REG - Kingfisher PLC - Interim Results - Part 2 <Origin Href="QuoteRef">KGF.L</Origin> - Part 2
15/09/2015 07:02
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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 Koçtaş 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 2 August 2014(restated - note 2) Year ended
1 August 2015 31 January 2015
UK 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 2 August 2014 31 January 2015
1 August 2015 (restated - note 2) (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 2 August 2014 31 January 2015
1 August 2015 (restated - note 2) (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 of6.85p 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 of3.15p per share - - 75
Ordinary final dividend for the year ended 1 February 2014 of6.78p 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 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 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 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 2 February 2014 (5) 112 159 266
Currency translation differencesGroup - (309) - (309)
Joint ventures and associates - (2) - (2)
Cash flow hedgesFair 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 2 August 2014(restated - note 2) Year ended
1 August 2015 31 January 2015
Operating 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 E236m (£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
Véronique 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
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