For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230321:nRSU5876Ta&default-theme=true
RNS Number : 5876T Kingfisher PLC 21 March 2023
Consolidated income statement
Year ended 31 January 2023
2022/23 2021/22
Before adjusting items Adjusting items Before adjusting items Adjusting items
(note 4) (note 4)
£ millions Notes Total Total
Sales 3 13,059 - 13,059 13,183 - 13,183
Cost of sales (8,264) - (8,264) (8,248) - (8,248)
Gross profit 4,795 - 4,795 4,935 - 4,935
Selling and distribution expenses (3,087) (136) (3,223) (3,041) 42 (2,999)
Administrative expenses (868) (12) (880) (836) 13 (823)
Other income 25 1 26 23 3 26
Share of post-tax results 5 - 5 5 - 5
of joint ventures and associates
Operating profit 3 870 (147) 723 1,086 58 1,144
Finance costs (129) - (129) (148) - (148)
Finance income 17 - 17 11 - 11
Net finance costs 5 (112) - (112) (137) - (137)
Profit before taxation 758 (147) 611 949 58 1,007
Income tax expense 6 (169) 29 (140) (212) 48 (164)
Profit for the year 589 (118) 471 737 106 843
Earnings per share 7
Basic 23.8p 40.3p
Diluted 23.5p 39.8p
Adjusted basic 29.7p 35.2p
Adjusted diluted 29.4p 34.8p
The proposed dividend for the year ended 31 January 2023, 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 2022
and a final dividend of 8.60p.
Consolidated statement of comprehensive income
Year ended 31 January 2023
Notes 2022/23 2021/22
£ millions
Profit for the year 471 843
Remeasurements of post-employment benefits 9 (278) 21
Inventory cash flow hedges - fair value gains 58 59
Tax on items that will not be reclassified 85 (18)
Total items that will not be reclassified subsequently to profit or loss (135) 62
Currency translation differences
Group 129 (218)
Joint ventures and associates 11 (7)
Inventory cash flow hedges - gains transferred to income statement (5) -
Other cash flow hedges
Fair value gains - 1
Gains transferred to income statement - (1)
Total items that may be reclassified subsequently to profit or loss 135 (225)
Other comprehensive loss for the year - (163)
Total comprehensive income for the year 471 680
Consolidated statement of changes in equity
Year ended 31 January 2023
2022/23
Share capital Own shares held Other reserves Total
£ millions Notes Share Retained earnings Capital redemption reserve equity
premium
At 1 February 2022 325 2,228 (46) 4,025 50 196 6,778
Profit for the year - - - 471 - - 471
Other comprehensive (loss)/income for the year - - - (181) - 181 -
Total comprehensive income for the year - - - 290 - 181 471
Inventory cash flow hedges - gains transferred to inventories - - - - - (117) (117)
Share-based compensation - - - 19 - - 19
New shares issued under share schemes 1 - - 7 - - 8
Own shares issued under share schemes - - 24 (24) - - -
Purchase of own shares for cancellation (21) - - (275) 21 - (275)
Dividends 8 - - - (246) - - (246)
Tax on equity items - - - - - 25 25
At 31 January 2023 305 2,228 (22) 3,796 71 285 6,663
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 8 - - - (254) - - (254)
Tax on equity items - - - (1) - (2) (3)
At 31 January 2022 325 2,228 (46) 4,025 50 196 6,778
Consolidated balance sheet
At 31 January 2023
£ millions Notes 2022/23 2021/22
Non-current assets
Goodwill 2,408 2,424
Other intangible assets 371 330
Property, plant and equipment 3,205 3,078
Investment property 30 33
Right-of-use assets 1,947 1,885
Investments in joint ventures and associates 30 17
Post-employment benefits 9 251 540
Deferred tax assets 16 10
Other tax authority asset 64 64
Derivative assets - 1
Other receivables 19 22
8,341 8,404
Current assets
Inventories 3,070 2,749
Trade and other receivables 347 300
Derivative assets 16 37
Current tax assets 40 33
Cash and cash equivalents 286 823
Assets held for sale 3 6
3,762 3,948
Total assets 12,103 12,352
Current liabilities
Trade and other payables (2,483) (2,674)
Borrowings (16) (14)
Lease liabilities (343) (347)
Derivative liabilities (47) (12)
Current tax liabilities - (46)
Provisions (10) (23)
(2,899) (3,116)
Non-current liabilities
Other payables (4) (10)
Borrowings (102) (2)
Lease liabilities (2,101) (2,029)
Derivative liabilities (5) (1)
Deferred tax liabilities (205) (276)
Provisions (10) (10)
Post-employment benefits 9 (114) (130)
(2,541) (2,458)
Total liabilities (5,440) (5,574)
Net assets 6,663 6,778
Equity
Share capital 305 325
Share premium 2,228 2,228
Own shares held in ESOP trust (22) (46)
Retained earnings 3,796 4,025
Capital redemption reserve 71 50
Other reserves 285 196
Total equity 6,663 6,778
The financial statements were approved by the Board of Directors on 20 March
2023 and signed on its behalf by:
Thierry Garnier
Bernard Bot
Chief Executive Officer
Chief Financial Officer
Consolidated cash flow statement
Year ended 31 January 2023
£ millions Notes 2022/23 2021/22
Operating activities
Cash generated by operations 10 984 1,411
Income tax paid (130) (169)
French tax authority payments (34) -
Other tax authority payments - (64)
Net cash flows from operating activities 820 1,178
Investing activities
Purchase of property, plant and equipment and intangible assets (449) (397)
Disposal of property, plant and equipment, intangible assets and assets held 2 9
for sale
Disposal of businesses, net of cash disposed 8 7
Interest received 5 2
Interest element of lease rental receipts 1 1
Principal element of lease rental receipts 3 3
Advance payments on right-of-use assets (7) (11)
Advance receipts on right-of-use assets 2 -
Dividends received from joint ventures and associates 3 1
Net cash flows used in investing activities (432) (385)
Financing activities
Interest paid (5) (22)
Interest element of lease rental payments (124) (135)
Principal element of lease rental payments (329) (341)
Repayment of bank loans - (2)
Issue of fixed term debt 99 -
Repayment of fixed term debt - (95)
New shares issued under share schemes 8 5
Purchase of own shares for cancellation (337) (157)
Purchase of own shares for ESOP trust (9) (29)
Ordinary dividends paid to equity shareholders of the Company 8 (246) (254)
Net cash flows used in financing activities (943) (1,030)
Net decrease in cash and cash equivalents and bank overdrafts (555) (237)
Cash and cash equivalents and bank overdrafts at beginning of year 809 1,136
Exchange differences 16 (90)
Cash and cash equivalents and bank overdrafts at end of year 11 270 809
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
One Paddington Square, London, W2 1GG.
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 2023 ('the year' or '2022/23'). The comparative
financial year is the year ended 31 January 2022 ('the prior year' or
'2021/22').
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 2023, but are derived from those
statements. Statutory financial statements for 2021/22 have been filed with
the Registrar of Companies and those for 2022/23 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 2022/23
statutory financial statements, which have been prepared in accordance with
United Kingdom adopted international accounting standards and International
Financial Reporting Standards (IFRSs). The financial statements have also been
prepared in accordance with International Financial Reporting 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 downside 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 2023.
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 the going concern assessment. Further
details, including the analysis performed and conclusions reached, are set out
below.
The new financial year has started encouragingly, and despite the volatile
trading environment, underlying sales trends remain resilient across all our
banners (Q1 LFL sales (to 28 February 2023) +0.5%).
As of 31 January 2023, Kingfisher had access to over £800m of liquidity
comprising cash and cash equivalents (net of bank overdrafts) of £270m and
access to an to undrawn Revolving Credit Facility (RCF) of £550m (expiring at
the end of May 2025). The ratio of net debt to EBITDA on an IFRS 16 basis was
1.6 as of 31 January 2023.
In 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 resilient, in forming their outlook on the
future financial performance, the Directors considered 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 consideration of a remote scenario that
models the impact of a significant demand or supply shock preventing the Group
from realising a large part of its sales over the period of a month followed
by subdued demand for the remainder of the year. The total loss of sales in
this scenario is c.£2.2bn (16% 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 capital returns to shareholders. Even under this remote
scenario, which requires drawing on the RCF for a few months, the Group
retains headroom on its credit facilities.
Given current trading and expectations for the business, the Directors believe
that this scenario reflects a remote outcome for the Group. Should a more
extreme scenario occur than currently modelled 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 2022, as described in note
2 of those financial statements, except where set out below.
Following the International Monetary Fund's classification of Turkey as a
hyperinflationary economy during the year, the IASB prescribed the application
of IAS 29 - Financial reporting in hyper-inflationary economies for entities
with the currency of Turkey as their functional currency. IAS 29 requires
affected entities to state their financial statements in terms of the
purchasing power at the end of the reporting period. The Group's Turkish joint
venture, Koctas, has prepared its financial statements under IAS 29. Note, IAS
29 does not require the restatement of prior year comparative figures in the
consolidated financial statements. For 2022/23, the application of IAS 29 has
resulted in a £9m increase in the Group's investment in the joint venture, a
£4m charge to the consolidated income statement and a £13m credit to Other
Comprehensive Income.
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 2022, 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 2023, but they do not have a
material impact on the consolidated financial statements.
Principal rates of exchange against Sterling
2022/23 2021/22
Average rate Year end rate Average rate Year end rate
Euro 1.17 1.13 1.17 1.20
US Dollar 1.23 1.23 1.38 1.34
Polish Zloty 5.48 5.34 5.34 5.49
Romanian Leu 5.76 5.58 5.76 5.92
Turkish Lira* 23.18 23.18 12.92 18.06
* the FY 2022/23 Turkish Lira average exchange rate represents the closing
rate for the year, due to the application of hyperinflation accounting in
Turkey.
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.
3 Segmental analysis
Income statement
2022/23
UK & Ireland France Poland Other Other International Total
Sales 6,200 4,452 1,734 673 2,407 13,059
Retail profit/(loss) 603 195 148 (23) 125 923
Central costs (49)
Share of interest and tax of joint ventures and associates (4)
Adjusting items (147)
Operating profit 723
Net finance costs (112)
Profit before taxation 611
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
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 and results
from franchise agreements. 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
2022/23 2021/22
£ millions
Included within selling and distribution expenses
Net store asset impairment (losses)/reversals (139) 33
Release of France and other restructuring provisions 3 9
(136) 42
Included within administrative expenses
Romania goodwill impairment (16) -
Release of Castorama Russia disposal warranty liability 4 -
Release of France uncertain operating tax position - 9
Commercial operating model restructuring - 4
(12) 13
Included within other income 1 3
Profit on exit of properties
1 3
Adjusting items before tax (147) 58
Prior year and other adjusting tax items 29 48
Adjusting items (118) 106
In consideration of the significant increase in discount rates resulting from
high levels of inflation and wider macroeconomic uncertainty, the Group has
undertaken a full impairment review of its stores. The significant increase in
discount rates, combined with revised financial projections, has resulted in
the recognition of £139m of net store asset impairment charges in the year.
These have been recorded principally in the UK and France.
Current year adjusting items include a £3m credit 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.
An impairment charge of £16m has been recorded relating to the remaining
goodwill in Romania, principally driven by the significant increase in
discount rates and revised financial projections.
A £4m liability that was held in relation to warranties as part of the
Castorama Russia disposal in 2020 has been released in the year following the
expiry of the warranty claims period.
A profit of £1m has been recorded on the exit of one property in the UK.
Prior year and other adjusting tax items relate principally to deferred tax
credits recorded in respect of the impairments noted above 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.
5 Net finance costs
£ millions 2022/23 2021/22
Bank overdrafts, bank loans and derivatives (3) (7)
Fixed term debt (2) (3)
Lease liabilities (124) (135)
Other interest payable - (3)
Finance costs (129) (148)
Cash and cash equivalents and short-term deposits 5 2
Net interest income on defined benefit pension schemes 11 8
Finance lease income 1 1
Finance income 17 11
Net finance costs (112) (137)
6 Income tax expense
£ millions 2022/23 2021/22
UK corporation tax
Current tax on profits for the year (44) (80)
Adjustments in respect of prior years 3 2
(41) (78)
Overseas tax
Current tax on profits for the year (77) (87)
Adjustments in respect of prior years 4 31
(73) (56)
Current tax (114) (134)
Deferred tax
Current year (25) (56)
Adjustments in respect of prior years (3) 1
Adjustments in respect of changes in tax rates 2 25
Deferred tax (26) (30)
Income tax expense (140) (164)
The adjusted effective tax rate on profit before adjusting items is 22%
(2021/22: 22%). The adjusted effective tax rate calculation is set out in the
Financial Review in part 1 of this announcement.
During the year, a payment of €40m (£34m) was made to the French tax
authorities relating to a historic tax liability. This amount was fully
provided for at the prior year end.
7 Earnings per share
Pence 2022/23
2021/22
Basic earnings per share 23.8 40.3
Effect of dilutive share options per share (0.3) (0.5)
Diluted earnings per share 23.5 39.8
Basic earnings per share 23.8 40.3
Adjusting items before tax per share 7.4 (2.8)
Prior year and other adjusting tax items per share (1.5) (2.3)
Adjusted basic earnings per share 29.7 35.2
Diluted earnings per share 23.5 39.8
Adjusting items before tax per share 7.3 (2.7)
Prior year and other adjusting tax items per share (1.4) (2.3)
Adjusted diluted earnings per share 29.4 34.8
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 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 year attributable to equity shareholders of the Company. A
reconciliation of statutory earnings to adjusted earnings is set out below:
£ millions 2022/23 2021/22
Earnings 471 843
Adjusting items before tax 147 (58)
Prior year and other adjusting tax items (29) (48)
Adjusted earnings 589 737
The weighted average number of shares in issue during the year, excluding
those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is set
out below:
Weighted average number of shares (millions) 2022/23 2021/22
Basic 1,980 2,092
Diluted 2,002 2,116
8 Dividends
£ millions 2022/23 2021/22
Dividends paid to equity shareholders of the Company
Ordinary interim dividend for the year ended 31 January 2023 of 3.80p per 74 80
share
(year ended 31 January 2022: 3.80p per share)
Ordinary final dividend for the year ended 31 January 2022 of 8.60p per share 172 116
(year ended 31 January 2021: 5.50p per share)
Ordinary interim dividend for the year ended 31 January 2021 of 2.75p per - 58
share
246 254
The proposed dividend for the year ended 31 January 2023, 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 2022
and a final dividend of 8.60p.
9 Post-employment benefits
2022/23 2021/22
£ millions UK Overseas Total UK Overseas Total
Net surplus/(deficit) in schemes 540 (130) 410 504 (145) 359
at beginning of year
Current service cost (3) (10) (13) (3) (11) (14)
Administration costs (4) - (4) (3) - (3)
Net interest income/(expense) 12 (1) 11 8 - 8
Net remeasurement (losses)/gains (308) 30 (278) 7 14 21
Contributions paid by employer 14 4 18 27 3 30
Exchange differences - (7) (7) - 9 9
Net surplus/(deficit) in schemes at end of year 251 (114) 137 540 (130) 410
Present value of defined benefit obligations (1,979) (134) (2,113) (2,934) (150) (3,084)
Fair value of scheme assets 2,230 20 2,250 3,474 20 3,494
Net surplus/(deficit) in schemes 251 (114) 137 540 (130) 410
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 full actuarial valuation of the scheme is carried out every three years by
an independent actuary for the Trustee and the last full valuation was carried
out as at 31 March 2022. Following this valuation and in accordance with the
scheme's Statement of Funding Principles, the Trustee and Kingfisher have
agreed to cease annual employer contributions during the period from August
2022 to July 2025. This agreement has been reached with reference to a funding
objective that targets a longer-term, low risk funding position in excess of
the minimum statutory funding requirements. This longer-term objective is
based on the principle of the scheme reaching a point where it can provide
benefits to members with a high level of security, thereby limiting its
reliance on the employer for future support. The Company monitors the scheme
funding level on a regular basis and will reassess with the scheme Trustee the
appropriate level of contributions at future valuations.
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 2022/23 2021/22
Discount rate 4.50 2.20
Price inflation 3.25 3.50
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 2022/23 2021/22
Age to which current pensioners are expected to live (60 now)
- Male 86.2 86.4
- Female 88.7 87.3
Age to which future pensioners are expected to live (60 in 15 years' time)
- Male 87.5 87.5
- Female 90.8 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 1.0% Decrease/increase by £320m
Price inflation Increase/decrease by 0.5% Increase/decrease by £134m
Mortality Increase/decrease in life expectancy by one year Increase/decrease by £74m
10 Cash generated by operations
£ millions 2022/23 2021/22
Operating profit 723 1,144
Share of post-tax results of joint ventures and associates (5) (5)
Depreciation and amortisation 582 555
Net impairment losses/(reversals) 155 (31)
Loss on disposal of property, plant and equipment, investment property, assets - 1
held for sale and intangible assets
Lease gains (2) (1)
Share-based compensation charge 19 27
Increase in inventories (234) (359)
Increase in trade and other receivables (44) (23)
(Decrease)/increase in trade and other payables (196) 158
Movement in provisions (13) (42)
Movement in post-employment benefits (1) (13)
Cash generated by operations 984 1,411
11 Net debt
£ millions 2022/23 2021/22
Cash and cash equivalents 286 823
Bank overdrafts (16) (14)
Cash and cash equivalents and bank overdrafts 270 809
Bank loans (3) (2)
Fixed term debt (99) -
Net financing derivatives 2 (3)
Lease liabilities (2,444) (2,376)
Net debt (2,274) (1,572)
£ millions 2022/23 2021/22
Net debt at beginning of year (1,572) (1,394)
Net decrease in cash and cash equivalents and bank overdrafts (555) (237)
Repayment of bank loans - 2
Issue of fixed term debt (99) -
Repayment of fixed term debt - 95
Net cash flow (654) (140)
Movements in lease liabilities (41) 7
Exchange differences and other non-cash movements (7) (45)
Net debt at end of year (2,274) (1,572)
12 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
illegal state aid. In January 2021, the Group received a charging notice from
HM Revenue & Customs for £57m, which was paid in February 2021, with a
further £7m interest paid in April 2021.
The UK Government and the Group, along with other UK-based multinational
groups, appealed the European Commission decision to the European Courts. On 8
June 2022, the General Court of the European Union dismissed several of those
appeals, including the UK Government's. This decision has been appealed to the
European Court of Justice.
The final impact on the Group remains uncertain but, based upon advice taken,
the Group continues to consider 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.
13 Post balance sheet events
During the period since the balance sheet date, the Group purchased 1 million
of the Company's own shares for cancellation at a cost of £3m. This amount
was deducted from equity in 2022/23 as a result of an irrevocable buyback
agreement which was in place at 31 January 2023.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SEDFASEDSEDD