REG - Kingfisher PLC - Half-year Results (Part 2 of 2) <Origin Href="QuoteRef">KGF.L</Origin> - Part 2
20/09/2016 07:07
- Part 2: For the preceding part double click ID:nRST2527Ka
31 July 2016 31 January 2016
UK corporation tax
Current tax on profits for the period (44) (15) (7)
Adjustments in respect of prior years - - 4
(44) (15) (3)
Overseas tax
Current tax on profits for the period (65) (59) (117)
Adjustments in respect of prior years - 1 7
(65) (58) (110)
Deferred tax
Current period (1) 5 14
Adjustments in respect of prior years 2 - -
Adjustments in respect of changes in tax rates 2 - (1)
3 5 13
Income tax expense (106) (68) (100)
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 26% (2015/16: 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 2016 was 26%. Exceptional tax items for the current
period amount to a charge of £2m, none of which relates to prior year items
(2015/16: £29m credit, none of which related to prior year items). Exceptional
tax items for the year ended 31 January 2016 amounted to a credit of £67m, £1m
of which related to prior year items.
8. Earnings per share
Half year ended Half year ended Year ended
Pence 31 July 2016 1 August 2015 31 January 2016
Basic earnings per share 14.1 13.6 17.8
Effect of dilutive share options - - -
Diluted earnings per share 14.1 13.6 17.8
Basic earnings per share 14.1 13.6 17.8
B&Q China operating loss - 0.2 0.2
Exceptional items before tax (0.5) (0.4) 7.2
Tax on exceptional and prior year items (0.1) (1.2) (3.3)
Financing fair value remeasurements 0.1 0.2 0.2
Tax on financing fair value remeasurements - (0.1) (0.1)
Adjusted basic earnings per share 13.6 12.3 22.0
Transformation costs before exceptional items 0.8 - -
Tax on transformation costs before exceptional items (0.2) - -
Underlying basic earnings per share 14.2 12.3 22.0
Diluted earnings per share 14.1 13.6 17.8
B&Q China operating loss - 0.2 0.2
Exceptional items before tax (0.5) (0.4) 7.2
Tax on exceptional and prior year items (0.1) (1.2) (3.3)
Financing fair value remeasurements 0.1 0.2 0.2
Tax on financing fair value remeasurements - (0.1) (0.1)
Adjusted diluted earnings per share 13.6 12.3 22.0
Transformation costs before exceptional items 0.8 - -
Tax on transformation costs before exceptional items (0.2) - -
Underlying diluted earnings per share 14.2 12.3 22.0
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 2016 1 August 2015 31 January 2016
Earnings 321 318 412
B&Q China operating loss - 4 4
Exceptional items before tax (11) (9) 166
Tax on exceptional and prior year items (2) (30) (76)
Financing fair value remeasurements 2 3 4
Tax on financing fair value remeasurements - (1) (1)
Adjusted earnings 310 285 509
Transformation costs before exceptional items 18 - -
Tax on transformation costs before exceptional items (5) - -
Underlying earnings 323 285 509
The weighted average number of shares in issue during the period, excluding
those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is
2,271m (2015/16: 2,327m). The diluted weighted average number of shares in
issue during the period is 2,275m (2015/16: 2,329m). For the year ended 31
January 2016, the weighted average number of shares in issue was 2,311m and
the diluted weighted average number of shares in issue was 2,319m.
9. Dividends
Half year ended Half year ended Year ended
£ millions 31 July 2016 1 August 2015 31 January 2016
Dividends to equity shareholders of the Company
Ordinary final dividend for the year ended 31 January 2016 of6.92p per share 157 - -
Ordinary interim dividend for the year ended 31 January 2016 of 3.18p per share - - 72
Ordinary final dividend for the year ended 31 January 2015 of6.85p per share - 160 160
157 160 232
The proposed ordinary interim dividend for the period ended 31 July 2016 is
3.25p 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 £136m (2015/16: £178m) and for the year ended
31 January 2016 were £331m. Disposals in net book value of property, plant and
equipment, investment property, property assets held for sale and other
intangible assets are £5m (2015/16: £2m) and for the year ended 31 January
2016 were £28m.
Capital commitments contracted but not provided for at the end of the period
are £36m (2015/16: £50m) and at 31 January 2016 were £46m.
11. Post-employment benefits
Half year ended Half year ended Year ended
£ millions 31 July 2016 1 August 2015 31 January 2016
Net surplus in schemes at beginning of period 159 112 112
Current service cost (5) (4) (8)
Administration costs (2) (2) (4)
Net interest income 4 2 5
Net actuarial (losses)/gains (87) (72) 19
Contributions paid by employer 18 18 37
Exchange differences (9) 5 (2)
Net surplus in schemes at end of period 78 59 159
UK 178 140 246
Overseas (100) (81) (87)
Net surplus in schemes at end of period 78 59 159
Present value of defined benefit obligations (3,075) (2,637) (2,476)
Fair value of scheme assets 3,153 2,696 2,635
Net surplus in schemes at end of period 78 59 159
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 2016.
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 2016 1 August 2015 31 January 2016
Discount rate 2.4 3.6 3.6
Price inflation 2.9 3.3 3.1
12. Financial instruments
The Group holds the following derivative financial instruments at fair value:
At At At
£ millions 31 July 2016 1 August 2015 31 January 2016
Cross currency interest rate swaps 52 42 56
Foreign exchange contracts 75 22 43
Derivative assets 127 64 99
At At At
£ millions 31 July 2016 1 August 2015 31 January 2016
Foreign exchange contracts (13) (17) (6)
Derivative liabilities (13) (17) (6)
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 directors
consider that 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 2016 1 August 2015 31 January 2016
Bank overdrafts 117 43 76
Bank loans 9 10 10
Fixed term debt 146 170 185
Finance leases 41 47 46
Borrowings 313 270 317
Fair value
At At At
£ millions 31 July 2016 1 August 2015 31 January 2016
Bank overdrafts 117 43 76
Bank loans 9 10 11
Fixed term debt 151 177 192
Finance leases 52 59 56
Borrowings 329 289 335
13. Other reserves
£ millions Translation reserve Cash flowhedge reserve Available-for- sale reserve Other Total
At 1 February 2016 (205) 25 2 172 (6)
Currency translation differencesGroup 304 - - - 304
Joint ventures and associates 2 - - - 2
Cash flow hedgesFair 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 2015 (194) 41 - 164 11
Currency translation differencesGroupJoint ventures and associatesTransferred to income statement (136)(3)(7) --- --- --- (136)(3)(7)
Cash flow hedgesFair value losses - (21) - - (21)
Gains transferred to inventories - (30) - - (30)
Tax on items that may be reclassified (2) 14 - - 12
Other comprehensive income for the period (148) (37) - - (185)
Purchase of own shares for cancellation - - - 6 6
At 1 August 2015 (342) 4 - 170 (168)
At 1 February 2015 (194) 41 - 164 11
Currency translation differencesGroup 1 - - - 1
Joint ventures and associates (3) - - - (3)
Transferred to income statement (7) - - - (7)
Cash flow hedgesFair value gains - 24 - - 24
Gains transferred to inventories - (50) - - (50)
Available-for-sale financial assets
Fair value gains - - 2 - 2
Tax on items that may be reclassified (2) 10 - - 8
Other comprehensive income for the year (11) (16) 2 - (25)
Purchase of own shares for cancellation - - - 8 8
At 31 January 2016 (205) 25 2 172 (6)
14. Cash generated by operations
£ millions Half year ended Half year ended Year ended
31 July 2016 1 August 2015 31 January 2016
Operating profit 439 394 526
Share of post-tax results of joint ventures and associates 1 - (3)
Depreciation and amortisation 121 120 240
Impairment losses 1 39 55
Loss on disposal of property, plant and equipment, property held for sale and intangible assets - - 3
Profit on disposal of property and other companies - (16) (13)
Profit on disposal of B&Q China (3) (143) (143)
Share-based compensation charge 9 7 11
(Increase)/decrease in inventories (65) (111) 56
Decrease/(increase) in trade and other receivables 30 (40) (36)
Increase in trade and other payables 238 191 27
Movement in provisions (63) 102 233
Movement in post-employment benefits (11) (12) (25)
Cash generated by operations 697 531 931
15. Net cash
At At At
£ millions 31 July 2016 1 August 2015 31 January 2016
Cash and cash equivalents 1,134 537 730
Bank overdrafts (117) (43) (76)
Cash and cash equivalents and bank overdrafts 1,017 494 654
Short-term deposits - 123 70
Bank loans (9) (10) (10)
Fixed term debt (146) (170) (185)
Financing derivatives 77 45 63
Finance leases (41) (47) (46)
Net cash 898 435 546
Half year ended Half year ended Year ended
£ millions 31 July 2016 1 August 2015 31 January 2016
Net cash at beginning of period 546 329 329
Net increase in cash and cash equivalents and bank overdrafts, including amounts classified as held for sale 300 11 127
(Decrease)/increase in short-term deposits (70) 75 22
Repayment of bank loans 2 1 1
Repayment of fixed term debt 47 - -
Receipt on financing derivatives (10) - -
Capital element of finance lease rental payments 7 6 13
Cash flow movement in net cash 276 93 163
Adjustment for cash classified as held for sale (B&Q China) - 57 57
Exchange differences and other non-cash movements 76 (44) (3)
Net cash at end of period 898 435 546
16. Disposals
On 5 July 2016, the Group disposed of its remaining 30% interest in the B&Q
China business to Wumei Holdings Inc for a gross consideration of £67m, being
the Sterling equivalent of RMB 582m. The profit on disposal of £3m is analysed
as follows:
£ millions
Proceeds 67
Disposal costs (4)
Net disposal proceeds 63
Fair value of investment disposed (67)
Fair value gains transferred from available-for-sale reserve 7
Exceptional profit on disposal 3
In the prior year, the Group received gross proceeds of £140m and recognised a
profit on disposal of £143m in respect of Wumei Holdings Inc acquiring a
controlling 70% stake in the B&Q China business. In the prior year, the Group
also completed the sale of a property company for proceeds of £18m and a
profit of £16m.
17. Contingent assets and liabilities
The Group has arranged for certain guarantees to be provided to third parties
in the ordinary course of business. Of these guarantees, only £1m (2015/16:
£1m) would crystallise due to possible future events not wholly within the
Group's control. At 31 January 2016 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.
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 2016. There have been no significant changes in
related parties or related party transactions in the period.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that 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 2016, which noted that Janis Kong stepped
down as a Director and Rakhi Goss-Custard was appointed as a Director, both
effective 1 February 2016. There have been no other changes in the period.
By order of the Board
Véronique Laury
Karen Witts
Chief Executive Officer
Chief Financial Officer
19 September 2016
19 September 2016
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 2016 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 18. 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 2016 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
Chartered Accountants and Statutory Auditor
London, United Kingdom
19 September 2016
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