REG - Kingfisher PLC - Interim Results - Part 2 <Origin Href="QuoteRef">KGF.L</Origin> - Part 1
RNS Number : 0269ZKingfisher PLC15 September 2015KINGFISHER PLC
2015/16 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Half year ended 1 August 2015
Half year ended 2 August 2014
(restated - note 2)
Before
Exceptional
Before
Exceptional
exceptional
items
exceptional
items
millions
Notes
items
(note 5)
Total
items
(note 5)
Total
Sales
4
5,492
-
5,492
5,768
-
5,768
Cost of sales
(3,474)
-
(3,474)
(3,660)
-
(3,660)
Gross profit
2,018
-
2,018
2,108
-
2,108
Selling and distribution expenses
(1,360)
(151)
(1,511)
(1,446)
(11)
(1,457)
Administrative expenses
(288)
-
(288)
(297)
-
(297)
Other income
15
160
175
19
21
40
Share of post-tax results of joint ventures and associates
-
-
-
2
-
2
Operating profit
385
9
394
386
10
396
Analysed as:
Retail profit
4
410
9
419
419
10
429
Central costs
(19)
-
(19)
(19)
-
(19)
Share of interest and tax of joint ventures and associates
(2)
-
(2)
(3)
-
(3)
B&Q China operating loss
(4)
-
(4)
(11)
-
(11)
Finance costs
(11)
-
(11)
(6)
-
(6)
Finance income
3
-
3
3
-
3
Net finance costs
6
(8)
-
(8)
(3)
-
(3)
Profit before taxation
377
9
386
383
10
393
Income tax expense
7
(97)
29
(68)
(104)
1
(103)
Profit for the period
280
38
318
279
11
290
Attributable to:
Equity shareholders of the Company
318
291
Non-controlling interests
-
(1)
318
290
Earnings per share
8
Basic
13.6p
12.3p
Diluted
13.6p
12.2p
Adjusted basic
12.3p
12.3p
Adjusted diluted
12.3p
12.2p
The proposed interim ordinary dividend for the period ended 1 August 2015 is 3.18p per share.
KINGFISHER PLC
2015/16 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Year ended 31 January 2015
(restated - note 2)
Before
Exceptional
exceptional
items
millions
Notes
items
(note 5)
Total
Sales
4
10,966
-
10,966
Cost of sales
(6,918)
-
(6,918)
Gross profit
4,048
-
4,048
Selling and distribution
expenses
(2,835)
(32)
(2,867)
Administrative expenses
(571)
-
(571)
Other income
40
(3)
37
Share of post-tax results of joint
ventures and associates
5
-
5
Operating profit
687
(35)
652
Analysed as:
Retail profit
4
742
(35)
707
Central costs
(40)
-
(40)
Share of interest and tax of joint
ventures and associates
(6)
-
(6)
B&Q China operating loss
(9)
-
(9)
Finance costs
(13)
-
(13)
Finance income
5
-
5
Net finance costs
6
(8)
-
(8)
Profit before taxation
679
(35)
644
Income tax expense
7
(177)
106
(71)
Profit for the year
502
71
573
Attributable to:
Equity shareholders of the Company
573
Non-controlling interests
-
573
Earnings per share
8
Basic
24.3p
Diluted
24.2p
Adjusted basic
21.3p
Adjusted diluted
21.2p
KINGFISHER PLC
2015/16 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
millions
Notes
Half year ended
1 August 2015
Half year ended
2 August 2014
(restated - note 2)Year ended
31 January 2015
Profit for the period
318
290
573
Actuarial (losses)/gains on post employment benefits
11
(72)
42
175
Tax on items that will not be reclassified
23
(39)
(85)
Total items that will not be reclassified
subsequently to profit or loss
(49)
3
90
Currency translation differences
Group
(136)
(77)
(308)
Joint ventures and associates
(3)
-
(2)
Transferred to income statement
16
(7)
-
-
Cash flow hedges
Fair value (losses)/gains
(21)
(6)
70
(Gains)/losses transferred to inventories
(30)
16
(5)
Tax on items that may be reclassified
12
(3)
(14)
Total items that may be reclassified
subsequently to profit or loss
(185)
(70)
(259)
Other comprehensive income for the period
(234)
(67)
(169)
Total comprehensive income for the period
84
223
404
Attributable to:
Equity shareholders of the Company
84
224
403
Non-controlling interests
-
(1)
1
84
223
404
KINGFISHER PLC
2015/16 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity shareholders of the Company
millions
Share capital
Share
premium
Own shares held
Retained earnings
Other reserves (note 13)
Total
Non-controlling interests
Total equity
At 1 February 2015 (restated - note 2)
369
2,214
(26)
3,652
11
6,220
10
6,230
Profit for the period
-
-
-
318
-
318
-
318
Other comprehensive income for the period
-
-
-
(49)
(185)
(234)
-
(234)
Total comprehensive income for the period
-
-
-
269
(185)
84
-
84
Disposal of B&Q China (note 16)
-
-
-
-
-
-
(10)
(10)
Share-based compensation
-
-
-
7
-
7
-
7
New shares issued under share schemes
-
1
-
-
-
1
-
1
Own shares issued under share schemes
-
-
15
(14)
-
1
-
1
Purchase of own shares for cancellation
(6)
-
-
(111)
6
(111)
-
(111)
Purchase of own shares for ESOP trust
-
-
(11)
-
-
(11)
-
(11)
Dividends
-
-
-
(160)
-
(160)
-
(160)
At 1 August 2015
363
2,215
(22)
3,643
(168)
6,031
-
6,031
At 2 February 2014 (restated - note 2)
373
2,209
(35)
3,486
266
6,299
9
6,308
Profit for the period (restated - note 2)
-
-
-
291
-
291
(1)
290
Other comprehensive income for the period
-
-
-
3
(70)
(67)
-
(67)
Total comprehensive income for the period
-
-
-
294
(70)
224
(1)
223
Share-based compensation
-
-
-
6
-
6
-
6
New shares issued under share schemes
-
1
-
-
-
1
-
1
Own shares issued under share schemes
-
-
11
(10)
-
1
-
1
Purchase of own shares for cancellation
(1)
-
-
(35)
1
(35)
-
(35)
Dividends
-
-
-
(259)
-
(259)
-
(259)
At 2 August 2014 (restated - note 2)
372
2,210
(24)
3,482
197
6,237
8
6,245
At 2 February 2014 (restated - note 2)
373
2,209
(35)
3,486
266
6,299
9
6,308
Profit for the year
-
-
-
573
-
573
-
573
Other comprehensive income for the year
-
-
-
90
(260)
(170)
1
(169)
Total comprehensive income for the year
-
-
-
663
(260)
403
1
404
Share-based compensation
-
-
-
11
-
11
-
11
New shares issued under share schemes
1
5
-
-
-
6
-
6
Own shares issued under share schemes
-
-
26
(24)
-
2
-
2
Purchase of own shares for cancellation
(5)
-
-
(150)
5
(150)
-
(150)
Purchase of own shares for ESOP trust
-
-
(17)
-
-
(17)
-
(17)
Dividends
-
-
-
(334)
-
(334)
-
(334)
At 31 January 2015 (restated - note 2)
369
2,214
(26)
3,652
11
6,220
10
6,230
KINGFISHER PLC
2015/16 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED BALANCE SHEET
millions
Notes
At 1 August 2015
At 2 August 2014
(restated - note 2)
At 31 January 2015
(restated - note 2)
Non-current assets
Goodwill
2,412
2,416
2,414
Other intangible assets
10
270
240
258
Property, plant and equipment
10
3,088
3,526
3,203
Investment property
10
53
40
30
Investments in joint ventures and associates
19
26
28
B&Q China investment
12
60
-
-
Post employment benefits
11
140
28
194
Deferred tax assets
9
11
10
Derivative assets
12
31
33
52
Other receivables
7
14
7
6,089
6,334
6,196
Current assets
Inventories
2,064
2,199
2,021
Trade and other receivables
558
610
537
Derivative assets
12
33
11
70
Current tax assets
7
11
6
Short-term deposits
123
167
48
Cash and cash equivalents
537
627
561
Assets held for sale
-
11
274
3,322
3,636
3,517
Total assets
9,411
9,970
9,713
Current liabilities
Trade and other payables
(2,431)
(2,687)
(2,337)
Borrowings
12
(102)
(103)
(105)
Derivative liabilities
12
(17)
(18)
(10)
Current tax liabilities
(97)
(203)
(87)
Provisions
(40)
(9)
(13)
Liabilities held for sale
-
-
(195)
(2,687)
(3,020)
(2,747)
Non-current liabilities
Other payables
(62)
(85)
(64)
Borrowings
12
(168)
(218)
(232)
Deferred tax liabilities
(276)
(286)
(324)
Provisions
(106)
(42)
(34)
Post employment benefits
11
(81)
(74)
(82)
(693)
(705)
(736)
Total liabilities
(3,380)
(3,725)
(3,483)
Net assets
6,031
6,245
6,230
Equity
Share capital
363
372
369
Share premium
2,215
2,210
2,214
Own shares held in ESOP trust
(22)
(24)
(26)
Retained earnings
3,643
3,482
3,652
Other reserves
13
(168)
197
11
Total attributable to equity shareholders of the Company
6,031
6,237
6,220
Non-controlling interests
-
8
10
Total equity
6,031
6,245
6,230
The interim financial report was approved by the Board of Directors on 14 September 2015 and signed on its behalf by:
Vronique Laury, Chief Executive Officer
Karen Witts, Chief Financial Officer
KINGFISHER PLC
2015/16 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED CASH FLOW STATEMENT
millions
Notes
Half year ended
1 August 2015
Half year ended
2 August 2014
Year ended
31 January 2015
Operating activities
Cash generated by operations
14
531
512
806
Income tax paid
(65)
(65)
(146)
Net cash flows from operating activities
466
447
660
Investing activities
Purchase of property, plant and equipment and intangible assets
(177)
(119)
(275)
Disposal of property, plant and equipment and property held for sale
2
47
50
Disposal of property company
16
18
-
-
Disposal of B&Q China
16
- Proceeds (net of costs and cash disposed)
105
-
-
- Deposit (repaid)/received
(12)
-
12
Disposal of Hornbach
16
-
198
198
Increase in short-term deposits
(75)
(167)
(48)
Interest received
1
2
5
Dividends received from joint ventures and associates
6
7
7
Net cash flows from investing activities
(132)
(32)
(51)
Financing activities
Interest paid
(6)
(3)
(10)
Interest element of finance lease rental payments
(2)
(2)
(3)
Repayment of bank loans
(1)
(2)
(2)
Repayment of Medium Term Notes and
other fixed term debt
-
-
(73)
Payment on financing derivatives
-
-
(9)
Capital element of finance lease rental payments
(6)
(7)
(14)
New shares issued under share schemes
1
1
6
Own shares issued under share schemes
1
1
2
Purchase of own shares for ESOP trust
(11)
-
(17)
Purchase of own shares for cancellation
(139)
(35)
(100)
Special dividend paid to equity shareholders of the Company
-
(100)
(100)
Ordinary dividends paid to equity shareholders of the Company
(160)
(159)
(234)
Net cash flows from financing activities
(323)
(306)
(554)
Net increase in cash and cash equivalents and bank overdrafts, including amounts classified as held for sale
11
109
55
Cash and cash equivalents and bank overdrafts, including amounts classified as held for sale, at beginning of period
527
534
534
Exchange differences
(44)
(31)
(62)
Cash and cash equivalents and bank overdrafts, including amounts classified as held for sale, at end of period
Cash and cash equivalents classified as held for sale (B&Q China)
494
-
612
-
527
(57)
Cash and cash equivalents and bank overdrafts at end of period
15
494
612
470
KINGFISHER PLC
2015/16 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.
Kingfisher plc is a company incorporated in the United Kingdom. The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX. The Company is listed on the London Stock Exchange.
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 2015 were approved by the Board of Directors on 30 March 2015 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 14 September 2015.
2. Basis of preparation
The interim financial report for the 26 weeks ended 1 August 2015 ('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 2015, 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, '2014/15' refers to the prior half year.
The Directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements for the half year ended 1 August 2015.
The following statutory (GAAP) measures have been restated following the adoption of IFRIC 21 'Levies', in the current period (see note 3):
Half year ended 2 August 2014
Year ended 31 January 2015
millions
Before restatement
IFRIC 21
After
restatement
Before restatement
IFRIC 21
After
restatement
Selling and distribution expenses
(1,475)
18
(1,457)
(2,867)
-
(2,867)
Income tax expense
(98)
(5)
(103)
(71)
-
(71)
Trade and other payables
(2,691)
4
(2,687)
(2,323)
(14)
(2,337)
Deferred tax liabilities
(286)
-
(286)
(329)
5
(324)
Retained earnings at beginning of period
3,495
(9)
3,486
3,495
(9)
3,486
Retained earnings at end of period
3,478
4
3,482
3,661
(9)
3,652
Basic earnings per share
11.8p
0.5p
12.3p
24.3p
-
24.3p
Diluted earnings per share
11.7p
0.5p
12.2p
24.2p
-
24.2p
In addition to the adoption of IFRIC 21, the following adjusted (non-GAAP) measures have also been restated in the comparatives to exclude B&Q China's operating results, in order to improve comparability following the disposal of the Group's controlling interest in the current period (see note 16):
Half year ended 2 August 2014
Year ended 31 January 2015
millions
Before restatement
IFRIC 21
B&Q China
After
restatement
Before restatement
IFRIC 21
B&Q China
After
restatement
Adjusted sales
5,768
-
(163)
5,605
10,966
-
(361)
10,605
Retail profit
390
18
11
419
733
-
9
742
Adjusted pre-tax profit
364
18
11
393
675
-
9
684
Adjusted earnings
267
13
11
291
493
-
9
502
Adjusted basic earnings per share
11.3p
0.5p
0.5p
12.3p
20.9p
-
0.4p
21.3p
Adjusted diluted earnings per share
11.2p
0.5p
0.5p
12.2p
20.8p
-
0.4p
21.2p
Segment assets
3,554
4
(19)
3,539
3,679
(9)
(72)
3,598
The IFRIC 21 and B&Q China restatements have only impacted the France and Other International segments respectively. Refer to the data tables for the full year 2014/15 results at www.kingfisher.com for the impact of the restatements on quarterly segmental sales and retail profit comparatives.
There have been no changes in estimates of amounts reported in prior periods that have had a material effect in the current period.
Principal rates of exchange against Sterling
Half year ended
1 August 2015Half year ended
2 August 2014Year ended
31 January 2015
Average
rate
Period end
rate
Average
rate
Period end
rate
Average
rate
Year end
rate
Euro
1.38
1.41
1.23
1.25
1.25
1.33
US Dollar
1.53
1.57
1.68
1.68
1.64
1.50
Polish Zloty
5.70
5.87
5.11
5.24
5.23
5.57
Russian Rouble
86.58
95.18
59.05
60.18
66.70
105.58
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 adjusted sales, retail profit, adjusted pre-tax profit, effective tax rate, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These and other non-GAAP measures such as net debt/cash are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items', 'adjusted', 'effective tax rate' and 'net debt/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 (principally the costs of the Group's head office), exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of joint ventures and associates. 2014/15 comparatives have been restated for the adoption of IFRIC 21 (impacting only the half year) and to exclude B&Q China's operating results.
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 underlying 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 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). 2014/15 comparatives have been restated for the adoption of IFRIC 21 (impacting only the half year) and to exclude B&Q China's operating results. 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 underlying items of a financing nature.
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 debt/cash comprises borrowings and financing derivatives (excluding accrued interest), less cash and cash equivalents and short-term deposits. It excludes balances classified as assets and liabilities held for sale.
3. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 January 2015, as described in note 2 of those financial statements, with the exception of the adoption in the period of IFRIC 21 'Levies'.
IFRIC 21 sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation changes the timing of when such liabilities are recognised, particularly in connection with levies that are triggered by circumstances on a specific date. This applies from the start of the current financial year, with restatement of 2014/15 comparatives. It will have no material impact on the annual results, but has had a significant impact on the phasing of operating profit (and related deferred tax) in France, with fewer costs recognised in the first half (and third quarter) but more costs to be recognised in the final quarter of the year. It has also resulted in a restatement of balance sheet payables and deferred tax.
Taxes on income for interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The most significant areas of accounting estimates and judgements are set out in note 3 of the annual financial statements for the year ended 31 January 2015 and remain unchanged.
The directors intend to prepare the Kingfisher plc parent company financial statements under the accounting standard FRS 101, 'Reduced disclosure framework', for the first time for the year ended 30 January 2016. These have previously been prepared under existing UK GAAP but will need to be prepared under FRS 101 or an alternative standard in 2015/16. FRS 101 allows qualifying UK companies to apply the recognition and measurement requirements of IFRS, but with reduced disclosures, and the directors consider it is in the best interests of the Group for Kingfisher plc to adopt this standard. A shareholder or shareholders holding in aggregate 5% or more of the total issued shares in Kingfisher plc may object to the use of the disclosure exemptions, in writing, to the Company Secretary at the registered office no later than 31 December 2015. The consolidated financial statements for the Group will continue to be prepared under IFRS as adopted by the European Union.
4. Segmental analysis
Income statement
Half year ended 1 August 2015
millions
France
UK & Ireland
Other International
Total
Poland
Other
Adjusted sales
1,976
2,527
508
371
5,382
B&Q China sales
110
Sales
5,492
Retail profit
167
194
53
(4)
410
Central costs
(19)
Share of interest and tax of joint ventures and associates
(2)
B&Q China operating loss
(4)
Exceptional items
9
Operating profit
394
Net finance costs
(8)
Profit before taxation
386
Half year ended 2 August 2014 (restated - note 2)
millions
France
UK & Ireland
Other International
Total
Poland
Other
Adjusted sales
2,205
2,419
554
427
5,605
B&Q China sales
163
Sales
5,768
Retail profit
200
166
54
(1)
419
Central costs
(19)
Share of interest and tax of joint ventures and associates
(3)
B&Q China operating loss
(11)
Exceptional items
10
Operating profit
396
Net finance costs
(3)
Profit before taxation
393
Year ended 31 January 2015 (restated - note 2)
millions
France
UK & Ireland
Other International
Total
Poland
Other
Adjusted sales
4,132
4,600
1,055
818
10,605
B&Q China sales
361
Sales
10,966
Retail profit
349
276
118
(1)
742
Central costs
(40)
Share of interest and tax of joint ventures and associates
(6)
B&Q China operating loss
(9)
Exceptional items
(35)
Operating profit
652
Net finance costs
(8)
Profit before taxation
644
Balance sheet
At 1 August 2015
millions
France
UK & Ireland
Other International
Total
Poland
Other
Segment assets
1,162
1,343
463
340
3,308
B&Q China investment
60
Central liabilities
(184)
Goodwill
2,412
Net cash
435
Net assets
6,031
At 2 August 2014 (restated - note 2)
millions
France
UK & Ireland
Other International
Total
Poland
Other
Segment assets
1,283
1,366
518
372
3,539
B&Q China assets (excluding cash) and liabilities
19
Central liabilities
(225)
Goodwill
2,416
Net cash
496
Net assets
6,245
At 31 January 2015 (restated - note 2)
millions
France
UK & Ireland
Other International
Total
Poland
Other
Segment assets
1,231
1,543
501
323
3,598
B&Q China assets (including cash) and liabilities held for sale
72
Central liabilities
(183)
Goodwill
2,414
Net cash
329
Net assets
6,230
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. Central liabilities comprise unallocated head office and other central items including pensions, interest and tax.
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
1 August 2015
2 August 2014
31 January 2015
Included within selling and distribution expenses
UK & Ireland and continental Europe restructuring
(151)
(6)
(17)
Transaction costs
-
(5)
(15)
(151)
(11)
(32)
Included within other income
Profit on disposal of B&Q China
143
-
-
Profit on disposal of property company
16
-
-
Disposal of properties and non-operational asset losses
1
21
(3)
160
21
(3)
Exceptional items before tax
9
10
(35)
Exceptional tax items
29
1
106
Exceptional items
38
11
71
Current period exceptional items include a 151m restructuring charge relating to the transformation of B&Q in the UK and the announced closure of two loss-making stores in France. In the UK, the transformation of B&Q involves the closure of stores in over-spaced catchments and optimisation of vacant space, and productivity initiatives aimed at delivering a simpler, more efficient business with a lower cost operating model. The exceptional loss includes lease exit costs, store asset impairments, inventory write downs and employee redundancy costs. In the prior year, transformation costs amounted to 17m. In France, the exceptional charge includes lease exit costs and store asset impairments.
In the prior year, exceptional transaction costs were incurred relating to the potential acquisition of Mr Bricolage, which ultimately did not proceed, and the agreement to dispose of a controlling stake in the B&Q China business.
Profits were recorded in the period on the disposal of the Group's controlling 70% stake in B&Q China and the sale of a property company. Refer to note 16 for further information.
Exceptional tax items for the period amount to a credit of 29m. In the prior year, exceptional tax credits included the tax impact on exceptional items and the release of prior year provisions, which had either been agreed with the tax authorities, reassessed or time expired.
6. Net finance costs
Half year ended
Half year ended
Year ended
millions
1 August 2015
2 August 2014
31 January 2015
Bank overdrafts and bank loans
(5)
(3)
(7)
Medium Term Notes and other fixed term debt
(1)
(1)
(3)
Finance leases
(2)
(2)
(3)
Financing fair value remeasurements
(3)
1
4
Net interest expense on defined benefit pension schemes
-
(1)
(3)
Other interest payable
-
-
(1)
Finance costs
(11)
(6)
(13)
Cash and cash equivalents and short-term deposits
1
3
5
Net interest income on defined benefit pension schemes
2
-
-
Finance income
3
3
5
Net finance costs
(8)
(3)
(8)
7. Income tax expense
Half year ended
millions
Half year ended
1 August 20152 August 2014
(restated - note 2)
Year ended
31 January 2015UK corporation tax
Current tax on profits for the period
(15)
(35)
(46)
Adjustments in respect of prior years
-
-
96
(15)
(35)
50
Overseas tax
Current tax on profits for the period
(59)
(64)
(138)
Adjustments in respect of prior years
1
(1)
6
(58)
(65)
(132)
Deferred tax
Current period
5
(3)
12
Adjustments in respect of changes in tax rates
-
-
(1)
5
(3)
11
Income tax expense
(68)
(103)
(71)
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% (2014/15: 27%), 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 2015 was 27%. Exceptional tax items for the current period amount to a credit of 29m, none of which relates to prior year items (2014/15: 1m credit, none of which related to prior year items). Exceptional tax items for the year ended 31 January 2015 amounted to a credit of 106m, 95m of which related to prior year items.
8. Earnings per share
Half year ended
Year ended
Pence
Half year ended
1 August 20152 August 2014
(restated - note 2)31 January 2015
(restated - note 2)Basic earnings per share
13.6
12.3
24.3
Effect of dilutive share options
-
(0.1)
(0.1)
Diluted earnings per share
13.6
12.2
24.2
Basic earnings per share
13.6
12.3
24.3
B&Q China operating loss
0.2
0.5
0.4
Exceptional items before tax
(0.4)
(0.4)
1.5
Tax on exceptional and prior year items
(1.2)
-
(4.8)
Financing fair value remeasurements
0.2
(0.1)
(0.2)
Tax on financing fair value remeasurements
(0.1)
-
0.1
Adjusted basic earnings per share
12.3
12.3
21.3
Diluted earnings per share
13.6
12.2
24.2
B&Q China operating loss
0.2
0.5
0.4
Exceptional items before tax
(0.4)
(0.4)
1.5
Tax on exceptional and prior year items
(1.2)
-
(4.8)
Financing fair value remeasurements
0.2
(0.1)
(0.2)
Tax on financing fair value remeasurements
(0.1)
-
0.1
Adjusted diluted earnings per share
12.3
12.2
21.2
The calculation of basic and diluted earnings per share is based on the profit for the period attributable to equity shareholders of the Company. A reconciliation of statutory earnings to adjusted earnings is set out below:
Half year ended
Year ended
millions
Half year ended
1 August 20152 August 2014
(restated - note 2)31 January 2015
(restated - note 2)Earnings
318
291
573
B&Q China operating loss
4
11
9
Exceptional items before tax
(9)
(10)
35
Tax on exceptional and prior year items
(30)
-
(112)
Financing fair value remeasurements
3
(1)
(4)
Tax on financing fair value remeasurements
(1)
-
1
Adjusted earnings
285
291
502
The weighted average number of shares in issue during the period, excluding those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is 2,327m (2014/15: 2,364m). The diluted weighted average number of shares in issue during the period is 2,329m (2014/15: 2,375m). For the year ended 31 January 2015, the weighted average number of shares in issue was 2,358m and the diluted weighted average number of shares in issue was 2,369m.
9. Dividends
Half year ended
Half year ended
Year ended
millions
1 August 2015
2 August 2014
31 January 2015
Dividends to equity shareholders of the Company
Ordinary final dividend for the year ended 31 January 2015 of
6.85p per share
160
-
-
Special interim dividend of 4.2p per share paid 25 July 2014
-
100
100
Ordinary interim dividend for the year ended 31 January 2015 of
3.15p per share
-
-
75
Ordinary final dividend for the year ended 1 February 2014 of
6.78p per share
-
159
159
160
259
334
The proposed ordinary interim dividend for the period ended 1 August 2015 is 3.18p 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 178m (2014/15: 124m) and for the year ended 31 January 2015 were 291m. Disposals in net book value of property, plant and equipment, investment property, property assets held for sale and other intangible assets are 2m (2014/15: 24m) and for the year ended 31 January 2015 were 26m.
Store asset impairment losses of 39m were recorded in the period as part of the UK and continental Europe exceptional restructuring programmes set out in note 5. These were based on a determination of recoverable amounts of the stores as the net present value of future pre-tax cash flows ('value-in-use') or fair value less costs to sell (using market valuations performed by independent external valuers) if higher.
Capital commitments contracted but not provided for at the end of the period are 50m (2014/15: 54m) and at 31 January 2015 were 57m.
11. Post employment benefits
Half year ended
Half year ended
Year ended
millions
1 August 2015
2 August 2014
31 January 2015
Net surplus/(deficit) in schemes at beginning of period
112
(100)
(100)
Current service cost
(4)
(4)
(9)
Administration costs
(2)
(2)
(3)
Curtailment gain
-
-
9
Net interest income/(expense)
2
(1)
(3)
Net actuarial (losses)/gains
(72)
42
175
Contributions paid by employer
18
18
36
Exchange differences
5
1
7
Net surplus/(deficit) in schemes at end of period
59
(46)
112
At
At
At
millions
1 August 2015
2 August 2014
31 January 2015
UK
140
28
194
Overseas
(81)
(74)
(82)
Net surplus/(deficit) in schemes
59
(46)
112
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 2015.
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 to 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
1 August 2015
2 August 2014
31 January 2015
Discount rate
3.6
4.2
3.0
Price inflation
3.3
3.2
2.8
12. Financial instruments
The Group holds the following derivative financial instruments at fair value:
At
At
At
millions
1 August 2015
2 August 2014
31 January 2015
Cross-currency interest rate swaps
42
37
54
Foreign exchange contracts
22
7
68
Derivative assets
64
44
122
At
At
At
millions
1 August 2015
2 August 2014
31 January 2015
Cross-currency interest rate swaps
-
(8)
-
Foreign exchange contracts
(17)
(10)
(10)
Derivative liabilities
(17)
(18)
(10)
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.
The Group has a 30% interest in B&Q China, along with an option to sell this interest in the future - refer to note 16 for further details. At 1 August 2015 the fair value of this 30% B&Q China investment is judged to be 60m, based on a consideration of the economic value attributed to the B&Q China business, and the fair value of the option is judged not to be significant. The value of the option is based on the value of the investment, which incorporates non-observable inputs that would be classified as 'level 3' in the IFRS 13 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 1' inputs for the Medium Term Notes and 'level 2' inputs for other borrowings as defined by the IFRS 13 fair value hierarchy.
Carrying amount
At
At
At
millions
1 August 2015
2 August 2014
31 January 2015
Bank overdrafts
43
15
91
Bank loans
10
12
11
Medium Term Notes and other fixed term debt
170
238
183
Finance leases
47
56
52
Borrowings
270
321
337
Fair value
At
At
At
millions
1 August 2015
2 August 2014
31 January 2015
Bank overdrafts
43
15
91
Bank loans
10
13
12
Medium Term Notes and other fixed term debt
177
245
190
Finance leases
59
70
68
Borrowings
289
343
361
13. Other reserves
millions
Cash flow hedge reserve
Translation reserve
Other
Total
At 1 February 2015
41
(194)
164
11
Currency translation differences
Group
Joint ventures and associates
Transferred to income statement
-
-
-
(136)
(3)
(7)
-
-
-
(136)
(3)
(7)
Cash flow hedges
Fair value losses
(21)
-
-
(21)
Gains transferred to inventories
(30)
-
-
(30)
Tax on items that may be reclassified
14
(2)
-
12
Other comprehensive income for the period
(37)
(148)
-
(185)
Purchase of own shares for cancellation
-
-
6
6
At 1 August 2015
4
(342)
170
(168)
At 2 February 2014
(5)
112
159
266
Currency translation differences
Group
-
(77)
-
(77)
Cash flow hedges
Fair value losses
(6)
-
-
(6)
Losses transferred to inventories
16
-
-
16
Tax on items that may be reclassified
(3)
-
-
(3)
Other comprehensive income for the period
7
(77)
-
(70)
Purchase of own shares for cancellation
-
-
1
1
At 2 August 2014
2
35
160
197
At 2 February 2014
(5)
112
159
266
Currency translation differences
Group
-
(309)
-
(309)
Joint ventures and associates
-
(2)
-
(2)
Cash flow hedges
Fair value gains
70
-
-
70
Gains transferred to inventories
(5)
-
-
(5)
Tax on items that may be reclassified
(19)
5
-
(14)
Other comprehensive income for the year
46
(306)
-
(260)
Purchase of own shares for cancellation
-
-
5
5
At 31 January 2015
41
(194)
164
11
14. Cash generated by operations
Half year ended
millions
Half year ended
1 August 20152 August 2014
(restated - note 2)
Year ended
31 January 2015Operating profit
394
396
652
Share of post-tax results of joint ventures and associates
-
(2)
(5)
Depreciation and amortisation
120
132
262
Impairment losses
39
-
30
Profit on disposal of property, plant and equipment, property held for sale and intangible assets
-
(22)
(20)
Profit on disposal of property company
(16)
-
-
Profit on disposal of B&Q China
(143)
-
-
Share-based compensation charge
7
6
11
Increase in inventories
(111)
(179)
(150)
(Increase)/decrease in trade and other receivables
(40)
(28)
12
Increase in trade and other payables
191
225
53
Movement in provisions
102
(4)
(6)
Movement in post employment benefits
(12)
(12)
(33)
Cash generated by operations
531
512
806
15. Net cash
At
At
At
millions
1 August 2015
2 August 2014
31 January 2015
Cash and cash equivalents
537
627
561
Bank overdrafts
(43)
(15)
(91)
Cash and cash equivalents and bank overdrafts
494
612
470
Short-term deposits
123
167
48
Bank loans
(10)
(12)
(11)
Medium Term Notes and other fixed term debt
(170)
(238)
(183)
Financing derivatives
45
23
57
Finance leases
(47)
(56)
(52)
Net cash
435
496
329
Half year ended
Half year ended
Year ended
millions
1 August 2015
2 August 2014
31 January 2015
Net cash at beginning of period
329
238
238
Net increase in cash and cash equivalents and
bank overdrafts, including amounts classified as held for sale
11
109
55
Increase in short-term deposits
75
167
48
Repayment of bank loans
1
2
2
Repayment of Medium Term Notes and other fixed term debt
-
-
73
Payment on financing derivatives
-
-
9
Capital element of finance lease rental payments
6
7
14
Cash flow movement in net cash
93
285
201
Adjustment for cash classified as held for sale (B&Q China)
57
-
(57)
Exchange differences and other non-cash movements
(44)
(27)
(53)
Net cash at end of period
435
496
329
16. Disposals
On 30 April 2015 Wumei Holdings Inc acquired a controlling 70% stake in the B&Q China business from the Group for a gross cash consideration of 140m, and a 12m deposit received in the prior year was repaid. As part of the terms of the transaction, Kingfisher has the option from 1 May 2017, or sooner where agreed by both parties, to require Wumei Holdings Inc to acquire the Group's remaining 30% interest for a fixed price of the Sterling equivalent of RMB 582m.
The profit on disposal of 143m is analysed as follows:
millions
Proceeds (net of disposal costs paid of 3m)
137
Cash disposed
(32)
Net disposal proceeds received
105
Other disposal costs
(3)
Net disposal proceeds
102
Fair value of 30% interest retained
60
162
Net assets disposed excluding cash (see below)
(32)
Non-controlling interests disposed
10
Currency translation gains transferred from translation reserve
3
Exceptional profit on disposal
143
millions
Property, plant and equipment
150
Inventories, trade and other receivables/(payables)
(108)
Provisions
(3)
Deferred tax liabilities
(9)
Other net assets
2
Net assets disposed excluding cash
32
The Group does not have the ability to exert significant influence on the B&Q China operations, for example, as part of the terms agreed with Wumei Holdings Inc, the Group currently does not have the right to appoint directors to the board. The remaining 30% B&Q China investment is therefore classified as a financial asset and not as an associate, with no share of B&Q China's results being recognised in the income statement after the disposal date. Included within the profit on disposal is a gain of 44m attributable to measuring this retained 30% investment at fair value. The B&Q China' business had been classified as a disposal group held for sale from 22 December 2014 (the date of announcement of the transaction agreement) up to the 30 April 2015 disposal date. Accordingly, depreciation of 4m was not charged with respect to B&Q China during the period.
In April 2015 the Group also completed the sale of a property company for proceeds of 18m and a profit of 16m. At disposal, the freehold properties had a net book value of 6m and 4m of currency translation gains were transferred from the translation reserve.
In the prior year the Group received proceeds of 236m (198m) following the sale of its 21% stake in Hornbach in March 2014.
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 (2014/15: 1m) would crystallise due to possible future events not wholly within the Group's control. At 31 January 2015 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 2015. 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 2015. With the exception of Kevin O'Byrne, who stepped down as a Director of Kingfisher plc on 15 May 2015, there have been no changes in the period.
By order of the Board
Vronique Laury Karen Witts
Chief Executive Officer Chief Financial Officer
14 September 2015 14 September 2015
INDEPENDENT REVIEW REPORT TO KINGFISHER PLC
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the half year ended 1 August 2015 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 interim 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 interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim 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 interim 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 interim 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 interim financial report for the half year ended 1 August 2015 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
14 September 2015
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR GGURPBUPAGMC
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