Full Year Results 2003/04
Kingfisher PLC
17 March 2004
Embargoed until 0700 Hours
Wednesday 17 March 2004
Kingfisher plc preliminary results for the 52 weeks ended 31 January 2004
Highlights - Continuing Business (1)
• Reported retail sales up 15% to £7.0 billion (2002/3: £6.1 billion),
up 11% in constant currencies
• Reported retail profit (2) up 23% to £638 million (2002/3:
£520 million), up 20% in constant currencies
• Adjusted pre-tax profits (3) of £591 million, up 15% (2002/3:
£514 million)
• Pre-tax profit down 9% to £571 million, (2002/3: £630 million which
included an exceptional property gain of £144 million)
• Adjusted basic earnings per share (3) up by 33% to 17.8p
(2002/3: 13.4p)
• Basic earnings per share up by 15% to 20.3p (2002/3: 17.7p)
• Underlying return on invested capital (ROIC) improved to 8.7%
(2002/3: 7.6%)
• Non-UK businesses account for 41% of retail sales and 39% of retail
profit
(1) Continuing home improvement business only; excludes Dubois Materiaux in
France, Reno Depot in Canada, Nomi in Poland and Castorama Brazil, which have
been sold, and Castorama in Belgium and Germany, which have been closed
(including these businesses adjusted pre-tax profits (2) were £612m). Also
excludes Kingfisher's former Electricals businesses, including Promarkt, sold in
February 2003 and Kesa Electricals plc, demerged in July 2003.
(2) Retail profit is stated before central costs, exceptional items, and
goodwill amortisation
(3) Excluding exceptional items and goodwill amortisation
Total Group - including all the disposed, demerged and closed businesses
• Sales reduced by 18% to £8.8 billion (2002/3: £10.7 billion)
• Pre-tax profits reduced by 13% to £427 million (2002/3: £493 million)
• Basic earnings per share up 10% to 10.1p (2002/3: 9.2p)
• Full year dividend 9.65p (2002/3: 10.86p)
• Total net debt reduced to £844 million (2002/3: £ 1.9 billion)
Note: All prior year earnings per share and dividend per share figures restated
for the 7 for 8 share consolidation. Current year dividends exclude any interim
and final dividends from Kesa Electricals plc.
'Kingfisher's home improvement businesses finished the year stronger than ever.
The combination of leading brands, international diversity and Europe's largest
buying scale means we are well positioned for continuing growth.'
Gerry Murphy, Chief Executive
Commenting on the results, Sir Francis Mackay, Chairman, said: 'I am pleased to
report a landmark year for Kingfisher. Following the demerger of Kesa
Electricals and the disposal of our non-core home improvement operations, the
restructuring process begun three years ago is now complete. Kingfisher is now a
focused home improvement business.
'The Kingfisher team has delivered a good set of results and I am delighted that
the benefits of the Castorama integration we set out at the time of the buy-out
are being delivered ahead of schedule.'
Gerry Murphy, Chief Executive, said: 'Kingfisher is now using its international
scale and diversity to deliver sustainable growth and improved returns for
shareholders.
'We have made good progress this year delivering strong sales growth and winning
market share. In the UK, B&Q and Screwfix Direct maintained their growth
momentum whilst, in France, Castorama has been re-energised and growth continued
apace at Brico Depot.
'Outside of the UK and France, our other international operations have all
delivered strong growth in sales and profits, with B&Q China making its first
full year profit.
'All three of Kingfisher's main retail brands have demonstrated that they can
operate successfully in other international markets and adapt their formats to
local cultures.
'Progress was also made on the supply side, with the Strategic Supplier
Management programme now effective across the Group. For customers, this has
meant great new products at great value prices. At the same time, our partner
suppliers are growing their businesses alongside ours.
'Kingfisher's home improvement businesses finished the year stronger than ever.
The combination of leading brands, international diversity and Europe's largest
buying scale means we are well positioned for continuing growth.'
FULL YEAR RESULTS
Kingfisher plc, Europe's leading home improvement retailer, today announced full
year preliminary results for the year ended 31 January 2004.
HOME IMPROVEMENT - Continuing Businesses
Total reported sales grew by 15% to £7 billion with like-for-like (LFL) sales
growing just over 5%. Reported retail profit grew by 23% to £638 million.
Reported pre-tax profits, adjusted to exclude exceptional items and goodwill
amortisation, were £591 million, up 15% on the previous year.
The reported results benefited from the strengthening of the Euro on translation
of Euro denominated sales and profits into Sterling. On a constant currency
basis, eliminating the translation benefit, sales grew by 11% and retail profits
by 20%.
Sales growth for the year, as previously announced on 18 February 2004, was
strong and market share gains were achieved by all the Group's European and
Asian businesses. This performance was driven by 28 net new store openings, and
a continued focus on new ranges and value for money pricing to drive LFL sales.
Retail profits grew faster than sales due to the continuing success of the
Group-wide Strategic Supplier Management programme (SSM), as well as the focus
on reducing operating costs and overheads.
Property income of £32 million (2002/3: £59 million), was down year-on-year
principally reflecting the disposal last year of a portfolio of third party
occupied property for £688 million.
Other operating costs, principally Group central costs, fell just under £7m
year-on-year to £46 million. This included savings from the reorganisation of
the London and Lille corporate offices following the demerger of Kesa
Electricals.
Net interest costs of £34 million increased significantly year-on-year (2002/3:
£12 million). Last year's interest costs benefited by £15 million from investing
the cash proceeds of the rights issue for two months prior to the purchase of
the outstanding shares in Castorama.
The effective tax rate for the year was 31.6% of continuing profits,
pre-exceptionals and goodwill, excluding prior year adjustments. This compared
with 32.0% last year. In addition, an exceptional tax credit of £75 million
arose in the second half of the year, from the release of provisions no longer
required in respect of earlier years' tax liabilities.
Adjusted basic earnings per share grew 33% to 17.8p (2002/03: 13.4p) boosted by
strong pre-tax profit growth and the elimination of minority interests; last
year nearly £100 million of earnings were attributable to the minority
shareholders of Castorama. Basic earnings per share grew 15% to 20.3p (2002/3:
17.7p).
Underlying return on invested capital (ROIC) improved in the year from 7.6% to
8.7%, just above the Group's cost of capital of 8.4%. Improving ROIC will
continue to be a key focus for the Group.
During the year, the continuing Group properties were revalued and a surplus of
£296 million has been incorporated into the Group's tangible fixed assets. The
value of the Group's remaining property portfolio now stands at £2.2 billion.
Including the greater than expected uplift arising on the property portfolio
revaluation, headline ROIC improved to 11.3% (See Financial Review for
definition of ROIC).
TOTAL GROUP - including all the disposed, demerged and closed businesses
Total Group retail sales reduced 18% to £8.8 billion (2002/3: £10.7 billion).
Pre-tax profits also reduced 13% to £427 million, reflecting the extensive
corporate restructuring in the year. Net exceptional charges of £208 million,
before £29 million of tax relief were incurred in the year. Exceptional costs
arose relating to the demerger of Kesa Electricals totalling £135 million. A
further £58 million of costs arose on the non-core home improvement businesses
which have been sold or closed, £10 million on the restructuring of the
corporate head office and £5 million on fixed asset write downs. In addition, an
exceptional tax charge of £99 million was incurred in respect of a payment made
to the French tax authorities following the demerger. The Group has initiated
proceedings for the recovery of the tax paid and, although these proceedings may
take some time to be resolved, considers that its risk of being ultimately
liable for this amount is low. Taking these, and the exceptional tax credit of
£75 million discussed earlier into account, basic earnings per share rose nearly
10% to 10.1p.
Cash Flow and Net Debt
Net debt fell from £1.9 billion to £844 million. Cash inflow from operating
activities was strong at £777 million and a further £819 million was received
from the sales of tangible fixed assets, mostly third-party occupied properties.
A further £423 million of debt was assumed by Kesa Electricals on demerger.
Investment in the growth of the business continued with gross capital
expenditure of £389 million (2002/3 : £468 million) on new and existing stores,
supply chain and IT infrastructure.
Dividend
A final dividend of 6.15p per share is proposed, which when combined with the
interim dividend of 3.5p per share takes the full year dividend to 9.65p per
share, which excludes any interim and final dividend from Kesa Electricals plc.
Outlook
Although broadly stable, the economic outlook for retailers in 2004 in the UK is
coloured by the general expectation of some pressure on consumers' disposable
incomes from higher taxes, interest rates and pension contributions. Whilst
these trends are unhelpful for consumption generally, home improvement has
proved to be relatively resilient in the past and the Board believes that
Kingfisher's international dimension and its ability to provide great value to
customers means the Group is well positioned for continuing growth.
A more detailed operating and financial review appears on the following pages.
This news release contains forward-looking statements. By their nature,
forward-looking statements involve risks and uncertainties because they relate
to events and depend on circumstances that will occur in the future. The Group's
actual results, financial situation, development and performance may differ
materially from that expressed or implied in these forward-looking statements as
a result of a variety of factors. The Group accepts no obligation to continue to
report or update these forward-looking statements or adjust them to future
events or developments.
Enquiries:
Ian Harding, Director of Communications 020 7644 1029
Loraine Woodhouse, Head of Investor Relations 020 7644 1032
Nigel Cope, Head of External Communications 020 7644 1030
Kingfisher Website www.kingfisher.com
Kingfisher plc 020 7372 8008
Further copies of this announcement can be downloaded from the website or by
application to:
The Company Secretary
Kingfisher plc
3 Sheldon Square
Paddington
London W2 6PX
Company Profile
Kingfisher is Europe's leading home improvement retailer with leading market
positions in the UK, France, Poland, Italy, China and Taiwan. Sales for the
continuing Home Improvement business for the year ended 31 January 2004 were
just over £7 billion of which £2.9 billion, or 41%, was generated outside the
UK.
Kingfisher operates over 560 stores in nine countries in Europe and Asia. The
Group also has a strategic alliance with Hornbach, Germany's leading DIY
Warehouse retailer, which operates more than 110 stores in Germany, Austria,
Netherlands, Luxembourg, Switzerland, Sweden and the Czech Republic.
UK & IRELAND
Retail Sales £m Total LFL Retail Profit £m Total
Change % Change % Change %
2004 2003 2004 2003
B&Q 3,896.8 3,549.5 9.8 3.9 371.8 329.7 12.8
Screwfix Direct 220.6 184.5 19.6 19.6 19.1 18.0 6.1
Total UK 4,117.4 3,734.0 10.3 4.7 390.9 347.7 12.4
B&Q's growth momentum continued with total sales up nearly 10% to £3.9 billion
and profits up nearly 13% to £372 million.
Increased market share - B&Q's share of the UK's repair, maintenance and
improvement market increased to 14.4% (2002/3: 13.5%).
Mini-Warehouses a success - Four new mini-Warehouse stores were opened and a
further 16 converted from Supercentres, taking the total to 28. Giving customers
greater access to B&Q's full product range, the converted mini-Warehouses are
enjoying double digit sales uplifts, on average, as well as improved margins. On
average, the capital investment for conversions is around £1 million with an
additional £0.4 million adverse profit impact in the year of conversion. In the
current year there are plans to convert a further 25 Supercentres to the
mini-Warehouse format.
7% new sales space - Nine new Warehouse stores and four new mini-Warehouses
opened in the year. During the current year B&Q expects to open a further 20
stores, including 11 Warehouses and nine mini-Warehouses, with net space again
growing 7%.
New ranges popular with customers - New kitchen, bedroom and bathroom ranges
performed well. B&Q is extending its range of 'Special Order' products, which
can be ordered in-store, by telephone or online and delivered directly to home.
Examples include bedroom furniture and an improved range of electrical
appliances.
Retail margin improved from 9.3% to 9.5%, reflecting initiatives to reduce
shrinkage and the ongoing SSM programme.
B&Q Direct now profitable, with on-line sales almost doubling in the year to £37
million.
SCREWFIX DIRECT sales rose by 20% to over £220 million, helped by the rapid
expansion of the catalogue and on-line business. Profits grew by six per cent to
£19 million despite £2.7 million of one-off costs associated with a new
fulfilment centre due to open this year.
FRANCE
Retail sales £m 2004 2003 % Change % Change % LFL
(Reported) (Constant) Change
Castorama 1,541.8 1,364.6 13.0 2.7 1.6
Brico Depot 786.0 568.8 38.1 25.7 12.1
Total France 2,327.8 1,933.4 20.4 9.5 4.7
Retail profit £m 2004 2003 % Change % Change
(Reported) (Constant)
Castorama (1) 125.8 94.9 32.6 20.5
Brico Depot 59.7 39.3 51.9 38.1
Total France 185.5 134.2 38.2 25.7
2004 £1 = Euro 1.4392, 2003 £1 = Euro 1.5828
(1) Cost of the French corporate office in Lille have been re-allocated to other
operating costs (2003: £14 million).
CASTORAMA revitalisation on track with sales of £1.5 billion, up 2.7% and retail
profits of £126 million, up over 20% on a constant currency basis.
Strong new management team in place - Philippe Tible, an experienced French
retailer, joined as Chief Executive of Castorama in February 2003. He has
strengthened the management team with key appointments in commercial, supply
chain and store operations.
Integration benefits boost profit - In total £45 million of integration benefits
were achieved in the year, faster than originally envisaged. Of this, £32
million related specifically to Castorama France. Adoption of the SSM Programme
facilitated investment in lower prices to drive faster sales growth. Market
share gains in the second half were achieved.
New ranges being introduced - These include new bathroom accessories, showers
and tiles. Castorama has also improved pricing on key value lines and introduced
more entry price ranges. Some value lines, such as laminate flooring and
heating, saw dramatic sales increases and cash margin growth as a result of more
competitive pricing and strong promotions.
Three new format stores trading well - During 2003, three new format stores were
opened with more competitive pricing and improved ranging and merchandising.
Initial results are encouraging, with sales growth ahead of expectations.
Castorama plans to refurbish all its stores over time, using the learning from
these three stores. In the current year, seven stores are being refurbished and
a further three relocated at a total capital cost of £48 million.
BRICO DEPOT growth continued. Aimed at the trade buyer and DIY enthusiast, the
Brico Depot discount format recorded sales of £786 million, up 26% and profits
of £60 million, up 38% on a constant currency basis.
All categories did well, with sales of kitchens and laminate flooring delivering
particularly strong growth.
Four new stores were opened in the year taking the total to 59. Seven new
openings are planned for the current year.
REST OF WORLD
Retail sales £m 2004 2003 % Change % Change % LFL
(Reported) (Constant) Change
Castorama Poland 285.6 235.1 21.5 26.4 13.1
Castorama Italy 173.7 139.9 24.2 12.9 7.6
B&Q China 131.5 88.0 49.4 63.8 9.1
Other Int'l (1) 2.2 - n/a n/a n/a
Total 593.0 463.0 28.1 28.9 10.7
Retail profit £m 2004 2003 % Change % Change
(Reported) (Constant)
Castorama Poland 41.4 26.3 57.4 63.7
Castorama Italy 13.5 9.5 42.1 29.2
B&Q China 0.4 (1.4) n/a n/a
B&Q Taiwan 5.4 4.8 12.5 21.5
Other Int'l (1) 1.1 (1.2) n/a n/a
Total 61.8 38.0 62.6 59.6
(1) Other international includes Hornbach in Germany, Koctas in Turkey, B&Q
Korea and Brico Stock Spain.
Profits ahead in all countries with sales of £593 million, up 29% and retail
profit of £62 million, up nearly 60% on a constant currency basis.
Eighteen new stores in five countries - Store openings included seven B&Qs in
China and three in Taiwan, four Castoramas in Italy, and three in Poland. Also
opened was the Group's first store in Spain in October under the Brico Stock
brand. During the current year, planned openings include eight B&Q's in China
and three in Taiwan. Seven Castorama stores are planned in Poland and four in
Italy. Brico Stock is planning a further four stores in Spain.
First year of profit in China - B&Q China moved into profit for the first time
with a full year profit of £0.4m on sales of £131 million, up 64% in constant
currencies, despite disruption from the SARS epidemic. Taiwan also had a good
year with profits of £5.4 million, up 21% in constant currencies, helped by a
strong performance from its installations business.
Poland and Italy showing strong growth - Castorama Poland delivered total sales
of £286 million, up 26% and profits of £41 million up 64% in constant
currencies. The overall performance was helped by consumers bringing some
purchases forward ahead of planned VAT increases ahead of EU accession in May.
In Italy, Castorama sales of £174 million were ahead by 13% with profits over
£13 million, up 29% in constant currencies.
In Germany, Hornbach, in which Kingfisher has a 21% economic interest, is now
working closely with the Group on the development of own brand products and Far
East sourcing.
KINGFISHER CONTINUING HOME IMPROVEMENT AT A GLANCE
Retail Sales £m Total LFL Retail Profit £m Total
2004 2003 Change % Change % 2004 2003 Change %
B&Q 3,896.8 3,549.5 9.8 3.9 371.8 329.7 12.8
Screwfix Direct 220.6 184.5 19.6 19.6 19.1 18.0 6.1
Total UK 4,117.4 3,734.0 10.3 4.7 390.9 347.7 12.4
Castorama (1) 1,541.8 1,364.6 13.0 1.6 125.8 94.9 32.6
Brico Depot 786.0 568.8 38.1 12.1 59.7 39.3 51.9
Total France (1) 2,327.8 1,933.4 20.4 4.7 185.5 134.2 38.2
Castorama Poland 285.6 235.1 21.5 13.1 41.4 26.3 57.4
Castorama Italy 173.7 139.9 24.2 7.6 13.5 9.5 42.1
B&Q China 131.5 88.0 49.4 9.1 0.4 (1.4) n/a
B&Q Taiwan (2) - - - n/a 5.4 4.8 12.5
Other Int'l (3) 2.2 - n/a - 1.1 (1.2) n/a
Rest of World 593.0 463.0 28.1 10.7 61.8 38.0 62.6
Total 7,038.2 6,130.4 14.8 5.1 638.2 519.9 22.8
2004 £1 = Euro 1.4392, 2003 £1 = Euro 1.5828.
(1) Cost of the French corporate office in Lille have been re-allocated to other
operating costs (2003: £14 million).
(2) Joint venture (sales not consolidated)
(3) Includes Hornbach, Koctas, B&Q Korea and Brico Stock Spain
(4) Includes Amiland (three stores).
Home Improvement Store numbers Selling space Employees
(000s sq.m.) (FTE)
B&Q 327 2,119.6 26,705
Screwfix Direct - - 1,579
Total UK 327 2,119.6 28,284
Castorama (4) 108 966.2 13,520
Brico Depot 59 289.0 3,701
Total France 167 1,255.2 17,221
Castorama Poland 19 184.8 3,893
Castorama Italy 18 116.4 1,726
B&Q China 15 189.0 4,143
B&Q Taiwan 17 82.6 1,672
Other International (3) 6 27.5 486
Total Rest of World 75 600.3 11,920
Total 569 3,975.1 57,425
FINANCIAL REVIEW
Earnings per share and dividend cover
Basic earnings per share increased by 15% from 17.7p to 20.3p. Adjusted earnings
per share which removes the impact of exceptional items (which were net gains in
both years) and acquisition goodwill amortisation increased 33% from 13.4p to
17.8p per share.
2004 2003
Basic earnings per share 20.3p 17.7p
Exceptional items (2.7)p (4.6)p
Goodwill amortisation 0.2p 0.3p
Adjusted earnings per share 17.8 p 13.4p
The full year dividend of 9.65p is covered 1.84 times by adjusted earnings
before exceptional items and goodwill amortisation.
Return on invested capital
Underlying Return on Invested Capital (ROIC) improved in the year from 7.6% to
8.7%, just above the Group's cost of capital at 8.4%. Underlying ROIC assumes
properties appreciate at a steady rate over the long term. When calculating the
underlying ROIC short term property variations more or less than the long term
mean are excluded.
ROIC is defined as Net Operating Profit Less Adjusted Taxes (Operating profit
excluding goodwill, exceptionals, property lease and depreciation costs less tax
at Group effective tax rate, plus property revaluation in the year) divided by
Average Invested Capital (average holding in the year of fixed and net current
assets invested in the business, plus property operating lease costs capitalised
at the market property yield).
Cashflow and investment in the businesses
Net debt decreased from £1,926.4 million at the start of the year to £843.8
million at the year end. During the year £423.0 million of debt was demerged as
part of the Kesa Electricals plc demerger. In addition, £203.0 million of
proceeds were received on the sale of discontinued businesses.
A total of £777.4 million of net cash was generated from operating activities
compared to £895.0 million in the previous year. Capital expenditure for the
Group was £389.1 million, down from £468.4 million in the previous year. A
total of £819.2 million (2003: £215.4 million) was received during the year in
respect of the sale of tangible fixed assets, £687.6 million relating to the
proceeds from the sale by B&Q Properties Limited (formerly Chartwell Land plc)
of its third-party property portfolio.
During the year the Group extended the maturity of its debt by issuing £250
million of bonds due 2014, and €500 million of bonds due 2010 under the Group's
€2,500 million Medium Term Note programme, the proceeds of which were
principally used to repay short and medium term bank borrowings.
In addition to the bond issues, the Group has access to various borrowing
facilities, including a £540 million committed revolving credit facility,
maturing in 2007, and a £180 million committed facility maturing in 2006,
provided by a number of banks. These facilities are available to be drawn to
support the general corporate purposes of the group including working capital
requirements.
At 31 January 2004, the Group had undrawn committed bank facilities of £720.0
million (2003: £579.0 million).
Investments, acquisitions and disposals
The Group successfully completed the demerger of Kesa Electricals plc on 7 July
2003. On demerger, the Company declared a dividend in specie, which was
satisfied by the issue of shares in Kesa Electricals plc. The dividend in
specie of £1,592.9 million represented the net assets of the business
transferred to Kesa Electricals plc at the date of demerger of £785.6 million,
goodwill of £1,230.3m relating to Kesa Electricals plc businesses that had
previously been written off to reserves which was resurrected on demerger less
debt of £423.0 million assumed by Kesa Electricals plc.
During the year, the Group acquired the remaining 0.6% of Castorama Dubois
Investissements S.C.A ('CDI') for £62.4 million giving rise to goodwill of £53.1
million.
The Group also completed the disposal of the non-core Home Improvement
businesses. These included the sale of Reno-Depot in Canada, Dubois Materiaux
in France, NOMI in Poland and Castorama Brazil and the closure of Castorama
Belgium. An exceptional loss on disposal of £58.3 million has been included in
the profit and loss account. In addition, the closure of the loss-making
Castorama Germany business was also completed.
Property
The Group owns a significant property portfolio, most of which is now used for
trading purposes and which at the year end had a value of £2.2 billion.
Following the buy-out of the minority interest, a full external valuation of the
CDI properties on an existing use basis was undertaken. In addition, the Group
continued its normal practice of externally valuing (on an existing use basis)
one-third of the B&Q property portfolio in the UK, with internal valuations
being performed for the other two-thirds. In both cases these revalued amounts
have been incorporated into the accounts, giving rise to a revaluation surplus
in the year of £295.7 million. This surplus reflects the strong growth in
property yields during the period together with the full valuation of our
property portfolio.
Interest
The net interest charge for the year, excluding the exceptional financing charge
of £86.9 million, was £44.1 million, of which £33.6 million related to
continuing operations. The continuing net interest charge in the prior year of
£12.4 million, benefited from interest income of £14.8 million on the proceeds
of the rights issue held prior to the purchase of the shares in Castorama.
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. At the year end 30% of the Group's long term
borrowings were at a fixed rate of interest (2003: 18%). The interest risk
profile changed following the issue of the €500 million bond in October 2003, of
which €300 million was not swapped to floating rate.
Exceptional financing charges
Exceptional financing charges of £86.9 million, shown in the profit and loss
account for the year, comprised a cost of £27.7 million relating to
restructuring the Group's debt as a result of the demerger of Kesa Electricals
plc, a gain of £23.9 million on unwinding an associated interest rate swap, and
a cost of £83.1 million incurred in connection with a foreign exchange contract,
which had been taken out to protect the Sterling value of the expected Euro
receipts from the sale or Initial Public Offering of Kesa Electricals plc. As
Kesa Electricals was subsequently demerged, part of the contract was no longer
required, and was closed out in April 2003 at a loss of £83.1 million. A further
loss of £45.9 million arose on settlement of the remaining part of the swap
contract at demerger date. This has been offset through reserves against the
gain arising on the repayment by Kesa Electricals plc of Euro denominated loans
at the date of demerger.
The cash cost of the exceptional financing charges, shown in the consolidated
cashflow for the year, was £111.2 million, comprising the £83.1 million loss on
the foreign exchange contract, the £27.7 million cost of the debt restructuring
and a further £0.4 million of other costs. The gain of £23.9 million on the
associated interest rate swap was received in cash shortly after the year end.
Other exceptional Items
Operating exceptional items include £9.8 million for the costs of restructuring
the Kingfisher plc head office following the demerger of Kesa Electricals plc
and additional costs relating to the integration of the head offices in London
and Lille. In addition, a further £5.3 million of incremental internal costs
directly attributable to the demerger was incurred during the year.
Non-operating exceptional items include £43.2 million of external costs,
principally professional advisors' and commitment fees, directly attributable to
the demerger of Kesa Electricals plc and a charge of £58.3 million in relation
to the loss on sale or termination of the non-core Home Improvement operations
as discussed above.
Exceptional amounts written off fixed asset investments of £6.3 million relate
to the Group's investment in the World Wide Retail Exchange, a company providing
an independent online e-marketplace for products and services.
Taxation
The effective overall tax rate on profit has increased from 44.9% in 2003 to
46.3%, which exceeds the UK statutory rate of 30% primarily as a result of the
exceptional items charged in the current year and previous years, a majority of
which do not qualify for tax relief. The effective tax rate on profit for
continuing operations before exceptional items and acquisition goodwill
amortisation excluding prior year adjustments is 31.6% compared to 32.0% in
2003.
An exceptional tax charge of £98.5 million represents tax paid to the French tax
authorities as a consequence of the demerger. The Group has initiated
proceedings for the recovery of the tax paid and, although these proceedings may
take some time to be resolved, considers that its risk of being ultimately
liable for this amount is low.
The Group has also released £75.2m of tax provisions in respect of prior year
liabilities which have either been agreed with the relevant Revenue authorities
or where the likelihood of any liability arising is now considered to be remote.
This has been recorded as an exceptional tax credit in continuing operations
in the year.
Dividend
The final dividend for the year ended 31 January 2004 will be paid on 11 June
2004 to shareholders on the register at close of business on 2 April 2004,
subject to approval of shareholders at the Company's Annual General Meeting, to
be held on 3 June 2004. A scrip dividend alternative will be offered to
shareholders.
Pensions
The Group continues to account for pension costs on the basis of the
requirements of SSAP 24 and provides the disclosures regarding the FRS 17
valuation of the Kingfisher defined benefit pension scheme ('the Scheme') net
assets and liabilities. At the start of the year, the FRS 17 valuation for the
Scheme showed a deficit, net of deferred tax, of £188 million. The assets in the
scheme have increased by £127 million during the year. However, due mainly to a
fall in the discount rate in real terms as inflation expectations rose, the
liabilities increased by £129 million. At the end of the year, the FRS 17
valuation for the Scheme showed a deficit, net of deferred tax, of £189 million,
being approximately £157 million attributable to the Group and £32 million to
Kesa Electricals. Under the terms of the Kesa Electricals demerger, the assets
and liabilities associated with Kesa Electricals' employees are to be
transferred to a new Kesa Electricals scheme after they cease to participate in
the Kingfisher Pension Scheme on 31 March 2004.
In January 2004 the Group announced to employees changes to the Kingfisher UK
Schemes, the effect of which is to close the defined benefit scheme to new
members from 1 April 2004. With effect from that date, new employees will become
eligible to join the new Defined Contribution section of the Scheme. Through a
process of individual and store-based communications all existing UK employees
were given the opportunity to choose the type and level of pension provision
they would receive from 1 April 2004. Under the process each employee was
invited to make a positive decision to participate either in the defined
benefits section or the defined contribution section of the Scheme, or not
participate in the Scheme for pension benefits.
As a result of these changes, and the separation of Electricals, the next formal
valuation of the Scheme will be made on 31 March 2004 when the Kesa Electricals
members leave the Scheme. In advance of the results of the new valuation, the
Group will be increasing its contributions by approximately 6% to 20% of
pensionable salaries for Defined Benefit Section members, as from 1 April 2004.
Accounting changes
The Group has adopted Application Note G of Financial Reporting Standard 5
'Revenue Recognition' and early adopted UITF 38 'Accounting for ESOP Trusts'.
The total impact had the previous policies continued in the current year would
have been to increase profit after tax by £4.8m. The total impact of adopting
the new policies on the year ended 1 February 2003 has been to increase profit
after tax by £0.9m. The total cumulative effect of all the prior year
adjustments on the balance sheet as at 1 February 2003 is a decrease in reserves
of £145.6m. Further information is provided in Note 1.
International Financial Reporting Standards
International Financial Reporting Standards (IFRS) become mandatory for the
consolidated financial statements reported by all EU listed companies from 2005
onwards. The areas of greatest impact for Kingfisher have been identified and
work is underway to ensure the required compliance with IFRS for the 2005/06
financial year. The impact assessment has identified that changes in accounting
treatment for property, goodwill, pensions, deferred tax and financial
instruments may have greatest impact on the Group.
Consolidated profit and loss account
For the financial year ended 31 January 2004
2004 2003
£ millions Notes Continuing Discontinued Total Continuing Discontinued Total
Operations Operations Operations Operations
(restated) (restated) (restated)
Turnover including share of 7,177.4 1,756.3 8,933.7 6,311.8 4,542.2 10,854.0
joint ventures
Less: share of joint (126.9) (8.2) (135.1) (124.3) (19.1) (143.4)
ventures
Group turnover 2 7,050.5 1,748.1 8,798.6 6,187.5 4,523.1 10,710.6
Group operating profit 3 585.1 50.1 635.2 485.9 126.1 612.0
Share of operating profit in:
Joint ventures 7.5 2.3 9.8 4.0 5.7 9.7
Associates 16.1 2.4 18.5 8.0 4.4 12.4
Total operating profit 608.7 54.8 663.5 497.9 136.2 634.1
including share of joint
ventures and associates
Analysed as:
Home Improvement 638.2 21.6 659.8 519.9 14.2 534.1
Electrical and Furniture - 38.9 38.9 - 157.9 157.9
Property 32.3 - 32.3 59.0 - 59.0
Other operating costs (46.2) - (46.2) (52.8) - (52.8)
Exceptional items - 4 (11.6) (3.5) (15.1) (22.0) (29.6) (51.6)
operating
Acquisition goodwill amortisation (4.0) (2.2) (6.2) (6.2) (6.3) (12.5)
(net)
Total operating profit 608.7 54.8 663.5 497.9 136.2 634.1
including share of joint
ventures and associates
Exceptional items - 4
non-operating
Demerger costs - (43.2) (43.2) - (11.8) (11.8)
Loss on the sale or - (58.3) (58.3) - (228.4) (228.4)
termination of operations
Profit/(loss) on the 2.0 - 2.0 144.2 (1.2) 143.0
disposal of fixed assets
Exceptional amounts written 4 (6.3) - (6.3) - - -
off fixed asset investments
Profit/(loss) on ordinary 604.4 (46.7) 557.7 642.1 (105.2) 536.9
activities before interest
Net interest payable (33.6) (10.5) (44.1) (12.4) (31.1) (43.5)
(excluding exceptional
financing charges)
Exceptional financing 4 - (86.9) (86.9) - - -
charges
Net interest payable 5 (33.6) (97.4) (131.0) (12.4) (31.1) (43.5)
Profit/(loss) on ordinary 570.8 (144.1) 426.7 629.7 (136.3) 493.4
activities before taxation
Tax on profit/(loss) on (182.5) 8.4 (174.1) (201.8) (19.9) (221.7)
ordinary activities
(excluding exceptional tax)
Exceptional tax 75.2 (98.5) (23.3) - - -
Tax on profit / (loss) on 6 (107.3) (90.1) (197.4) (201.8) (19.9) (221.7)
ordinary activities
Profit / (loss) on ordinary 463.5 (234.2) 229.3 427.9 (156.2) 271.7
activities after taxation
Equity minority interests (0.2) 0.5 0.3 (99.3) (1.8) (101.1)
Profit/(loss) for the 8 463.3 (233.7) 229.6 328.6 (158.0) 170.6
financial year attributable
to shareholders
Earnings per share (pence) 7
Basic 20.3 10.1 17.7 9.2
Diluted 20.2 10.0 17.4 8.9
Basic - adjusted 17.8 19.2 13.4 19.1
Diluted - adjusted 17.7 19.1 13.2 18.8
Consolidated balance sheet
As at 31 January 2004
£ millions Note 2004 2004 2003 2003
(restated) (restated)
Fixed assets
Intangible assets - goodwill 2,455.3 2,651.5
Tangible assets 2,781.2 3,040.9
Investments in joint ventures
Share of gross assets 50.6 190.1
Share of gross liabilities (30.0) 20.6 (158.1) 32.0
Investments in associates 125.1 131.1
Other investments 0.2 13.8
5,382.4 5,869.3
Current assets
Development work in progress - 5.1
Stocks 1,071.7 1,630.1
Debtors due within one year 493.0 1,369.7
Debtors due after more than one year 25.8 61.7
Investments 23.8 145.7
Cash at bank and in hand 144.2 98.5
1,758.5 3,310.8
Creditors
Amounts falling due within one year (1,925.2) (3,258.7)
Net current (liabilities)/assets (166.7) 52.1
Total assets less current liabilities 5,215.7 5,921.4
Creditors
Amounts falling due after more than one year (744.9) (1,528.4)
Provisions for liabilities and charges (64.2) (53.8)
4,406.6 4,339.2
Capital and reserves
Called up share capital 366.3 359.3
Share premium account 2,150.9 2,155.2
Revaluation reserve 441.3 165.8
Non-distributable reserves 159.0 159.0
Profit and loss account 1,286.2 1,477.6
Equity shareholders' funds 8 4,403.7 4,316.9
Equity minority interests 2.9 22.3
4,406.6 4,339.2
Consolidated cash flow statement
For the financial year ended 31 January 2004
£ millions Note 2004 2003
(restated)
Net cash inflow from operating activities 9 777.4 895.0
Dividends received from joint ventures and associates 2.4 6.9
Returns on investment and servicing of finance
Interest received 26.5 44.8
Interest paid (82.4) (81.2)
Underwriting and issue costs of new debt - (8.0)
Exceptional financing charges (111.2) -
Interest element of finance lease rental payments (2.7) (3.2)
Dividends paid by subsidiaries to minorities - (33.3)
Net cash outflow from returns on investment and servicing of finance (169.8) (80.9)
Taxation
UK Corporation tax paid (134.5) (94.4)
Overseas tax paid (53.7) (76.5)
Exceptional tax paid (98.5) -
Tax paid (286.7) (170.9)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (389.1) (468.4)
Receipts from the sale of tangible fixed assets 819.2 215.4
Purchase of own shares - (25.7)
Payments for additions to investments - (3.4)
Receipts from sale of own shares and nil-paid rights 17.6 11.7
Net cash inflow/(outflow) from capital expenditure and financial investment 447.7 (270.4)
Acquisitions and disposals
Purchase of subsidiary and business undertakings (63.7) (3,152.3)
Sale of subsidiary and business undertakings 203.0 -
Loan to former subsidiary net of repayment (18.1) -
Cash acquired on purchase of subsidiary undertakings - 5.2
Purchase of associates and joint ventures (1.8) (36.2)
Non-operating demerger costs (40.7) (11.8)
Cash disposed on sale of subsidiary undertakings (27.3) (35.9)
Disposal of associates and joint ventures 0.6 -
Issues of shares by Group companies to minority shareholders - 19.3
Net cash inflow/(outflow) from acquisitions and disposals 52.0 (3,211.7)
Equity dividends paid to shareholders (119.2) (139.1)
Net cash inflow/(outflow) before use of liquid resources and financing 703.8 (2,971.1)
Management of liquid resources
(Increase)/decrease in short-term deposits (41.4) 268.8
(Increase)/decrease in short-term investments (41.7) 30.8
Net cash (outflow)/inflow from management of liquid resources (83.1) 299.6
Financing
Issue of ordinary share capital 2.7 2,014.4
Rights issue costs - (43.9)
Capital element of finance lease rental payments (11.6) (13.5)
Increase/(decrease) in loans (584.6) 634.7
Net cash (outflow)/inflow from financing (593.5) 2,591.7
Increase/(decrease) in cash 27.2 (79.8)
Reconciliation of net cash flow to movement in net debt
For the financial year ended 31 January 2004
£ millions 2004 2003
Net debt at start of year (1,926.4) (1,044.2)
Increase/(decrease) in cash 27.2 (79.8)
Debt in subsidiary becoming a joint venture - 172.3
Debt demerged with Kesa Electricals plc 423.0 -
Increase/(decrease)in short-term deposits 41.4 (268.8)
Decrease/(increase) in debt and lease financing 597.7 (613.2)
Amortisation of underwriting and issue costs of new debt (1.5) (6.5)
Increase/ (decrease) short term investments 41.7 (30.8)
Foreign exchange effects (46.9) (55.4)
Net debt at end of year (843.8) (1,926.4)
Consolidated statement of total recognised gains and losses
For the financial year ended 31 January 2004
£ millions 2004 2003
(restated)
Profit for the financial year 229.6 170.6
Unrealised surplus on revaluation of properties 295.7 39.3
Tax on realised revaluation surplus - (7.4)
Minority interest movement on the issue of shares in Castorama - (0.9)
Net foreign exchange adjustments offset in reserves (15.1) (4.1)
Tax effect of exchange adjustments offset in reserves 23.4 10.0
Total recognised gains relating to the financial year 533.6 207.5
Prior year adjustment (see Note 1) (145.6)
Total gains and losses recognised since last annual report 388.0
Notes to the accounts
1. Basis of preparation
The consolidated profit and loss account, consolidated balance sheet,
consolidated cash flow statement, consolidated statement of total recognised
gains and losses and extracts from the notes to the accounts for 2004 and 2003
do not constitute the Group's Annual Report & Accounts. The auditors have made
a report on the Group's statutory accounts for each of the years 2004 and 2003
under section 235 of the Companies Act 1985 which do not contain a statement
under sections 237 (2) or (3) of the Companies Act and are unqualified. The
statutory accounts for 2003 have been delivered to the Registrar of Companies
and the statutory accounts for 2004 will be filed with the Registrar in due
course. Copies of the Annual Report & Accounts will be posted to shareholders
during the week beginning 26 April 2004.
The accounts for the year ended 31 January 2004 have been prepared using the
same accounting policies as were used in the preparation of the accounts for the
year ended 1 February 2003 with the exception of revenue recognition where
Application Note G of FRS 5 has been adopted and in respect of accounting for
ESOP Trusts where UITF 38 has been adopted.
Application Note G of FRS 5 requires that companies provide for customer
returns. Such provision has now been made representing the Group's estimate of
the amount of product sold during the year which will be returned in the
following year. The new Application Note also requires turnover and associated
costs to be recognised when a product or service has been delivered or performed
rather than at time of customer payment. This effects only a small component of
the Group's activities relating to installations and delivered products and
impacts the timing of revenue and profit recognition only. These changes have
been accounted for as a prior period adjustment and previously reported figures
have been restated accordingly. If the previous policy in respect of these
items had been adopted in the current year, the impact would have been to
increase sales by £21.2m and profit after tax by £9.2m. The impact of adopting
the new policy on the year ended 1 February 2003 has been to reduce sales by
£13.7m and profit after tax by £4.0m. The cumulative effect of this prior year
adjustment on the balance sheet as at 1 February 2003 is an increase in the
provision for customer returns of £5.1m, an increase in deferred income of
£13.2m, offset by a decrease in deferred tax of £5.0m giving rise to a decrease
in reserves of £13.3m.
Urgent Issues Task Force 38 'Accounting for ESOP Trusts' has been adopted for
the first time in these financial statements. As required by the UITF, own
shares held by the Kingfisher Employee Share Ownership Trust have been
reclassified from fixed asset investments to a reduction in shareholders' funds.
The shares will be held at historical cost until such time as they are disposed.
Any profit or loss on the disposal of own shares is treated as a movement in
reserves rather than as a profit and loss item. If the previous policy had been
adopted in the current year, the impact would have been to reduce profit after
tax by £4.4m. The impact of adopting the new policy on the year ended 1
February 2003 has been to increase profit after tax by £4.9m. The cumulative
effect of this prior year adjustment on the balance sheet as at 1 February 2003
is to reduce other investments and profit and loss reserve by £132.3m.
The total impact had the previous policies continued in the current year would
have been to increase profit after tax by £4.8m. The total impact of adopting
the new policies on the year ended 1 February 2003 has been to increase profit
after tax by £0.9m. The total cumulative effect of all the prior year
adjustments on the balance sheet as at 1 February 2003 is a decrease in reserves
of £145.6m.
2. Turnover
2004 2003
Continuing Discontinued Total Continuing Discontinued Total
£ millions Operations Operations Operations Operations
(restated) (restated) (restated)
Home Improvement 7,038.2 436.2 7,474.4 6,130.4 610.7 6,741.1
Electrical and Furniture - 1,311.9 1,311.9 - 3,897.7 3,897.7
Retail Sales 7,038.2 1,748.1 8,786.3 6,130.4 4,508.4 10,638.8
Property 12.3 - 12.3 57.1 - 57.1
Financial Services - - - - 14.7 14.7
7,050.5 1,748.1 8,798.6 6,187.5 4,523.1 10,710.6
Property turnover
comprises:
Third party rental 10.2 - 10.2 34.4 - 34.4
income
Property development 2.1 - 2.1 22.7 - 22.7
sales
12.3 - 12.3 57.1 - 57.1
3. Operating profit
2004 2003
Continuing Discontinued Total Continuing Discontinued Total
£ millions Operations Operations Operations Operations
(restated) (restated) (restated)
Group turnover 7,050.5 1,748.1 8,798.6 6,187.5 4,523.1 10,710.6
Cost of sales (4,377.9) (1,183.1) (5,561.0) (3,925.3) (3,166.8) (7,092.1)
Gross profit 2,672.6 565.0 3,237.6 2,262.2 1,356.3 3,618.5
Selling expenses (1,766.9) (419.6) (2,186.5) (1,450.9) (929.4) (2,380.3)
Administrative expenses (321.5) (110.0) (431.5) (317.0) (314.8) (631.8)
Exceptional items -
operating (administrative
expenses) (11.6) (3.5) (15.1) (18.1) (29.6) (47.7)
Administrative expenses - (333.1) (113.5) (446.6) (335.1) (344.4) (679.5)
total
Other income 12.5 18.2 30.7 9.7 43.6 53.3
Group operating profit 585.1 50.1 635.2 485.9 126.1 612.0
4. Exceptional items
2004 2003
Continuing Discontinued Total Continuing Discontinued Total
£ millions Operations Operations Operations Operations
Operating exceptionals
Demerger costs (1.8) (3.5) (5.3) - - -
Group restructuring (9.8) - (9.8) (18.1) - (18.1)
Darty anti-competitive fine - - - - (9.6) (9.6)
Impairment of Nomi goodwill - - - - (20.0) (20.0)
Total charged to Group operating (11.6) (3.5) (15.1) (18.1) (29.6) (47.7)
profit
Impairment of Koctas goodwill - - - (3.9) - (3.9)
Total charged to share of joint - - - (3.9) - (3.9)
ventures
Total operating exceptionals (11.6) (3.5) (15.1) (22.0) (29.6) (51.6)
Non-operating exceptionals
Demerger costs - (43.2) (43.2) - (11.8) (11.8)
Loss on sale of Home Improvement - (58.3) (58.3) - - -
businesses
Loss on closure of Castorama - - - - (34.8) (34.8)
Germany
Loss on sale of ProMarkt - - - - (193.6) (193.6)
Loss on the sale or termination of - (58.3) (58.3) - (228.4) (228.4)
operations
Disposal of fixed asset 1.3 - 1.3 - - -
investments
Profit / (loss) on the disposal of 0.7 - 0.7 144.2 (1.2) 143.0
properties
Profit/(loss) on the disposal of 2.0 - 2.0 144.2 (1.2) 143.0
fixed assets
Exceptional amounts written off (6.3) - (6.3) - - -
fixed asset investments
Total non-operating exceptionals (4.3) (101.5) (105.8) 144.2 (241.4) (97.2)
Exceptional financing charges (see - (86.9) (86.9) - - -
note 5)
Total exceptional charges (15.9) (191.9) (207.8) 122.2 (271.0) (148.8)
5. Net interest payable
£ millions 2004 2003
Interest payable 72.2 86.8
Interest receivable (25.2) (38.9)
47.0 47.9
Interest capitalised (2.9) (4.4)
Net interest payable (before exceptional financing charges) 44.1 43.5
Exceptional financing charges 86.9 -
Net interest payable 131.0 43.5
The share of net interest payable by joint ventures included above is £0.4 million (2003: £0.4 million).
The share of net interest payable by associates included above is £5.7 million (2003: £2.9 million).
Interest payable includes amortisation of underwriting and issue costs of new debt of £1.5 million (2003: £6.5
million).
Of the net interest payable in 2004, (before exceptional financing charge) a total of £10.5 million (2003:
£31.1 million) was charged to discontinued operations.
The exceptional financing charges of £86.9 million have also been charged to discontinued operations.
6. Taxation
Before Exceptional 2004 2003
£ millions Exceptional Tax Tax Total Total
(restated)
UK Corporation tax
Current tax for the period 86.0 - 86.0 213.5
Adjustments in respect of prior periods (0.4) (51.3) (51.7) (12.2)
85.6 (51.3) 34.3 201.3
Double taxation relief (9.5) - (9.5) (39.3)
76.1 (51.3) 24.8 162.0
Foreign tax
Current tax for the period 91.0 98.5 189.5 55.6
Adjustments in respect of prior periods 4.2 (23.9) (19.7) -
95.2 74.6 169.8 55.6
Deferred tax (3.7) - (3.7) (1.7)
Associated undertakings 4.4 - 4.4 3.3
Joint ventures 2.1 - 2.1 2.5
174.1 23.3 197.4 221.7
Of the taxation set out above, a total of £90.1 million (2003: £19.9 million)
was charged to discontinued operations.
7. Earnings per share
Earnings per share for continuing operations is presented in order to provide a
more meaningful comparison.
The calculation of basic earnings per share for continuing operations is based
on the profit on ordinary activities, after taxation and minority interests of
£463.3 million (2003: £328.6 million) and the weighted average number of shares
in issue during the period of 2,277.4 million (2003: 1,856.8 million - restated
for the 7 for 8 share consolidation in July 2003).
The diluted earnings per share for continuing operations is based on the diluted
profit on ordinary activities, after taxation and minority interests of £463.3
million (2003: £325.0 million) and the diluted weighted average number of
shares in issue during the period of 2,290.4 million (2003: 1,866.6 million -
restated for the 7 for 8 share consolidation in July 2003).
Adjusted earnings per share figures are presented to allow comparison to prior
year on a comparable basis. These exclude the effects of exceptional items and
acquisition goodwill amortisation.
The difference between the basic and diluted earnings per share is reconciled as
follows:
2004 2004 2003 2003
pence Continuing Total Continuing Total
(restated) (restated)
Basic earnings per share 20.3 10.1 17.7 9.2
Effect of exceptionals
- Operating exceptional items 0.5 0.7 1.2 2.8
- Demerger costs - 1.9 - 0.6
- Loss on the sale of operations - 2.5 - 12.3
- Profit on the disposal of fixed assets (0.1) (0.1) (7.8) (7.7)
- Amounts written off fixed asset investments 0.3 0.3 - -
- Tax impact arising on exceptional items (0.1) (1.3) 2.1 1.3
- Exceptional tax (3.3) 1.0 - -
- Exceptional financing charges - 3.8 - -
- Minority share of exceptional items - - (0.1) -
Acquisition goodwill amortisation (net of tax) 0.2 0.3 0.3 0.6
Basic - adjusted earnings per share 17.8 19.2 13.4 19.1
Diluted earnings per share 20.2 10.0 17.4 8.9
Effect of exceptionals
- Operating exceptional items 0.5 0.7 1.2 2.8
- Demerger costs - 1.9 - 0.6
- Loss on the sale of operations - 2.5 - 12.2
- Profit on the disposal of fixed assets (0.1) (0.1) (7.7) (7.6)
- Amounts written off fixed asset investments 0.3 0.3 -
- Tax impact arising on exceptional items (0.1) (1.3) 2.0 1.3
- Exceptional tax (3.3) 1.0 - -
- Exceptional financing charges - 3.8 - -
Acquisition goodwill amortisation (net of tax) 0.2 0.3 0.3 0.6
Diluted - adjusted earnings per share 17.7 19.1 13.2 18.8
8. Reconciliation of movement in equity shareholders' funds
£ millions 2004 2003
(restated)
Profit for the financial year attributable to the members of Kingfisher 229.6 170.6
plc
Ordinary dividends on equity shares (221.1) (244.0)
Dividend in specie - demerger of Kesa Electricals plc (1,592.9) -
(1,584.4) (73.4)
Goodwill resurrected on demerger 1,230.3 -
Foreign exchange adjustments (net of tax) 8.3 5.9
Unrealised surplus on revaluation of properties 295.7 39.3
Tax on realised revaluation surplus - (7.4)
Shares issued under option schemes 2.7 6.1
Gain on disposal of nil-paid rights - 10.8
Net proceeds from rights issue - 1,961.2
ESOP shares disposed 17.6 -
Addition to ESOP shares due to scrip dividend (1.7) -
Scrip issue 118.3 49.1
Minority interest movement on issue of shares in Castorama - (0.9)
Net addition to shareholders' funds 86.8 1,990.7
Opening shareholders' funds * 4,316.9 2,326.2
Closing shareholders' funds 4,403.7 4,316.9
* originally £4,462.5 million before deducting prior year adjustment of £145.6
million
9. Net cash inflow from operating activities
£ millions 2004 2003
(restated)
Group operating profit 635.2 612.0
Impairment charge - 20.0
Depreciation and amortisation 175.2 221.6
Decrease in development work in progress 5.1 56.4
Increase in stocks (74.5) (100.1)
Decrease in debtors 1.1 58.2
Increase in creditors 41.3 21.6
Profit/(loss) on disposal of fixed assets (6.0) 5.3
Net cash inflow from operating activities 777.4 895.0
10. Operating leases
The operating lease charge for the Group's continuing operations were as follows:
£ millions 2004 2003
Land and buildings 221.4 189.9
Plant and equipment 23.9 23.1
11. Pension costs
Pension schemes operated and regular pension costs - SSAP 24
The Group operates a variety of pension arrangements covering both funded and
unfunded defined benefit schemes and funded defined contribution schemes. By
far the most significant are the funded defined benefit and defined contribution
schemes for the Group's UK employees.
The total pension charge in the profit and loss account of £44.7m (2003: £43.8m)
includes £2.3m (2003: £3.2m) for the UK defined contribution scheme.
The pension cost for the UK defined benefit scheme ('the Scheme') charged in the
profit and loss account of £37.9m (2003: £35.2m) is based on the formal
actuarial valuation described above, adjusted to reflect market movements since
the date of this valuation, and in accordance with SSAP 24 'Accounting for
pension costs'. The valuation assumptions used for accounting purposes are an
inflation rate of 3.0% p.a., an investment return on existing assets of 7.1%
p.a., an investment return on future contributions of 6.6% p.a., pensionable pay
increases of 4.6% p.a. and pension increases of 2.75% p.a. Variations against
regular cost have been amortised using the straight line method. The pension
cost for the Scheme is £7.2m higher than the contributions paid into the Scheme
by the Group during the year. The contributions paid into the Scheme are in line
with the contribution rate as advised by the actuary following the 31 March 2002
valuation.
There are also funded and unfunded defined benefit arrangements covering senior
executives in France, for which the charge in profit and loss account was £2.0m
(2003: £4.8m). A further £2.5m charge (2003: £0.6m) has been reflected in the
profit and loss account in respect of other overseas pension arrangements.
FRS 17 disclosures
The Accounting Standards Board has deferred the full mandatory adoption of FRS
17 following the planned move to International Financial Reporting Standards.
Instead the transitional disclosure requirements will continue.
The valuation of the Scheme used for FRS 17 disclosures has been based on the
most recent actuarial valuation of the Group's UK Scheme at 31 March 2002 and
updated to 31 January 2004 and takes into account the transitional requirements
of FRS 17.
The financial assumptions used to calculate estimated Scheme liabilities under
FRS 17 are:
2004 2003
Discount rate 5.6% 5.5%
Salary escalation 4.3% 3.9%
Rate of pension increases 2.7% 2.3%
Price inflation 2.7% 2.3%
The assets in the Scheme at 31 January 2004 and the expected future rates of
return on them were:
2004 2003
£ millions % £ millions %
Equities 566 8.0 388 8.5
Bonds 254 5.0 288 4.7
Property 32 6.5 7 7.0
Other (principally cash) 57 3.7 99 3.8
Total market value of assets 909 6.5 782 6.5
Present value of scheme liabilities (1,179) (1,050)
Deficit in the scheme (270) (268)
Related deferred tax asset 81 80
Net pension liability (189) (188)
Movement in deficit during the year
£ millions 2004 2003
Deficit in Scheme at start of year (before tax) (268) (160)
Current service cost (37) (38)
Employer contributions 29 31
Settlement gain - 95
Curtailment gain - 1
Other finance (charge)/income (6) 6
Actuarial gain/(loss) recognised in STRGL 12 (203)
Deficit in Scheme at end of year (before tax) (270) (268)
Comparison between SSAP24 and FRS17 for the Scheme
FRS17 total profit and loss account charge excluding settlement gains arising on bulk (43) (31)
transfer
SSAP24 profit and loss account charge (37) (35)
For the Group's remaining defined benefit plans, the market value of assets held
by insurance companies was £10 million (2003: £24 million), Group balance sheet
provisions totalled £12 million (2003: £11 million) and the aggregate unfunded
obligations for the plans were £7 million (2003: £15 million).
This information is provided by RNS
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