REG - Kingfisher PLC - Interim Results - Part 2 <Origin Href="QuoteRef">KGF.L</Origin> - Part 2
29/10/2014 10:39
- Part 2: For the preceding part double click ID:nRSJ2504Ra
Financing fair value remeasurements 1 1 (2)
Unwinding of discount on provisions (1) - -
Net interest expense on defined benefit pension schemes (1) - -
Capitalised interest 1 - -
Finance costs (6) (6) (12)
Cash and cash equivalents and short-term deposits 3 3 6
Net interest income on defined benefit pension schemes - 1 2
Kesa demerger French tax case - repayment supplement income - 27 27
Finance income 3 31 35
Net finance (costs)/income (3) 25 23
7. Income tax
Half year ended Half year ended Year ended
£ millions 2 August 2014 3 August 2013 1 February 2014
UK corporation tax
Current tax on profits for the period 35 30 47
Adjustments in respect of prior years - (1) (7)
35 29 40
Overseas tax
Current tax on profits for the period 64 66 131
Kesa demerger French tax case - (118) (118)
Other adjustments in respect of prior years 1 (12) (11)
65 (64) 2
Deferred tax
Current period (2) 3 16
Adjustments in respect of changes in tax rates - (7) (9)
(2) (4) 7
Income tax expense/(credit) 98 (39) 49
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% (2013/14: 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 1 February 2014 was 26%. Exceptional tax items for the current
period amount to a credit of £1m (2013/14: £118m credit, all of which related
to prior year items). Exceptional tax items for the year ended 1 February 2014
amounted to a credit of £114m, £118m of which related to prior year items.
8. Earnings per share
Half year ended Half year ended Year ended
Pence 2 August 2014 3 August 2013(restated - note 2) 1 February 2014(restated - note 2)
Basic earnings per share 11.8 18.7 30.0
Effect of dilutive share options (0.1) (0.2) (0.3)
Diluted earnings per share 11.7 18.5 29.7
Basic earnings per share 11.8 18.7 30.0
Share of Hornbach post-tax results - - (0.6)
Exceptional items before tax (0.4) (1.5) (0.7)
Tax on exceptional and prior year items - (5.9) (6.0)
Financing fair value remeasurements (0.1) - 0.1
Adjusted basic earnings per share 11.3 11.3 22.8
Diluted earnings per share 11.7 18.5 29.7
Share of Hornbach post-tax results - - (0.6)
Exceptional items before tax (0.4) (1.5) (0.7)
Tax on exceptional and prior year items - (5.8) (5.9)
Financing fair value remeasurements (0.1) - 0.1
Adjusted diluted earnings per share 11.2 11.2 22.6
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 Half year ended Year ended
£ millions 2 August 2014 3 August 2013(restated - note 2) 1 February 2014(restated - note 2)
Earnings 278 440 709
Share of Hornbach post-tax results - (1) (14)
Exceptional items before tax (10) (35) (17)
Tax on exceptional and prior year items - (138) (141)
Financing fair value remeasurements (1) (1) 2
Tax on financing fair value remeasurements - - (1)
Adjusted earnings 267 265 538
The weighted average number of shares in issue during the period, excluding
those held in the Employee Share Ownership Plan Trust (ESOP), is 2,364m
(2013/14: 2,358m). The diluted weighted average number of shares in issue
during the period is 2,375m (2013/14: 2,376m). For the year ended 1 February
2014, the weighted average number of shares in issue was 2,363m and the
diluted weighted average number of shares in issue was 2,382m.
9. Dividends
Half year ended Half year ended Year ended
£ millions 2 August 2014 3 August 2013 1 February 2014
Dividends to equity shareholders of the Company
Special interim dividend of 4.2p per share paid 25 July 2014 100 - -
Ordinary final dividend for the year ended 1 February 2014 of6.78p per share 159 - -
Ordinary interim dividend for the year ended 1 February 2014 of3.12p per share - - 74
Ordinary final dividend for the year ended 2 February 2013 of6.37p per share - 150 150
259 150 224
The proposed ordinary interim dividend for the period ended 2 August 2014 is
3.15p per share.
10. Capital expenditure
Additions to the cost of property, plant and equipment, investment property
and intangible assets, excluding assets acquired on the purchase of
businesses, are £124m (2013/14: £146m) and for the year ended 1 February 2014
were £308m. Disposals in net book value of property, plant and equipment,
investment property, property assets held for sale and intangible assets are
£24m (2013/14: £9m) and for the year ended 1 February 2014 were £13m.
Capital commitments contracted but not provided for at the end of the period
are £54m (2013/14: £48m) and at 1 February 2014 were £31m.
11. Post employment benefits
Half year ended Half year ended Year ended
£ millions 2 August 2014 3 August 2013 1 February 2014
Net deficit in schemes at beginning of period (100) - -
Current service cost (4) (4) (9)
Administration costs (2) (2) (3)
Net interest (expense)/income (1) 1 2
Net actuarial gains/(losses) 42 (17) (127)
Contributions paid by employer 18 16 33
Exchange differences 1 - 4
Net deficit in schemes at end of period (46) (6) (100)
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 1 February 2014.
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 based on the yield on the iBoxx over 15 year AA-rated Sterling corporate
bond index adjusted for the difference in term between iBoxx and 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 2 August 2014 3 August 2013 1 February 2014
Discount rate 4.2 4.6 4.4
Price inflation 3.2 3.3 3.3
12. Financial instruments
The Group holds the following financial instruments at fair value:
At At At
£ millions 2 August 2014 3 August 2013 1 February 2014
Cross-currency interest rate swaps 37 60 42
Foreign exchange contracts 7 7 3
Derivative assets 44 67 45
At At At
£ millions 2 August 2014 3 August 2013 1 February 2014
Cross-currency interest rate swaps (8) (13) (9)
Foreign exchange contracts (10) (6) (18)
Derivative liabilities (18) (19) (27)
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'. 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 a mix of
Level 1 and Level 2 inputs as defined by the fair value hierarchy of IFRS 13,
'Fair value measurement'.
Carrying amount
At At At
£ millions 2 August 2014 3 August 2013 1 February 2014
Bank overdrafts 15 1 1
Bank loans 12 16 14
Medium Term Notes and other fixed term debt 238 264 247
Finance leases 56 63 62
Borrowings 321 344 324
Fair value
At At At
£ millions 2 August 2014 3 August 2013 1 February 2014
Bank overdrafts 15 1 1
Bank loans 13 17 16
Medium Term Notes and other fixed term debt 245 273 254
Finance leases 70 79 79
Borrowings 343 370 350
13. Other reserves
£ millions Cash flow hedge reserve Translation reserve Other Total
At 2 February 2014 (5) 112 159 266
Currency translation differencesGroup - (77) - (77)
Cash flow hedgesFair 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 3 February 2013 (8) 374 159 525
Currency translation differencesGroup - (23) - (23)
Joint ventures and associates - (1) - (1)
Cash flow hedgesFair value gains 13 - - 13
Gains transferred to inventories (1) - - (1)
Tax on items that may be reclassified (4) 2 - (2)
Other comprehensive income for the period 8 (22) - (14)
At 3 August 2013 - 352 159 511
At 3 February 2013 (8) 374 159 525
Currency translation differencesGroup - (210) - (210)
Joint ventures and associates - (25) - (25)
Transferred to income statement - (31) - (31)
Cash flow hedgesFair value losses (4) - - (4)
Losses transferred to inventories 9 - - 9
Tax on items that may be reclassified (2) 4 - 2
Other comprehensive income for the year 3 (262) - (259)
At 1 February 2014 (5) 112 159 266
14. Cash generated by operations
Half year ended Half year ended Year ended
£ millions 2 August 2014 3 August 2013 1 February 2014
Operating profit 378 376 736
Share of post-tax results of joint ventures and associates (2) (5) (8)
Depreciation and amortisation 132 130 261
Impairment losses - - 2
(Profit)/loss on disposal of property, plant and equipment, investment property and intangible assets (22) (1) 1
Share-based compensation charge 6 7 7
Increase in inventories (179) (60) (31)
Increase in trade and other receivables (28) (50) (60)
Increase in trade and other payables 243 234 118
Movement in provisions (4) (21) (29)
Movement in post employment benefits (12) (10) (21)
Cash generated by operations 512 600 976
15. Net cash
At At At
£ millions 2 August 2014 3 August 2013 1 February 2014
Cash and cash equivalents 627 559 535
Bank overdrafts (15) (1) (1)
Cash and cash equivalents and bank overdrafts 612 558 534
Short-term deposits 167 - -
Bank loans (12) (16) (14)
Medium Term Notes and other fixed term debt (238) (264) (247)
Financing derivatives 23 44 27
Finance leases (56) (63) (62)
Net cash 496 259 238
Short-term deposits comprise bank deposits with original maturities of between
three and 12 months.
Half year ended Half year ended Year ended
£ millions 2 August 2014 3 August 2013 1 February 2014
Net cash at beginning of period 238 38 38
Net increase in cash and cash equivalents and bank overdrafts 109 137 153
Increase in short-term deposits 167 - -
Repayment of bank loans 2 89 89
Repayment of Medium Term Notes and other fixed term debt - 33 33
Receipt on financing derivatives - (6) (6)
Capital element of finance lease rental payments 7 6 13
Cash flow movement in net cash 285 259 282
Borrowings acquired - (35) (35)
Exchange differences and other non-cash movements (27) (3) (47)
Net cash at end of period 496 259 238
16. Acquisitions and disposals
On 3 April 2014, Kingfisher announced it had entered into exclusive
negotiations with the principal shareholders of Mr Bricolage, the French home
improvement retailer, to acquire their shareholding. A non-binding memorandum
of understanding was entered into, marking the start of exclusive negotiations
during which the operating businesses of Mr Bricolage and of Kingfisher in
France (Castorama and Brico Dépôt) would meet with their respective works
councils and would propose improved commercial terms to the franchisees of Mr
Bricolage. The outcome of these negotiations was successful and accordingly, a
binding agreement was entered into on 23 July 2014.
The acquisition by Kingfisher of the shares of the principal shareholders of
Mr Bricolage will now proceed subject to French anti-trust clearance.
Subsequently, a mandatory offer will be made to acquire the shares held by the
minority shareholders at the agreed price per share of E15, in accordance with
applicable law. The closure of the acquisition of the shareholding of the
principal shareholders is expected to be completed around the end of
Kingfisher's 2014/15 financial year.
In the prior period, the Group acquired 100% of the share capital of the
Bricostore Romania companies for cash consideration of £35m (along with a
non-cash element of £16m) and acquired cash of £7m and borrowings of £35m.
The Group received proceeds of E236m (£198m) following the disposal 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 (2013/14:
£1m) would crystallise due to possible future events not wholly within the
Group's control. At 1 February 2014 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 1 February 2014. There have been no significant changes in
related parties or related party transactions in the period, except that
Hornbach is no longer a related party.
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 1 February 2014. With the exception of Philippe
Tible, who stepped down as a Director of Kingfisher plc on 31 July 2014, there
have been no changes in the period.
By order of the Board
Sir Ian Cheshire
Karen Witts
Group Chief Executive
Group Finance Director
9 September 2014
9 September 2014
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 2 August
2014 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 2 August 2014 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
9 September 2014
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