensive income for the year 361 2,218 (24) 3,296 724 6,575 Share-based compensation – – – 6 – 6 Capital contributions given relating to share-based payments – – – 9 – 9 New shares issued under share schemes – 3 – – – 3 Own shares issued under share schemes – – 7 (6) – 1 Purchase of own shares for cancellation (note 9) (9) – – (150) 9 (150) Purchase of own shares for ESOP trust – – (6) – – (6) Dividends – – – (230) – (230) At 31 January 2017 352 2,221 (23) 2,925 733 6,208

At 1 February 2015 369 2,214 (26) 2,568 716 5,841 Profit for the year – – – 482 – 482 Other comprehensive income for the year – – – – – – Total comprehensive income for the year 369 2,214 (26) 3,050 716 6,323 Share-based compensation – – – 3 – 3 Capital contributions given relating to share-based payments – – – 14 – 14 New shares issued under share schemes – 4 – – – 4 Own shares issued under share schemes – – 18 (17) – 1 Purchase of own shares for cancellation (note 9) (8) – – (200) 8 (200) Purchase of own shares for ESOP trust – – (16) – – (16) Dividends – – – (232) – (232) At 31 January 2016 361 2,218 (24) 2,618 724 5,897

(1) The other reserves represent the premium on the issue of convertible loan stock in 1993, the merger reserve relating to the acquisition of Darty and the capital redemption reserve.

144 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

145 1.31 145 2015/16 1.16 2016/17 www.kingfisher.com ed as a capital contribution over over contribution capital a ed as ve been paid. The contributions are are The contributions paid. ve been www.kingfisher.com me as they arise. arise. me as they ear end rate end ear Principal rate of exchange against Sterling: Sterling: against rate of exchange Principal Euro Euro Y b. Investments less cost, at sheet balance in the included are subsidiaries in Investments any provisions for impairment. c. Operating leases income to the charged generally are payments rental lease Operating those for except relate, payments the which to period the in statement which Leases clauses. uplift rental minimum fixed incorporate which leases statement income to the are charged uplifts rental minimum fixed contain the term. lease over basis on a straight-line d. benefits Employee (i) benefits Post-employment pension contribution and defined benefit defined operates The Company scheme pension is a scheme benefit defined A employees. its schemes for receive will employee an which benefit pension of an amount defines which under scheme is a pension scheme contribution A defined on retirement. which theCompany usually pays fixedcontributions into a separate entity. accruing the meet to accumulated being is fund a separate cases In all are and trusts under held are funds of these of each The assets liabilities. entirely separate from theCompany’s assets. of defined in respect sheet in balance the recognised or liability The asset present the less assets scheme of value fair the is schemes pension benefit The date. sheet at the balance obligation benefit defined of the value actuaries by independent annually calculated is obligation benefit defined defined the of value present The method. credit unit projected the using cash future the estimated discounting by determined is obligation benefit are which bonds corporate of high quality rates using interest outflows which paid and be will benefits which the in currency the in denominated have terms tomaturity approximating to the termsof therelated liability. pension and adjustments experience from arising losses and gains Actuarial or toassumptions credited are charged statement in the changes actuarial of comprehensive inco payment no further has Company the schemes, contribution defined For obligations once the contributions ha when they due. are expense benefit an employee as recognised (ii) Share-based compensation compensation share-based equity-settled, several operates The Company for exchange in received services employee of the value The fair schemes. is and expense as an is recognised shares or deferred options of grant the calculatedusing Black-Scholes and stochasticmodels. The total amount to fair the to reference by determined is period vesting the over be expensed of any impact the excluding granted, shares or deferred options of the value to adjusted is charge of the The value conditions. vesting non-market non-market to due vesting options of levels actual and expected reflect conditions. vesting of share- respect in subsidiaries to given compensation the of value The fair is recognis schemes based compensation the vesting period. The capitalcontribution is reduced by any payments schemes. of these in respect subsidiaries from received trust’) (‘ESOP trust Plan Ownership Share Employee (iii) The ESOP trust isseparately a administereddiscretionary trust. Liabilitiesof ESOP of the assets the and Company the by guaranteed are trust ESOP the Company. the in shares comprise mainly trust d 31 of IAS 8 ‘Accounting Policies, d 31 of IAS 8 ‘Accounting e provisions of the Companies Act of the provisions e en prepared under historical the ese financial statements have statements have been ese financial 136 of IAS 1 ‘Presentation of of IAS 136 1 ‘Presentation tween two or more members of a erty, Plant and Equipment; and Plant Equipment; erty, e Companies income Act the Companies e 2006, of Directors on 21 March 2017. The 2017. March on 21 of Directors paragraph 73(e) of paragraph IAS 16 Prop Assets; Intangible 38 of IAS 118(e) paragraph paragraph 79(a)(iv) of IAS 1; 1; IAS of 79(a)(iv) paragraph

the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and and 134(f) to 134(d) 130(f)(ii), 130(f)(iii), paragraphs of requirements the of of Assets’. 135(e) to 135(c) IAS 36 ‘Impairment the requirements in IAS 24 ‘Related Party Disclosures’ to disclose related be into entered transactions party group, provided that anysubsidiary which isparty a to the transaction and member; a by such owned wholly is the requirements of paragraphs 17 and 18A of IAS 24 of IAS 24 18A 17 and of paragraphs requirements the ‘Related Party Disclosures’; the requirements of paragraphs 30 an Error’; and Estimates Accounting in Changes the requirements of IAS 7 ‘Statement of Cash Flows’; therequirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, to and 134 111 40D, 40C, 40B, 40A, Financial Statements’; – – the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Financial of 1 ‘Presentation IAS of 38 in paragraph requirement the Statements’ to present comparative information in respect of: – the requirements of paragraphs 91 to 99 of IFRS 13 Measurement’; ‘Fair Value the requirements of IFRS 7 ‘Financial Instruments: Disclosures’; the requirements of paragraphs 45(b) and 46 to 45(b) and 52 of IFRS 2 of paragraphs requirements the Payment’; ‘Share-based

Where required, equivalent disclosures are given in the consolidated consolidated the in given are disclosures equivalent required, Where plc. Kingfisher of statements financial Theprincipal accounting policies applied in the preparation of these financial statements areout set below.These policies have been stated. otherwise unless presented, to years the applied consistently – – – – – – a. currencies Foreign are currencies in foreign denominated liabilities and assets Monetary sheet the balance at exchange of rates at the Sterling into translated to the are taken items monetary on differences date. Exchange income statement. – – – statement of the Company has not been presented. presented. not has been of Company the statement exemptions disclosure of the following advantage has taken The Company under FRS 101: – cost convention, as modified by the use of valuations for certain financial financial certain for valuations of use the by modified as convention, cost benefits. post-employment and payments share-based instruments, As permittedof th section by 408 Notes Notes to the Company financial statements 1 POLICIES PRINCIPAL ACCOUNTING are the for (‘the Company’) plc of Kingfisher statements The financial or and were ‘2016/17’) year’ (‘the 2017 calendarended 31 January year Board authorised issue for by the 2016 January 31 ended calendaryear is the year financial comparative (‘the prior or year’ ‘2015/16’). consider enquiries, made appropriate having plc, of Kingfisher The directors operational in continue to Company the for exist resources that adequate concern going the adopt to is appropriate it therefore, that, and existence January 31 ended year for the statements financial the preparing in basis Strategic 46. on page Report the to 2017. Refer TheCompany meets the definition of a qualifying entityunder Financial such th 100 and as Reporting Standard Reduced 101 Reporting Standard Financial with in accordance prepared DisclosureFramework th (‘FRS 101’) and 2006. The be statements have financial

– 6 9 3 1 (6) (2) 680 (150) (230) Total Total 5,841 equity 6,208 5,897 6,575 (1)

9 – – – – – – – – 716 733 733 724 724 724 724 Other Other reserves

– – 3 – 3 – – 4 6 9 – – (2) (6) 14– 14 482 482 – 482 680 680 (200) (200) (200) 8 (232) (232) – (150) (230) 2,568 2,925 2,618 3,296 earnings Retained Retained – – – – – – – 7 – – – – – – – (6) 18 (17) – 1 26) 3,050 716 6,323 ( (16) – – (16) (26) (23) (24) (24) held acquisition of Darty and the capital redemption reserve. Own shares shares Own – – 4 – – – – – – 3 – – – – – – – – Share 2,214 2,221 2,218 2,218 premium – – – – – – – – – – – – – – – – (8) (9) 369 2,214 361 2,218 (24) 2,618 724 5,897 369 352 361 361 Share capital (note 10)

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r r 2016/17 Report Annual | plc Kingfisher At 31 January 2017 144 Company statement of changes in equity 2017 January 31 ended Year £ millions (1) The other reserves represent the on premium the of issue convertible loan stock in the1993, merger to reserve relating the At 1 February 2016 Total comprehensive incomefor the year At 31 January 2016 Total comprehensive incomefor the year At 1 February 2015 for income yea Other the comprehensive for income yea Other the comprehensive yea the Profit for yea the Profit for 9) (note cancellation for shares own of Purchase compensation Share-based payments to share-based relating given contributions Capital New shares issued under share schemes Own shares issuedunder share schemes trus ESOP for shares own of Purchase payments to share-based relating given contributions Capital New shares issued under share schemes

Own shares issuedunder share schemes Dividends trus ESOP for shares own of Purchase Dividends

9) (note cancellation for shares own of Purchase compensation Share-based NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

1 PRINCIPAL ACCOUNTING POLICIES CONTINUED Financial assets and liabilities are offset only when the Group has a currently d. Employee benefits continued enforceable legal right to set-off the respective recognised amounts and (iii) Employee Share Ownership Plan trust (‘ESOP trust’) intends either to settle on a net basis, or to realise the asset and settle the continued liability simultaneously. Own shares held by the ESOP trust are deducted from equity shareholders’ (i) Cash and cash equivalents funds and the shares are held at historical cost until they are sold. The Cash and cash equivalents include cash in hand, deposits held on call with assets, liabilities, income and costs of the ESOP trust are included in both banks and other short-term highly liquid investments with original the Company’s and the consolidated financial statements. maturities of three months or less. e. Taxation (ii) Borrowings The tax currently payable or receivable is based on taxable profit or loss for Interest bearing borrowings are recorded at the proceeds received, net of the year. direct issue costs and subsequently measured at amortised cost. Where Taxable profit differs from profit before taxation as reported in the income borrowings are in designated and effective fair value hedge relationships, adjustments are made to their carrying amounts to reflect the hedged risks. statement because it excludes items of income or expense which are Finance charges, including premiums payable on settlement or redemption taxable or deductible in other years or which are never taxable or deductible. and direct issue costs, are amortised to the income statement using the Deferred tax is the tax expected to be payable or recoverable on differences effective interest method. between the carrying amounts of assets and liabilities in the financial (iii) Trade receivables statements and the corresponding tax bases used in the computation of Trade receivables are initially recognised at fair value and are subsequently taxable profit and is accounted for using the balance sheet liability method. measured at amortised cost less any provision for bad and doubtful debts. Deferred tax liabilities are generally recognised for all taxable temporary (iv) Trade payables differences. Deferred tax assets are recognised to the extent that it is Trade payables are initially recognised at fair value and are subsequently probable that taxable profits will be available against which deductible measured at amortised cost. temporary differences or unused tax losses can be utilised. Deferred tax assets and liabilities are not generally recognised if the temporary difference (v) Derivatives and hedge accounting arises from the initial recognition of other assets and liabilities in a Where hedge accounting is not applied, or to the extent to which it is not transaction which affects neither the taxable profit nor the accounting effective, changes in the fair value of derivatives are recognised in the profit. Deferred tax liabilities are recognised for taxable temporary differences income statement as they arise. arising on investments in subsidiaries, except where the Company is able to Derivatives are initially recorded at fair value on the date a derivative control the reversal of the temporary difference and it is probable that the contract is entered into and are subsequently carried at fair value. The temporary difference will not reverse in the foreseeable future. accounting treatment of derivatives and other financial instruments classified as hedges depends on their designation, which occurs at the The carrying amount of deferred tax assets is reviewed at each balance sheet start of the hedge relationship. The Company designates certain derivatives date and reduced to the extent that it is no longer probable that sufficient as a hedge of the fair value of an asset or liability (‘fair value hedge’). taxable profits will be available to allow all or part of the asset to be recovered. For an effective hedge of an exposure to changes in fair value, the hedged Current and deferred tax are calculated using tax rates which have been item is adjusted for changes in fair value attributable to the risk being enacted or substantively enacted by the balance sheet date and are hedged with the corresponding entry being recorded in the income expected to apply in the period when the liability is settled or the asset statement. Gains or losses from remeasuring the corresponding hedging is realised. instrument are recognised in the same line of the income statement. Current and deferred tax are charged or credited to the income statement, In order to qualify for hedge accounting, the Company documents in except when they relate to items charged or credited directly to equity, in advance the relationship between the item being hedged and the hedging which case the current or deferred tax is also recognised directly in equity. instrument. The Company also documents and demonstrates an assessment of the relationship between the hedged item and the hedging f. Provisions instrument, which shows that the hedge has been and will be highly Provisions are recognised when the Company has a present legal or effective on an ongoing basis. The effectiveness testing is re-performed at constructive obligation as a result of past events, it is more likely than not each period end to ensure that the hedge remains highly effective. that an outflow of resources will be required to settle the obligation and the Hedge accounting is discontinued when the hedging instrument expires or amount can be reliably estimated. Provisions are not recognised for future is sold, terminated or exercised, or no longer qualifies for hedge accounting. operating losses. If the effect of the time value of money is material, provisions are h. Dividends determined by discounting the expected future cash flows at a pre-tax rate Interim dividends are recognised when they are paid to the Company’s which reflects current market assessments of the time value of money and, shareholders. Final dividends are recognised when they are approved by where appropriate, the risks specific to the liability. the Company’s shareholders. g. Financial instruments Sources of estimation uncertainty Post-employment benefits Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes a party to the contractual The present value of the defined benefit liabilities recognised on the balance provisions of the instrument. Financial assets are derecognised when the sheet is dependent on a number of market rates and assumptions including contractual rights to the cash flows from the financial asset expire or the interest rates of high quality corporate bonds, inflation and mortality rates. The Company has substantially transferred the risks and rewards of ownership. net interest expense or income is dependent on the interest rates of high Financial liabilities (or a part of a financial liability) are derecognised when the quality corporate bonds and the net deficit or surplus position. The market obligation specified in the contract is discharged or cancelled or expires. rates and assumptions are based on the conditions at the time and changes in these can lead to significant movements in the estimated obligations.

146 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

5 2 3 28 38 231 147 147 2015/16 2015/16 6 2 6 44 58 415 2016/17 2016/17 n the Audit Committee www.kingfisher.com o 88. Total Directors’ Directors’ Total o 88. ecause the Group financial ed financial statements. Fees Fees statements. ed financial vices, the reasons why the why reasons the vices, www.kingfisher.com muneration Report on pages 66 t r’s independence and objectivity were safeguarded areset out i dit services to the Company are not required to be disclosed b disclosed be to required not are Company the to services dit e disclosed in the Directors’ Re Directors’ the in disclosed e

-employment benefits – defined contribution contribution defined – benefits -employment t Administration Administration Pos Directors’ remuneration and details of share option exercises ar exercises option share of details and remuneration Directors’ Number Average numberof persons employed £ millions salaries and Wages costs Social security 2 DISCLOSURES STATEMENT INCOME consolidat plc Kingfisher of the 7 note in disclosed is statements financial the consolidated and Company the for fee The audit non-au and audit for associates and their LLP to Deloitte payable

statements disclose such fees on a consolidated basis. Details of the Company’s policy on the use of auditors for non-audit ser non-audit for of auditors use on the policy Company’s of the Details basis. consolidated on a fees such disclose statements auditor was used rather than another supplier and how the audito Report on page Report on page 62. Dividend disclosures are provided in note 11 of theKingfisher plc consolidated financial statements. Share-based compensation compensation Share-based Employee benefit expenses remuneration for the year is £6m (2015/16: £6m). £6m). (2015/16: is £6m year remuneration the for thehedging instrument expiresor liabilities recognised on the balance liabilities recognised cit or surplus position. The market cit or surplus rket rates and assumptions including rket rates and assumptions including ndent on the interest rates of high ndent on the interest nts in the estimated obligations. nts s and other financial instruments instruments financial other s and Financial assets and liabilities are offset only when the Group has a currently currently a has the Group when only offset are liabilities and assets Financial and amounts recognised respective the set-off to right legal enforceable intends either to settleon a net basis,or torealise the asset and settle the simultaneously. liability (i) Cash and cash equivalents with call on held deposits hand, cash in include cash equivalents Cash and original with investments liquid highly short-term other and banks maturities of three months or less. (ii) Borrowings of net received, at proceeds recorded the borrowings are bearing Interest Where cost. at amortised measured subsequently and costs issue direct relationships, hedge value fair effective and designated in are borrowings risks. the hedged reflect to amounts carrying their made to are adjustments Finance charges, including premiums payable on settlement or redemption the using statement the income to are costs, amortised and issue direct effective interest method. receivables Trade (iii) subsequently are and value at fair recognised initially are receivables Trade debts. doubtful and bad for provision any less cost amortised at measured (iv) Trade payables subsequently and are value fair at recognised initially are payables Trade measured at amortisedcost. accounting hedge and Derivatives (v) is not it which to extent the or to applied, not is accounting hedge Where the in recognised are derivatives of value the fair in changes effective, income statementas they arise. derivative a date on the value at fair recorded initially are Derivatives The value. at fair carried subsequently are and into entered is contract accounting treatmentof derivative at the occurs which designation, their on depends hedges as classified derivatives certain designates The Company relationship. hedge start of the hedge’). value (‘fair or liability asset of an value fair of the as a hedge hedged in the value, fair to changes of exposure hedge an For effective an being risk the to attributable value in fair changes for is adjusted item hedged withcorresponding the entrybeing recorded in theincome hedging corresponding the remeasuring or Gains losses from statement. statement. income of the line same the in recognised are instrument In order to qualify for hedge accounting, the Company documents in and hedging the hedged being item the between relationship the advance an demonstrates and documents also The Company instrument. and hedging the item the hedged between of relationship the assessment highly be will and been has hedge the that shows which instrument, at re-performed is testing The effectiveness basis. ongoing on an effective effective. highly remains hedge that the ensure end to each period when discontinued is accounting Hedge is sold, terminatedor exercised,or nolonger qualifies forhedge accounting. Sources of estimation uncertainty Post-employmentbenefits the defined benefit value of The present of ma on a number sheet is dependent interest of rates high quality corporate The rates. mortality and bonds, inflation or income is depe net interest expense quality corporate bonds and the net defi rates and assumptions are based on the conditions at the time and changes in these can lead to significant moveme h. Dividends Dividends h. Interim dividends are recognised whenthey arepaid tothe Company’s by approved are they when recognised are dividends Final shareholders. the Company’s shareholders. of the time value of money and, and, money of value time the of ts is reviewed at each balance sheet sheet balance each at reviewed is ts also recognised directly in equity. in equity. directly recognised also credited to the income statement, to the statement, credited income st events, it is more likely than not than likely more is it st events, ll or part of the asset to be recovered. recovered. to be of the asset ll or part bases used in the computation of computation used in the bases taxation as reported in the income in the reported as taxation comes a party to the contractual to the comes a party contractual taxable nor accounting profit the taxable ing the balance sheet liability method. method. liability sheet the balance ing ed using tax rates which have been been have which rates tax using ed gnised temporary differences taxable for recognised for all taxable temporary recognised all taxable for available against which deductibleavailable receivable is based on taxable profit or loss for loss for or profit on taxable based is receivable 2016/17 Report Annual | plc Kingfisher f. Provisions f. Provisions or legal a has present when Company the are recognised Provisions constructive obligation as a result of pa that an outflowof resources will berequired to settle theobligation and the future for recognised not are Provisions estimated. be reliably can amount operating losses. are provisions is material, of money value of time If effect the the determined by discountingthe expected futurecash flows at a pre-taxrate which reflects current market assessments the liability. to specific the risks where appropriate, g. instruments Financial Company’s on the recognised are liabilities financial and assets Financial balance sheet whenCompany the be the when derecognised are assets Financial instrument. of the provisions or the expire asset financial the from flows cash the to rights contractual of ownership. rewards the risks and transferred has substantially Company the when derecognised are liability) of a financial (or a part liabilities Financial or expires. cancelled or is discharged contract in the specified obligation 146 NOTES TO THE COMPANY CONTINUED FINANCIAL STATEMENTS CONTINUED POLICIES ACCOUNTING PRINCIPAL 1 d. continued benefits Employee trust’) (‘ESOP trust Plan Ownership Share Employee (iii) continued shareholders’ equity from deducted are trust ESOP the by held Own shares The sold. are they until cost historical at held are shares the and funds both in included are trust ESOP the of costs and income liabilities, assets, statements. financial consolidated the and Company’s the Taxation e. or The currently payable tax the year. before from profit differs profit Taxable statement because it excludes itemsof income or expense which are deductible. or taxable never are which or years other in deductible or taxable on differences or recoverable payable be to expected tax the tax is Deferred the financial in liabilities and of assets amounts carrying the between statements and the corresponding tax us for is accounted and taxable profit generally are liabilities tax Deferred it is that extent the to recognised are tax assets Deferred differences. be profits will taxable probable that tax Deferred utilised. be can losses tax unused or differences temporary difference temporary if the recognised generally not are liabilities and assets arises from theinitial recognitionofother assets and liabilitiesin a transaction which affectsneither the reco are tax liabilities Deferred profit. except in subsidiaries, on investments wherearising the Company is able to controlthe reversal of the temporarydifference and it is probablethat the future. the foreseeable in reverse not will difference temporary asse tax deferred of amount carrying The probable that sufficient it is no longer extent that to the date and reduced a allow to available be will profits taxable calculat tax are deferred and Current and are date sheet balance the by enacted or substantively enacted asset or the settled is liability when the the period in apply to expected is realised. or charged tax are deferred and Current except when theyrelate toitems chargedorcredited directly to equity, in which case the current or deferred tax is NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

3 INVESTMENTS Investment £ millions in subsidiary At 1 February 2016 6,813 Capital contributions given relating to share-based payments 9 Contributions received relating to share-based payments (3) At 31 January 2017 6,819

The more significant subsidiary undertakings of the Company at 31 January 2017 and the ultimate percentage holding are set out below. For a full list of subsidiaries and related undertakings, see note 15. Country of incorporation and % interest held and Class of operation voting rights share owned Main activity Ordinary & B & Q plc United Kingdom 100% Special (1) Retailing B&Q Properties Limited United Kingdom 100% Ordinary Property investment Halcyon Finance Limited United Kingdom 100% Ordinary Financing Kingfisher Holdings Limited United Kingdom 100% Ordinary Holding company Kingfisher Information Technology Services (UK) Limited United Kingdom 100% Ordinary IT services Screwfix Direct Limited United Kingdom 100% Ordinary Retailing Sheldon Holdings Limited United Kingdom 100% Ordinary Holding company Zeus Land Investments Limited United Kingdom 100% Ordinary Holding company B&Q Ireland Limited Ireland 100% Ordinary Retailing Brico Dépôt S.A.S.U. France 100% Ordinary Retailing Castorama Dubois Investissements S.C.A. France 100% Ordinary Holding company Castorama France S.A.S.U. France 100% Ordinary Retailing Euro Dépôt Immobilier S.A.S.U. France 100% Ordinary Property investment L’Immobilière Castorama S.A.S.U. France 100% Ordinary Property investment Kingfisher France S.A.S. France 100% Ordinary Holding company Kingfisher Asia Limited Hong Kong 100% Ordinary Sourcing Castim Sp. z o.o. Poland 100% Ordinary Property investment Castorama Polska Sp. z o.o. Poland 100% Ordinary Retailing Brico Dépôt Portugal S.A. Portugal 100% Ordinary Retailing Castorama RUS LLC(2) Russia 100% Ordinary Retailing Bricostore Romania S.A.(2) Romania 100% Ordinary Retailing Euro Dépôt España S.A.U. Spain 100% Ordinary Retailing

(1) The special shares in B & Q plc are owned 100% by Kingfisher plc and are non-voting. (2) Owing to local conditions, these companies prepare their financial statements to 31 December.

4 TRADE AND OTHER RECEIVABLES £ millions 2016/17 2015/16 Current Owed by Group undertakings 6,861 3,338 Other receivables 2 3 6,863 3,341

148 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

1 – 1 – (1) (1) (3) (3) (1) 10 66 56 50 42 48 48 137 137 149 149 4,266 4,359 benefits 2015/16 2015/16 2015/16 and and post- employment Employment 6 2 – – – 61 55 51 (17) (17) 147 147 contract to purchase 7,491 7,544 2016/17 2016/17 2016/17 www.kingfisher.com se of the Company’s own own se of Company’s the for credit risk. These fair value value fair These risk. credit for www.kingfisher.com cash flows arising from the financial instruments and adjusted adjusted and instruments financial from the arising flows cash tes of interest, foreign exchange and credit risk. risk. credit and exchange foreign interest, of tes n is charged at current thereo due market rates. interest The any and demand on yable

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own shares in the prior year related to a liability arising under an irrevocable closed season buyback agreement for the purcha the for agreement buyback season closed irrevocable an under arising liability a to related year prior in the shares own shares. Derivative assets assets Derivative ra market observable using all made are measurements At 1 February 2015 At 1 February 2015 Charge to income statemen £ millions At 1 February 2016 statemen income to Credit Foreign exchange contracts future by discounting are calculated of derivatives Fair values 8 DEFERRED TAX 7 DERIVATIVES £ millions rate swaps interest Cross currency Foreign exchange contracts liabilities Derivative Non-current debt term Fixed Detailsof the fixed termdebt are givenin note 22 to theconsolidated financialstatements. 6 BORROWINGS 6 BORROWINGS £ millions Current deb term Fixed Amounts owed to Group undertakings repa are undertakings Group to owed Amounts 5 PAYABLES AND OTHER TRADE £ millions Current undertakings Group Owed to shares own to purchase Contract

Other taxation and social security security social Otherand taxation Accruals and other payables At 31 January 2017 2017 At 31 January At 31 January 2016 2016 At 31 January t t t t 3 9 (3) 3,338 3,341 6,813 6,819 2015/16 Retailing Retailing Retailing Retailing Retailing Retailing Retailing Retailing Retailing Sourcing Financing IT services Investment Investment Main activity Main in subsidiary

2 6,861 6,863 2016/17 below. For a full list of list For a full below. Retailing (1) Class of of Class Special Ordinary & share owned owned share 100% Ordinary Property investmen 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary Holding company 100% Ordinary Property investmen 100% Ordinary 100% Ordinary Holding company 100% Ordinary 100% Ordinary Holding company 100% Ordinary 100% 100% Ordinary 100% Ordinary Propertyinvestmen 100% Ordinary Propertyinvestmen 100% Ordinary company Holding 100% Ordinary company Holding 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary voting rights % interest held and % and interest held Spain Russia Ireland France France France France France France Poland Poland Portugal operation Romania Country of Country Hong Kong incorporationand United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom

. A

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.S. .S. A (2) A .S.U. .S.U. A 2016/17 Report Annual | plc Kingfisher Euro Dépôt Immobilier S. Euro Dépôt España S.A.U. S.A.U. España Dépôt Euro Castorama France S. Kingfisher Asia Limited Limited Asia Kingfisher z o.o. Sp. Castim Brico Dépôt Portugal S.A. S.A. Portugal Dépôt Brico Castorama RUS LLC non-voting. are plc and Kingfisher by (1) 100% owned are & Q plc B in shares special The (2) Owingto localconditions, these companies preparetheir financial statements to 31 December. 4 RECEIVABLES TRADE AND OTHER £ millions Current undertakings Owed by Group Other receivables 148 NOTES TO THE COMPANY CONTINUED FINANCIAL STATEMENTS 3 INVESTMENTS £ millions At 1 February 2016 payments to share-based relating given contributions Capital payments share-based to relating received Contributions 2017 At 31 January Themore significant subsidiary undertakingsof the Company at 31January 2017 and the ultimate percentage holding are set out see note 15. undertakings, related and subsidiaries B & Q plc Limited Finance Halcyon Limited Holdings Kingfisher Limited (UK) Services Technology Information Kingfisher Limited Direct Screwfix Limited Holdings Sheldon United Kingdom Limited Investments Land Zeus S. Castorama L’Immobilière S. France Kingfisher z o.o. Sp. Polska Castorama B&Q Ireland Limited Limited Ireland B&Q Brico Dépôt S. B&Q Properties Limited Limited Properties B&Q Bricostore Romania S.A. Castorama Dubois Investissements S.C. Investissements Dubois Castorama NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

9 PROVISIONS Onerous property £ millions contracts At 1 February 2016 5 Charge to income statement 1 At 31 January 2017 6

Current liabilities 1 Non-current liabilities 5 6

Within the onerous property contracts provision, the Company has provided against future liabilities for all properties sublet at a shortfall and long-term idle properties. The provision is based on the present value of future cash outflows relating to rent, rates and service charges. The weighted average remaining lease term to earliest exit, before any surrenders, assignment or mitigation through subleases, is five years. 10 POST-EMPLOYMENT BENEFITS The Company participates in both a funded defined benefit scheme and a funded defined contribution scheme. Defined contribution scheme Pension costs for the defined contribution scheme, at rates specified in the scheme’s rules, are as follows:

£ millions 2016/17 2015/16 Charge to operating profit 2 2

From July 2012, an enhanced defined contribution scheme was offered to all Company employees. Eligible Company employees have been automatically enrolled into the defined contribution scheme since 31 March 2013. Defined benefit scheme Kingfisher plc is one of a number of Group companies that participate in the Kingfisher Pension Scheme, and therefore the Company has accounted for its share of the scheme assets and liabilities. The valuation of the scheme has been based on the most recent actuarial valuation as at 31 March 2016 and has been updated to 31 January 2017. The final salary pension scheme was closed to future benefit accrual with effect from July 2012. The Trust Deed provides Kingfisher with an unconditional right to a refund of surplus assets assuming the full settlement of plan liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business the Trustees has no rights to unilaterally wind up, or otherwise augment the benefits due to members of, the scheme. Based on these rights, any net surplus in the UK scheme is recognised in full. In 2010/11 and 2011/12 the Company entered into two phases of a property partnership arrangement with the scheme Trustee to address an element of the scheme deficit. Further details on this arrangement are given in note 27 of the consolidated financial statements. The reported pension position reflects the Company’s share of the resulting scheme asset. Income statement £ millions 2016/17 2015/16 Net interest income 1 1 Total credited to income statement 1 1

150 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

1 – – 1 1 – – (9) (2) 10 57 15 83 13 13 151 151 361 352 share share capital 2015/16 Ordinary £ millions 1 3 (3) 1 2 83 17 10 73 17 101 (58) 101 assets Total ingfisher Economic 2,296 2,240 Scheme shares shares 2016/17 millions an (‘KASTIP’), Kingfisher Kingfisher (‘KASTIP’), an ordinary scribed as part of the of the part as scribed Number of Number year, rather than at thedate www.kingfisher.com may vary according to vary may lan (‘PSP’) and Sharesave Sharesave and (‘PSP’) lan

eturns programme. programme. eturns £3.15 and a weighted average average a weighted £3.15 and – 1(2) 2 1 7 (7) 7 3 – (2) 3 (2) 1 (2) 70)83 13 varied according to to according varied (77)88 11 ( (70) (88) (19) www.kingfisher.com obligation obligation Defined benefit benefit Defined ercised. Vesting dates have exercise prices ranging from nil to from ranging exercise priceshave nds after they are ex after are nds they . On that basis, the weighted average share price during the the during price share average weighted the basis, that . On period. Performance conditions were based on 50% K EPS were 50% based and conditions Performance period. s. The awards were granted as nil cost options. Vesting dates Vesting nil cost options. s. The were as granted awards on of its own shares for cancellation at a cost of £200m as part of its capital r of its capital part of £200m as cost at a cancellation for shares own on of its tions outstanding at the end of the year year of the the end at outstanding tions pence per share. share. per pence 7 / 5

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Cash and othe and Cash Ordinary shares have a par value of 15 value a par have shares Ordinary 12 SHARE-BASED PAYMENTS Pl Incentive Transformation and Share Alignment Kingfisher the including plans incentive of share number a operates Company The At 1 February 2016 At 1 February 2016 New shares issued under share schemes cancellation for shares of own Purchase Government and corporate bonds bonds corporate and Government Property 11 CAPITAL SHARE CALLED UP P Share Performance (LTIP), Plan Incentive Term Long (‘KISS’), Scheme Share Incentive Kingfisher (‘KISP’), Plan Share Incentive overseas. UK, Ireland and plans in the the basis throughout year on a regular exercised have been Options (1) Representing the total amounts recognised in other comprehensive income for the year. year. the for income comprehensive other (1) in recognised amounts total the Representing follows: as is analysed assets scheme of value The fair £ millions Equities Balance sheet follows: as are assets of scheme value fair the and obligation benefit the defined of value present the in Movements 2017 At 31 January op The £3.54). (2015/16: of exercise, is £3.53

During the year the Company purchased 58 milli 58 purchased Company the year the During Total fairvalue of scheme assets remaining contractual life life of (2015/16: 7.7 years contractual remaining 4.2 years). de awards are The KASTIP to 88. 66 pages on Report Remuneration Directors’ in the disclosed are awards Directors’ The Executive Directors’ Remuneration Report. year three for deferred are awards shares KISP, and KISS the Under individual grants. grants. individual individual grants. grants. individual over a three-year on performance based annually LTIP was granted Profit(‘KEP’). The awards granted were as nil cost options, and only divide accrue Benefits paid paid Benefits Benefits paid paid Benefits Actuarial (losses)/gains (losses)/gains Actuarial At 31 January 2016 2016 At 31 January At 1 February 2015 by employe paid Contributions At 1 February 2016 At 1 February 2016 Interest (expense)/income 2017 At 31 January £ millions Interest (expense)/income gains/(losses) Actuarial Contributions paid by employe paid Contributions 1 1 2 5 6 1 5 6 1 2015/16 2015/16 Onerous property contracts 1 1 2

ress an element of element ress an een automatically automatically een 2016/17 2016/17 ny has accounted forny has accounted its s at 31 March 2016 and has rted pension position reflects reflects position pension rted an liabilities in the event of a augment the benefits due to to due benefits the augment at a shortfall and long-term idle long-term and shortfall at a e weighted average remaining remaining average e weighted re liabilities for all properties sublet the consolidated financial statements. The repo statements. financial consolidated the provided against provided futu icipate in the Kingfisher Pension Scheme, and therefore the Compa the therefore and Scheme, Pension Kingfisher the in icipate scheme has been based on the most recent actuarial valuation a valuation actuarial recent most on the based been has scheme two phases of a property partnership arrangement with the scheme Trustee to add to Trustee scheme the with arrangement partnership property of a phases two re benefit accrual with effect from July 2012. me since 31 March 2013. 2013. March me since 31 y surrenders, assignmentormitigation through subleases, isfive years. e ordinary course of business the Trustees has no rights to unilaterally wind up, or otherwise or otherwise up, wind unilaterally to rights no has Trustees the of business course e ordinary

t

t income statement 2016/17 Report Annual | plc Kingfisher Income statement statement Income £ millions income interest Net Total credited to 150 NOTES TO THE COMPANY CONTINUED FINANCIAL STATEMENTS 9 PROVISIONS £ millions At 1 February 2016 Charge to income statemen 10 POST-EMPLOYMENT BENEFITS scheme. contribution defined a funded and scheme benefit defined a funded both in participates Company The scheme contribution Defined as follows: are rules, the scheme’s in specified rates at scheme, contribution defined for the costs Pension £ millions Chargeoperating to profi Defined benefit scheme part that companies of Group is one of number plc a Kingfisher of the The valuation liabilities. assets and of the share scheme been updated to 31 January 2017. 2017. January 31 to updated been closed to futu pension scheme was salary The final of pl settlement full the assuming assets surplus of refund a to right unconditional an with Kingfisher provides Trust Deed The in th Furthermore, plan wind-up. in full. recognised is UK scheme the in surplus net any rights, on these Based scheme. of, the members entered into Company the and 2011/12 In 2010/11 of note 27 in given are arrangement Furtherthe scheme deficit. on this details theCompany’s shareof the resulting scheme asset. From July 2012, an enhanced defined contribution scheme was offered to all Company employees. Eligible Company employees have b have employees Company Eligible employees. Company all to offered was scheme contribution defined enhanced an 2012, From July sche defined contribution the into enrolled At 31 January 2017 2017 At 31 January Current liabilities Non-current liabilities Within the onerous property contracts provision, the Company has properties. The provision is based on the present value of future cash outflows relating torent, rates and service charges. Th an before exit, earliest to term lease NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

12 SHARE-BASED PAYMENTS CONTINUED PSP awards were based on performance conditions over a three-year period. The performance conditions were based on 50% EPS and 50% KEP and granted as nil cost options. Vesting dates may vary according to individual grants. Under the UK Sharesave scheme, eligible UK employees have been invited to enter into HMRC-approved savings contracts for a period of three or five years, whereby shares may be acquired with savings under the contract. The option price is the average market price over three days shortly before the invitation to subscribe, discounted by 20%. Options are exercisable within a six-month period from the conclusion of a three- or five-year period. The Irish and International Sharesave plans, which operate along similar lines of the UK Sharesave scheme, include eligible employees in Ireland and certain overseas locations. The rules of all schemes include provision for the early exercise of options in certain circumstances. The Employee Share Ownership Plan trust (‘ESOP trust’) The ESOP trust is funded by an interest free loan from the Company of £78m (2015/16: £76m) to enable it to acquire shares in Kingfisher plc. The shares are used to satisfy options awarded under the Transformation Incentive award, Alignment Share award, KISP, KISS, Performance Share Plan, Store Management Incentive Share Scheme and International Sharesave Schemes. The ESOP trust’s shareholding at 31 January 2017 is 6 million shares (2015/16: 7 million shares) with a nominal value of £1m (2015/16: £1m) and a market value of £22m (2015/16: £23m). Dividends on these shares were waived for the interim and final dividends. 13 COMMITMENTS Operating lease commitments The Company is a lessee of offices under lease agreements with varying terms, escalation clauses and renewal rights. Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:

£ millions 2016/17 2015/16 Less than one year 4 3 One to five years 15 13 More than five years 5 5 24 21

Undiscounted total future minimum rentals receivable under non-cancellable operating leases (being the total of future minimum operating sublease receipts expected to be received) are as follows:

£ millions 2016/17 2015/16 Less than one year 1 1 One to five years 2 1 3 2

14 RELATED PARTY TRANSACTIONS During the year, the Company carried out a number of transactions with related parties in the normal course of business and on an arm’s length basis. The names of the related parties, the nature of these transactions and their total value are shown below:

2016/17 2015/16 £ millions Income Receivable Income Receivable Transactions with Koçtaş Yapi Marketleri Ticaret A.S. in which the Kingfisher plc Group holds a 50% interest Commission and other income 0.5 0.2 0.5 0.2 Transactions with the Kingfisher Pension Scheme Provision of administrative services 1.3 0.1 1.2 0.1

Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists in force with non-related parties. Directors’ remuneration and details of share option exercises are disclosed in the Directors’ Remuneration Report on pages 66 to 88. Other transactions with the Kingfisher Pension Scheme are detailed in note 10.

152 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

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Castorama Dubois Investissements S.C.A. Investissements Dubois Castorama Brico Communication S.R.L. Communication Brico Eijsvogel Finance Limited Finance Eijsvogel Brico Supply S.A. Castorama Polska Sp. o.o. z Sp. Polska Castorama Electricfix Limited Limited Electricfix Euro Dépôt Immobilier S.A.S.U. Limited Steel Forge Up Geared Limited Limited Finance Halcyon DIY Express Limited DIY Express Limited (GB) EasyDrive S.A.R.L. Eijsvogel (UK) Limited Erbauer Castorama France S.A.S.U. Dickens Limited Brico Development S.A. Brico Foncier S.A. S.A. Calarasi Imobiliare Brico Bricostore Romania S.A. B&QProperties Witney Limited Limited Wrexham Properties B&Q Limited Bob’s Bargain Brico Dépôt Portugal S.A. Brico Dépôt S.A.S.U. B&Q Properties Limited Properties B&Q Limited B&Q Properties New Malden Limited Limited Nursling B&Q Properties Limited Shields South Properties B&Q Limited Sutton-In-Ashfield Properties B&Q Limited Swindon B&Q Properties B&Q Ireland Limited Limited B&Q Ireland plc B & Q Ches B&Q Properties Limited Park Retail Chestnut B&Q Properties B&Q Properties Farnborough Limited Limited Investments B&Q Properties All subsidiary undertakings, unless otherwise noted, are consolidated in the Group’s financial statements, have only one class one class only have statements, financial in the Group’s are consolidated noted, otherwise unless undertakings, All subsidiary Limited Finance Alcedo Limited Guernsey B&Q (Retail) Limited Jersey B&Q (Retail) 15 GROUP THE OF RELATED UNDERTAKINGS addres the 2017, at 31 January undertakings as related of list a full anies ActComp 2006, of the 409 Section with In accordance and their country of incorporationis shown Subsidiary undertakings plc). (Kingfisher Company the than other Group the within companies by held shares their all have and shares), ordinary S.A.S.U. Estate ADSR Real

Castorama RUS LLC Budle Finance Limited Finance Budle Castim Sp. z o.o. Sp. Castim Euro Dépôt España S.A.U. España Euro Dépôt Castorama Partenariat SNC 5 1 2 3 1 13 21 2015/16 2015/16 5 2 3 4 1 15 24 2016/17 2016/17 are Plan, Store Store Plan, are od of three or five years, years, or five of three od ngfisher plc. The shares The plc. shares ngfisher an arm’s length basis.The ortly before the invitation to to the invitation before ortly o 88. 88. o 015/16: £1m) and a market market £1m) a and 015/16: 2015/16 Income Receivable 0.5 1.2 0.2 0.1

n overseas locations. locations. n overseas riod. The Irish and International International and Irish The riod. 0.2 0.2 0.1 ists in force with non-related parties. parties. non-related with in force ists 0.5 1.3 2016/17 Income Receivable muneration Report on pages 66 t m) to enable it to acquire shares in Ki in shares it to acquire m) enable to n shares) with a nominal value of £1m (2 of £1m nominal value with a n shares) rformance conditions werebased on 50% EPS and 50% KEP and om the conclusion of a three- or five-year pe or five-year of a three- om the conclusion operating sublease sublease operating minimum of future (being the total leases operating ncellable invited to enter into HMRC-approved savings contracts for a peri a for contracts savings HMRC-approved into enter to invited The option price is the average market price over three days sh days three over market price is the average price option The centive award, Alignment Share award, KISP, KISS, Performance Sh Performance KISS, award, KISP, Share Alignment award, centive s basis. Goods are sold or bought on the basis of the price l price of the on the basis or bought are sold s basis. Goods e disclosed in the Directors’ Re the Directors’ in e disclosed aresave scheme, include eligible employees in Ireland and certai Ireland in employees include eligible aresave scheme, r non-cancellable operating leases are as follows: as follows: are leases operating r non-cancellable y 2017 is 6 million shares (2015/16: 7 millio (2015/16: million shares is 6 y 2017 nsion Scheme are detailed in note 10. 10. note in are detailed Scheme nsion ee loan from the Company of £78m (2015/16: £76 (2015/16: of £78m Company the from ee loan mance conditions over a three-year period. The pe period. a three-year over conditions mance tions are exercisable within a six-month period fr period a six-month within are exercisable tions Yapi Marketleri Ticaret A.S. in which the Kingfisher plc Group holds holds a Group plc Kingfisher the in which A.S. Ticaret Yapi Marketleri ş

r r 2016/17 Report Annual | plc Kingfisher Commissionother and income Provisionof administrative services One to five years years five One to More than five years non-ca under receivable rentals minimum future total Undiscounted receipts expected toreceived) be are as follows: years five One to 14 TRANSACTIONS RELATED PARTY During theyear, the Companycarried out number a of transactionswith related parties in thenormal course of business andon namesof the related parties, the nature of these transactions and their totalvalue areshown below: Koçta with Transactions 152 NOTES TO THE COMPANY CONTINUED FINANCIAL STATEMENTS 12 PAYMENTS SHARE-BASED CONTINUED perfor on based were awards PSP operateUK Sh Sharesave which similar of lines along plans, the circumstances. certain in options of exercise early the for provision include schemes all of rules The The Employee Share Ownership Plan trust(‘ESOP trust’) fr interest an by is funded trust The ESOP In Transformation the under awarded options are used to satisfy Schemes. Sharesave International and Scheme Share Incentive Management shareholding at 31 Januar trust’s The ESOP dividends. final and interim the for waived shares were value on (2015/16: of £23m). these Dividends £22m COMMITMENTS 13 commitments lease Operating rights. renewal and clauses escalation terms, varying with lease agreements under of offices is a lessee The Company unde payable rentals minimum future total Undiscounted £ millions yea one than Less £ millions yea one than Less £ millions 50% interest Scheme Pension Kingfisher the with Transactions ar exercises option share of details and remuneration Directors’ granted as nil cost options. Vesting dates may vary according to individual grants. grants. to individual vary may according dates Vesting granted as nil cost options. have been UK employees eligible scheme, UK Sharesave the Under the contract. under savings with be acquired may shares whereby by 20%. Op discounted subscribe, Services are usually negotiated with related parties on a cost-plu on parties related with negotiated usually are Services Pe with the Kingfisher Other transactions NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

15 RELATED UNDERTAKINGS OF THE GROUP CONTINUED L’Immobilière Castorama S.A.S.U. (32) Screwfix S.A.S.U. (21) Locke & Co Limited (29) Screws Limited (29) Martin Pecheur Finance S.A.R.L. (12) SFD Limited (29) Martin Pecheur Holdings Limited (6) Sheldon Euro Investments Limited (7) Martin Pecheur Investments Limited (20) Sheldon Euro Investments 2 Limited (7) Martin Pecheur Limited (20) Sheldon Holdings Limited (7) Martin Pecheur S.A.R.L. (21) Sheldon Poland Investments Limited (7) Martin Pecheur Sterling Investments Limited (7) Sheldon Sterling Investments Limited (7) Moretti (UK) Limited (29) Site (UK) Limited (29) New England Paint Company Limited (7) SNC Dynastock (16) No Nonsense Limited (29) Société Commanditée de Castorama Dubois Investissements Socodi S.A.R.L.(21) Owl Developments Sp. z o.o (30) Société de Participation d’Investissement et de Construction Region Nord (10) Paddington Investments Ireland Limited (6) Société Letranne S.C.I. (9) Pescador S.A.R.L. (21) Sorod S.A. (3) Plumbfix Limited (29) Street Club Limited (13) Powersmith Limited (29) Titan Power Tools (UK) Limited (29) Portswood B.V. (22) Trade Point Limited (13) Portswood Investments Limited (7) Waren Investments Limited (7) ProLand Corporation LLC (1) Watersmith UK Limited (29) Screwfix Direct Limited (e) (29) Wildbird International Limited (f) (29) Screwfix Investments Limited (7) Zeus Land Investments Limited (7) Screwfix Limited (29)

Related undertakings other than subsidiaries (27) (28) Crealfi S.A. (France, 49%) Koçtaş Yapi Marketleri Ticaret A.S. (Turkey, 50%)

(a) Kingfisher plc holds 1,000 Special Shares of £0.05 each, and 1,000 Special A Shares of £0.05 each – both representing 100% of the nominal value of each class of share. The shares held by Kingfisher plc represent less than 0.01% of the total issued share capital and are non-voting. The remaining shares in issue are Ordinary shares, have voting rights attached and are held by Kingfisher International Investments S.A.S.U. (b) The shares are held directly by Kingfisher plc. (c) 90,889,378 Ordinary shares of no par value, 43,041,757 A Preference Shares of no par value and 17,299,082 B Preference Shares of €1.00 each – each representing 100% of the nominal value of each class of share. These represent 100% of the total issued share capital. (d) Kingfisher Properties Investments Limited and Kingfisher Pension Trustee Limited are the limited partners; B&Q Properties Investments Limited is the general partner. (e) 4,083 Ordinary A shares of £1 each, 45,917 Ordinary C shares of £1 each and 4,591,700 Ordinary D Shares – each representing 100% of the nominal value of each class of share. These represent 100% of the total issued share capital. (f) 200 Ordinary shares of £1 each, 100 Ordinary B shares of £1 each, 5 Ordinary C shares of £1 each, 5 Ordinary D shares of £1 each and 10 Ordinary E shares of £1 each – each representing 100% of the nominal value of each class of share. These represent 100% of the total issued share capital.

154 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts

155 155 www.kingfisher.com www.kingfisher.com stanbul, Turkey İ d, Çekmeköy, ş Celik Bulvari, No.1 C.Blok Cekmekoy, Istanbul, Turkey Turkey Istanbul, Cekmekoy, C.Blok No.1 Bulvari, Celik ngton Road, Dublin 4, D04 XN32, Ireland try of incorporation:

(7) (7) Kingdom United 6PX, W2 London, Paddington, Square, 3 Sheldon (8) Kingdom United 2YU, EC2P London, Square, 30 Finsbury (9) Rue 30-32 Longpont-sur-Orge, Tourelle, la de France 91310 (10) 494 Avenue Général dedu Gaulle, 59910, Bondues, France (11) 2, Square, Dublin Ireland Canal Grand 6thFloor, 2 (12) 99 Grand-rue, L-1661, Luxembourg (13) Kingdom United 3LE, SO53 Eastleigh, Ford, Chandlers Avenue, Chestnut B&Q House, (14) Spain Llobregat,Barcelona, dePrat El A 1a, 08820 Edificio C/ Selva, la 10 Inblau (15) Guernsey GY1 2AS, Port, St Peter Road, Upland Court, Canada (16) Chez Castorama, Parc d’Activités, 59175 Templemars, France (17) ÇolakogluIs Merkezi Turgut ÖzalBulvari ,No: 82/3-4-5-6Ta Registered offices and coun offices and Registered (1) Moscow,Naberezhnaya, 123610, Russian Federation 12 Krasnopresnenskaya (2) Kingdom United 1YB, AB10 Scotland, , Aberdeen, Terrace Albyn 13 (3) Romania Bucharest, District, 6th Centre, Commercial Bricostore Castel, building floor, 5th Giulesti, Calea 1-3 (4) Poland Warsaw, 45a, 02-148 17 Stycznia (5) Bay, 21/F Kings Hong Cornwall Quarry Road, 979 House, Kong (6) Buildings,Haddi Victoria 2nd Floor, 1-2

(18) nab. Bld7, Derbenevskaya 8, Moscow,115114, Russian Federation (19) GaspeJE2St.Jersey Helier, 66-72 Esplanade, House, 3QT, (20) OgierSt Jersey House, The Helier, Esplanade, JE4 9WG, (21) France Templemars, 59175 Parc d'Activités, (22) RapenburgerstraatNetherlands E, 1011 VM, Amsterdam, 175, (23) Belgium des RegusBrussels,Park Rue Atrium, Colonies 1000 11, (24) B&Q RoomPudong,Road, Commercial 401, Building, Xiao Shanghai, 393 Yin China 201204, (25) Portugal Lisboa, ConcelhoMamede, de SalaFreguesia San 12, de Esq. 5 - 1º Castilho, Rua (26) Rue Tourelle, Longpont-sur-Orge, France la 91310 de (27) RueFranceBois Sauvage, du CEDEX, EVRY 91038, (28) Sirri Sapagi 11.Km.Alemdar otobani Sile Tasdelen, (29) Trade House, Mead Avenue, Houndstone Business Park, Yeovil, BA22 8RT, United Kingdom (30) Poland Warsaw, 02-255, 78, ul. Krakowoakow (31) Road, Park, 4, Willis Towers House,Dublin Merrion Elm Ireland Watson (32) France Templemars, Zone 59175 Industrielle, (21) (10)

(28) (7) (7) (7) (7) (7) res of – each representingofres each the €1.00 nominal 100% g 100% of the nominal value of each class of share. These These share. of class each of value nominal the of g 100% (29) of the nominal value of each class of share. The shares held by The shares of share. each class of value nominal the of e Ordinary shares, have voting rights attached and are held by and are attached rights voting have shares, e Ordinary (f) (29) Investments Limited is the general partner. partner. general the is Limited Investments 1 each and 10 Ordinary E shares of £1 each – each representing representing – each each of £1 E shares Ordinary 10 and each 1 (7) (7) (29) (9) (13) (13) (29) (16) (21) (29) (29) (3) Yapi Marketleri TicaretYapi A.S. (Turkey, 50%) ş SNC Dynastock SNC Dynastock Sheldon Poland Investments Limited Investments Poland Sheldon Site (UK) Limited (UK)Site Limited S.C.I. Société Letranne SociétéCommanditée Castorama de Dubois Investissements Socodi S.A.R.L. Sorod S.A. Screws Limited Sheldon Holdings Limited Holdings Sheldon Sheldon Euro Investments 2 Limited Investments Euro Sheldon Watersmith UK Limited Watersmith Koçta Titan Power Tools (UK) Limited (UK) Tools Power Titan Trade Point Limited Limited Waren Investments Sheldon Sterling Investments Limited Investments Sterling Sheldon Street Club Street Club Limited Sheldon Euro Investments Limited Investments Euro Sheldon Nord Region et de Construction d’Investissement de Participation Société SFD Limited Wildbird International Limited International Wildbird Zeus Land Investments Limited Limited Investments Land Zeus Screwfix S.A.S.U. Screwfix ch, 5 Ordinary C shares of £1 each, 5 Ordinary D shares of D shares £ ofeach, 5 Ordinary shares £1 C 5 Ordinary ch, erence Shares of SharesvalueBerence 17,299,082Sha no Preference and par d 1,000 Special A Shares of representing each – both Special d 1,000 £0.05 100% Pension Trustee Limited are the limited partners; B&Q Properties Properties B&Q partners; the limited are Limited Trustee Pension

(7)

(6)

(7) (20)

(6) (32) (7) (12)

(7) (30)

(1) (27)

(20) (e) (29) (21)

(29) (29) (29)

(29)

(21) (29) (29) (22) 2016/17 Report Annual | plc Kingfisher Kingfisher plc represent less than 0.01% of the total issued share capital and are non-voting. The remaining shares in issue ar issue in shares remaining The non-voting. are and capital share issued total the of 0.01% than less represent plc Kingfisher Kingfisher International InvestmentsS.A.S.U. capital. share issued total of the 100% represent These class of share. of each value represent 100% of the total issued share capital. capital. share issued total the of 100% represent 100% of the value of nominal each of class These share. ofrepresent 100% the total issued share capital. 154 NOTES TO THE COMPANY CONTINUED FINANCIAL STATEMENTS 15 CONTINUED THE GROUP OF RELATED UNDERTAKINGS S.A.S.U. L’Immobilière Castorama Locke & Co Limited S.A.R.L. Finance Pecheur Martin Limited Holdings Pecheur Martin Limited Investments Pecheur Martin Limited Pecheur Martin S.A.R.L. Pecheur Martin Limited Investments Sterling Pecheur Martin Moretti (UK) Limited Paint Company New England Limited Limited No Nonsense Sp. z o.o Owl Developments Limited Ireland Investments Paddington Pescador S.A.R.L. Limited Plumbfix Powersmith Limited B.V. Portswood Limited Investments Portswood LLC Corporation ProLand Screwfix Direct Limited Limited Investments Screwfix Limited Screwfix subsidiaries than other undertakings Related 49%) (France, S.A. Crealfi each,of an Shares £0.05 Special holds 1,000 (a) Kingfisher plc (b) The shares are held directly by Kingfisher plc. (b) plc. by Kingfisher directly held are shares The ofvalue,Pref no(c) 90,889,378 shares A par 43,041,757 Ordinary Kingfisher and Limited Investments Properties Kingfisher (d) (e) 4,083 Ordinary A shares of £1 each, 45,917 Ordinary C shares of £1 each and 4,591,700 Ordinary D Shares – each representin each Shares – D Ordinary each 4,591,700 of and £1 C shares Ordinary ofeach, 45,917 A shares £1 4,083 Ordinary (e) (f) (f) ofB shares£1 each,of shares 200 Ordinary £1 ea 100 Ordinary

Group five year financial summary

2012/13(1)(2)(4) 2013/14(1)(2) 2014/15(2)(5) 2015/16 2016/17 £ millions 53 weeks(3) 52 weeks(3) 52 weeks Calendar year(6) Calendar year(6) Income statement Sales 10,573 11,125 10,966 10,441 11,225 B&Q China sales (374) (421) (361) (110) – Adjusted sales 10,199 10,704 10,605 10,331 11,225 Retail profit 761 785 742 746 847 Central costs (42) (42) (40) (45) (48) Share of interest and tax of joint ventures and associates (6) (5) (6) (5) (5) Net finance costs before financing fair value measurements and exceptional items (3) (2) (12) (10) (7) Underlying pre-tax profit 710 736 684 686 787 Transformation costs (before exceptional items) – – – – (44) Adjusted pre-tax profit 710 736 684 686 743 B&Q China operating loss (9) (6) (9) (4) – Share of Hornbach post-tax results 14 14 – – – Exceptional items (before tax) (26) 17 (35) (166) 17 Financing fair value remeasurements 2 (2) 4 (4) (1) Profit before taxation 691 759 644 512 759 Income tax expense (including exceptional items) (127) (49) (71) (100) (149) Profit for the year 564 710 573 412 610 Balance sheet Goodwill and other intangible assets 2,565 2,639 2,672 2,673 2,707 Property, plant and equipment and investment property 3,814 3,675 3,233 3,237 3,613 Investments in joint ventures and associates 289 32 28 23 23 Investment in B&Q China – – – 62 – Assets and liabilities held for sale – 208 79 6 – Other net current (liabilities)/assets (7) (128) (19) 182 55 51 Post-employment benefits – (100) 112 159 131 Other net non-current liabilities (7) (422) (356) (405) (575) (395) Capital employed 6,118 6,079 5,901 5,640 6,130 Equity shareholders’ funds 6,148 6,308 6,220 6,186 6,771 Non-controlling interests 8 9 10 – – Net cash (38) (238) (329) (546) (641) Capital employed 6,118 6,079 5,901 5,640 6,130 Other financial information Like-for-like sales growth (3.0%) 0.3% 0.9% 2.3% 2.3% Effective tax rate 27% 26% 27% 26% 26% Basic earnings per share (pence) 24.1 30.0 24.3 17.8 27.1 Adjusted basic earnings per share (pence) 22.1 23.0 21.3 22.0 24.4 Underlying basic earnings per share (pence) 22.1 23.0 21.3 22.0 25.9 Ordinary dividend per share (pence) 9.46 9.9 10.0 10.1 10.4 Gross capital expenditure (8) 316 304 275 333 406 Number of stores (9) 988 1,079 1,153 1,156 1,194 (1) Adjusted pre-tax profit and adjusted basic earnings per share restated to exclude (4) 2012/13 restated for IAS 19 (revised), ‘Employee benefits’, resulting in the reclassification contribution from Hornbach, following its disposal in 2014/15. There was no contribution of £3m of pension administration costs from net finance costs to retail profit. from Hornbach in 2014/15. (5) 2014/15 restated for IFRIC 21, ‘Levies’, resulting in a restatement of balance sheet (2) Sales, retail profit, adjusted pre-tax profit, like-for-like sales growth and adjusted basic payables, deferred tax and equity shareholders’ funds. earnings per share restated to exclude B&Q China operating results, following the disposal (6) In 2015/16 the Group moved its year end to 31 January (previously the nearest Saturday of a 70% controlling stake in 2015/16. to 31 January) resulting in a calendar year ended 31 January 2016. This only impacted the (3) Like-for-like sales growth in 2012/13 was calculated by comparing 53 weeks against the UK & Ireland business with all other businesses already reporting on a calendar basis. This equivalent 53 weeks of the prior year. Like-for-like sales growth in 2013/14 is calculated change had no material impact on the Group’s results. by comparing 52 weeks against the equivalent 52 weeks of the prior year. This only (7) Other net current (liabilities)/assets and other net non-current liabilities reported above impacted the UK & Ireland businesses with all of the other businesses reporting on a exclude any components of net cash. calendar basis. The effect of the 53rd week on the results of the Group in 2012/13 was (8) Excluding business acquisitions. the inclusion of an additional £72m sales and an immaterial benefit to retail profit. (9) Excluding joint ventures and associates. 156 KingfisherKingfisher plc | Annual plcReport | Annual 2016/17 Report 2016/17 Accounts % %

Low 157 0.08 0.12 0.50 0.24 0.92 2.87 7.97 9.23 9.07 8.40 7.81 6.91 1.20 0.01 0.00 0.07 0.00 0.52 95.27 98.20 100.00 100.00 0 4 May 2017 5 May 2017 26 May 2017 30 May 2017 19 June 2017 Shares Shares 45,511 High 9.34 9.98 9.34 234,426 10.97 11.92 14.71 1,912,185 2,732,305 5,304,917 1,523,516 Dollars per ADR** 20,544,770 64,261,567 11,216,663 26,805,875 11,692,495 2,239,911,802 2,133,939,395 2,199,609,979 2,239,911,802 % % Low 3.59 3.20 1.32 1.52 3.07 3.17 2.85 2.71 2.54 2.17 7.39 0.08 0.03 0.50 0.00 0.10 48.08 17.70 24.59 91.90 100.00 100.00 www.kingfisher.com 6 0 17 20 752 672 277 319 104 3,711 5,154 Share- holders 1,550 20,964 10,079 19,267 20,964 High 3.83 4.44 4.20 3.14 2.87 3.86 Holdings £ per ordinary share* £ per ordinary

Based on the daily closing price of Kingfisher plc shares on the London Stock Exchange. Stock London on the plc shares of Kingfisher Based on the daily closing price market. (OTC) of Kingfisher plc ADRs in the Over-the-Counter Based on the daily closing price Financial year Financial Total Size of holding 0-500 501-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-500,000 500,001 and above 2015/16 2014/15 2013/14 2012/13 2011/12 2017 31 JANUARY AT DIVIDEND year ended 31 January the financial 2017 of dividend for The interim 2016. was paid on 11 November 3.25p per share the final dividend for the payment information provides The table below at our 2017 Annual approval shareholder subject to of 7.15p per share, Meeting: General Ex-dividend date date Record forms/currency of DRIP mandate return for Final date elections notification rate exchange Euro and DRIP purchase date Payment SHARE PRICE HISTORY 2016/17 * ** AND SHAREHOLDINGS AS OF SHAREHOLDERS ANALYSIS Classification of Holder Individuals Bank or Nominees Trust Investment Insurance Company Insurance Other Company Trust Pension Body Other Corporate Total

March 2018 March 24 May 2017 17 August 2017 21 November 2017 21 November 20 September 2017 20 September

Telephone share dealing: Commission is 1%, plus £35; stamp duty at share Telephone 8.00am from service The is available on purchases. 0.5% is payable Telephone: bank holidays. excluding Friday to 4.30pm Monday to +44(0)370 703 0084. a minimum is 1%, subject to dealing: Commission share Internet The on purchases. at 0.5% is payable of £30; stamp duty charge Simply log onto hours. out of market orders place to service is available www.investorcentre.co.uk. – – UNAUTHORISED BROKERS (BOILER ROOM SCAMS) (BOILER ROOM BROKERS UNAUTHORISED to the available register its share to make Kingfisher plc is legally obliged unsolicited may receive public. Consequently some shareholders general unauthorised investment from mail, including correspondence received have that some shareholders aware are We companies. investment concerning phone calls or correspondence unsolicited who target based brokers overseas typically from These are matters. worthless to be turn out or to sell what often offering UK shareholders They can be very persistent in US or UK investments. high risk shares be very wary of advised to are Shareholders persuasive. and extremely free of or offers at a discount to buy shares offers advice, any unsolicited reports. company will be endorses that the company dealing facilities Details of any share mailings. included in company +44(0) 370 702 0129. SHARE DEALING FACILITIES Kingfisher plc shares buy or sell the opportunity have to Shareholders by the Registrar. operated dealing facility using a share – – of both services can be obtained by calling and conditions Terms Second-quarter trading update trading Second-quarter SHAREHOLDER ENQUIRIES such their shareholdings, regarding have Any queries that shareholders certificates lost share of shares, transfer as a change of name or address, using the contact the Registrar to or dividend cheques, should be referred on UK business days Helpline is available A Shareholder details above. self-service an automated 8.30am and 5.30pm and contains between a day. 24 hours functionality which is available REGISTRAR Services PLC Investor Computershare W2 6BD, at 2.00pm. W2 6BD, FINANCIAL CALENDAR follows: for 2017/18 is as financial calendar The proposed update trading First-quarter 31 July 2017 to results Half-year update trading Third-quarter 31 January 2018 to Final results The Pavilions Road Bridgwater ANNUAL GENERAL MEETING GENERAL ANNUAL 13 June 2017 be held on Tuesday, Meeting will Our 2017 Annual General London 3 Kingdom Street, Paddington, London Novotel at the Hotel BS99 6ZZ Bristol +44(0) 370 702 0129 Telephone: www.investorcentre.co.uk Website: SHAREHOLDER INFORMATION SHAREHOLDER PAYMENT METHODS online and offline. It is updated with the latest financial information at the Shareholders can elect to receive their dividends in a number of ways: same time as the corporate website. To discover more, download it free from the App store. –– Cheque: Dividends will automatically be paid to shareholders by cheque, which will be sent by post to the shareholder’s DOCUMENT VIEWING registered address; Shareholders will have the opportunity to view certain documentation, –– BACS: Dividends can be paid by mandate directly to a UK bank or as outlined in the Notice of Annual General Meeting, from at least building society account through the BACS system. This method of 15 minutes prior to the meeting, until its conclusion. The rules of the payment reduces the risk of your cheque being intercepted or lost in Kingfisher Incentive Share Plan (KISP), the Kingfisher Alignment Shares the post. Shareholders wishing to receive their dividends in this way and Transformation Incentive Plan (KASTIP), the (proposed) Articles of can update their mandate instructions at www.investorcentre.co.uk Association and other documentation referred to in this Annual Report or complete a dividend mandate form and return it to the Registrar; can be viewed at the registered office during normal business hours. –– Dividend Reinvestment Plan (DRIP): The company also offers GROUP COMPANY SECRETARY AND REGISTERED OFFICE shareholders a DRIP, whereby their cash dividend can be used to buy Paul Moore, Kingfisher plc additional shares in the company. Shareholders can apply online at www.investorcentre.co.uk or complete a mandate form and return 3 Sheldon Square, Paddington, London, W2 6PX it to the address shown above; and Telephone: +44 (0)20 7372 8008 –– Global Payments Service: This service, provided by the Registrar Fax: +44 (0)20 7644 1001 enables shareholders to have dividend payments paid directly into www.kingfisher.com their bank account in their chosen local currency. To view terms and register, please visit www.computershare.com/uk/investor/GPS. Registered in England and Wales Registered Number 01664812 AMERICAN DEPOSITARY RECEIPTS (ADRS) The company has a Sponsored Level 1 ADR programme in the United FORWARD-LOOKING STATEMENTS States, which trades on the OTCQX Platform. Each ADR represents All statements in this Annual Report and Accounts, other than historical two Kingfisher ordinary shares. The company’s ADR programme is facts, may be forward-looking statements. Such statements are therefore administered by Citibank, N.A., who were appointed on 1 October 2015. subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied because they ADR Investor Contact: relate to future events. Telephone: +1 877 248 4237 E-mail: [email protected] Forward-looking statements can be identified by the use of relevant terminology including the words: ‘believes’, ‘estimates’, ‘anticipates’, ADR Broker Contact: ‘expects’, ‘intends’, ‘plans’, ‘goal’, ‘target’, ‘aim’, ‘may’, ‘will’, ‘would’, ‘could’ or Telephone: +1 212 723 5435 / +44(0) 20 7500 2030 ‘should’ or, in each case, their negative or other variations or comparable @ E-mail: citiadr citi.com terminology and include all matters that are not historical facts. They ELECTRONIC COMMUNICATION appear in a number of places throughout this Annual Report and Shareholders who have not yet elected to receive shareholder Accounts and include statements regarding our intentions, beliefs or documentation in electronic form can sign up by visiting current expectations and those of our officers, directors and employees www.investorcentre.co.uk/ecomms and registering their details. When concerning, amongst other things, our results of operations, financial registering for electronic communications, shareholders will be sent an condition, changes in tax rates, liquidity, prospects, growth, strategies email each time the company publishes statutory documents, providing and the businesses we operate. a link to the information. Other factors that could cause actual results to differ materially from Electing for electronic communications does not mean that shareholders those estimated by the forward-looking statements include, but are cannot obtain hard copy documents. Should shareholders require not limited to, global economic business conditions, global and regional a paper copy of any of the company’s shareholder documentation, they trade conditions, monetary and interest rate policies, foreign currency should contact the Registrar at the address stated under the section exchange rates, equity and property prices, the impact of competition, headed ‘Registrar’. inflation and deflation, changes to regulations, taxes and legislation, changes to consumer saving and spending habits; and our success in CORPORATE WEBSITE managing these factors. Shareholders are encouraged to visit Kingfisher’s corporate website Consequently, our actual future financial condition, performance and (kingfisher.com). The website includes information about the company, results could differ materially from the plans, goals and expectations set its strategy and business performance, latest news and press releases and out in our forward-looking statements. Reliance should not be placed approach to corporate governance. The Investor Relations section is a key on any forward-looking statement. Nothing in this Annual Report and tool for shareholders, with information about Kingfisher’s share price, Accounts or the Kingfisher website should be construed as a profit financial results, shareholders meetings and dividends. This section also forecast or an invitation to deal in the securities of Kingfisher. contains frequently asked questions and copies of the current and past annual reports. The forward-looking statements contained herein speak only as of the date of this Annual Report and the company undertakes no obligation Kingfisher has an Investor Relations app for the iPad. The app provides to publicly update any forward-looking statement, whether as a result of access to the latest share price information, corporate news, financial new information, future events or otherwise, other than in accordance reports, presentations, corporate videos and earnings webcasts both with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority).

158 Kingfisher plc | Annual Report 2016/17 Accounts

159 www.kingfisher.com is defined as the number of individual variantsis defined as the number of individual (Stock Keeping Unit) Keeping (Stock comprises cash and cash equivalents and short term deposits, and short cash and cash equivalents Net cash term comprises interest). accrued (excluding derivatives and financing less borrowings for sale. as held classified balances It excludes Portugal Europe, of Screwfix consists New Country Development and Romania. Russia, Romania, Portugal, of Poland, Other International consists venture). joint (Koçtaş Turkey Spain and Europe, Screwfix report theto used measure profit is our operating profit Retail sustainable businesses including the of the underlying retail performance central before This is stated programme. benefits of our transformation share and the Group’s items exceptional costs, transformation costs, 2015/16 year Full and associates. and tax of joint ventures of interest loss. B&Q China’s operating exclude comparatives Europe. continental outside of UK in Screwfix to refers Europe Screwfix joint (Koçtaş Venture Joint sales excluding Group to sales refer Statutory sales. venture) SKU sale, for a distinct type of item It is in stock. or remaining sold of products type that with the item associated and all attributes such as a product not include, but are could These attributes others. distinguish it from packaging colour, size, description, material, manufacturer, to, limited terms. and warranty of the ONE the additional costs represent costs Transformation launched in 2016/17. They programme Kingfisher transformation P&L ‘transformation costs’, exceptional ‘transformation comprise (capital capex’ and ‘transformation items) non-exceptional (i.e. costs’ expenditure). of the the performance report is used to profit Underlying pre-tax including the sustainable benefits level, underlying business at a Group short-term the before is stated This programme. of our transformation items exceptional programme, with our transformation associated costs and FFVR. UK. and Screwfix of B&Q in the UK & Ireland consists UK & Ireland

represents fair value fair represents excluding B&Q China sales. excluding sales derived from online transactions, including click online transactions, from sales derived

(Goods Not For Resale) covers the procurement of all goods the procurement covers Resale) (Goods Not For remeasurements) value fair (financing (business as usual) refers to activity without the transformation. activity without the transformation. to (business as usual) refers (cost price reduction) refers to the savings made on cost of the savings made on cost to refers reduction) price (cost data includes relocated and extended stores. and extended data includes relocated Banque de France measures are before exceptional items, FFVR, amortisation items, exceptional before are Adjusted measures items tax on prior year and tax items intangibles, related of acquisition 2015/16 year tax. Full changes on deferred including the impact of rate B&Q China’s results. exclude comparatives of the performance report is used to profit Adjusted pre-tax of our including both the benefits level the business at a Group before This is stated costs. and the associated programme transformation and FFVR. items exceptional sales statutory Adjusted sales represents GLOSSARY ORDER) LISTED IN ALPHABETICAL (TERMS ARE http://webstat.banque-france.fr/en/browse.do?node=5384326 BAU in be broadly this to expect would we our performance, to When referring markets. in our respective backdrop line with the macroeconomic CPR goods sold. Digital sales are & collect. This includes sales transacted on any device, however does not however on any device, transacted This includes sales & collect. a call centre. include sales through and amortisation) is tax, depreciation interest, (earnings before EBITDA costs and P&L and transformation central less profit as retail calculated and amortisation. depreciation before amortisation and tax, depreciation, interest, (earnings before EBITDAR central less profit as retail is calculated lease rentals) operating property and amortisation and depreciation before P&L costs, and transformation lease rentals. operating property FFVR fluctuations from financial instruments. fluctuations from Dépôt France. and Brico France of Castorama consists France (excluding operations from cash generated cash represents flow Free tax and capital less the amount spent on interest, items) exceptional and business acquisitions (excluding during the year expenditure disposals and asset disposals). GNFR (including media buying, mechanical consumes and services a retailer handling equipment, printing and paper). costs and central less profit is post-tax retail adjusted ROCE Lease lease and property items exceptional excluding costs, transformation historic excluding capital employed divided by lease adjusted costs, Capital provision. restructuring goodwill, net cash and exceptional Kingfisher leases. include capitalised property to is adjusted employed industry is a reasonable lease rent operating 8x property believes of its leased assets. Capital value estimating the economic for standard point as a two capitalised leases, is calculated for except employed disposed businesses e.g. China. The calculation excludes average. the constant representing sales growth like-for-like LFL stands for been open that have stores for sales growth on year year currency, than a year. for more Kingfisher is included in two socially responsible investment indices this year, the Dow Jones Sustainability Index (DJSI) and FTSE4Good. We also participated in the Carbon Disclosure Project’s (CDP) Climate and Forests questionnaires in 2016.

160 Kingfisher plc | Annual Report 2016/17 Printed by Park Communications on FSC® certified paper. Park is an EMAS certified company and its Environmental Management System is certified to ISO 14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled. This document is printed on UPM Fine Offset, a paper containing virgin fibre sourced from well managed, responsible, FSC® certified forests. Designed and produced by Black Sun Plc www.blacksunplc.com Photography Douglas Fry, Piranha Photography: Pages 1, 12, 30, 47, 48, 49, 52, 60, 64, 66 Kingfisher plc, 3 Sheldon Square, Paddington, London W2 6PX Telephone: +44 (0)20 7372 8008 www.kingfisher.com