REG - Kingfisher PLC - Half-Year Results (Part 2 of 2) <Origin Href="QuoteRef">KGF.L</Origin> - Part 1

KingfisherAnnouncement

20/09/2017 07:08

RNS Number : 2164R
Kingfisher PLC
20 September 2017
Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT







Half year ended 31 July 2017

Half year ended 31 July 2016


Before
Exceptional


Before
Exceptional



exceptional
items


exceptional
items

 millions
Notes
items
(note 5)
Total

items
(note 5)
Total
Sales
4
6,008
-
6,008

5,749
-
5,749
Cost of sales

(3,798)
-
(3,798)

(3,623)
-
(3,623)
Gross profit

2,210
-
2,210

2,126
-
2,126
Selling and distribution expenses 

(1,439)
13
(1,426)

(1,386)
15
(1,371)
Administrative expenses

(390)
(5)
(395)

(326)
(1)
(327)
Other income

11
-
11

9
3
12
Share of post-tax results of joint ventures and associates
1
-
1

(1)
-
(1)
Operating profit 

393
8
401

422
17
439
Finance costs

(8)
-
(8)

(13)
(6)
(19)
Finance income

9
-
9

7
-
7
Net finance income/(costs)
6
1
-
1

(6)
(6)
(12)
Profit before taxation

394
8
402

416
11
427
Income tax expense
7
(106)
(1)
(107)

(104)
(2)
(106)
Profit for the period

288
7
295

312
9
321


















Earnings per share 
8







Basic



13.3p



14.1p
Diluted



13.3p



14.1p
Adjusted basic



13.0p



13.6p
Adjusted diluted



13.0p



13.6p
Underlying basic



14.5p



14.2p
Underlying diluted



14.5p



14.2p









Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
Underlying pre-tax profit



440



436
Transformation costs before exceptional items
(46)



(18)
Adjusted pre-tax profit



394



418
Financing fair value remeasurements
-



(2)
Exceptional items



8



11
Profit before taxation



402



427
The proposed interim ordinary dividend for the period ended 31 July 2017 is 3.33p per share.


Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT


Year ended 31 January 2017


Before
Exceptional



exceptional
items

 millions
Notes
items
(note 5)
Total
Sales
4
11,225
-
11,225
Cost of sales

(7,050)
-
(7,050)
Gross profit

4,175
-
4,175
Selling and distribution expenses 

(2,758)
21
(2,737)
Administrative expenses

(687)
(5)
(692)
Other income

19
7
26
Share of post-tax results of joint ventures and associates
1
-
1
Operating profit 

750
23
773
Finance costs

(21)
(6)
(27)
Finance income

13
-
13
Net finance costs
6
(8)
(6)
(14)
Profit before taxation

742
17
759
Income tax expense
7
(143)
(6)
(149)
Profit for the year

599
11
610





Earnings per share 
8



Basic



27.1p
Diluted



27.0p
Adjusted basic



24.4p
Adjusted diluted



24.3p
Underlying basic



25.9p
Underlying diluted



25.8p





Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
Underlying pre-tax profit



787
Transformation costs before exceptional items



(44)
Adjusted pre-tax profit



743
Financing fair value remeasurements



(1)
Exceptional items



17
Profit before taxation



759


Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 millions
Notes
Half year ended
31 July 2017
Half year ended
31 July 2016
Year ended
31 January 2017
Profit for the period

295
321
610
Actuarial losses on post-employment benefits
11
(21)
(87)
(50)
Tax on items that will not be reclassified

5
29
11
Total items that will not be reclassified
subsequently to profit or loss

(16)
(58)
(39)
Currency translation differences 




Group

137
304
390
Joint ventures and associates

1
2
(1)
Cash flow hedges




Fair value (losses)/gains

(37)
26
52
Gains transferred to inventories

(14)
(18)
(60)
Available-for-sale financial assets




Fair value gains

-
5
5
Transferred to income statement

-
(7)
(7)
Tax on items that may be reclassified

12
1
2
Total items that may be reclassified
subsequently to profit or loss

99
313
381
Other comprehensive income for the period

83
255
342
Total comprehensive income for the period

378
576
952


Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 millions
Share capital
Share
premium
Own shares held
Retained earnings
Other reserves (note 13)
Total equity
At 1 February 2017
352
2,221
(23)
3,837
384
6,771
Profit for the period
-
-
-
295
-
295
Other comprehensive income for the period
-
-
-
(16)
99
83
Total comprehensive income for the period
-
-
-
279
99
378
Share-based compensation
-
-
-
12
-
12
New shares issued under share schemes
-
2
-
-
-
2
Own shares issued under share schemes
-
-
4
(4)
-
-
Purchase of own shares for cancellation
(7)
-
-
(200)
7
(200)
Dividends (note 9)
-
-
-
(159)
-
(159)
At 31 July 2017
345
2,223
(19)
3,765
490
6,804







At 1 February 2016
361
2,218
(24)
3,637
(6)
6,186
Profit for the period
-
-
-
321
-
321
Other comprehensive income for the period
-
-
-
(58)
313
255
Total comprehensive income for the period
-
-
-
263
313
576
Share-based compensation
-
-
-
9
-
9
New shares issued under share schemes
-
1
-
-
-
1
Own shares issued under share schemes
-
-
6
(5)
-
1
Purchase of own shares for cancellation
(6)
-
-
(111)
6
(111)
Dividends (note 9)
-
-
-
(157)
-
(157)
At 31 July 2016
355
2,219
(18)
3,636
313
6,505
At 1 February 2016
361
2,218
(24)
3,637
(6)
6,186
Profit for the year
-
-
-
610
-
610
Other comprehensive 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 (note 9)
-
-
-
(230)
-
(230)
At 31 January 2017
352
2,221
(23)
3,837
384
6,771


Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED BALANCE SHEET
 millions
Notes
At 31 July 2017
At 31 July 2016 
At 31 January 2017
Non-current assets




Goodwill

2,400
2,399
2,399
Other intangible assets
10
332
290
308
Property, plant and equipment
10
3,657
3,433
3,589
Investment property
10
21
23
24
Investments in joint ventures and associates 

25
24
23
Post-employment benefits
11
236
178
239
Deferred tax assets

29
17
28
Derivative assets
12
-
51
54
Other receivables

9
7
8


6,709
6,422
6,672
Current assets




Inventories

2,522
2,154
2,173
Trade and other receivables

545
566
551
Derivative assets
12
71
76
36
Current tax assets

1
11
6
Cash and cash equivalents

776
1,134
795
Assets held for sale

-
5
-


3,915
3,946
3,561
Total assets

10,624
10,368
10,233





Current liabilities




Trade and other payables

(2,906)
(2,733)
(2,495)
Borrowings
12
(160)
(132)
(14)
Derivative liabilities
12
(36)
(13)
(26)
Current tax liabilities

(133)
(116)
(141)
Provisions

(31)
(95)
(63)


(3,266)
(3,089)
(2,739)
Non-current liabilities




Other payables

(56)
(52)
(50)
Borrowings
12
(31)
(181)
(184)
Deferred tax liabilities

(279)
(322)
(282)
Provisions

(71)
(119)
(99)
Post-employment benefits
11
(117)
(100)
(108)


(554)
(774)
(723)
Total liabilities

(3,820)
(3,863)
(3,462)
Net assets

6,804
6,505
6,771





Equity




Share capital

345
355
352
Share premium

2,223
2,219
2,221
Own shares held in ESOP trust

(19)
(18)
(23)
Retained earnings

3,765
3,636
3,837
Other reserves
13
490
313
384
Total equity

6,804
6,505
6,771
The interim financial report was approved by the Board of Directors on 19 September 2017 and signed on its behalf by:
Vronique Laury, Chief Executive Officer
Karen Witts, Chief Financial Officer


Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED CASH FLOW STATEMENT
 millions
Notes
Half year ended
31 July 2017
Half year ended
31 July 2016
Year ended
31 January 2017
Operating activities




Cash generated by operations
14
497
697
925
Income tax paid

(99)
(63)
(144)
Net cash flows from operating activities

398
634
781





Investing activities




Purchase of property, plant and equipment and intangible assets

(129)
(141)
(406)
Disposal of property, plant and equipment, investment property and assets held for sale 

1
5
20
Proceeds on disposal of B&Q China
16
-
63
63
Decrease in short-term deposits

-
70
70
Interest received

6
3
5
Net cash flows used in investing activities

(122)
-
(248)





Financing activities




Interest paid

(6)
(6)
(10)
Interest element of finance lease rental payments

(1)
(1)
(2)
Repayment of bank loans

(3)
(2)
(2)
Repayment of fixed term debt

-
(47)
(47)
Receipt on financing derivatives

-
10
10
Capital element of finance lease rental payments

(6)
(7)
(12)
New shares issued under share schemes

2
1
3
Own shares issued under share schemes

-
1
1
Purchase of own shares for ESOP trust

-
-
(6)
Purchase of own shares for cancellation

(149)
(126)
(200)
Ordinary dividends paid to equity shareholders of the Company
9
(159)
(157)
(230)
Net cash flows from financing activities

(322)
(334)
(495)





Net (decrease)/increase in cash and cash equivalents and bank overdrafts

(46)
300
38
Cash and cash equivalents and bank overdrafts at beginning of period

795
654
654
Exchange differences 

19
63
103
Cash and cash equivalents and bank overdrafts at end of period
15
768
1,017
795


Kingfisher plc
2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 the United Kingdom and is listed on the London Stock Exchange. The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX.
The interim financial report does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Audited statutory accounts for the year ended 31 January 2017 were approved by the Board of Directors on 21 March 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006. The interim financial report has been reviewed, not audited, and was approved by the Board of Directors on 19 September 2017.
2. Basis of preparation
The interim financial report for the six months ended 31 July 2017 ('the half year') has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. It should be read in conjunction with the annual financial statements for the year ended 31 January 2017, which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The consolidated income statement and related notes represent results for continuing operations, there being no discontinued operations in the periods presented. Where comparatives are given, '2016/17' refers to the six months ended 31 July 2016.
Going concern
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 condensed consolidated financial statements for the half year ended 31 July 2017.
Changes in accounting policies and estimates
There have been no changes in estimates of amounts reported in prior periods that have had a material effect in the current period.
There are no new standards, amendments or interpretations which are mandatory for the first time for the half year ended 31 July 2017 that are relevant or material for the Group. 
Amendments to IAS 7, 'Statement of Cash Flows' will be effective for the Group's annual financial statements for the year ended 31 January 2018, requiring additional disclosures relating to movements in liabilities associated with financing activities. 
The following new standards will be effective for the Group's 2018/19 financial year:
IFRS 9, 'Financial Instruments' supersedes IAS 39 'Financial Instruments: Recognition and Measurement' and changes some requirements for the measurement and classification of financial instruments, impairment of financial assets and certain elements of hedge accounting. A high-level assessment of the standard has been undertaken, and it is not expected that it will have a material effect on the Group's financial statements, except for additional disclosures relating to hedge accounting, credit risk management and impairment of financial assets.
IFRS 15, 'Revenue from Contracts with Customers' supersedes IAS 18 'Revenue' and establishes a principles-based approach to revenue recognition and measurement based on the concept of recognising revenue when performance obligations are satisfied. As the majority of the Group's revenue is recognised at the point of sale, it is not expected that the new standard will have a material effect on its financial statements or the amount, timing or nature of revenue recognised by the Group.
The following new standard will be effective for the Group's 2019/20 financial year:
IFRS 16, 'Leases' supersedes IAS 17 'Leases'. It has not yet been endorsed by the European Union. The most significant changes are in relation to lessee accounting. Under IFRS 16 the lessee will recognise a right-of-use asset and a lease liability for all leases currently accounted for as operating leases, with the exception of leases for a short period (less than 12 months) and those for items of low value. The asset will be depreciated over the term of the lease, whilst interest will be charged on the liability over the same period. The Group anticipates that the adoption of IFRS 16 will have a significant impact on the primary financial statements, including an impact on the operating profit, profit before tax, total assets and total liabilities lines. The impact of the standard on the Group is currently being assessed and therefore it is not yet practicable to provide a full estimate of its effect. The
undiscounted amount of the Group's operating lease commitments at 31 January 2017 disclosed under IAS 17, the current leasing standard, was 3.4 billion.
Other new standards and interpretations which are in issue but not yet effective are not expected to have a material impact on the consolidated financial statements.
Principal rates of exchange against Sterling

Half year ended
31 July 2017
Half year ended
31 July 2016
Year ended
31 January 2017

Average
rate
Period end
rate
Average
rate
Period end
rate
Average
rate
Year end
rate
Euro
1.16
1.12
1.26
1.19
1.21
1.16
US Dollar
1.27
1.31
1.41
1.31
1.34
1.26
Polish Zloty
4.91
4.76
5.51
5.18
5.28
5.03
Russian Rouble
73.57
77.75
96.27
87.74
87.98
75.72
Risks and uncertainties
The principal risks and uncertainties to which the Group is exposed are set out on pages 38-46 of the Kingfisher plc Annual Report and Accounts for the year ended 31 January 2017. These have been reviewed and updated as part of the Group's half year procedures and are listed in the Financial Review.
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, 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, exceptional items and amortisation of acquisition intangibles. It includes the sustainable benefits of the transformation programme. Central costs principally comprise the costs of the Group's head office before transformation costs.
The separate reporting of non-recurring exceptional items, which are presented as exceptional within their relevant income statement category, helps provide an indication of the Group's 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 programme 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, amortisation of acquisition intangibles, 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 short-term additional costs that arise only as a result of the transformation programme 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 programme. 
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.
Net cash comprises cash and cash equivalents and short-term deposits less borrowings and financing derivatives (excluding accrued interest).
3. 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. The critical accounting estimates and judgements are set out in note 3 of the annual financial statements for the year ended 31 January 2017 and remain unchanged.
Taxes on income for interim periods are accrued using the best estimate of the effective tax rate that would be applicable to expected total annual earnings.
4. Segmental analysis
Income statement

Half year ended 31 July 2017
 millions
UK & Ireland 
France
Other International 
Total
Poland
Other
Sales
2,602
2,273
694
439
6,008
Retail profit 
215
174
84
(6)
467
Central costs




(25)
Share of interest and tax of joint ventures and associates




(3)
Transformation costs before exceptional items




(46)
Exceptional items




8
Operating profit




401
Net finance income




1
Profit before taxation




402

Half year ended 31 July 2016
 millions
UK & Ireland
France
Other International 
Total
Poland
Other
Sales
2,609
2,175
587
378
5,749
Retail profit 
211
187
73
(7)
464
Central costs




(22)
Share of interest and tax of joint ventures and associates




(2)
Transformation costs before exceptional items




(18)
Exceptional items




17
Operating profit




439
Net finance costs




(12)
Profit before taxation




427

Year ended 31 January 2017
 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
Balance sheet

At 31 July 2017
 millions
UK & Ireland 
France
Other International 
Total
Poland
Other
Segment assets 
1,433
1,485
619
419
3,956
Central liabilities




(202)
Goodwill




2,400
Net cash




650
Net assets




6,804

At 31 July 2016
 millions
UK & Ireland 
France
Other International 
Total
Poland
Other
Segment assets 
1,183
1,341
515
376
3,415
Central liabilities




(207)
Goodwill




2,399
Net cash




898
Net assets




6,505

At 31 January 2017
 millions
UK & Ireland 
France
Other International 
Total
Poland
Other
Segment assets 
1,416
1,410
606
454
3,886
Central liabilities




(155)
Goodwill




2,399
Net cash




641
Net assets




6,771
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 Kota 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. Central liabilities comprise unallocated head office and other central items including contracts to purchase own shares, central assets, pensions, insurance, interest and tax.
Transformation costs before exceptional items principally relate to the unified and unique offer range implementation and the digital strategic initiative.
The Group's sales, although generally not highly seasonal on a half-yearly basis, do increase over the Easter period and during the summer months leading to slightly higher sales usually being recognised in the first half of the year.
5. Exceptional items

Half year ended
Half year ended
Year ended
 millions
31 July 2017
31 July 2016
31 January 2017
Included within selling and distribution expenses



UK & Ireland and continental Europe restructuring
13
15
21

13
15
21
Included within administrative expenses



Transformation exceptional costs
(5)
(1)
(5)

(5)
(1)
(5)
Included within other income



Profit on disposal of B&Q China
-
3
3
Disposal of properties 
-
-
4

-
3
7
Included within net finance income/(costs)



UK & Ireland and continental Europe restructuring - unwinding of discount on provisions
-
(6)
(6)

-
(6)
(6)
Exceptional items before tax
8
11
17
Exceptional tax items
(1)
(2)
(6)
Exceptional items
7
9
11
Current period exceptional items include a 13m net credit principally arising due to savings on B&Q store exit costs as compared with the original restructuring provisions recognised. 
In the prior period, a net credit of 15m (21m for the full year) 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.
Transformation exceptional costs of 5m have been recorded in the period driven by changes associated with the Group's new offer and supply chain organisation, and other restructuring and efficiency costs in the UK relating to the Group's five-year transformation programme.
In the prior periods, a profit of 3m was recorded on disposal of the Group's remaining 30% stake in B&Q China.
6. Net finance income/costs

Half year ended 
Half year ended 
Year ended 
 millions
31 July 2017
31 July 2016
31 January 2017
Bank overdrafts and bank loans
(5)
(5)
(10)
Fixed term debt
(1)
(1)
(2)
Finance leases
(1)
(1)
(2)
Financing fair value remeasurements
-
(2)
(1)
Unwinding of discount on provisions
-
(7)
(7)
Other interest payable
(1)
(3)
(5)
Finance costs
(8)
(19)
(27)




Cash and cash equivalents and short-term deposits
3
3
6
Net interest income on defined benefit pension schemes
3
4
7
Other interest income
3
-
-
Finance income 
9
7
13




Net finance income/(costs)
1
(12)
(14)
In the prior periods, the 7m charge relating to the unwinding of discount on provisions included a 6m exceptional charge relating to the reduction in discount rate used to measure the overall UK restructuring provision.
7. Income tax expense
 millions
Half year ended
31 July 2017
Half year ended
31 July 2016
Year ended
31 January 2017
UK corporation tax



Current tax on profits for the period
(43)
(44)
(66)
Adjustments in respect of prior years
(2)
-
10

(45)
(44)
(56)
Overseas tax



Current tax on profits for the period
(56)
(65)
(155)
Adjustments in respect of prior years
1
-
(11)

(55)
(65)
(166)
Deferred tax



Current period
(8)
(1)
22
Adjustments in respect of prior years
1
2
16
Adjustments in respect of changes in tax rates
-
2
35

(7)
3
73




Income tax expense
(107)
(106)
(149)
The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 27% (2016/17: 26%), representing the best estimate of the effective rate for the full financial year. The effective tax rate on the same basis for the year ended 31 January 2017 was 26%. Exceptional tax items for the current period amount to a charge of 1m, none of which relates to prior year items (2016/17: 2m charge, none of which related to prior year items). Exceptional tax items for the year ended 31 January 2017 amounted to a net charge of 6m, of which a 1m credit related to prior year items.
8. Earnings per share

Half year ended
Half year ended 
Year ended 
Pence
31 July 2017
31 July 2016
31 January 2017
Basic earnings per share
13.3
14.1
27.1
Effect of dilutive share options
-
-
(0.1)
Diluted earnings per share
13.3
14.1
27.0




Basic earnings per share
13.3
14.1
27.1
Exceptional items before tax
(0.3)
(0.5)
(0.8)
Tax on exceptional and prior year items
-
(0.1)
(2.0)
Financing fair value remeasurements
-
0.1
0.1
Adjusted basic earnings per share
13.0
13.6
24.4
Transformation costs before exceptional items
2.1
0.8
2.0
Tax on transformation costs before exceptional items
(0.6)
(0.2)
(0.5)
Underlying basic earnings per share
14.5
14.2
25.9




Diluted earnings per share
13.3
14.1
27.0
Exceptional items before tax
(0.3)
(0.5)
(0.8)
Tax on exceptional and prior year items
-
(0.1)
(2.0)
Financing fair value remeasurements
-
0.1
0.1
Adjusted diluted earnings per share
13.0
13.6
24.3
Transformation costs before exceptional items
2.1
0.8
2.0
Tax on transformation costs before exceptional items
(0.6)
(0.2)
(0.5)
Underlying diluted earnings per share
14.5
14.2
25.8
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 and underlying earnings is set out below:

Half year ended
Half year ended 
Year ended 
 millions
31 July 2017
31 July 2016
31 January 2017
Earnings
295
321
610
Exceptional items before tax
(8)
(11)
(17)
Tax on exceptional and prior year items
1
(2)
(43)
Financing fair value remeasurements
-
2
1
Adjusted earnings
288
310
551
Transformation costs before exceptional items 
46
18
44
Tax on transformation costs before exceptional items
(12)
(5)
(11)
Underlying earnings
322
323
584
The weighted average number of shares in issue during the period, excluding those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is 2,216m (2016/17: 2,271m). The diluted weighted average number of shares in issue during the period is 2,225m (2016/17: 2,275m). For the year ended 31 January 2017, the weighted average number of shares in issue was 2,256m and the diluted weighted average number of shares in issue was 2,263m.
9. Dividends

Half year ended 
Half year ended 
Year ended 
 millions
31 July 2017
31 July 2016
31 January 2017
Dividends to equity shareholders of the Company



Ordinary final dividend for the year ended 31 January 2017 of
7.15p per share
159
-
-
Ordinary interim dividend for the year ended 31 January 2017 of 3.25p per share
-
-
73
Ordinary final dividend for the year ended 31 January 2016 of
6.92p per share
-
157
157

159
157
230
The proposed ordinary interim dividend for the period ended 31 July 2017 is 3.33p per share. 
10. Property, plant and equipment, investment property and other intangible assets
Additions to the cost of property, plant and equipment, investment property and other intangible assets are 125m (2016/17: 136m) and for the year ended 31 January 2017 were 410m. Disposals in net book value of property, plant and equipment, investment property, property assets held for sale and other intangible assets are 2m (2016/17: 5m) and for the year ended 31 January 2017 were 24m.
Capital commitments contracted but not provided for at the end of the period are 101m (2016/17: 36m) and at 31 January 2017 were 31m.
11. Post-employment benefits

Half year ended
Half year ended 
Year ended 
 millions
31 July 2017
31 July 2016
31 January 2017
Net surplus in schemes at beginning of period
131
159
159
Current service cost
(6)
(5)
(9)
Administration costs
(2)
(2)
(4)
Net interest income
3
4
7
Net actuarial losses
(21)
(87)
(50)
Contributions paid by employer
18
18
38
Exchange differences
(4)
(9)
(10)
Net surplus in schemes at end of period
119
78
131
UK
236
178
239
Overseas
(117)
(100)
(108)
Net surplus in schemes at end of period
119
78
131
Present value of defined benefit obligations
(3,142)
(3,075)
(3,125)
Fair value of scheme assets
3,261
3,153
3,256
Net surplus in schemes at end of period
119
78
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 provided in note 27 of the annual financial statements for the year ended 31 January 2017.
A key assumption in valuing the pension obligation 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, being the Group's principal defined benefit scheme, are set out below:

At 
At 
At 
Annual % rate
31 July 2017
31 July 2016
31 January 2017
Discount rate
2.5
2.4
2.7
Price inflation
3.4
2.9
3.6
12. Financial instruments
The Group holds the following derivative financial instruments at fair value:

At 
At 
At 


 millions
31 July 2017
31 July 2016
31 January 2017


Cross currency interest rate swaps
47
52
55


Foreign exchange contracts
24
75
35


Derivative assets
71
127
90



At 
At 
At 


 millions
31 July 2017
31 July 2016
31 January 2017


Foreign exchange contracts
(36)
(13)
(26)


Derivative liabilities
(36)
(13)
(26)


The fair values are calculated by discounting future cash flows arising from the instruments and adjusted for credit risk. These fair value measurements are all made using observable market rates of interest, foreign exchange and credit risk. All the derivatives held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement', representing significant observable inputs other than quoted prices in active markets for identical assets or liabilities. There are no non-recurring fair value measurements nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy.
Except as detailed in the following table of borrowings, the carrying amounts of financial instruments recorded at amortised cost in the financial statements are approximately equal to their fair values. Where available, market values have been used to determine the fair values of borrowings. Where market values are not available or are not reliable, fair values have been calculated by discounting cash flows at prevailing interest and foreign exchange rates. This has resulted in level 2 inputs for borrowings as defined by the IFRS 13 fair value hierarchy.



Carrying amount



At 
At 
At 


 millions
31 July 2017
31 July 2016
31 January 2017


Bank overdrafts
8
117
-


Bank loans
6
9
9


Fixed term debt
139
146
147


Finance leases
38
41
42


Borrowings
191
313
198











Fair value



At 
At 
At 


 millions
31 July 2017
31 July 2016
31 January 2017


Bank overdrafts
8
117
-


Bank loans
6
9
9


Fixed term debt
144
151
153


Finance leases
44
52
49


Borrowings
202
329
211


13. Other reserves
 millions
Translation reserve
Cash flow
hedge reserve
Available-for- sale reserve
Other
Total
At 1 February 2017
184
19
-
181
384
Currency translation differences
Group
137
-
-
-
137
Joint ventures and associates
1
-
-
-
1
Cash flow hedges
Fair value losses
-
(37)
-
-
(37)
Gains transferred to inventories
-
(14)
-
-
(14)
Tax on items that may be reclassified
-
12
-
-
12
Other comprehensive income for the period
138
(39)
-
-
99
Purchase of own shares for cancellation
-
-
-
7
7
At 31 July 2017
322
(20)
-
188
490






At 1 February 2016
(205)
25
2
172
(6)
Currency translation differences





Group
304
-
-
-
304
Joint ventures and associates
2
-
-
-
2
Cash flow hedges
Fair value gains
-
26
-
-
26
Gains transferred to inventories
-
(18)
-
-
(18)
Available-for-sale financial assets





Fair value gains
-
-
5
-
5
Transferred to income statement
-
-
(7)
-
(7)
Tax on items that may be reclassified
2
(1)
-
-
1
Other comprehensive income for the period
308
7
(2)
-
313
Purchase of own shares for cancellation
-
-
-
6
6
At 31 July 2016
103
32
-
178
313






At 1 February 2016
(205)
25
2
172
(6)
Currency translation differences
Group
390
-
-
-
390
 Joint ventures and associates
(1)
-
-
-
(1)
Cash flow hedges
Fair value gains
-
52
-
-
52
Gains transferred to inventories
-
(60)
-
-
(60)
Available-for-sale financial assets





Fair value gains
-
-
5
-
5
Transferred to income statement
-
-
(7)
-
(7)
Tax on items that may be reclassified
-
2
-
-
2
Other comprehensive income for the year
389
(6)
(2)
-
381
Purchase of own shares for cancellation
-
-
-
9
9
At 31 January 2017
184
19
-
181
384
14. Cash generated by operations
 millions
Half year ended
31 July 2017
Half year ended
31 July 2016 
Year ended
31 January 2017
Operating profit
401
439
773
Share of post-tax results of joint ventures and associates 
(1)
1
(1)
Depreciation and amortisation 
122
121
253
Impairment losses
-
1
14
Loss on disposal of property, plant and equipment, property held for sale and intangible assets
1
-
4
Profit on disposal of B&Q China
-
(3)
(3)
Share-based compensation charge 
12
9
15
Increase in inventories
(295)
(65)
(46)
Decrease in trade and other receivables
16
30
62
Increase in trade and other payables
313
238
4
Movement in provisions
(62)
(63)
(125)
Movement in post-employment benefits
(10)
(11)
(25)
Cash generated by operations
497
697
925
15. Net cash

At 
At 
At 
 millions
31 July 2017
31 July 2016
31 January 2017
Cash and cash equivalents
776
1,134
795
Bank overdrafts
(8)
(117)
-
Cash and cash equivalents and bank overdrafts
768
1,017
795
Bank loans
(6)
(9)
(9)
Fixed term debt
(139)
(146)
(147)
Financing derivatives 
65
77
44
Finance leases
(38)
(41)
(42)
Net cash
650
898
641

Half year ended 
Half year ended 
Year ended 
 millions
31 July 2017
31 July 2016
31 January 2017
Net cash at beginning of period
641
546
546
Net (decrease)/increase in cash and cash equivalents and 
bank overdrafts
(46)
300
38
Decrease in short-term deposits
-
(70)
(70)
Repayment of bank loans
3
2
2
Repayment of fixed term debt
-
47
47
Receipt on financing derivatives
-
(10)
(10)
Capital element of finance lease rental payments 
6
7
12
Cash flow movement in net cash
(37)
276
19
Exchange differences and other non-cash movements
46
76
76
Net cash at end of period
650
898
641
16. Disposals
In the prior period, the Group disposed of its remaining 30% interest in the B&Q China business to Wumei Holdings Inc. for a consideration (net of disposal costs) of 63m, recognising a profit on disposal of 3m.
17. Contingent liabilities
The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees, 44m (2016/17: 1m) would crystallise due to possible future events not wholly within the Group's control. At 31 January 2017, the amount was 1m.
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 has been assessed and for which a bank guarantee is now in place. Interest and penalties of 47m would arise 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. 
Whilst the procedures that must be followed to resolve these sort 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.
18. Related party transactions
The Group's significant related parties are its joint ventures, associates and pension schemes as disclosed in note 37 of the annual financial statements for the year ended 31 January 2017. There have been no significant changes in related parties or related party transactions in the period.
19. Post balance sheet event
On 1 August 2017, the Group signed an agreement to purchase 100% of the shares in Praktiker Romania SRL, a home improvement retailer with 27 stores and a turnover in 2016 of approximately 140m. Subject to regulatory approval, the transaction is expected to complete towards the end of the Group's 2017/18 financial year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge this set of interim condensed financial statements has been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
 an indication of important events that have occurred during the period and their impact on the interim condensed financial statements, and a description of the principal risks and uncertainties for the remainder of the financial year; and
 material related party transactions in the period and any material changes in the related party transactions described in the last annual report.
The Directors of Kingfisher plc were listed in the Kingfisher plc Annual Report for the year ended 31 January 2017, which noted that Andy Cosslett would join the Board as a non-executive Director and Chairman-designate on 1 April 2017. Andy Cosslett became Chairman at the conclusion of the Annual General Meeting on 13 June 2017, replacing Daniel Bernard who resigned as a Director on that date.
By order of the Board
Vronique Laury Karen Witts
Chief Executive Officer Chief Financial Officer
19 September 2017   19 September 2017
INDEPENDENT REVIEW REPORT TO KINGFISHER PLC
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2017 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 19. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review 
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
19September 2017

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