Company Announcements

Our colleagues are critical to the successful delivery of our 'Powered by Kingfisher' strategy. We have rebalanced responsibilities between Group and banners to set the right conditions for our individual banners to grow while leveraging the Group's scale and expertise to meet customer needs.

Our accelerated investment programme requires an expansion of our technical capabilities. More generally, the failure to attract, retain and develop colleagues with the appropriate skills, capabilities and diverse backgrounds, or to have adequate succession plans, could impact our ability to meet our business objectives.

How our risks have changed

No change. Although recruitment has become increasingly competitive as economies recover, we have successfully implemented our organisational structure changes and have plans in place to

address our future resource requirements.

Link to strategic priorities

·      Grow e-commerce sales

·      Build a mobile-first and service orientated customer experience

·      Differentiate and grow through own exclusive brands (OEB)

·      Lead the industry in Responsible Business practices

How we manage and monitor the risk

·      The Board has approved our Group strategy for people and culture, with individual priorities agreed for each banner and function.

·      The Group Executive and Board hold regular talent reviews focused on ensuring the senior leadership group has the required capabilities to deliver the strategy and on activities to strengthen our leadership succession pipeline.

·      We have a formal Technology Capability programme in place to ensure continued focus and progress on acquiring and retaining critical skills. A new Technology careers webpage has been launched, which has increased the level of traffic to our site.

·      We have refreshed the Employer Brand in the UK retail banners and are in the process of extending and aligning this across the wider Group.

·      We invest in tools and infrastructure to support our colleagues' learning, including a leadership development portal for bite-size instant learning and e-learning for our store teams on new products.

·      We have identified and agreed the key leadership requirements and behaviours to accelerate delivery of our strategy and target culture which we define as agile, inclusive and led by trust. These behaviours will become the cornerstone of our work on leadership hiring, talent management and leadership development.

·      Each banner has a tailored diversity and inclusion plan. Areas of focus are our senior leadership, creating a culture of inclusion, our customer proposition and learning for life. Relevant targets are linked to the remuneration of senior leaders.

·      The physical and mental wellness of our colleagues has remained a priority during the year through communications and the provision of external support (e.g. mental health awareness training for line managers). We continue to check in on how colleagues are feeling through our annual colleague survey.

2. Level and Impact of Change

Under our strategic plan 'Powered by Kingfisher', the business is utilising its core strengths and commercial assets, and 'powering' its distinct retail banners to address the significant growth opportunities that exist within the home improvement market. We have high ambitions and we are continuously improving our offer, market positions, cost base and technology. In particular, we are rolling out a Group-wide IT systems development programme.

Where relevant we may also consider complementary acquisitions, partnerships and joint ventures to optimise our business activities and support our strategy.

Failure to properly prioritise activity and manage change effectively could result in weaker than

anticipated sales growth, reduced operating margins or insufficient cash being generated to meet

our objectives.

How our risks have changed

Decreased. The planned organisational structure changes have been implemented and we have made significant progress on our strategic priorities.

Link to strategic priorities

·      Grow e-commerce sales

·      Build a mobile-first, service orientated customer experience

·      Differentiate and grow through own exclusive brands (OEB)

·      Test compact store concepts and adapt our store footprint

·      Source and buy better, reduce our costs and same-store inventory

·      Lead the industry in Responsible Business practices

·      Expand engagement with trade customers

How we manage and monitor the risk

3. Contagious Diseases

How our risks have changed

No change. There has been significant progress in the rollout of vaccines and in medical treatments over the past year. We also have procedures in place to protect our colleagues and customers while continuing to trade. However, uncertainty still remains over new variants, and the possible

reimposition of Covid-related restrictions.

Link to strategic priorities

·      Lead the industry in Responsible Business practices

How we manage and monitor the risk

·      The health and safety of our colleagues and customers remains our top priority, alongside supporting governments to limit the spread of the virus. We have maintained strict hygiene and appropriate social distancing measures in our stores. We significantly invested in PPE to ensure availability for our staff, deep cleaned stores where required and allowed staff to self-isolate while continuing to be paid.

·      We have communicated regularly to colleagues and customers, providing reassurance and responding to common concerns.

·      Our Group Crisis Committee has met at least fortnightly throughout the year in response to the pandemic, with representation from banners and functions. The Committee monitors events, changes in governments' approaches and response strategies. The Board provides regular oversight to evaluate the impact of Covid-19 on Kingfisher.

·      We have liaised closely with governments to ensure we can continue to provide home improvement while playing our role to limit transmission of the disease.

·      We have ensured that our office-based colleagues are able to work from home, in line with local governmental guidance, with access to appropriate equipment. Ongoing line manager training and mental health 'wellness' awareness has been provided for working in this way.

·      We have business continuity and crisis teams in each of our markets, who we would mobilise in the event of any future significant operational impact.

·      If required, we are able to significantly reduce discretionary spend (including freezing pay reviews, delaying bonus payments and/or recruitment), stop all non-committed capital expenditure, reprioritise sourcing requirements and adjust purchasing plans.

·      We regularly monitor customer, colleague and stakeholder sentiment through social media and colleague feedback. This output influences the operational decisions we take.

4. Supply Chain Resilience

A resilient supply chain is key to our business and the achievement of our strategic objectives. We are dependent on complex global supply chains and fulfilment solutions to deliver our products to our customers. There has been significant disruption caused by the pandemic with congestion at ports and an increased demand for containers. The pandemic has also caused operational difficulties for our suppliers, testing their ability to respond quickly to changes in demand. Major disruption to our supply chain could result in reduced levels of product available for sale, with an adverse financial and reputational impact.

How our risks have changed

No change. There have been continued challenges to our supply chain as a result of the pandemic.

However, capacity has increased and would be able to meet demand were it not for disruption at key points in the network.

Link to strategic priorities

·      Grow e-commerce sales

·      Source and buy better, reduce costs and same‑store inventory

·      Expand engagement with trade customers

How we manage and monitor the risk

·      Our Supply and Logistics three-year roadmap was updated in 2021/22. It considers our future logistics capacity needs based upon the various sourcing, inventory and sales generative strategies identified in the Group's strategic planning activities.

·      Business continuity plans are updated regularly, covering our internal points of failure and key partner service-continuity plans. The actions include a response to supplier and logistics failures, and plans were tested live as part of our Covid response activities.

·      We have established partnerships with key transportation and logistics suppliers to align planning and secure capacity.

·      Since the start of the pandemic, a weekly meeting of Supply Chain Directors from across the Group has been held to identify and agree key actions to respond to the changing supply needs.

·      We have extended our demand forecasting to better anticipate future sales requirements and worked with suppliers to ensure product availability.

·      We have continued the implementation of store-based fulfilment for customer orders to support the business operation and the increased demand since the pandemic started.

·      We have an agreed supplier strategy which includes guidance on choosing which regions to source from and when to use more than one factory or supplier to increase resilience.

·      There is a robust process for selecting individual suppliers. This includes checks on financial strength, ethical and environmental risks and their ability to manufacture the products to the agreed specification.

·      We continually review key suppliers by category to establish capacity and volumes and assess the impact of an interruption in supply.

5. Competition

Our competitors include both traditional store-based and pureplay online retailers. The pandemic has accelerated changes in the market, with a sharp rise in the use of online marketplaces and an increase in the number of competitors in the home improvement market. Competitors are also developing their offers, including both direct-to-customer operations and the services offered.

Targeted actions or disruptive behaviour by competitors could negatively impact our market share,

the value of our assets and our financial results.

How our risks have changed

No change. Our strategy has enabled us to continue to grow our Group sales and profit and gain market share in the UK and France.

Link to strategic priorities

·      Grow e-commerce sales

·      Build a mobile-first, service orientated customer experience

·      Differentiate and grow through own exclusive brands (OEB)

·      Test compact store concepts and adapt our store footprint

·      Source and buy better, reduce our costs and our same-store inventory

·      Expand engagement with trade customers

How we manage and monitor the risk

We are building a differentiated offer through:

·      Clear positioning for each of our banners, with different operating models to address diverse customer needs, such as general DIY needs, trade-focussed and discounters.

·      Centrally developing our OEB brands, with clearly defined range principles and customer projects to create a differentiated and compelling offer.

·      Giving greater autonomy to local banners and allowing local ranges, services and store formats that are tailored to customers' needs.

·      Competing on price by using the scale of our Group to benefit from volume and lower purchase prices.

·      Tailoring trading actions to local markets, through distinct customer communications (adverts, brochures), promotions and loyalty schemes to increase sales and brand loyalty.

We regularly monitor our market share, our performance and that of our competitors, to react quickly to targeted actions via:

·      Comparison of price indices vs competition in our key categories and measure customer price perception on a regular basis.

·      Customer trend monitoring in all our markets to anticipate and develop an appropriate offer.

·      Monitoring Net Promotor Scores (NPS) scores, with targets to improve the customer experience and satisfaction.

6. Changing Customer Preferences

The pace of change remains high, with a greater use of e-commerce solutions for click & collect and home delivery. To make our products available to customers where and when they want it, we have accelerated our investment programme. This ensures we have innovative digital channels supported by an agile and reliable infrastructure, including technology and logistics capability, and an optimised property portfolio with in-store services.

Failure to identify new trends and optimise our channels quickly enough could affect our ability to stimulate spend and adversely impact the value of our assets and our financial results.

How our risks have changed

No change. The increased autonomy of the banners in our new commercial operating model allows them to more quickly identify and react to changes in customer trends. However, a significant risk

remains that we are not able to deliver the required changes quickly enough or that the changes are not sufficiently compelling for our customers.

Link to strategic priorities

·      Grow e-commerce sales

·      Build a mobile-first, service orientated customer experience

·      Test compact store concepts and adapt our store footprint

·      Lead the industry in Responsible Business practices

·      Expand engagement with trade customers

How we manage and monitor the risk

·      A Group digital strategy has been developed and approved by the Board, with various priority programmes underway.

·      Our Customer & Market Intelligence team continuously monitors and gathers insights, which is regularly shared with the Group Executive, the Board and the wider business. We also have teams focused on customer data and digital experience, so that we can better understand the behaviour of our customers and provide them with personalised omnichannel experiences.

·      We have an established Technology Product Council, meeting on a quarterly basis, to monitor financial and project portfolio performance and to prioritise upcoming digital initiatives.

·      We have launched strategic programmes to grow e-commerce, focusing on putting stores at the centre of our fulfilment model. We have implemented a digital hub model to improve speed of delivery. Drive through pick-ups are now in all medium and big stores in France and Poland and lockers have been rolled out to all Castorama Poland stores.

·      We are continuing to invest in developing our mobile consumer apps so that they can be used in our stores for self-service ordering and payment.

·      We have also improved the customer proposition by broadening the services we provide. This includes technology driven services to improve the experience of buying online and making DIY projects more affordable.

·      We have expanded the range of do-it-for-me services available to customers to help them complete projects, including rolling out our NeedHelp proposition in the UK and Poland. NeedHelp is the leading European home improvement services marketplace.

·      We have continued to test and develop our understanding of compact store formats and concessions, with additional openings in the UK, France and Poland. We now have 25 stores across four banners, providing us with strong learnings for our future blueprint.

·      We continue to review the best options to further expand product choice, including our recently launched e-commerce marketplace proposition.

·      To our focus on speed and convenience for customers, Screwfix has launched 'Sprint', offering deliveries direct to site within one hour for a third of UK postcodes.

7. Political and Market Volatility

Kingfisher operates in eight countries across Europe and relies on a global supply base, exposing us to both geopolitical uncertainty and local volatility. Disruption could include government restrictions on mobility, strikes, work stoppages and/or our ability to receive products from affected countries. Market volatility has increased since the pandemic began, resulting in changing customer behaviours and reduced consumer confidence. If governments try to reduce their budget deficits through taxation, this will create additional burdens on businesses. These impacts could potentially disrupt the day-to-day operations of our business and our ability to meet our strategic objectives.

How our risks have changed

Increased. We have seen increased economic volatility across all our markets, with higher material,

energy and labour costs driving higher inflation. A continued conflict in Eastern Europe would negatively impact energy and commodity prices and could limit the availability of certain raw materials.

Link to strategic priorities

·      Source and buy better, reduce costs and same-store inventory

How we manage and monitor the risk

8. Legal and Regulatory

The Group's operations are subject to a broad range of regulatory requirements in the markets in which it operates. A major corporate issue or crisis, a significant fraud or material non-compliance

with legislative or regulatory requirements would impact our brands and reputation, could expose us to significant fines or penalties and would require significant management attention.

How our risks have changed

No change.

Link to strategic priorities

·      Source and buy better, reduce our costs and same-store inventory

·      Lead the industry in Responsible Business practices

How we manage and monitor the risk

Policies and procedures:

·      Policies and procedures are in place, clearly stating our expectation to carry out our business fairly and with complete integrity.

·      Our Goods Not For Resale Vendor Engagement Assessment tool increases the level of supplier due diligence covering business integrity, data protection and information security.

·      A new whistleblowing policy and hotline, facilitated by an independent third party, were put in place throughout the Group in FY21/22, with a communications campaign to raise awareness. Champions in all banners received training to ensure that all calls are followed up and investigated appropriately.

Training and communication:

·      Revised Group-wide mandatory compliance training was rolled out and delivered in 2021, with two modules for all colleagues (Code of Conduct, including anti-bribery and corruption, and GDPR) and two for head-office staff (Fair Competition & Market Abuse Regulation). Refresher training modules were launched in January 2022 to be completed by all colleagues.

Oversight and reporting:

·      Our Legal & Compliance network is well established, for teams at Group and banners to work and communicate together.

·      The Group Ethics and Compliance Committee (GECC) ensures that the Group approach to ethics and compliance is adequate and effective. This includes approving compliance training and reviewing the outcomes of investigations. Local Ethics and Compliance Committees have been implemented in all banners to ensure a consistent approach across the Group.

·      We have a Disclosure Committee in place to address our Market Abuse Regulation requirements.

·      Whistleblowing statistics and trends are monitored in the local Ethics and Compliance Committees and reported to the GECC, Audit Committee and Board annually.

9. Cyber and Data Security

Cyber-attacks and security incidents continue to increase and the retail sector has joined a number of industry sectors as a target due to it becoming more data driven. As we increase our digital presence and develop smart products and services our risk profile will continue to change.

Failure to protect data, detect breaches, and respond accordingly would negatively impact our operations, profitability and reputation.

How our risks have changed

Increased. Alongside a continued acceleration in digital growth, there has been a growing number of organisations affected over the past year, with a wider availability of tools and techniques available to cause serious disruption.

Link to strategic priorities

·      Grow e-commerce sales

·      Build a mobile-first, service orientated customer experience

How we manage and monitor the risk

·      Cyber security continues to receive Group Executive-level sponsorship and Board focus.

·      Cyber security is an integral part of the IT strategy with a clear three-year plan supporting the strategic priorities and will continue to develop and evolve our capabilities to manage new threats.

·      An independent maturity assessment has been completed and results incorporated into the 3-year plan. There will be a continuous independent assurance schedule to ensure we meet target maturity.

·      We regularly review the cyber threats facing Kingfisher and work with security partners to evaluate and implement appropriate controls.

·      All technology development goes through a 'Secure by Design' process to ensure solutions and data are secure and adhere to compliance and regulation requirements.

·      We perform security assurance of third parties that process our data across all functions and banners.

·      We have a continuous programme to enhance our protective and defensive capabilities.

·      There is a robust major incident management process and we maintain a third-party retainer for incident response, breach and forensic expertise.

10. Reputation and Trust

Our customers, colleagues, suppliers, investors and the communities we source from and operate expect us to conduct our business in a way that is responsible. One of the many ways we strive to ensure this is through our publicly communicated Responsible Business strategy and targets, covering topics such as climate change, responsible sourcing and diversity (for further details please refer to Responsible Business on pages 23 to 29).

Failure to deliver on our obligations and commitments could undermine trust in Kingfisher, damage our reputation and impact our ability to meet our strategic objectives.

How our risks have changed

No change. The level of scrutiny and expectations from our stakeholders remains high, particularly around our response to Covid-19 and the environment.

Link to strategic priorities

·      Lead the industry in Responsible Business practices

How we manage and monitor the risk

Governance:

·      Our Code of Conduct establishes the core behaviours we expect of ourselves and others, including our suppliers.

·      The Responsible Business Committee leads and oversees the delivery of the responsible business strategy. It is chaired by a non-executive director and includes the Chief Executive Officer.

·      Our approved science-based carbon reduction targets ensure we have a short-term plan to 2025 decarbonise our full supply chain including moving our property portfolio to renewable energy, lower carbon transport solutions and editing our product ranges to offer customers the most energy and water efficient products.

·      Our annual reward measures help to ensure that environment, social and governance (ESG) issues and stakeholder concerns are further prioritised.

Stakeholder dialogue:

·      Monitoring of external stakeholders' views of our company through traditional and digital media for all our companies.

·      For colleagues, we have forums and works' councils in all of our businesses, including a collective forum that meets with the CEO and members of the Board.

·      Externally, we have regular engagement with a range of NGO partners in our key markets, which helps to ensure that the company remains close to social and environmental concerns.

Due diligence and external assurance:

·      Our due diligence of suppliers covers a range of ESG issues, from environment to modern slavery; and includes our policy framework and supplier standards, which we expect suppliers to adhere to; supplier training and capacity building; and auditing of high-risk suppliers.

·      Our due diligence extends to the data we disclose. Selected ESG data in the annual Responsible Business Report and Modern Slavery Statement is independently audited by DNV.

·      Independent ratings agencies also monitor and rate our ESG performance throughout the year, including MSCI, CDP, Sustainalytics and ISS ESG.