REG - Kingfisher PLC - Final Results (Part 2 of 2)
22/03/2022 07:16
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RNS Number : 5185F Kingfisher PLC 22 March 2022
Consolidated income statement
Year ended 31 January 2022
2021/22 2020/21 re-presented (note 2)
Before adjusting items Adjusting items Before adjusting items Adjusting items
(note 4) (note 4)
£ millions Notes Total Total
Sales 3 13,183 - 13,183 12,343 - 12,343
Cost of sales (8,248) - (8,248) (7,770) - (7,770)
Gross profit 4,935 - 4,935 4,573 - 4,573
Selling and distribution expenses (3,041) 42 (2,999) (2,843) 12 (2,831)
Administrative expenses (836) 13 (823) (809) (6) (815)
Other income 23 3 26 19 13 32
Other expenses - - - - (49) (49)
Share of post-tax results 5 - 5 6 - 6
of joint ventures and associates
Operating profit 3 1,086 58 1,144 946 (30) 916
Finance costs (148) - (148) (180) - (180)
Finance income 11 - 11 20 - 20
Net finance costs 5 (137) - (137) (160) - (160)
Profit before taxation 949 58 1,007 786 (30) 756
Income tax expense 6 (212) 48 (164) (182) 18 (164)
Profit for the year 737 106 843 604 (12) 592
Earnings per share 8
Basic 40.3p 28.1p
Diluted 39.8p 27.9p
Adjusted basic 35.2p 28.7p
Adjusted diluted 34.8p 28.5p
The proposed dividend for the year ended 31 January 2022, subject to approval
by shareholders at the Annual General Meeting, is 12.40p per share, comprising
an interim dividend of 3.80p in respect of the six months ended 31 July 2021
and a final dividend of 8.60p.
The Group no longer uses the term 'exceptional adjusting items' within its
Alternative Performance Measure definitions, with the term 'adjusting items'
now judged to be more appropriate. As a result, the previous columnar
presentation in the consolidated income statement has been revised to include
all 'adjusting items', including prior year tax items. Refer to note 2
Consolidated statement of comprehensive income
Year ended 31 January 2022
Notes 2021/22 2020/21
£ millions
Profit for the year 843 592
Remeasurements of post-employment benefits 10 21 68
Inventory cash flow hedges - fair value gains/(losses) 59 (48)
Tax on items that will not be reclassified (18) (13)
Total items that will not be reclassified subsequently to profit or loss 62 7
Currency translation differences
Group (218) 112
Joint ventures and associates (7) (2)
Transferred to income statement - 49
Other cash flow hedges
Fair value gains 1 5
Gains transferred to income statement (1) (5)
Total items that may be reclassified subsequently to profit or loss (225) 159
Other comprehensive (loss)/income for the year (163) 166
Total comprehensive income for the year 680 758
Consolidated statement of changes in equity
Year ended 31 January 2022
2021/22
Share capital Own shares held Other reserves Total
£ millions Notes Share Retained earnings Capital redemption reserve equity
premium
At 1 February 2021 332 2,228 (23) 3,630 43 361 6,571
Profit for the year - - - 843 - - 843
Other comprehensive income/(loss) for the year - - - 16 - (179) (163)
Total comprehensive income/(loss) for the year - - - 859 - (179) 680
Inventory cash flow hedges - losses transferred to inventories - - - - - 16 16
Share-based compensation - - - 27 - - 27
New shares issued under share schemes - - - 5 - - 5
Own shares issued under share schemes - - 15 (15) - - -
Purchase of own shares for cancellation (7) - - (226) 7 - (226)
Purchase of own shares for ESOP trust - - (38) - - - (38)
Dividends 9 - - - (254) - - (254)
Tax on equity items - - - (1) - (2) (3)
At 31 January 2022 325 2,228 (46) 4,025 50 196 6,778
2020/21
Share capital Own shares held Other reserves Total
£ millions Share Retained earnings Capital redemption reserve equity
premium
At 1 February 2020 332 2,228 (23) 2,994 43 228 5,802
Profit for the year - - - 592 - - 592
Other comprehensive income for the year - - - 44 - 122 166
Total comprehensive income for the year - - - 636 - 122 758
Inventory cash flow hedges - losses transferred to inventories - - - - - 13 13
Share-based compensation - - - 14 - - 14
New shares issued under share schemes - - - 1 - - 1
Own shares issued under share schemes - - 14 (14) - - -
Purchase of own shares for ESOP trust - - (14) - - - (14)
Tax on equity items - - - (1) - (2) (3)
At 31 January 2021 332 2,228 (23) 3,630 43 361 6,571
Consolidated balance sheet
At 31 January 2022
£ millions Notes 2021/22 2020/21
Non-current assets
Goodwill 2,424 2,427
Other intangible assets 330 320
Property, plant and equipment 3,078 3,075
Investment property 33 20
Right-of-use assets 1,885 1,845
Investments in joint ventures and associates 17 20
Post-employment benefits 10 540 504
Deferred tax assets 10 15
Other tax authority asset 64 57
Derivative assets 1 -
Other receivables 22 29
8,404 8,312
Current assets
Inventories 2,749 2,488
Trade and other receivables 300 290
Derivative assets 37 5
Current tax assets 33 20
Cash and cash equivalents 823 1,142
Assets held for sale 6 12
3,948 3,957
Total assets 12,352 12,269
Current liabilities
Trade and other payables (2,674) (2,520)
Borrowings (14) (101)
Lease liabilities (347) (330)
Derivative liabilities (12) (59)
Current tax liabilities (46) (70)
Other tax authority liability - (57)
Provisions (23) (46)
(3,116) (3,183)
Non-current liabilities
Other payables (10) (11)
Borrowings (2) (2)
Lease liabilities (2,029) (2,091)
Derivative liabilities (1) (1)
Deferred tax liabilities (276) (232)
Provisions (10) (33)
Post-employment benefits 10 (130) (145)
(2,458) (2,515)
Total liabilities (5,574) (5,698)
Net assets 6,778 6,571
Equity
Share capital 325 332
Share premium 2,228 2,228
Own shares held in ESOP trust (46) (23)
Retained earnings 4,025 3,630
Capital redemption reserve 50 43
Other reserves 196 361
Total equity 6,778 6,571
The financial statements were approved by the Board of Directors on
21 March 2022 and signed on its behalf by:
Thierry Garnier
Bernard Bot
Chief Executive Officer
Chief Financial Officer
Consolidated cash flow statement
Year ended 31 January 2022
£ millions Notes 2021/22 2020/21
Operating activities
Cash generated by operations 11 1,411 1,816
Income tax paid (169) (166)
Other tax authority payments (64) -
Net cash flows from operating activities 1,178 1,650
Investing activities
Purchase of property, plant and equipment and intangible assets (397) (281)
Disposal of property, plant and equipment, investment property, assets held 9 48
for sale and intangible assets
Purchase of businesses, net of cash acquired - (8)
Disposal of businesses, net of cash disposed 7 27
Interest received 2 4
Interest element of lease rental receipts 1 2
Principal element of lease rental receipts 3 3
Advance payments on right-of-use assets (11) (2)
Dividends received from joint ventures and associates 1 -
Net cash flows used in investing activities (385) (207)
Financing activities
Interest paid (22) (26)
Interest element of lease rental payments (135) (153)
Principal element of lease rental payments (341) (309)
Repayment of bank loans (2) (1)
Issue of fixed term debt - 1,950
Repayment of fixed term debt (95) (2,011)
Receipt on financing derivatives - 1
New shares issued under share schemes 5 1
Purchase of own shares for ESOP trust (29) (14)
Purchase of own shares for cancellation (157) -
Ordinary dividends paid to equity shareholders of the Company 9 (254) -
Net cash flows used in financing activities (1,030) (562)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts (237) 881
Cash and cash equivalents and bank overdrafts at beginning of year 1,136 195
Exchange differences (90) 60
Cash and cash equivalents and bank overdrafts at end of year 12 809 1,136
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 and Wales, 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 year ended 31 January 2022 ('the year' or '2021/22'). The comparative
financial year is the year ended 31 January 2021 ('the prior year' or
'2020/21').
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 2022, but are derived from those
statements. Statutory financial statements for 2020/21 have been filed with
the Registrar of Companies and those for 2021/22 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 2021/22
statutory financial statements, which have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards (IFRS
Standards) as issued by the IASB. 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.
Going concern
Based on the Group's liquidity position and cash flow projections, including a
forward-looking remote scenario, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future and they continue to adopt
the going concern basis of accounting in preparing the condensed consolidated
financial statements for the year ended 31 January 2022.
The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review in part 1 of this
announcement. The Directors have considered these areas alongside the
principal risks and how they may impact going concern. Further details,
including the analysis performed and conclusions reached, are set out below.
The new financial year has started positively, reflecting continued strong
demand across all our banners (Q1 2022/23 LFL sales (to 19 March 2022) are
down by 8.1%%, reflecting very strong comparatives in the prior year, however
the corresponding 2-year LFL is up 16.0%). While the exceptional demand we
have seen since early May 2020 has moderated, the COVID crisis has established
longer-term trends that are clearly supportive for our industry - including
the renewed importance of the home, more working from home and the development
of a new generation of DIY'ers. We expect these broad trends to endure.
As of 31 January 2022, Kingfisher had access to over £1.3bn of liquidity
comprising cash and cash equivalents (net of bank overdrafts) of over £800m
and access to undrawn Revolving Credit Facilities (RCFs) of £550m (expiring
at the end of May 2024). The ratio of net debt to EBITDA on an IFRS 16 basis
was 1.0 as of 31 January 2022.
Considering whether the Group's financial statements can be prepared on a
going concern basis, the Directors have reviewed the Group's business
activities together with factors likely to affect its performance, financial
position and access to liquidity (including consideration of financial
covenants and credit ratings).
While trading continues to be strong, in forming their outlook on the future
financial performance, the Directors considered the normalisation of store
traffic and average spend, the risk of higher business volatility and the
potential negative impact of the general economic environment on household and
trade spend.
The Directors' review also included a remote scenario to assess the impact of
more restrictive containment measures than those experienced during the
pandemic to date in the event of a more severe wave of resurgence of the COVID
pandemic. The remote scenario considers the impact of a significant drop in
sales over a period of six months followed by a period of recovery lasting two
months before trading resumes to the expected forecast. The total loss of
sales in this scenario is c.£2.1bn against budgeted sales (23% of total sales
over the impacted period). The scenario assumes the impact of lost sales is
partially offset by a limited set of mitigating actions on variable and
discretionary costs, capital expenditure and the suspension of dividend
payments. The scenario also assumes the £300m share buyback programme
announced in September 2021 is completed in full. Even under this remote
scenario the Group retains significant headroom on its credit facilities with
only a limited drawing on the RCF required for a few months.
Given current trading and expectations for the business, the Directors believe
that this scenario reflects a remote outcome for the Group. Should the impact
of the pandemic be more prolonged or severe than currently forecast by the
Directors under this remote scenario, the Group would need to implement
additional operational or financial measures.
Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 January 2021, as described in note
2 of those financial statements, except where set out below.
Costs related to the configuration and customisation in cloud computing
arrangements, where they do not give the Group power to control the future
economic benefits and to restrict access of others to those benefits, are not
capitalised as they do not meet the definition of intangible benefits under
IAS 38. Such costs are expensed as incurred. Configuration and customisation
in cloud computing arrangements are only capitalised where a separate asset is
created and capitalisable under IAS 38.
Shares purchased for cancellation are deducted from retained earnings. The
Group uses irrevocable closed period buyback programmes. A liability to
purchase shares is recognised at inception of the programme with any
subsequent reduction in the obligation credited back to retained earnings at
the end of the programme. Share capital is reduced and credited to the capital
redemption reserve, maintaining non-distributable reserves.
Critical accounting judgements and key sources of estimation uncertainty
The critical accounting judgements and key sources of estimation uncertainty
are consistent with those of the annual financial statements for the year
ended 31 January 2021, as described in note 3 of those financial statements.
New and amended accounting standards
New standards, amendments and interpretations are in issue and effective for
the Group's financial year ended 31 January 2022, but they do not have a
material impact on the consolidated financial statements.
Principal rates of exchange against Sterling
2021/22 2020/21
Average rate Year end rate Average rate Year end rate
Euro 1.17 1.20 1.12 1.13
US Dollar 1.38 1.34 1.29 1.37
Polish Zloty 5.34 5.49 5.00 5.11
Romanian Leu 5.76 5.92 5.43 5.50
Russian Rouble n/a n/a 92.43* 103.99
* The Group completed the sale of Castorama Russia on 30 September 2020. The
2020/21 Russian Rouble YTD average rate relates to the period to 30 September
2020 (i.e. to the date of disposal).
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, adjusted pre-tax profit, adjusted effective tax rate, 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 debt, are used by Kingfisher
for internal performance analysis and incentive compensation arrangements for
employees. The terms 'retail profit', 'adjusting items', 'adjusted', 'adjusted
effective tax rate', 'net cashflow' and 'net debt' 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 and
adjusting items. Central costs principally comprise the costs of the Group's
head office before adjusting items.
Adjusting items, which are presented separately within their relevant income
statement category, include items which by virtue of their size and/or nature,
do not reflect the Group's ongoing trading performance. Adjusting items may
include, but are not limited to:
· non-trading items included in operating profit such as profits
and losses on the disposal, closure, exit or impairment of subsidiaries, joint
ventures, associates and investments which do not form part of the Group's
ongoing trading activities;
· the costs of significant restructuring and incremental
acquisition integration costs;
· profits and losses on the disposal/exit of properties,
impairments of goodwill and significant impairments (or impairment reversals)
of other non-current assets;
· prior year tax items (including the impact of changes in tax
rates on deferred tax), significant one-off tax settlements and provision
charges/releases and the tax effects of other adjusting items;
· financing fair value remeasurements i.e. 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 (or non-designated) hedge relationships. Financing
derivatives are those that relate to hedged items of a financing nature.
The term 'adjusted' refers to the relevant measure being reported for
continuing operations excluding adjusting items.
The adjusted effective tax rate is calculated as continuing income tax expense
excluding prior year tax items (including the impact of changes in tax rates
on deferred tax), significant one-off tax settlements and provision
charges/releases and the tax effects of other adjusting items, divided by
continuing profit before taxation excluding adjusting items. Prior year tax
items represent income statement tax relating to underlying items originally
arising in prior years, including the impact of changes in tax rates on
deferred tax. 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 debt comprises lease liabilities, borrowings and financing derivatives
(excluding accrued interest) less cash and cash equivalents and short-term
deposits, including such balances classified as held for sale.
Re-presentation of income statement
The Group no longer uses the term 'exceptional adjusting items' within its
Alternative Performance Measure definitions, with the term 'adjusting items'
now judged to be more appropriate given the potential for certain items
previously classified as 'exceptional adjusting items' to be recurring in
nature. This removes the previous distinction between 'exceptional adjusting
items' and other adjusting items (i.e. prior year tax items and financing fair
value remeasurements) from the Group's Alternative Performance Measures and
simplifies the Group's reporting of such items. As a result, the consolidated
income statement comparatives for the year ended 31 January 2021, which
previously included separate presentation of 'exceptional adjusting items',
have been re-presented to include all 'adjusting items' (as defined above)
separately in the columnar presentation. The effect of this change is the
inclusion within the 'Adjusting items' column of those prior year tax items
that were not previously classified as 'exceptional adjusting items' (2021/22:
£59m credit, 2020/21: £21m credit). Financing fair value remeasurements are
£nil in the current and prior year. This represents a change in terminology
and presentation only, with no impact on adjusted or statutory performance
measures. Refer to note 4.
Refer to the Financial Review for definitions of all of the Group's
Alternative Performance Measures, including further information on why they
are used and details of where reconciliations to statutory measures can be
found where applicable.
3 Segmental analysis
Income statement
2021/22
UK & Ireland France Poland Other Other International Total
Sales 6,505 4,498 1,525 655 2,180 13,183
Retail profit/(loss) 794 221 135 (2) 133 1,148
Central costs (60)
Share of interest and tax of joint ventures and associates (2)
Adjusting items 58
Operating profit 1,144
Net finance costs (137)
Profit before taxation 1,007
2020/21
UK & Ireland France Poland Other Other International Total
Sales 5,743 4,309 1,550 741 2,291 12,343
Retail profit/(loss) 681 181 146 (5) 141 1,003
Central costs (54)
Share of interest and tax of joint ventures and associates (3)
Adjusting items (30)
Operating profit 916
Net finance costs (160)
Profit before taxation 756
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
reportable business segment, being the supply of home improvement products and
services. The majority of the sales in each geographical area are derived from
in-store and online sales of products.
The 'Other International' segment consists of Poland, Iberia, Romania, the
joint venture Koçtaş in Turkey, NeedHelp, Screwfix International, results
from franchise agreements and, in the prior year, Russia. Poland has been
shown separately due to its significance.
Central costs principally comprise the costs of the Group's head office before
adjusting items.
4 Adjusting items
2021/22 2020/21
£ millions
Included within selling and distribution expenses
Net store asset impairment reversals 33 42
Release of France and other restructuring provisions 9 -
Impairments of Russia assets and other exit costs - (27)
IT asset write-downs and related costs - (3)
42 12
Included within administrative expenses
Release of France uncertain operating tax position 9 -
Commercial operating model restructuring 4 (16)
Release of B&Q China disposal warranty liability - 10
13 (6)
Included within other income/(expenses) 3 13
Profit on exit of properties
Loss on disposal of Castorama Russia - (49)
3 (36)
Adjusting items before tax 58 (30)
Prior year and other adjusting tax items 48 18
Adjusting items 106 (12)
Revised future store performance projections, reflecting continued strong
trading and benefits arising from the Group's 'Powered by Kingfisher'
strategy, have resulted in net store asset impairment reversals of £33m.
These predominately comprised reversals of adjusting impairment charges
recorded in 2019/20.
Current year adjusting items include a £9m credit principally arising due to
savings on costs relating to legacy store closure programmes in France as
compared with the original restructuring provisions recognised as adjusting
items.
A £9m liability that was held in relation to an uncertain operating tax
position in France has been released in the year. This formed part of a
liability of £26m that had been recorded as an adjusting item in 2019/20.
In the prior year, the Group commenced formal consultation with employee
representatives regarding its proposal to implement a new commercial operating
model. A credit of £4m has been recognised in the current year due to cost
savings as compared with the original restructuring provisions recognised as
adjusting items.
A profit of £3m has been recorded on the exit of two properties in the UK and
one property in France.
Prior year and other adjusting tax items of £48m relate principally to the
impact of the enacted future increase in the UK tax rate on deferred tax
balances and a release of prior year provisions for uncertain tax positions,
which reflect a reassessment of expected outcomes, agreed positions with tax
authorities and items that have time-expired. Of this amount, a £26m credit
is included within current tax and a £22m credit is included within deferred
tax respectively. Refer to note 6.
5 Net finance costs
£ millions 2021/22 2020/21
Bank overdrafts, bank loans and derivatives (7) (13)
Fixed term debt (3) (14)
Lease liabilities (135) (153)
Capitalised interest - 2
Other interest payable (3) (2)
Finance costs (148) (180)
Cash and cash equivalents and short-term deposits 2 3
Net interest income on defined benefit pension schemes 8 6
Finance lease income 1 2
Release of liability for interest on uncertain tax positions - 9
Finance income 11 20
Net finance costs (137) (160)
6 Income tax expense
£ millions 2021/22 2020/21
UK corporation tax
Current tax on profits for the year (80) (102)
Adjustments in respect of prior years 2 10
(78) (92)
Overseas tax
Current tax on profits for the year (87) (61)
Adjustments in respect of prior years 31 5
(56) (56)
Current tax (134) (148)
Deferred tax
Current year (56) (26)
Adjustments in respect of prior years 1 2
Adjustments in respect of changes in tax rates 25 8
Deferred tax (30) (16)
Income tax expense (164) (164)
The adjusted effective tax rate on profit before adjusting items
is 22% (2020/21: 23%).
The UK Budget on 3 March 2021 announced the intention to increase the tax rate
from the current rate of 19% to 25%, with effect from April 2023. The change
was substantively enacted in May 2021, with the effect of reducing the net
deferred tax liability as reported at the year end by £25m. This reflects an
increase in net deferred tax assets that would be expected to reverse in the
future at the new rate, with net deferred tax liabilities not impacted by this
future change in rate.
7 Government grants
In the prior year, the Group announced furlough programmes to some of our
colleagues in the UK, Republic of Ireland, France, Poland, Spain and Romania,
such as the Coronavirus Job Retention Scheme (CJRS) in the UK and 'activité
partielle' relief measures in France. Approximately 50% of the Group's
colleagues were furloughed in April 2020, reducing to c.10% by the end of May
2020 as stores within the UK and France were reopened. With the exception of
those who were vulnerable and/or at a higher risk of infection, all furloughed
colleagues returned by 1 July 2020.
In addition, the UK government announced in March 2020 that retail premises in
England would be granted relief from paying business rates in the 2020/21 tax
year, effective from April 2020. Similar measures (a combination of payment
deferrals and relief) were announced by the local governments and assemblies
of Scotland, Wales and Northern Ireland, as well as the Republic of Ireland.
In Q4 2020/21, the Group repaid £25m received in the first half of that year
under the UK and Republic of Ireland furlough programmes and decided to repay
and forego all UK and Republic of Ireland business rates relief for the entire
2020/21 tax year. Kingfisher's total business rates bill eligible for relief
in 2020/21 was £105m.
Participation in government support schemes lowered the operating costs of the
Group by £45m for the year ended 31 January 2021.
Government grants for the year ended 31 January 2022 lowered the operating
costs of the Group by £6m, principally relating to Poland, where national
lockdown restrictions resulted in the temporary closure of all stores between
27 March and 3 May 2021.
8 Earnings per share
Pence 2021/22
2020/21
Basic earnings per share 40.3 28.1
Effect of dilutive share options (0.5) (0.2)
Diluted earnings per share 39.8 27.9
Basic earnings per share 40.3 28.1
Adjusting items before tax (2.8) 1.4
Prior year and other adjusting tax items (2.3) (0.8)
Adjusted basic earnings per share 35.2 28.7
Diluted earnings per share 39.8 27.9
Adjusting items before tax (2.7) 1.4
Prior year and other adjusting tax items (2.3) (0.8)
Adjusted diluted earnings per share 34.8 28.5
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 trust') 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.
The calculation of basic and diluted earnings per share is based on the profit
for the period attributable to equity shareholders of the Company. A
reconciliation of statutory earnings to adjusted earnings is set out below:
£ millions 2021/22 2020/21
Earnings 843 592
Adjusting items before tax (58) 30
Prior year and other adjusting tax items (48) (18)
Adjusted earnings 737 604
The weighted average number of shares in issue during the period, excluding
those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is set
out below:
Weighted average number of shares (millions) 2021/22 2020/21
Basic 2,092 2,105
Diluted 2,116 2,119
9 Dividends
£ millions 2021/22 2020/21
Dividends paid to equity shareholders of the Company
Ordinary interim dividend for the year ended 31 January 2021 of 2.75p per 58 -
share
Ordinary final dividend for the year ended 31 January 2021 of 5.50p per share 116 -
Ordinary interim dividend for the year ended 31 January 2022 of 3.80p per 80 -
share
254 -
The proposed dividend for the year ended 31 January 2022, subject to approval
by shareholders at the Annual General Meeting, is 12.40p per share, comprising
an interim dividend of 3.80p in respect of the six months ended 31 July 2021
and a final dividend of 8.60p.
10 Post-employment benefits
2021/22 2020/21
£ millions UK Overseas Total UK Overseas Total
Net surplus/(deficit) in schemes 504 (145) 359 404 (127) 277
at beginning of year
Current service cost (3) (11) (14) (2) (7) (9)
Past service cost - - - (1) - (1)
Administration costs (3) - (3) (3) - (3)
Net interest income/(expense) 8 - 8 7 (1) 6
Net remeasurement gains/(losses) 7 14 21 73 (5) 68
Contributions paid by employer 27 3 30 26 3 29
Exchange differences - 9 9 - (8) (8)
Net surplus/(deficit) in schemes at end of year 540 (130) 410 504 (145) 359
Present value of defined benefit obligations (2,934) (150) (3,084) (3,092) (165) (3,257)
Fair value of scheme assets 3,474 20 3,494 3,596 20 3,616
Net surplus/(deficit) in schemes 540 (130) 410 504 (145) 359
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.
During the year the UK scheme purchased an annuity for £902m from a major
insurance company. This targeted certain pensioner liabilities, removing the
longevity risk associated with these members. Measured against the long-term
funding objective that has been agreed between Kingfisher and the Trustee, the
transaction generated a funding improvement as well as a significant reduction
in funding risk. As the cost of the annuity of £902m was greater than the IAS
19 accounting value of the corresponding liabilities, an asset remeasurement
loss of £87m has been recorded in other comprehensive income.
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 2021/22 2020/21
Discount rate 2.2 1.5
Price inflation 3.5 2.9
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 2021/22 2020/21
Age to which current pensioners are expected to live (60 now)
- Male 86.4 86.5
- Female 87.3 87.3
Age to which future pensioners are expected to live (60 in 15 years' time)
- Male 87.5 87.6
- Female 90.2 90.2
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 £309m
Price inflation Increase/decrease by 0.5% Increase/decrease by £246m
Mortality Increase/decrease in life expectancy by one year Increase/decrease by £109m
11 Cash generated by operations
£ millions 2021/22 2020/21
Operating profit 1,144 916
Share of post-tax results of joint ventures and associates (5) (6)
Depreciation and amortisation 555 536
Net impairment gains (31) (7)
Loss/(gain) on disposal of property, plant and equipment, investment property, 1 (10)
assets held for sale and intangible assets
Loss on disposal of subsidiaries - 49
Lease gains (1) -
Share-based compensation charge 27 14
(Increase)/decrease in inventories (359) 86
(Increase)/decrease in trade and other receivables (23) 17
Increase in trade and other payables 158 267
Movement in provisions (42) (30)
Movement in post-employment benefits (13) (16)
Cash generated by operations 1,411 1,816
12 Net debt
£ millions 2021/22 2020/21
Cash and cash equivalents 823 1,142
Bank overdrafts (14) (6)
Cash and cash equivalents and bank overdrafts 809 1,136
Bank loans (2) (4)
Fixed term debt - (93)
Net financing derivatives (3) (12)
Lease liabilities (2,376) (2,421)
Net debt (1,572) (1,394)
£ millions 2021/22 2020/21
Net debt at beginning of year (1,394) (2,526)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts (237) 881
Repayment of bank loans 2 1
Issue of fixed term debt - (1,950)
Repayment of fixed term debt 95 2,011
Receipt on financing derivatives - (1)
Net cash flow (140) 942
Movements in lease liabilities (excluding lease liabilities disposed) 7 136
Lease liabilities disposed - 27
Exchange differences and other non-cash movements (45) 27
Net debt at end of year (1,572) (1,394)
The Group repaid its €50m and £50m fixed term loans at maturity in
September 2021 and December 2021 respectively.
During the prior year the Group repaid a €50m Medium Term Note at its
maturity and drew down on and repaid in full the following funds:
· £600m of commercial paper under the Bank of England's Covid
Corporate Financing Facility;
· €600m term facility with three French banks guaranteed at 80%
by the French State (Prêt garanti par l'État);
· £775m of the Group's revolving credit facilities; and
· €50m of temporary borrowing.
13 Contingent liabilities
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.
In October 2017, the European Commission opened a state aid investigation into
the Group Financing Exemption section of the UK controlled foreign company
rules. While the Group has complied with the requirements of UK tax law in
force at the time, in April 2019 the European Commission concluded that
aspects of the UK controlled foreign company regime partially constitute state
aid. The UK Government and the Group, along with other UK-based international
companies, have appealed the European Commission decision to the European
Courts.
Notwithstanding these appeals, under EU law, the UK government is required to
commence collection proceedings. In January 2021, the Group received a
charging notice from HM Revenue & Customs (HMRC) for £57m, which was paid
in February 2021, with a further £7m interest paid in April 2021.
The final impact on the Group remains uncertain but based upon advice taken,
the Group considers that the amount paid of £64m, which is included in
non-current assets, will ultimately be recovered.
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 outcome of these contingent
liabilities to have a material effect on the Group's financial position.
14 Post balance sheet events
During the period since the balance sheet date, the Group purchased 22 million
of the Company's own shares for cancellation at a cost of £69m. This amount
was deducted from equity in 2021/22 as a result of an irrevocable closed
season buyback agreement which was in place at 31 January 2022.
In February 2022, a payment of €40m was made to the French tax authorities
relating to a historic tax liability. This amount was fully provided for at
the balance sheet date.
In light of the events in Russia and Ukraine, note that the Group has no
material balance sheet exposures to Russia and/or the Russian Rouble following
the disposal of the Castorama Russia business in September 2020.
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