Final Results - Part 2
Kingfisher PLC
27 March 2008
Consolidated income statement
For the financial year ended 2 February 2008
2007/08 2006/07
Before Exceptional Total Before Exceptional Total
exceptional items exceptional items
£ millions Notes items (note 3) items (note 3)
Continuing operations:
Revenue 2 9,364 - 9,364 8,676 - 8,676
Cost of sales (6,093) - (6,093) (5,624) - (5,624)
Gross profit 3,271 - 3,271 3,052 - 3,052
Selling and distribution (2,390) (35) (2,425) (2,207) - (2,207)
expenses
Administrative expenses (469) - (469) (434) - (434)
Other income 22 44 66 24 49 73
Other expenses - (5) (5) - - -
Share of post-tax results of 2 19 19 17 - 17
joint ventures and associates -
Operating profit 453 4 457 452 49 501
Analysed as:
Retail profit 2 498 (1) 497 504 49 553
Central costs (40) 5 (35) (39) - (39)
Share of interest and tax of (5) (5) (13) - (13)
joint ventures and associates -
Finance income 33 33 25 - 25
-
Finance costs (95) (95) (76) - (76)
-
Net finance costs 4 (62) (62) (51) - (51)
-
Profit before taxation 391 4 395 401 49 450
Income tax expense 5 (125) 2 (123) (120) 8 (112)
Profit for the year 266 6 272 281 57 338
Attributable to:
Equity shareholders of the 274 337
Company
Minority interests (2) 1
272 338
Earnings per share 7
Basic 11.7p 14.4p
Diluted 11.7p 14.4p
Adjusted basic 11.3p 11.9p
Adjusted diluted 11.3p 11.8p
The proposed final dividend for the financial year ended 2 February 2008,
subject to approval by shareholders at the Annual General Meeting, is 3.4p per
share.
Consolidated statement of recognised income and expense
For the financial year ended 2 February 2008
£ millions Notes 2007/08 2006/07
Actuarial gains on post employment benefits 47 95
Currency translation differences
Group 206 (60)
Joint ventures and associates 26 (12)
Losses transferred to income statement 3 -
Cash flow hedges
Fair value losses (6) (9)
Losses transferred to inventories 8 3
Tax on items recognised directly in equity (19) (30)
Net income/(expense) recognised directly in equity 265 (13)
Profit for the year 272 338
Total recognised income for the year 537 325
Attributable to:
Equity shareholders of the Company 9 537 324
Minority interests - 1
537 325
Consolidated balance sheet
As at 2 February 2008
£ millions Notes 2007/08 2006/07
Non-current assets
Goodwill 2,532 2,552
Other intangible assets 85 89
Property, plant and equipment 3,698 3,211
Investment property 29 29
Investments in joint ventures and associates 204 185
Post employment benefits 8 110 -
Deferred tax assets 25 30
Derivative financial instruments 66 29
Other receivables 13 18
6,762 6,143
Current assets
Inventories 1,873 1,531
Trade and other receivables 533 495
Current tax assets 1 15
Other investments 11 28
Derivative financial instruments 5 10
Cash and cash equivalents 218 395
2,641 2,474
Total assets 9,403 8,617
Current liabilities
Trade and other payables (2,238) (1,953)
Current tax liabilities (89) (87)
Derivative financial instruments (10) (5)
Borrowings (191) (242)
Provisions (47) (56)
(2,575) (2,343)
Non-current liabilities
Other payables (32) (4)
Deferred tax liabilities (318) (263)
Derivative financial instruments (52) (46)
Borrowings (1,620) (1,432)
Provisions (49) (53)
Post employment benefits 8 (33) (55)
(2,104) (1,853)
Total liabilities (4,679) (4,196)
Net assets 4,724 4,421
Equity
Share capital 371 371
Share premium 2,188 2,185
Own shares held (66) (81)
Reserves 9 2,220 1,939
Minority interests 11 7
Total equity 4,724 4,421
The financial statements were approved by the Board of Directors on 26 March
2008 and signed on its behalf by:
Ian Cheshire Duncan Tatton-Brown
Group Chief Executive Group Finance Director
Consolidated cash flow statement
For the financial year ended 2 February 2008
£ millions Notes 2007/08 2006/07
Net cash flows from operating activities 10 465 559
Cash flows from investing activities
Purchase of minority interests (1) (2)
Purchase of intangible assets (29) (28)
Purchase of property, plant and equipment and investment property (499) (439)
Disposal of property, plant and equipment and investment property 117 251
Disposal of investment in joint venture 50 -
Net disposal/(purchase) of other investments 21 (29)
Dividends received from joint ventures and associates 6 5
Net cash flows from investing activities (335) (242)
Cash flows from financing activities
Interest received 23 19
Interest paid (89) (71)
Interest element of finance lease rental payments (6) (6)
Net receipt on forward foreign exchange contracts 6 -
Net receipt/(repayment) of bank loans 136 (133)
Issue of Medium Term Notes and other fixed term debt - 252
Capital element of finance lease rental payments (11) (12)
Issue of share capital to equity shareholders of the Company 3 11
Issue of share capital to minority interests 3 1
Disposal of own shares held 2 7
Dividends paid to equity shareholders of the Company (249) (248)
Dividends paid to minority interests (4) (2)
Net cash flows from financing activities (186) (182)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts (56) 135
Cash and cash equivalents and bank overdrafts at beginning of year 245 114
Exchange differences 6 (4)
Cash and cash equivalents and bank overdrafts at end of year 11 195 245
Notes to the financial information
For the financial year ended 2 February 2008
1. Basis of preparation
The financial information which comprises the consolidated income statement,
consolidated statement of recognised income and expense, consolidated balance
sheet, consolidated cash flow statement and related notes do not constitute the
Group's Annual Report and Accounts. The auditors have reported on the Group's
statutory accounts for each of the years 2007/08 and 2006/07 under section 235
of the Companies Act 1985, which do not contain statements under sections 237
(2) or (3) of the Companies Act 1985 and are unqualified. The statutory accounts
for 2006/07 have been delivered to the Registrar of Companies and the statutory
accounts for 2007/08 will be filed with the Registrar in due course. Copies of
the Annual Report and Accounts will be posted to shareholders during the week
beginning 28 April 2008.
The Group's financial reporting year ends on the nearest Saturday to 31 January
each year. The current financial year is the 52 weeks ended 2 February 2008.
The comparative financial year is the 53 weeks ended 3 February 2007. This only
impacts the UK operations with all of the other operations reporting on a
calendar basis as a result of local statutory requirements.
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European
Union, IFRIC interpretations and those parts of the Companies Act 1985
applicable to companies reporting under IFRS. The consolidated financial
statements have been prepared under the historical cost convention, as modified
by the use of valuations for certain financial instruments, share-based payments
and post employment benefits.
The principal accounting policies applied in the preparation of the consolidated
financial statements are consistent with those set out in the statutory accounts
for 2006/07.
Use of adjusted measures
Kingfisher believes that retail profit, adjusted pre-tax profit, adjusted
post-tax profit and adjusted earnings per share provide additional useful
information on underlying trends to shareholders. These measures are used by
Kingfisher for internal performance analysis and incentive compensation
arrangements for employees. The terms 'retail profit', 'exceptional items' and '
adjusted' are not defined terms under IFRS and may therefore not be comparable
with similarly titled profit measures reported by other companies. It is not
intended to be a substitute for, or superior to, GAAP measurements of profit.
The term 'adjusted' refers to the relevant measure being reported excluding
exceptional items, financing fair value remeasurements and amortisation of
acquisition intangibles. Retail profit is defined as operating profit before
central costs (principally the costs of the Group's head office), exceptional
items, amortisation of acquisition intangibles and the Group's share of interest
and tax of joint ventures and associates.
The separate reporting of non-recurring exceptional items, which are presented
as exceptional within their relevant income statement category, helps provide an
indication of the Group's underlying business performance. The principal items
which will be included as exceptional items are:
• non-trading items included in operating profit such as profits and
losses on the disposal or closure of subsidiaries, joint ventures, associates
and investments which do not form part of the Group's trading activities;
• gains and losses on the disposal of properties; and
• the costs of significant restructuring and incremental acquisition
integration costs.
2. Segmental analysis
Income statement
Year ended 2 February 2008
£ millions United France Poland Rest of Asia Total
Kingdom Europe
External revenue 4,395 3,224 703 570 472 9,364
Retail profit 153 237 87 35 (14) 498
Exceptional items before central costs 38 1 - - (40) (1)
Less: Share of operating profit of joint ventures and - - - (20) (4) (24)
associates
Segment result before joint ventures and associates 191 238 87 15 (58) 473
Share of post-tax results of joint ventures and - - - 16 3 19
associates
Segment result 191 238 87 31 (55) 492
Central costs (35)
Operating profit 457
Net finance costs (62)
Profit before taxation 395
Income tax expense (123)
Profit for the year 272
Year ended 3 February 2007
£ millions United France Poland Rest of Asia Total
Kingdom Europe
External revenue 4,262 2,955 508 494 457 8,676
Retail profit 183 206 58 52 5 504
Exceptional items before central costs 50 (1) - - - 49
Less: Share of operating profit of joint ventures and - (1) - (23) (6) (30)
associates
Segment result before joint ventures and associates 233 204 58 29 (1) 523
Share of post-tax results of joint ventures and - - - 13 4 17
associates
Segment result 233 204 58 42 3 540
Central costs (39)
Operating profit 501
Net finance costs (51)
Profit before taxation 450
Income tax expense (112)
Profit for the year 338
The Group's primary reporting segments are geographic, with the Group operating
in four main geographical areas, being the UK, France, Rest of Europe and Asia.
The Group only has one business segment, being retail, therefore no secondary
segmental disclosure is given.
The 'Rest of Europe' segment consists of B&Q Ireland, Castorama Poland,
Castorama Italy, Castorama Russia, Brico Depot Spain, Koctas and Hornbach.
Poland has been shown separately as it meets the reportable segment criteria as
prescribed by IAS 14 Segment Reporting. The 'Asia' segment consists of B&Q
China, B&Q Taiwan, B&Q Home in South Korea and the Asia head office.
Central costs have not been allocated. These principally comprise the Head
Office operations of Kingfisher plc.
3. Exceptional items
£ millions 2007/08 2006/07
Included within selling and distribution expenses
Loss on closure of B&Q Home in South Korea and Asia head office (13) -
China restructuring (22) -
(35) -
Included within other income
Profit on disposal of properties 39 49
Recovery of loan receivable previously written off 5 -
44 49
Included within other expenses
Gross profit on disposal of B&Q Taiwan joint venture before goodwill 27 -
Goodwill attributed to B&Q Taiwan joint venture (32) -
Net loss on disposal of B&Q Taiwan joint venture (5) -
Exceptional items 4 49
Closure costs of £13m have been expensed in relation to the closure of B&Q Home
in South Korea and the Asia head office. A further £22m exceptional charge has
been recognised as part of a restructuring project in B&Q China, comprising
store impairment costs and onerous lease contracts.
The Group has recorded £39m exceptional profit on disposal of properties, which
includes a £40m profit on the sale and leaseback of the Worksop Distribution
Centre by B&Q UK. In the prior year, total profits recognised on the disposal
of properties totalled £49m. The Group recognised £43m profit on disposal of
properties on the sale and leaseback of seven large UK stores to The British
Land Company.
The Group has recognised £5m income in relation to the repayment of a loan made
to ProMarkt which had previously been written off as an exceptional item.
On 4 January 2008, the Group disposed of its 50% interest in B&Q Taiwan (B&Q
International Co. Ltd) to its joint venture partner, Test Rite International Co.
Ltd, for cash consideration of £50m. This resulted in a £27m profit before
goodwill being recognised and a £5m loss after goodwill. The goodwill was
allocated to B&Q Taiwan on the Group's acquisition of the minority interests of
Castorama in 2002/03.
4. Net finance costs
£ millions 2007/08 2006/07
Cash and cash equivalents and current other investments 21 19
Expected net return on defined benefit pension schemes 12 6
Finance income 33 25
Bank overdrafts and bank loans (12) (7)
Medium Term Notes and other fixed term debt (79) (65)
Financing fair value remeasurements 5 4
Finance leases (6) (6)
Unwinding of discount on provisions (3) (2)
Finance costs (95) (76)
Net finance costs (62) (51)
5. Income tax expense
£ millions 2007/08 2006/07
UK corporation tax
Current tax on profits for the year 21 36
Adjustments in respect of prior years (29) -
(8) 36
Double taxation relief (1) (6)
(9) 30
Overseas tax
Current tax on profits for the year 99 80
Adjustments in respect of prior years - (2)
99 78
Deferred tax
Current year 20 13
Adjustments in respect of prior years 22 (9)
Adjustments in respect of changes in tax rates (9) -
33 4
Income tax expense 123 112
The effective rate of tax on profit before exceptional items and excluding tax
adjustments in respect of prior years and changes in tax rates is 32.0% (2006/
07: 32.0%). A tax credit of £2m has been recognised in the income statement
relating to exceptional items, of which £14m is charged against the current year
tax charge in relation to the £4m net exceptional income, with the remaining
£16m credit in respect of prior periods, relating to tax previously provided on
exceptional items. The tax credit on exceptional items for the year ended 3
February 2007 was £8m, of which £3m related to adjustments in respect of prior
years.
6. Dividends
£ millions 2007/08 2006/07
Dividends to equity shareholders of the Company
Final dividend for the year ended 3 February 2007 of 6.8p per share (28 January 2006: 159 158
6.8p per share)
Interim dividend for the year ended 2 February 2008 of 3.85p per share (3 February 2007: 90 90
3.85p per share)
249 248
Proposed final dividend for the year ended 2 February 2008 of 3.4p per share 80
The proposed final dividend for the year ended 2 February 2008 is subject to
approval by shareholders at the Annual General Meeting and has not been included
as a liability in these financial statements.
7. Earnings per share
2007/08 2006/07
Earnings Weighted Per share Earnings Weighted Per
average amount average
number number share
of shares of shares amount
£ millions millions pence £ millions millions pence
Basic earnings per share 274 2,342 11.7 337 2,333 14.4
Effect of dilutive share options 9 - 11 -
Diluted earnings per share 274 2,351 11.7 337 2,344 14.4
Basic earnings per share 274 2,342 11.7 337 2,333 14.4
Effect of non-recurring costs
Exceptional items (4) (0.2) (49) (2.1)
Tax on exceptional items (2) (0.1) (8) (0.3)
Financing fair value remeasurements (5) (0.2) (4) (0.2)
Tax on financing fair value 2 0.1 1 0.1
remeasurements
Adjusted basic earnings per share 265 2,342 11.3 277 2,333 11.9
Diluted earnings per share 274 2,351 11.7 337 2,344 14.4
Effect of non-recurring costs
Exceptional items (4) (0.2) (49) (2.2)
Tax on exceptional items (2) (0.1) (8) (0.3)
Financing fair value remeasurements (5) (0.2) (4) (0.2)
Tax on financing fair value 2 0.1 1 0.1
remeasurements
Adjusted diluted earnings per share 265 2,351 11.3 277 2,344 11.8
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary equity shareholders of the Company by the weighted average number of
ordinary shares in issue during the year, excluding those held in the Employee
Share Ownership Plan Trust (ESOP) which for the purpose of this calculation are
treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. These represent share options granted to employees where the exercise
price is less than the average market price of the Company's shares during the
year.
Adjusted earnings per share figures are also presented. These exclude the
effects of exceptional items, financing fair value remeasurements and
amortisation of acquisition intangibles, to allow comparison of underlying
trading performance on a consistent basis.
8. Post employment benefits
Movements in the present value of defined benefit (obligations)/assets on the
balance sheet are as follows:
2007/08 2006/07
£ millions UK Other Total UK Other Total
Deficit in scheme at beginning of year (28) (27) (55) (210) (29) (239)
Total service cost charged in the income statement (26) (3) (29) (35) (5) (40)
Interest cost (74) (2) (76) (66) (1) (67)
Expected return on pension scheme assets 88 - 88 73 - 73
Actuarial gains/(losses) 49 (2) 47 92 3 95
Contributions paid 101 2 103 118 4 122
Settlements and curtailments - 1 1 - - -
Exchange differences - (2) (2) - 1 1
Surplus/(deficit) in scheme at end of year 110 (33) 77 (28) (27) (55)
The assumptions used in calculating the costs and obligations of the Group's
defined benefit pension plans, as shown in the tables below, are set by the
Directors after consultation with independent professionally qualified
actuaries.
2007/08 2006/07
Annual % rate UK Other UK Other
Discount rate 6.2 5.3 to 5.5 5.3 4.6 to 5.5
Salary escalation 4.1 2.0 to 6.6 4.5 3.5 to 6.7
Rate of pension increases 3.3 - 2.9 -
Price inflation 3.3 2.0 to 2.5 2.9 2.0 to 2.5
2007/08 2006/07
% rate of return UK Other UK Other
Equities 8.1 - 7.8 -
Bonds 5.3 - 4.9 4.5
Property 6.7 - 6.3 -
Other 4.3 4.0 3.9 4.0
Overall expected rate of return 6.8 4.0 6.5 4.0
The UK discount rate is based on the yield on the iBoxx over 15-year AA-rated
Sterling corporate bond index. The overall expected rate of return on plan
assets reflects market expectations at the valuation date of long-term asset
returns and the mix of assets in the plans.
2007/08 2006/07
Age to which current pensioners are expected to live (60 now)
- Male 87.2 85.1
- Female 85.9 86.3
Age to which future pensioners are expected to live (60 in 15 years time)
- Male 88.8 86.2
- Female 87.1 87.5
The mortality assumptions used in the actuarial valuations of the Group's UK
defined benefit pension liabilities have been selected with regard to the
characteristics and experience of the membership of the plan from 2004 to 2007.
The following table analyses, for the UK Plan, the estimated impact on plan
obligations resulting from changes to key actuarial assumptions, whilst holding
all other assumptions constant.
Assumption Change in assumption Impact on UK plan liabilities
Discount rate Increase/decrease by 0.1% Decrease/increase by £24m
Salary escalation Increase/decrease by 0.1% Increase/decrease by £3m
Rate of pension increases Increase/decrease by 0.1% Increase/decrease by £14m
Price inflation Increase/decrease by 0.1% Increase/decrease by £24m
Mortality Increase in life expectancy by one year Increase by £40m
9. Reserves
£ millions Cash flow Translation Other Retained Total
hedge reserve reserve reserves earnings
At 4 February 2007 (3) 20 159 1,763 1,939
Actuarial gains on post employment benefits - - - 47 47
Currency translation differences - Group - 204 - - 204
Currency translation differences - joint ventures and
associates - 26 - - 26
Currency translation differences - losses transferred
to income statement - 3 - - 3
Cash flow hedges - fair value losses (6) - - - (6)
Cash flow hedges - losses transferred to inventories 8 - - - 8
Tax on items recognised directly in equity (1) (5) - (13) (19)
Net income recognised directly in equity 1 228 - 34 263
Profit for the year - - - 274 274
Total recognised income for the year 1 228 - 308 537
Share-based compensation charge - - - 6 6
Own shares disposed - - - (13) (13)
Dividends - - - (249) (249)
At 2 February 2008 (2) 248 159 1,815 2,220
At 29 January 2006 1 92 159 1,609 1,861
Actuarial gains on post employment benefits - - - 95 95
Currency translation differences - Group - (60) - - (60)
Currency translation differences - joint ventures and
associates - (12) - - (12)
Cash flow hedges - fair value losses (9) - - - (9)
Cash flow hedges - losses transferred to inventories 3 - - - 3
Tax on items recognised directly in equity 2 - - (32) (30)
Net (expense)/income recognised directly in equity (4) (72) - 63 (13)
Profit for the year - - - 337 337
Total recognised (expense)/income for the year (4) (72) - 400 324
Share-based compensation charge - - - 9 9
Own shares disposed - - - (7) (7)
Dividends - - - (248) (248)
At 3 February 2007 (3) 20 159 1,763 1,939
10. Cash flows from operating activities
£ millions 2007/08 2006/07
Operating profit 457 501
Share of post-tax results of joint ventures and associates (19) (17)
Amortisation and depreciation 234 207
Impairment losses 19 1
Loss on disposal of intangible assets - 6
Profit on disposal of property, plant and equipment and investment property (29) (44)
Loss on disposal of investment in joint venture 5 -
Share-based compensation charge 6 9
Increase in inventories (215) (215)
Decrease in trade and other receivables 6 44
Increase in trade and other payables 173 295
(Increase)/decrease in working capital (36) 124
Decrease in provisions (16) (48)
Decrease in post employment benefits (75) (82)
Cash generated by operations 546 657
Income tax paid (81) (98)
Net cash flows from operating activities 465 559
11. Net debt
£ millions 2007/08 2006/07
Cash and cash equivalents 218 395
Bank overdrafts (23) (150)
Cash and cash equivalents and bank overdrafts 195 245
Current other investments 11 28
Bank loans (283) (146)
Medium Term Notes and other fixed term debt (1,436) (1,307)
Interest rate and cross currency swaps (excluding accrued interest) 23 (44)
Finance leases (69) (70)
Net debt (1,559) (1,294)
£ millions 2007/08 2006/07
Net debt at beginning of year (1,294) (1,355)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts (56) 135
Net (disposal)/purchase of other investments (21) 29
Net (receipt)/repayment of bank loans (136) 133
Issue of Medium Term Notes and other fixed term debt - (252)
Capital element of finance lease rental payments 11 12
Exchange differences and other non-cash movements (63) 4
Net debt at end of year (1,559) (1,294)
This information is provided by RNS
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Monday, 20th May 2024
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