REG - Kingfisher PLC - Half-Year Results (Part 2 of 2) <Origin Href="QuoteRef">KGF.L</Origin> - Part 2
20/09/2017 07:08
- Part 2: For the preceding part double click ID:nRST2164Ra
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 of7.15p 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 of6.92p 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 flowhedge reserve Available-for- sale reserve Other Total
At 1 February 2017 184 19 - 181 384
Currency translation differencesGroup 137 - - - 137
Joint ventures and associates 1 - - - 1
Cash flow hedgesFair 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 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 2016 (205) 25 2 172 (6)
Currency translation differencesGroup 390 - - - 390
Joint ventures and associates (1) - - - (1)
Cash flow hedgesFair 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 Half year ended Year ended
31 July 2017 31 July 2016 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 E49m has been assessed and for which a bank guarantee
is now in place. Interest and penalties of E47m 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 E140m. 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
Véronique 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
19 September 2017
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