REG - Kingfisher PLC - Final Results (Part 2 of 2)
Consolidated income statement
Year ended 31 January 2018
2017/18
2016/17
Before
Exceptional
Before
Exceptional
exceptional
items
exceptional
items
£ millions
Notes
items
(note 4)
Total
items
(note 4)
Total
Sales
3
11,655
-
11,655
11,225
-
11,225
Cost of sales
(7,352)
-
(7,352)
(7,050)
-
(7,050)
Gross profit
4,303
-
4,303
4,175
-
4,175
Selling and distribution expenses
(2,863)
14
(2,849)
(2,758)
21
(2,737)
Administrative expenses
(782)
(15)
(797)
(687)
(5)
(692)
Other income
24
1
25
19
7
26
Share of post-tax results
of joint ventures and associates
3
-
3
1
-
1
Operating profit
685
-
685
750
23
773
Finance costs
(19)
-
(19)
(21)
(6)
(27)
Finance income
16
-
16
13
-
13
Net finance costs
5
(3)
-
(3)
(8)
(6)
(14)
Profit before taxation
682
-
682
742
17
759
Income tax expense
6
(197)
-
(197)
(143)
(6)
(149)
Profit for the year
485
-
485
599
11
610
Earnings per share
7
Basic
22.1p
27.1p
Diluted
22.0p
27.0p
Adjusted basic
21.8p
24.4p
Adjusted diluted
21.7p
24.3p
Underlying basic
25.5p
25.9p
Underlying diluted
25.4p
25.8p
Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
Underlying pre-tax profit
797
787
Transformation costs before exceptional items
(114)
(44)
Adjusted pre-tax profit
683
743
Financing fair value remeasurements
(1)
(1)
Exceptional items
-
17
Profit before taxation
682
759
The proposed final dividend for the year ended 31 January 2018, subject to approval by shareholders at the Annual General Meeting, is 7.49p per share.
Consolidated statement of comprehensive income
Year ended 31 January 2018
£ millions
Notes
2017/18
2016/17
Profit for the year
485
610
Actuarial losses on post-employment benefits
9
(58)
(50)
Tax on items that will not be reclassified
16
11
Total items that will not be reclassified subsequently to profit or loss
(42)
(39)
Currency translation differences
Group
84
390
Joint ventures and associates
(1)
(1)
Cash flow hedges
Fair value (losses)/gains
(93)
52
Losses/(gains) transferred to inventories
20
(60)
Available-for-sale financial assets
Fair value gains
-
5
Transferred to income statement
-
(7)
Tax on items that may be reclassified
12
2
Total items that may be reclassified subsequently to profit or loss
22
381
Other comprehensive (loss)/income for the year
(20)
342
Total comprehensive income for the year
465
952
Consolidated statement of changes in equity
Year ended 31 January 2018
Attributable to equity shareholders of the Company
£ millions
Notes
Share capital
Share
premium
Own shares held
Retained earnings
Capital redemption reserve
Other reserves
Total
equity
At 1 February 2017
352
2,221
(23)
3,837
22
362
6,771
Profit for the year
-
-
-
485
-
-
485
Other comprehensive (loss)/ income for the year
-
-
-
(42)
-
22
(20)
Total comprehensive income for the year
-
-
-
443
-
22
465
Share-based compensation
-
-
-
8
-
-
8
New shares issued under share schemes
1
7
-
-
-
-
8
Own shares issued under share schemes
-
-
7
(7)
-
-
-
Purchase of own shares for cancellation
(13)
-
-
(260)
13
-
(260)
Purchase of own shares for ESOP trust
-
-
(13)
-
-
-
(13)
Dividends
8
-
-
-
(231)
-
-
(231)
At 31 January 2018
340
2,228
(29)
3,790
35
384
6,748
At 1 February 2016
361
2,218
(24)
3,637
13
(19)
6,186
Profit for the year
-
-
-
610
-
-
610
Other comprehensive (loss)/ income for the year
-
-
-
(39)
-
381
342
Total comprehensive income for the year
-
-
-
571
-
381
952
Share-based compensation
-
-
-
15
-
-
15
New shares issued under share schemes
-
3
-
-
-
-
3
Own shares issued under share schemes
-
-
7
(6)
-
-
1
Purchase of own shares for cancellation
(9)
-
-
(150)
9
-
(150)
Purchase of own shares for ESOP trust
-
-
(6)
-
-
-
(6)
Dividends
8
-
-
-
(230)
-
-
(230)
At 31 January 2017
352
2,221
(23)
3,837
22
362
6,771
Consolidated balance sheet
At 31 January 2018
£ millions
Notes
2017/18
2016/17
Non-current assets
Goodwill
2,437
2,399
Other intangible assets
355
308
Property, plant and equipment
3,736
3,589
Investment property
20
24
Investments in joint ventures and associates
25
23
Post-employment benefits
9
214
239
Deferred tax assets
30
28
Derivative assets
-
54
Other receivables
8
8
6,825
6,672
Current assets
Inventories
2,701
2,173
Trade and other receivables
550
551
Derivative assets
41
36
Current tax assets
-
6
Cash and cash equivalents
230
795
3,522
3,561
Total assets
10,347
10,233
Current liabilities
Trade and other payables
(2,666)
(2,495)
Borrowings
(140)
(14)
Derivative liabilities
(79)
(26)
Current tax liabilities
(140)
(141)
Provisions
(25)
(63)
(3,050)
(2,739)
Non-current liabilities
Other payables
(61)
(50)
Borrowings
(36)
(184)
Deferred tax liabilities
(264)
(282)
Provisions
(73)
(99)
Post-employment benefits
9
(115)
(108)
(549)
(723)
Total liabilities
(3,599)
(3,462)
Net assets
6,748
6,771
Equity
Share capital
340
352
Share premium
2,228
2,221
Own shares held in ESOP trust
(29)
(23)
Retained earnings
3,790
3,837
Capital redemption reserve
35
22
Other reserves
384
362
Total equity
6,748
6,771
The financial statements were approved by the Board of Directors on 20 March 2018 and signed on its behalf by:
Véronique Laury Karen Witts
Chief Executive Officer Chief Financial Officer
Consolidated cash flow statement
Year ended 31 January 2018
£ millions
Notes
2017/18
2016/17
Operating activities
Cash generated by operations
10
475
925
Income tax paid
(182)
(144)
Net cash flows from operating activities
293
781
Investing activities
Purchase of property, plant and equipment and intangible assets
(368)
(406)
Purchase of businesses, net of cash acquired
12
(12)
-
Disposal of property, plant and equipment, investment property and intangible assets
6
20
Disposal of B&Q China
-
63
Decrease in short-term deposits
-
70
Interest received
11
5
Net cash flows used in investing activities
(363)
(248)
Financing activities
Interest paid
(10)
(10)
Interest element of finance lease rental payments
(2)
(2)
Repayment of bank loans
(7)
(2)
Repayment of fixed term debt
-
(47)
Receipt on financing derivatives
-
10
Capital element of finance lease rental payments
(11)
(12)
New shares issued under share schemes
8
3
Own shares issued under share schemes
-
1
Purchase of own shares for ESOP trust
(13)
(6)
Purchase of own shares for cancellation
(260)
(200)
Ordinary dividends paid to equity shareholders of the Company
(231)
(230)
Net cash flows from financing activities
(526)
(495)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts
(596)
38
Cash and cash equivalents and bank overdrafts at beginning of year
795
654
Exchange differences
31
103
Cash and cash equivalents and bank overdrafts at end of year
11
230
795
Notes
1 General information
Kingfisher plc ('the Company'), its subsidiaries, joint ventures and associates (together 'the Group') supply home improvement products and services through a network of retail stores and other channels, located mainly in the United Kingdom and continental Europe.
The Company is incorporated in England, United Kingdom, and is listed on the London Stock Exchange. The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX.
2 Basis of preparation
The consolidated financial statements of the Company, its subsidiaries, joint ventures and associates are made up to 31 January. The current financial year is the calendar year ended 31 January 2018 ('the year' or '2017/18'). The comparative financial year is the calendar year ended 31 January 2017 ('the prior year' or '2016/17').
The directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the year ended 31 January 2018.
The condensed financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and related notes do not constitute statutory financial statements for the year ended 31 January 2018, but are derived from those statements. Statutory financial statements for 2016/17 have been filed with the Registrar of Companies and those for 2017/18 will be filed in due course. The Group's auditors have reported on both years' accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.
The condensed financial information has been abridged from the 2017/18 statutory financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS and therefore the consolidated financial statements comply with Article 4 of the EU IAS legislation. The consolidated income statement and related notes represent results for continuing operations, there being no discontinued operations in the years presented. The condensed financial information has 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.
Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 January 2017, as described in note 2 of those financial statements.
Principal rates of exchange against Sterling
2017/18
2016/17
Average rate
Year end rate
Average rate
Year end rate
Euro
1.14
1.14
1.21
1.16
US Dollar
1.30
1.42
1.34
1.26
Polish Zloty
4.83
4.75
5.28
5.03
Russian Rouble
75.53
79.74
87.98
75.72
Use of non-GAAP measures
In the reporting of financial information, the Group uses certain measures that are not required under IFRS, the generally accepted accounting principles ('GAAP') under which the Group reports. Kingfisher believes that retail profit, underlying pre-tax profit, adjusted pre-tax profit, effective tax rate, underlying earnings per share and adjusted earnings per share provide additional useful information on performance and trends to shareholders. These and other non-GAAP measures (also known as 'Alternative Performance Measures'), such as net cash, are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items', 'transformation costs', 'underlying', 'adjusted', 'effective tax rate' and 'net cash' are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.
Retail profit is defined as continuing operating profit before central costs, the Group's share of interest and tax of joint ventures and associates, transformation costs and exceptional items. It includes the sustainable benefits of the transformation plan. Central costs principally comprise the costs of the Group's head office before transformation costs.
The separate reporting of exceptional items, which are presented as exceptional within their relevant income statement category, helps provide an indication of the Group's ongoing business performance. The principal items which are included as exceptional items are:
· non-trading items included in operating profit such as profits and losses on the disposal, closure or impairment of subsidiaries, joint ventures, associates and investments which do not form part of the Group's trading activities;
· profits and losses on the disposal of properties and impairment losses on non-operational assets; and
· the costs of significant restructuring, including certain restructuring costs of the Group's five-year transformation plan launched in 2016/17, and incremental acquisition integration costs.
The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). Financing fair value remeasurements represent changes in the fair value of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying amount of borrowings and other hedged items under fair value hedge relationships. Financing derivatives are those that relate to hedged items of a financing nature.
The term 'underlying' refers to the relevant adjusted measure being reported before non-exceptional transformation costs. Non-exceptional transformation costs represent the additional costs that arise only as a result of the transformation plan launched in 2016/17, which either because of their nature or the length of the period over which they are incurred are not considered as exceptional items. These costs principally relate to the unified and unique offer range implementation and the digital strategic initiative. The separate reporting of such costs (in addition to exceptional items) helps provide an indication of the Group's underlying business performance, which includes the sustainable benefits of the transformation plan.
The effective tax rate is calculated as continuing income tax expense excluding tax on exceptional items and adjustments in respect of prior years and the impact of changes in tax rates on deferred tax, divided by continuing profit before taxation excluding exceptional items. The exclusion of items relating to prior years and those not in the ordinary course of business helps provide a better indication of the Group's ongoing rate of tax.
Net cash comprises cash and cash equivalents and short-term deposits less borrowings and financing derivatives (excluding accrued interest). It excludes balances classified as assets and liabilities held for sale.
3 Segmental analysis
Income statement
2017/18
£ millions
UK & Ireland
France
Other International
Total
Poland
Other
Sales
5,003
4,387
1,384
881
11,655
Retail profit
375
320
170
(16)
849
Central costs
(46)
Share of interest and tax of joint ventures and associates
(4)
Transformation costs before exceptional items
(114)
Operating profit
685
Net finance costs
(3)
Profit before taxation
682
2016/17
£ millions
UK & Ireland
France
Other International
Total
Poland
Other
Sales
4,979
4,254
1,191
801
11,225
Retail profit
358
353
144
(8)
847
Central costs
(48)
Share of interest and tax of joint ventures and associates
(5)
Transformation costs before exceptional items
(44)
Exceptional items
23
Operating profit
773
Net finance costs
(14)
Profit before taxation
759
The operating segments disclosed above are based on the information reported internally to the Board of Directors and Group Executive, representing the geographical areas in which the Group operates. The Group only has one business segment being the supply of home improvement products and services.
The 'Other International' segment consists of Poland, Spain, Portugal, Germany, Russia, Romania and the joint venture Koçtaş in Turkey. Poland has been shown separately due to its significance.
Central costs principally comprise the costs of the Group's head office before transformation costs.
Transformation costs before exceptional items principally relate to the unified and unique offer range implementation and the digital strategic pillar, with £42m (2016/17: £19m) included within selling and distribution expenses and £72m (2016/17: £25m) included within administrative expenses.
4 Exceptional items
£ millions
2017/18
2016/17
Included within selling and distribution expenses
UK & Ireland and continental Europe restructuring
12
21
Brico Dépôt Romania impairment reversal
2
-
14
21
Included within administrative expenses
Transformation exceptional costs
(15)
(5)
(15)
(5)
Included within other income
Profit on disposal of properties
1
4
Profit on disposal of B&Q China
-
3
1
7
Included within net finance costs
UK & Ireland and continental Europe restructuring
-
(6)
-
(6)
Exceptional items before tax
-
17
Tax on exceptional items
-
(6)
Exceptional items
-
11
Current year exceptional items include a £12m credit principally arising due to savings on B&Q store exit costs as compared with the original restructuring provisions recognised.
In the prior year, a net credit of £21m was recognised relating principally to savings on B&Q store exit costs, offset by store asset impairments relating to the closure of loss-making stores in continental Europe. In addition, a £6m exceptional interest charge relating to the reduction in discount rate used to measure the overall UK restructuring provision was recognised.
A £2m impairment reversal has been recognised in the current year relating to the reversal of store impairments (previously charged to exceptional items in 2015/16) in the Brico Dépôt Romania business, as a result of a sustained improvement in the performance of those stores.
Transformation exceptional costs of £15m have been recorded in the year driven by people changes associated with restructuring in the UK and other costs relating to the Group's five-year transformation plan. These include the move of transactional processing activity from the UK to a shared service centre in Poland.
In the prior year, a profit of £3m was recognised on disposal of the Group's remaining 30% stake in B&Q China.
5 Net finance costs
£ millions
2017/18
2016/17
Bank overdrafts and bank loans
(10)
(10)
Fixed term debt
(2)
(2)
Finance leases
(2)
(2)
Financing fair value remeasurements
(1)
(1)
Unwinding of discount on provisions
(1)
(7)
Capitalised interest
2
-
Other interest payable
(5)
(5)
Finance costs
(19)
(27)
Cash and cash equivalents and short term deposits
8
6
Net interest income on defined benefit pension schemes
5
7
Other interest income
3
-
Finance income
16
13
Net finance costs
(3)
(14)
In the prior year, the £7m charge relating to the unwinding of discount on provisions included a £6m exceptional finance charge relating to the reduction in discount rate used to measure the overall UK restructuring provision.
6 Income tax expense
£ millions
2017/18
2016/17
UK corporation tax
Current tax on profits for the year
(32)
(66)
Adjustments in respect of prior years
(8)
10
(40)
(56)
Overseas tax
Current tax on profits for the year
(152)
(155)
Adjustments in respect of prior years
(2)
(11)
(154)
(166)
Deferred tax
Current year
(20)
22
Adjustments in respect of prior years
1
16
Adjustments in respect of changes in tax rates
16
35
(3)
73
Income tax expense
(197)
(149)
The effective tax rate on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 30% (2016/17: 26%). The increase in the effective tax rate is largely due to a one off French tax surcharge in 2017/18. Tax on exceptional items for the year amount to a charge of £nil. In 2016/17, tax on exceptional items amounted to a charge of £6m, including a credit of £1m relating to prior year items.
7 Earnings per share
2017/18
2016/17
Earnings
Weighted
average
number
of shares
Earnings per share
Earnings
Weighted
average
number
of shares
Earnings per share
£ millions
millions
Pence
£ millions
millions
pence
Basic earnings per share
485
2,192
22.1
610
2,256
27.1
Effect of dilutive share options
-
9
(0.1)
-
7
(0.1)
Diluted earnings per share
485
2,201
22.0
610
2,263
27.0
Basic earnings per share
485
2,192
22.1
610
2,256
27.1
Exceptional items before tax
-
-
(17)
(0.8)
Tax on exceptional and prior year items
(7)
(0.3)
(43)
(2.0)
Financing fair value remeasurements
1
-
1
0.1
Adjusted basic earnings per share
479
2,192
21.8
551
2,256
24.4
Transformation costs before exceptional items
114
5.2
44
2.0
Tax on transformation costs before exceptional items
(35)
(1.5)
(11)
(0.5)
Underlying basic earnings per share
558
2,192
25.5
584
2,256
25.9
Diluted earnings per share
485
2,201
22.0
610
2,263
27.0
Exceptional items before tax
-
-
(17)
(0.8)
Tax on exceptional and prior year items
(7)
(0.3)
(43)
(2.0)
Financing fair value remeasurements
1
-
1
0.1
Adjusted diluted earnings per share
479
2,201
21.7
551
2,263
24.3
Transformation costs before exceptional items
114
5.2
44
2.0
Tax on transformation costs before exceptional items
(35)
(1.5)
(11)
(0.5)
Underlying diluted earnings per share
558
2,201
25.4
584
2,263
25.8
Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders of the Company by the weighted average number of 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 shares is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where both the exercise price is less than the average market price of the Company's shares during the year and any related performance conditions have been met.
8 Dividends
£ millions
2017/18
2016/17
Dividends to equity shareholders of the Company
Ordinary interim dividend for the year ended 31 January 2018 of 3.33p per share
(year ended 31 January 2017: 3.25p per share)
72
73
Ordinary final dividend for the year ended 31 January 2017 of 7.15p per share
(year ended 31 January 2016: 6.92p per share)
159
157
231
230
The proposed final dividend for the year ended 31 January 2018 of 7.49p per ordinary share (amounting to £162m, based on the issued share capital at year end) is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in the financial statements.
9 Post-employment benefits
2017/18
2016/17
£ millions
UK
Overseas
Total
UK
Overseas
Total
Net surplus/(deficit) in schemes
at beginning of year239
(108)
131
246
(87)
159
Current service cost
(2)
(9)
(11)
(2)
(7)
(9)
Administration costs
(4)
-
(4)
(4)
-
(4)
Net interest income/(expense)
7
(2)
5
9
(2)
7
Net actuarial (losses)/gains
(62)
4
(58)
(46)
(4)
(50)
Contributions paid by employer
36
2
38
36
2
38
Exchange differences
-
(2)
(2)
-
(10)
(10)
Net surplus/(deficit) in schemes at end of year
214
(115)
99
239
(108)
131
Present value of defined benefit obligations
(3,002)
(134)
(3,136)
(2,999)
(126)
(3,125)
Fair value of scheme assets
3,216
19
3,235
3,238
18
3,256
Net surplus/(deficit) in schemes
214
(115)
99
239
(108)
131
The assumptions used in calculating the costs and obligations of the Group's defined benefit pension schemes are set by the Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the sensitivity analysis.
A key assumption in valuing the pension obligations is the discount rate. Accounting standards require this to be set based on market yields on high quality corporate bonds at the balance sheet date. The UK scheme discount rate is derived using a single equivalent discount rate approach, based on the yields available on a portfolio of high-quality Sterling corporate bonds with the same duration as that of the scheme liabilities.
The principal financial assumptions for the UK scheme are as follows:
Annual % rate
2017/18
2016/17
Discount rate
2.5
2.7
Price inflation
3.4
3.6
For the UK scheme, the mortality assumptions used have been selected with regard to the characteristics and experience of the membership of the scheme as assessed from time to time relating to triennial funding valuations. The assumptions for life expectancy of UK scheme members are as follows:
Years
2017/18
2016/17
Age to which current pensioners are expected to live (60 now)
- Male
87.2
87.1
- Female
88.9
88.8
Age to which future pensioners are expected to live (60 in 15 years' time)
- Male
88.4
88.3
- Female
90.8
90.7
The following sensitivity analysis for the UK scheme shows the estimated impact on the obligation resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.
Assumption
Change in assumption
Impact on defined benefit obligation
Discount rate
Increase/decrease by 0.5%
Decrease/increase by £333m
Price inflation
Increase/decrease by 0.5%
Increase/decrease by £266m
Mortality
Increase in life expectancy by one year
Increase by £99m
10 Cash generated by operations
£ millions
2017/18
2016/17
Operating profit
685
773
Share of post-tax results of joint ventures and associates
(3)
(1)
Depreciation and amortisation
254
253
Net impairment losses
1
14
Loss on disposal of property, plant and equipment and investment property
2
4
Profit on disposal of B&Q China
-
(3)
Share-based compensation charge
8
15
Increase in inventories
(473)
(46)
Decrease in trade and other receivables
12
62
Increase in trade and other payables
87
4
Movement in provisions
(75)
(125)
Movement in post-employment benefits
(23)
(25)
Cash generated by operations
475
925
11 Net cash
£ millions
2017/18
2016/17
Cash and cash equivalents
230
795
Bank loans
(6)
(9)
Fixed term debt
(125)
(147)
Financing derivatives
14
44
Finance leases
(45)
(42)
Net cash
68
641
£ millions
2017/18
2016/17
Net cash at beginning of year
641
546
Net (decrease)/increase in cash and cash equivalents and bank overdrafts
(596)
38
Decrease in short term deposits
-
(70)
Repayment of bank loans
7
2
Repayment of fixed term debt
-
47
Receipt on financing derivatives
-
(10)
Capital element of finance lease rental payments
11
12
Cash flow movement in net cash
(578)
19
Borrowings acquired
(7)
-
Exchange differences and other non-cash movements
12
76
Net cash at end of year
68
641
12 Acquisitions
On 30 November 2017, the Group obtained control of Praktiker Romania S.A. ("Praktiker") by acquiring 100% of its share capital for a consideration of £14m, all of which comprised cash. Praktiker is a home improvement retailer operating 26 stores across Romania and was acquired to strengthen the Group's position in Romania.
Goodwill of £36m has been recognised on provisional net liabilities acquired of £22m, representing a strategic premium to strengthen the Group's position in Romania and anticipated synergies that will arise from the acquisition. None of this goodwill is expected to be deductible for income tax purposes.
£ millions
Provisional fair value amounts recognised of identifiable assets acquired and liabilities assumed
Other intangible assets
1
Property, plant and equipment
9
Inventories
31
Trade and other receivables
6
Cash and cash equivalents
2
Trade and other payables
(56)
Borrowings
(7)
Provisions
(8)
Total identifiable net liabilities acquired
(22)
Goodwill
36
Total consideration
14
The acquisition amounts recorded in the consolidated cash flow statement for the year are:
£ millions
Cash consideration
(14)
Cash acquired
2
Purchase of businesses, net of cash acquired
(12)
Immediately following the acquisition, Kingfisher settled Praktiker's bank loans of £4m (included within "Repayment of bank loans" in the consolidated cash flow statement).
Owing to local conditions, Praktiker prepares its financial statements to 31 December. In the period from 30 November 2017 to 31 December 2017, it contributed sales of £8m and a retail loss of £1m. If the acquisition had occurred at the start of the financial year, the Group's sales would have been £11,760m and Group's operating profit, after exceptional items, would have been £676m for the year ended 31 January 2018.
13 Contingent liabilities
The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees, £43m (2016/17: £1m) could crystallise due to possible future events not wholly within the Group's control.
The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are considered likely to arise on the basis of current information and legal advice.
The Group files tax returns in many jurisdictions around the world and at any one time, is subject to periodic tax audits in the ordinary course of its business. Applicable tax laws and regulations are subject to differing interpretations and the resolution of a final tax position can take several years to complete. Where it is considered that future tax liabilities are more likely than not to arise, an appropriate provision is recognised in the financial statements.
Included within these audits is a dispute with the French Tax Authority regarding the treatment of interest paid since the 2010 year end, where additional French tax of €49m (£43m) has been assessed and for which a bank guarantee is now in place. At the balance sheet date, interest and penalties of €49m (£43m) would be due on this assessment if not challenged successfully. Having taken external professional advice, the Group disagrees with the assessment and intends to defend its position through the courts. The Group does not consider it necessary to make provision for the amounts assessed at the current time, nor for any potential further amounts which may be assessed for subsequent years.
In October 2017, the European Commission opened a state aid investigation into the Group Financing Exemption section of the UK controlled foreign company rules. Along with many other UK-based international companies, the Group may be affected by the outcome of this investigation and is therefore monitoring developments. The Group does not currently consider any provision is required in relation to EU State Aid.
Whilst the procedures that must be followed to resolve these types of tax issues make it likely that it will be some years before the eventual outcome is known, the Group does not currently expect the final outcome of these contingent liabilities to have a material effect on the Group's financial position.
14 Events after the balance sheet date
In February 2018, the Group commenced formal consultation with employee representatives regarding its plans in France to restructure the business as part of the Group's transformation plan. This is expected to result in an exceptional cost of around £35m.
This information is provided by RNSThe company news service from the London Stock ExchangeENDFR URSWRWNAOUAR
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