Final Results
Kingfisher PLC
19 March 2003
Wednesday 19 March 2003
EMBARGOED UNTIL 0700 HOURS
Preliminary results for the year ended 1 February 2003
Kingfisher reports pre-tax profits ahead 17% to £655 million
2003 2002 % Change
(Continuing)
£m £m
Retail sales 10,654.0 9,618.7 11
Retail profit (before exceptionals & goodwill) 694.3 614.4 13
Profit before tax (before exceptionals & goodwill) 655.4 560.1 17
Profit before tax 494.1 470.3 5
Earnings (before exceptionals & goodwill net of tax & 353.5 266.8 33
minority interests)
Earnings 169.7 181.4 (6)
Earnings per share (before exceptionals & goodwill) 16.7p 16.0p 4
Earnings per share (basic) 8.0p 10.9p (27)
Full year dividend per share 9.5p 9.06p 5
Net debt 1,926.4 1,044.2 n/a
• Strong growth in Home Improvement - total sales up 15.8%, 4.3% like-for-like
• Castorama integration progressing well
• Review of international Home Improvement operations confirms focus on
Poland, Italy and the Far East
• Total sales growth in Electrical & Furniture sector of 3.0%, like-for-like
down 1.2%
• Underlying net debt fell by £0.2 billion driven by strong cashflow
'Our top priorities are to keep improving our customer offer, grow our market
share, continue to drive profitability and improve shareholder returns.'
Gerry Murphy, Chief Executive
'It's been a very positive year for Kingfisher. I'm certain that the clarity
and focus that will follow demerger will benefit shareholders, staff and
customers alike.'
Francis Mackay, Chairman
Kingfisher today announced full year preliminary results with retail sales ahead
11% to £10.7 billion and pre-tax profit before exceptional items and acquisition
goodwill amortisation ahead 17% to £655 million.
The Home Improvement sector performed strongly with total sales growing by
15.8%, 4.3% on a like-for-like basis. Retail profit in this sector grew 24.0% to
£534 million.
The Electrical & Furniture sector grew total sales by 3.0% but like-for-like
sales fell by 1.2%. Excluding ProMarkt, the German business sold in January,
total sales grew by more than 6% although like-for-like sales were down by 0.6%.
While retail profit in the UK increased by nearly 10%, the effect of a declining
electricals market across continental Europe led to an overall profit decline
for the sector of 12.8% to £160 million.
After taking account of the doubling in the number of shares in August 2002
following the rights issue in connection with the Castorama minority
acquisition, adjusted earnings grew by 33% and adjusted earnings per share by
4%. Unadjusted earnings fell by 6%, reflecting the exceptional items. The full
year dividend will be increased by 5% to 9.5p, leaving dividend cover per share
unchanged year-on-year at 1.8 times.
Net debt grew by £0.9 billion to £1.9 billion, reflecting the additional debt
raised to part-fund the Castorama minority acquisition. Underlying net debt,
after adjusting for the cost of acquiring the minority interests in Castorama
and for the proceeds of the rights issue, fell by £0.2 billion during the year,
despite continued investment in the business. Since the year end, net debt has
been reduced further by the receipt of £0.6 billion net proceeds from property
disposals.
The separation of Kingfisher's electricals businesses is expected to be
completed during the second quarter via the listing of a demerged company on the
London Stock Exchange. It will be led by its current management team under
Chief Executive Jean-Noel Labroue. Martin Reavley, who until recently was
Managing Director of Chartwell Land and oversaw January's retail park property
sale, has joined Kingfisher Electrical and will become Finance Director at the
point of demerger. A process is well under way to recruit a non-executive
chairman and non-executive directors.
Kingfisher also confirmed today that, outside the UK and France, it will focus
its international resources on growing market-leading businesses in Poland,
Italy and the Far East where it is already successfully established. On a
smaller scale, development work will continue in Spain, South Korea and Turkey.
Kingfisher has already announced plans to withdraw from Castorama's German
business and today confirmed it is pursuing exit options for its Canadian,
Belgian and Brazilian operations together with its NOMI subsidiary in Poland.
Gerry Murphy, Chief Executive, said: 'Kingfisher has grown sales and profit,
whilst at the same time controlling costs and cashflow. The integration of
Castorama is gathering pace with the integration of the London and Lille head
offices and the introduction of Kingfisher's proven Cost Price Reduction
Programme into Castorama.
'In Home Improvement - soon to be our sole focus - Kingfisher is now well
positioned, has clear momentum and strong operational management teams
throughout the business. Looking ahead, we can concentrate on growing our
business and delivering real value for our shareholders. Our top priorities are
to keep improving our customer offer, grow our market share, continue to drive
profitability and improve shareholder returns. The current environment is
uncertain but we remain cautiously optimistic for the year ahead.'
Francis Mackay, Chairman, said: 'It's been a very positive year for Kingfisher.
We're working on the demerger of Kingfisher into two focused businesses; the
world's leading international home improvement retailer on the one hand and one
of Europe's leading electricals retailers on the other. I'm certain that the
clarity and focus that will follow demerger will benefit shareholders, staff and
customers alike.'
This news release contains forward-looking statements based on current
assumptions and forecasts made by Kingfisher's management. Various known and
unknown risks, uncertainties and other factors could lead to substantial
differences between the actual future results, financial situation, development
or performance of the Group and the estimates given here. The Group accepts no
obligation to continue to report or update these forward-looking statements or
adjust them to future events or developments.
- ends -
1. Kingfisher is Europe's leading home improvement retailer and is ranked
number three in the world. With more than 600 home improvement stores
across the globe, the Group is the world's most international home
improvement retailer, enjoying market leading positions in the UK, France,
Poland and Taiwan. Sales for the Home Improvement sector for the year to
1 February 2003 were more than £6.7 billion, with retail profit of more than
£534 million. Kingfisher also has a strategic alliance with Hornbach,
Germany's leading DIY warehouse retailer, which operates 100 stores across
Europe.
2. Kingfisher Electrical operates 650 stores in seven countries. It is Europe's
third largest electricals retailer by sales and number two by retail profit.
As well as holding the leading position in France with Darty and BUT
and the number two position in the UK through Comet, Kingfisher also enjoys
leading positions in Belgium and in the Czech Republic and Slovakia. Sales
for the year to 1 February 2003 were around £3.9 billion with retail
profit of £160 million. On 1 February 2003, Kingfisher completed the sale
of ProMarkt, its German electricals business.
NB: Please note that as of 1 April 2003, Kingfisher's new address will be:
Kingfisher plc
3 Sheldon Square
Paddington
London W2 6PX
Switchboard telephone: +44 (0)20 7372 8008
Ian Harding, direct telephone: +44 (0)20 7644 1028
IMPROVEMENT
Sales £m % % Retail profit £m %
Total LFL Total
2003 2002 change change 2003 2002 change
UK 3,748.1 3,214.6 16.6 5.1 360.1 300.5 19.8
France 2,045.2 1,833.5 11.5 2.4 127.0 119.9 5.9
International 963.9 785.8 22.7 5.3 47.0 10.3 356.3
Total 6,757.2 5,833.9 15.8 4.3 534.1 430.7 24.0
UK
The UK repair, maintenance and improvement market showed growth of 4% for the
full year, with B&Q continuing to outperform the competition. During the year, B
&Q's market share grew from 12.3% to 13.5% driven by ongoing expansion, range
innovation and lower pricing.
During the year, B&Q opened 14 new Warehouses and four new Supercentres. Total
selling space grew by 138,000 square metres, an increase of 7.5%. Overall, B&Q
sales increased by 15.9%, 3.8% on a like-for-like basis, with growth across all
categories. B&Q continued to stimulate market demand through the introduction
of quality new ranges at everyday low prices. Sales of 'it' kitchens,
Performance Power tools, new laminate flooring and kitchen appliances were
particularly strong.
B&Q continued to focus on lowering the cost of home improvement for its
customers through its 'Price Reverse' campaign, which has seen the prices of
many products reduced to levels lower than ten years ago. Additionally, the
introduction of two new store cards, 'Homeplan' and 'You Can Do It', helped
customers spread the cost of their purchases. Since its launch in December 2002,
more than 30% of showroom purchases have been made on the 'Homeplan' card.
The Cost Price Reduction Programme (CPR) is now in its third year and continues
to yield significant benefits. The programme, which seeks to build
mutually-beneficial long term partnerships with key suppliers across the world,
has enabled B&Q to improve prices for customers, introduce innovative new and
exclusive product ranges and invest in store service and efficiency initiatives.
CPR, combined with the introduction of more aspirational product ranges, helped
lift gross margin during the year.
Screwfix Direct, the specialist catalogue and internet home improvement
retailer, grew sales by 31% with the internet now representing 18% of total
sales. B&Q Direct, which includes the transactional website diy.com and sells
14,000 products online, grew sales threefold during the year.
FRANCE
The French home improvement market grew by 4.6% in 2002/03. Together, Castorama
and Brico Depot grew Kingfisher's market share and achieved total sales growth
of 11.5%, with sales of just over £2 billion. On a like-for-like basis, sales
increased 2.4%.
Castorama reported total sales growth of 2.7%, up 1.4% on a like-for-like basis.
Sales growth in paint, kitchens, flooring, lighting, bathrooms and in the garden
and plants category was particularly strong during the year, driven mainly by
Castorama's continued focus on range improvements. Sales were also supported by
increased advertising spend. During the year, two new Castorama stores were
opened, four were relocated and two were transferred to Brico Depot. Total
selling space grew by 3.9% to more than 977,000 square metres.
Gross margin improved as a result of product mix and benefits from central
distribution and buying. However, costs grew faster with significant investment
in existing stores, pre-opening expenses, staff costs and advertising. As a
result, operating margin declined.
Since October, centrally driven product cross-marketing promotions and other
sales initiatives have been successfully implemented in all stores. In addition,
the Cost Price Reduction Programme was introduced into Castorama in the second
half of the year.
Brico Depot had another strong year with total sales up 34.8% in local currency
and like-for-like sales ahead 7.9%. This good overall performance was helped
range improvements during the year with particular success in buildings
materials. Operating margin increased as a result of scale efficiencies.
During the year, 13 new stores were opened, bringing the total to 56. A further
nine are planned to open in the coming year.
INTERNATIONAL
Almost all businesses grew operating profit with particularly strong results
from Castorama Poland, Reno-Depot in Canada and Castorama Italy.
Despite continuing high unemployment and poor consumer confidence, Castorama
Poland grew total sales by 37.9%, like-for-like sales by 11.1% and profit by
more than 40% over the previous year. Operating margin improved with careful
management of both store and central costs. Four new warehouse stores were
opened during the year, bringing the total to 16.
Castorama Italy generated total sales growth of 19.2%, up 8.0% on a
like-for-like basis. Profit was ahead by more than 40%. Two new warehouse stores
were opened during the year, bringing the total to 14.
B&Q Taiwan, which opened two new stores during the year, grew total sales by
26.8% in local currency, up 9.1% on a like-for-like basis, but reported flat
profit as a result of a difficult consumer climate. B&Q China continued its
expansion programme with a further three store openings during the year, almost
doubling the existing selling space. Overall sales grew by 142.2% during the
period, with like-for-like sales ahead by 18.9%. During the year the business
established a market leading position in Shanghai. Before pre-opening costs, the
business is now profitable.
In Canada, Reno-Depot achieved like-for-like sales growth of 1.7% in an
increasingly competitive market. Profit has substantially improved compared to
the previous year, benefiting from higher buying margin, a focus on store costs
and a reduction in marketing expenditure following one-off costs associated with
last year's launch of The Building Box in Ontario.
ELECTRICAL & FURNITURE
Sales £m % % Retail profit £m %
Total LFL Total
2003 2002 change change 2003 2002 change
France 1,788.4 1,700.0 5.2 (2.7) 153.1 173.8 (11.9)
UK 1,319.3 1,253.2 5.3 1.6 47.9 43.7 9.6
International 254.4 206.9 23.0 4.1 (5.6) (6.1) 8.2
Sub-total 3,362.1 3,160.1 6.4 (0.6) 195.4 211.4 (7.6)
Germany(1) 534.7 624.7 (14.4) (4.8) (35.2) (27.7) (27.1)
Total 3,896.8 3,784.8 3.0 (1.2) 160.2 183.7 (12.8)
(1) Includes 12 months to 31 January 2003 (last year: 13 months to 31
January 2002)
FRANCE
French consumer confidence continued to weaken in 2002/03. For the year to
January 2003, the market for white goods - a key product area for the Group -
declined by 1.6% and the market for brown and grey goods grew by 2.4%.
Against this background, sales at Darty in local currency declined by 0.6% to
just over £1.3 billion, with like-for-like sales down by 2.8%. Darty held market
share and achieved growth of 2.5% in brown and grey products such as home cinema
systems, large-screen televisions, DVD players, laptops and digital cameras.
Sales in white goods fell in line with the market.
Gross margin decreased, reflecting a shift in the sales mix towards new
technology products and lower mobile phone commissions. A reduction in costs
was insufficient to offset the decline in both sales and margin. As a result,
retail profit for the year was down 19.0% at £99.5 million.
During the year, six new stores were opened, a further seven were refurbished
and three were relocated. Selling space grew by just over 6%. In the coming
year, Darty plans to open six new stores and refurbish a further six.
BUT also felt the impact of depressed French consumer confidence. Total sales
grew by 15.1% in local currency, while like-for-like sales declined by 2.4%.
BUT's total sales were just under £480 million with retail profit of £53.6
million.
With both the electricals and furniture markets remaining difficult during the
year, sales growth at BUT was driven by the addition of new space, with the
acquisition of a further 12 franchise stores taking the owned total to 101. The
business continued its store refurbishment programme which aims to have all
owned and franchise stores in the same format by the end of 2003.
In furniture, sales of sofas and kitchens performed well. In electricals, sales
of brown goods such as large screen televisions experienced good growth. Product
margin improved, reflecting the continued benefit from central sourcing and
distribution, including the opening of a new distribution centre in Dijon.
UK
Comet's core market grew by 6.1% in the period February 2002 to January 2003,
with brown goods driving a significant proportion of the growth. As a result of
its strategy to develop a more specialist, value-added customer offer, Comet
grew market share within the electricals specialist sector but gave up share at
the lower value end of the market, particularly in small domestic appliances
such as kettles and toasters. Comet's overall market share dropped 0.3% to 13.1%
during the year.
With total sales growth of 5.3%, up 1.6% on a like-for-like basis, Comet was
able to grow retail profit by 9.6% to £47.9 million. Wider ranges, better
in-store service and improved product information encouraged customers to
purchase higher specification products, increasing both average selling prices
and product margin. Categories with particularly strong sales growth included
large screen televisions, DVD and home cinema, games and laptops. Improved
product margin was combined with strong cost control - specifically within
after-sales service, home delivery functions and central costs - to deliver the
overall improvement in operating margin.
A total of 12 interactive destination stores were opened during the year,
bringing the total to 43. In addition, following trials early in 2002, a total
of 47 core stores were 'relaid' to increase the space allocated to faster
selling products such as multi-media.
Comet.co.uk, the UK's fourth most visited retail website, more than doubled its
sales during the year and moved into profit for the first time.
INTERNATIONAL
This includes Vanden Borre in Belgium, BCC in the Netherlands and Datart in the
Czech Republic and Slovakia.
Vanden Borre continued the successful integration of Hugo Van Praag and, with
like-for-like growth of 19.3%, significantly outperformed the market. Strong
sales growth and cost management improved overall operating margin.
BCC continued to modernise its store format and added 28.5% new space, but faced
difficult trading conditions in a very price competitive market. However,
despite the aggressive competition, BCC improved product margin helped by
sourcing benefits across the Kingfisher Electrical sector. This improved margin
helped to reduce operating losses.
Datart made a small operating loss for the year.
PROPERTY
Chartwell Land, the Group's property development and investment business,
reported operating profit of £58.5 million, a 29.1% increase over last year. In
line with the Group's future focus on home improvement, and taking advantage of
market demand for quality retail property, Chartwell Land disposed of a number
of properties throughout the year. The most significant transaction came in
January with the sale of 15 retail parks and five retail development sites to a
property development consortium. Total exceptional profit for the year, the
majority of which was generated by the recent sale, was £143 million. At the
year end, Kingfisher retained around £2 billion of freehold property.
KINGFISHER DATA BY SECTOR AND COUNTRY AS AT 1 FEBRUARY 2003
Home Improvement Store nos. Selling space Employees
(000s sq.m.) (FTE)
UK 320 1,975.5 25,009
France 161 1,246.3 16,154
International 126 912.1 13,586
TOTAL 607 4,133.9 54,749
Electrical & Furniture Store nos. Selling space Employees
(000s sq.m.) (FTE)
France 293 538.0 13,455
UK 251 239.3 8,734
International 106 99.2 2,344
TOTAL 650 876.5 24,533
KINGFISHER
TOTAL 1,257 5,010.4 79,282
The French Electrical & Furniture figures include only those stores consolidated
in the Group's figures. The Group also has 129 non-consolidated franchises in
France with 339,000 square metres of selling space and 3,000 (FTE) employees.
The Electrical & Furniture figures set out above do not include ProMarkt, which
was sold on 1 February 2003.
FINANCIAL REVIEW
Shareholder return and dividends
Earnings per share for continuing operations before exceptional items and
acquisition goodwill amortisation increased from 16.0p to 16.7p per share (after
adjustment to reflect the bonus element of the rights issue) and is calculated
as follows:
2003 2002
Basic earnings per share 8.0p 10.9p
Exceptional items 8.2p 4.3p
Goodwill amortisation 0.5p 0.8p
Adjusted earnings per share 16.7p 16.0p
The revaluation surplus for the year of £39.3 million on the Group's property
portfolio was equivalent to an increase in shareholder value of 1.9p per share.
The Board has proposed a final dividend of 6.05p per share making the total
dividend for the year 9.5p per share. This dividend per share is covered 1.8
times by adjusted earnings per share.
Cashflow and investment in the businesses
Net debt has increased from £1,044.2 million at the start of the year to
£1,926.4 million at the year end. During the year, £3,152.3 million was used to
purchase subsidiary undertakings, principally the buy-out of substantially all
of the minority interests of Castorama. Cash of £1,961.2 million was received
as a result of the rights issue during the year.
A total of £895.0 million of net cash was generated from operating activities
compared to £825.3 million in the previous year. Gross capital expenditure for
the total Group was £468.4 million, down from £732.3 million in the previous
year. A total of £215.4 million (2002: £632.4 million) was received during the
year as a result of the sale of tangible fixed assets.
Following the year end, the Group received £648.6 million in relation to the
majority of the proceeds from the sale by Chartwell Land of its third party
property portfolio, with debt being reduced accordingly. The remaining £37.3
million is anticipated to be received by 31 March 2003.
Interest
In a lower interest rate environment and with strong operational cashflow, the
net interest charge on continuing businesses reduced from £41.2 million to £37.0
million (excluding amortisation of underwriting and issue costs of £6.5 million
on new debt). The interest on the additional borrowing raised to purchase the
shares in Castorama was partially offset by the investment of the rights issue
proceeds. The Group's borrowings and investments remained mainly at floating
rates of interest during the year.
Exceptional Items
Exceptional items are analysed in note 3.
Operating exceptional items of £51.6 million include the payment of a £9.6
million anti-competitive fine in respect of an earlier accounting period by
Darty (which is appealing against this fine), the impairment of goodwill in
relation to NOMI in Poland and Koctas in Turkey of £23.9 million, and Group
restructuring costs of £18.1 million. The Group restructuring charge reflects
the costs of the integration of Castorama following the buy-out of the minority
interests as well as Castorama's bid defence costs.
Demerger costs of £11.8 million relate to external costs incurred in the period,
principally professional advisors' fees that were directly attributable to the
planned separation of the Group's Electrical & Furniture sector.
The loss on sale or termination of operations of £228.4 million includes the
loss on disposal of ProMarkt of £193.6 million and a provision to cover the exit
from Castorama Germany of £34.8 million.
Property profits of £143.0 million include an amount of £126.9 million in
respect of the sale of the third party property portfolio by Chartwell Land,
together with further profit arising from the sale of properties around the
Group.
Taxation
The effective overall tax rate on profit before tax has increased to 45.2% from
35.7% on continuing operations in 2002, principally as a result of an increase
in taxable exceptional items.
The effective tax rate on profit before exceptional items and acquisition
goodwill amortisation, excluding prior year adjustments, has increased to 32.3%
from 30.3% on continuing operations in 2002, principally as a result of an
increase in overseas losses not utilised.
The impact of prior year adjustments is to reduce the effective tax rate on
profit before exceptional items and acquisition goodwill to 30.5%. The prior
year adjustment of £12.2 million arises mainly as a result of the agreement of
open years.
The revised composition of the Group and the change to the taxation of extended
warranties will impact the rate going forward.
Investments, acquisitions and disposals
During the year, the Group acquired substantially all of the outstanding
minority interests of Castorama. Total consideration was £3,132.8 million, which
has given rise to goodwill of £2,373.6 million.
The Group has made a number of other acquisitions during the year. These
include the acquisition of franchises owning 12 BUT stores and an increase in
the Group's interest in the Home Improvement business in China. The total
consideration for these acquisitions was £19.5 million, giving rise to goodwill
of £15.3 million.
The Group also increased its stake in German DIY retailer Hornbach, for a total
consideration of £36.2 million.
On 1 February 2003, the Group completed the sale of ProMarkt. An exceptional
loss of £193.6 million has been included in the profit and loss account.
Dividend
The final dividend for the year ended 1 February 2003 will be paid on 13 June
2003 to shareholders on the register at close of business on 4 April 2003,
subject to approval of shareholders at the company's Annual General Meeting, to
be held at 11am on 4 June 2003 at the Radisson SAS Portman Hotel, London. A
scrip dividend alternative will be offered to shareholders.
Pensions
The Group operates a number of pension arrangements of which by far the most
significant is the funded defined benefits scheme for the Group's UK employees
('the Scheme').
The Group continues to account for pension costs on the basis of the
requirements of SSAP24, under which convention the Scheme pension charge for the
year was £35 million (2002: £27 million - continuing operations only) split £26
million for Group/Home Improvement and £9 million for Electrical & Furniture.
Cash contributions to the Scheme made during the year totalled £31 million, of
which £23 million was for Group/Home Improvement and £8 million for Electrical &
Furniture.
A formal valuation of the Scheme was carried out at 31 March 2002. On the basis
of the principal assumptions used (see note 9), the assets at that date were
sufficient to cover 101% of the Scheme's liabilities.
As a result of the proposed separation of Electrical & Furniture, an interim
funding review will be carried out in 2003. The next formal valuation will be
made on or before 31 March 2005.
On the basis of the assumptions used for the SSAP24 valuation of the Scheme that
reflect market movements since the date of the last formal valuation at 1
February 2003, the SSAP24 pensions charge for the Scheme in 2004 would increase
to around £38 million for the Group as currently constituted. Of this, the
charge for Group/Home Improvement would be £28 million and £10 million for
Electrical & Furniture.
Once again in the accounts this year, the Group is making disclosures regarding
the FRS17 valuation of the Scheme net assets and liabilities.
At the start of the year, the FRS17 valuation for the Scheme showed a deficit,
net of deferred tax, of £112 million. Of this, around £40 million was
attributable to the separated General Merchandise businesses. As a result of
the general deterioration of the market during 2002, the net FRS17 Scheme
deficit at the end of the year is estimated to be £188 million. Of this amount,
approximately £165 million is attributable to Group/Home Improvement and £23
million to Electricals.
Had the Group charged pension costs to the profit and loss account under the
FRS17 basis for the year, the net charge (excluding the credit for settlements)
would have been £31 million (around 13.5% of pensionable salary).
As reported last year, the FRS17 net pension liability has no impact on pension
funding and, as a consequence, continues to have no impact on the Group's
current or future cash flow or reported earnings.
Annual Report & Accounts
The consolidated profit and loss account, consolidated balance sheet,
consolidated cash flow statement, consolidated statement of total recognised
gains and losses and extracts from the notes to the accounts for 2003 and 2002
do not constitute the Group's Annual Report & Accounts. The auditors have made
a report on the Group's statutory accounts for each of the years 2003 and 2002
under section 235 of the Companies Act 1985 which do not contain a statement
under sections 237 (2) or (3) of the Companies Act and are unqualified. The
statutory accounts for 2002 have been delivered to the Registrar of Companies
and the statutory accounts for 2003 will be filed with the Registrar in due
course.
Copies of the Annual Report & Accounts will be posted to shareholders during the
week beginning 28 April 2003.
Further copies of this announcement can be downloaded from the website
www.kingfisher.com or by application to:
Or from 1 April 2003:
The Company Secretary The Company Secretary
Kingfisher plc Kingfisher plc
North West House 3 Sheldon Square
119 Marylebone Road Paddington
London NW1 5PX London W2 6PX
Consolidated profit and loss account
For the financial year ended 1 February 2003
2003 2002
£ millions Notes Total Continuing Discontinued Total
Operations Operations
Turnover including share of joint ventures 10,869.2 9,819.4 1,532.3 11,351.7
Less: share of joint ventures (143.4) (109.9) (3.7) (113.6)
Group turnover 1 10,725.8 9,709.5 1,528.6 11,238.1
Group operating profit/(loss) 612.7 474.8 (26.0) 448.8
Share of operating profit in:
Joint ventures 9.7 9.4 - 9.4
Associates 12.4 4.3 - 4.3
Total operating profit/(loss) including share
of joint ventures and associates 2 634.8 488.5 (26.0) 462.5
Analysed as:
Home Improvement 534.1 430.7 - 430.7
Electrical and Furniture 160.2 183.7 - 183.7
General Merchandise - - (29.6) (29.6)
Property 58.5 45.3 29.0 74.3
e-commerce and other new channels (14.1) (18.8) (12.0) (30.8)
Other operating costs (39.8) (39.6) - (39.6)
Exceptional items - operating 3 (51.6) (97.9) (9.6) (107.5)
Acquisition goodwill amortisation (12.5) (14.9) (3.8) (18.7)
Total operating profit/(loss) including share 634.8 488.5 (26.0) 462.5
of joint ventures and associates
Exceptional items - non-operating 3
Demerger costs (11.8) - (27.2) (27.2)
(Loss)/profit on the sale or termination of (228.4) 57.7 (342.5) (284.8)
operations
Profit/(loss) on the disposal of fixed assets 143.0 (34.7) (19.4) (54.1)
Profit/(loss) on ordinary activities before 537.6 511.5 (415.1) 96.4
interest
Net interest payable 4 (43.5) (41.2) (27.2) (68.4)
Profit/(loss) on ordinary activities before 494.1 470.3 (442.3) 28.0
taxation
Tax on profit/(loss) on ordinary activities 5 (223.3) (168.1) 12.1 (156.0)
Profit/(loss) on ordinary activities after 270.8 302.2 (430.2) (128.0)
taxation
Equity minority interests (101.1) (120.8) - (120.8)
Profit/(loss) for the financial year 169.7 181.4 (430.2) (248.8)
attributable to shareholders
Earnings/(loss) per share (pence)* 6
Basic 8.0 10.9 (14.9)
Diluted 7.8 10.6 (15.0)
Basic - adjusted** 16.7 16.0 14.4
Diluted - adjusted** 16.4 15.6 14.0
* Adjusted for the bonus element of the rights issue.
** Adjusted earnings per share is before exceptional items and acquisition
goodwill amortisation.
The profit and loss account for the year ended 1 February 2003 relates entirely
to continuing operations.
Consolidated balance sheet
As at 1 February 2003
£ millions Note 2003 2002
Fixed assets
Intangible assets 2,651.5 295.4
Tangible assets 3,040.9 3,503.9
Investments in joint ventures
Share of gross assets 190.1 66.9
Share of gross liabilities (158.1) 32.0 (40.8) 26.1
Investments in associates 131.1 87.6
Other investments 146.1 122.4
6,001.6 4,035.4
Current assets
Development work in progress 5.1 61.5
Stocks 1,630.1 1,575.3
Debtors due within one year 1,369.7 904.5
Debtors due after more than one year 61.7 57.5
Investments 145.7 174.7
Cash at bank and in hand 98.5 387.4
3,310.8 3,160.9
Creditors
Amounts falling due within one year (3,245.5) (3,233.2)
Net current assets/(liabilities) 65.3 (72.3)
Total assets less current liabilities 6,066.9 3,963.1
Creditors
Amounts falling due after more than one year (1,528.4) (780.2)
Provisions for liabilities and charges (53.7) (44.9)
4,484.8 3,138.0
Capital and reserves
Called up share capital 359.3 177.7
Share premium account 2,155.2 365.3
Revaluation reserve 165.8 405.1
Non-distributable reserves 159.0 148.2
Profit and loss account 1,623.2 1,376.4
Equity shareholders' funds 7 4,462.5 2,472.7
Equity minority interests 22.3 665.3
4,484.8 3,138.0
Consolidated cash flow statement
For the financial year ended 1 February 2003
£ millions Note 2003 2002
Net cash inflow from operating activities 8 895.0 825.3
Dividends from joint ventures and associates 6.9 2.0
Returns on investment and servicing of finance
Interest received 44.8 25.6
Interest paid (81.2) (106.5)
Underwriting and issue costs of new debt (8.0) -
Interest element of finance lease rental payments (3.2) (3.4)
Dividends paid by subsidiaries to minorities (33.3) (31.2)
Net cash outflow from returns on investment and servicing of finance (80.9) (115.5)
Taxation
UK Corporation tax paid (94.4) (78.4)
Overseas tax paid (76.5) (87.5)
Tax paid (170.9) (165.9)
Capital expenditure and financial investment
Payments to acquire intangible fixed assets - (0.5)
Payments to acquire tangible fixed assets (468.4) (732.3)
Receipts from the sale of tangible fixed assets 215.4 632.4
Payments for additions to investments (3.4) (10.5)
Receipts from sale of investments 11.7 10.5
Purchase of own shares (25.7) (29.0)
Net cash outflow from capital expenditure and financial investment (270.4) (129.4)
Acquisitions and disposals
Purchase of subsidiary and business undertakings (3,152.3) (18.0)
Cash acquired on purchase of/joint venture becoming a subsidiary 5.2 12.9
Purchase of associates and joint ventures (36.2) (77.9)
Non-operating demerger costs (11.8) (27.2)
Disposal of subsidiary undertakings (35.9) 428.1
Disposal of associates and joint ventures - 101.7
Issue of shares by Group companies to minority shareholders 19.3 10.3
Net cash inflow/(outflow) from acquisitions and disposals (3,211.7) 429.9
Equity dividends paid to shareholders (139.1) (148.4)
Management of liquid resources
Decrease/(increase) in short-term deposits 268.8 (276.3)
Decrease/(increase) in short-term investments 30.8 (1.6)
Net cash inflow/(outflow) from management of liquid resources 299.6 (277.9)
Financing
Issue of ordinary share capital 2,014.4 18.0
Rights issue costs (43.9) -
Capital element of finance lease rental payments (13.5) (6.2)
Increase/(decrease) in loans 634.7 (372.7)
Net cash inflow/(outflow) from financing 2,591.7 (360.9)
(Decrease)/increase in cash (79.8) 59.2
Reconciliation of net cash flow to movement in net debt
For the financial year ended 1 February 2003
£ millions 2003 2002
Net debt at start of year (1,044.2) (1,873.8)
(Decrease)/increase in cash (79.8) 59.2
Debt in subsidiary becoming a joint venture/joint venture becoming a subsidiary 172.3 (102.3)
(Decrease)/increase in short-term deposits (268.8) 276.3
(Decrease)/increase in short-term investments (30.8) 1.6
(Increase)/decrease in debt and lease financing (613.2) 378.9
Amortisation of underwriting and issue costs of new debt (6.5) -
Debt demerged with Woolworths Group plc - 191.8
Foreign exchange effects (55.4) 17.9
Increase in market value of investments - 6.2
Net debt at end of year (1,926.4) (1,044.2)
Consolidated statement of total recognised gains and losses
For the financial year ended 1 February 2003
£ millions 2003 2002
Profit/(loss) for the financial year 169.7 (248.8)
Unrealised surplus on revaluation of properties 39.3 27.9
Tax on realised revaluation surplus (7.4) -
Minority interest movement on the issue of shares in Castorama (0.9) 2.7
Net foreign exchange adjustments offset in reserves (4.1) (26.4)
Tax effect of exchange adjustments offset in reserves 10.0 (2.9)
Total recognised gains/(losses) relating to the financial year 206.6 (247.5)
Notes to the accounts
1. Turnover
2003 2002
Total Continuing Discontinued Total
Operations Operations
£ millions
Home Improvement 6,757.2 5,833.9 - 5,833.9
Electrical and Furniture 3,896.8 3,784.8 - 3,784.8
General Merchandise - - 1,498.6 1,498.6
Retail Sales 10,654.0 9,618.7 1,498.6 11,117.3
Property 57.1 35.7 30.0 65.7
Financial Services 14.7 55.1 - 55.1
10,725.8 9,709.5 1,528.6 11,238.1
2. Operating profit
2003 2002
Total Continuing Discontinued Total
Operations Operations
£ millions
Group turnover 10,725.8 9,709.5 1,528.6 11,238.1
Cost of sales (7,101.7) (6,535.7) (1,073.5) (7,609.2)
Gross profit 3,624.1 3,173.8 455.1 3,628.9
Other income and expenses (2,963.7) (2,601.1) (471.5) (3,072.6)
Exceptional items - operating (47.7) (97.9) (9.6) (107.5)
Share of joint ventures and associates 22.1 13.7 - 13.7
634.8 488.5 (26.0) 462.5
3. Exceptional items
2003 2002
Total Continuing Discontinued Total
Operations Operations
£ millions
Operating exceptionals
- Darty anti-competitive fine (9.6) - - -
- Goodwill impairment of Nomi/ProMarkt (20.0) (93.7) - (93.7)
- Group restructuring (18.1) - - -
- Demerger costs - (4.2) (9.6) (13.8)
Total charged to Group operating profit (47.7) (97.9) (9.6) (107.5)
- Impairment of Koctas goodwill (3.9) - - -
Total charged to share of joint ventures (3.9) - - -
(51.6) (97.9) (9.6) (107.5)
Non-operating exceptionals
Demerger costs (11.8) - (27.2) (27.2)
(Loss)/profit on the sale or termination of
operations
- ProMarkt (193.6) - - -
- Castorama Germany (34.8) - - -
- Superdrug - - (342.5) (342.5)
- Time Retail Finance - 57.7 - 57.7
(228.4) 57.7 (342.5) (284.8)
Profit/(loss) on the disposal of fixed assets
- Profit/(loss) on the disposal of properties 143.0 (3.7) (1.9) (5.6)
- Disposal of fixed asset investments - (31.0) (17.5) (48.5)
143.0 (34.7) (19.4) (54.1)
4. Net interest payable
£ millions 2003 2002
Interest payable 86.8 111.9
Interest receivable (38.9) (27.9)
47.9 84.0
Interest capitalised (4.4) (15.6)
Net interest payable 43.5 68.4
The share of net interest payable by joint ventures included above is
£0.4 million (2002: £0.9 million).
The share of net interest payable by associates included above is £2.9 million
(2002: £nil).
Interest payable includes amortisation of underwriting and issue costs of new
debt of £6.5 million (2002: £nil).
Of the net interest payable in 2002, a total of £27.2 milion was charged to
discontinued operations.
5. Taxation
£ millions 2003 2002
UK Corporation tax:
Current tax on profits of the period 213.5 142.5
Adjustments in respect of prior periods (12.2) 4.8
201.3 147.3
Double taxation relief (39.3) (65.0)
162.0 82.3
Foreign tax:
Current tax on profits of the period 55.6 65.1
Adjustments in respect of prior periods - (1.4)
55.6 63.7
Deferred tax (0.1) 6.1
Associated undertakings 3.3 1.5
Joint ventures 2.5 2.4
223.3 156.0
Of the taxation set out above, a total of £12.1 million was credited to
discontinued operations in 2002.
6. Earnings per share
Earnings per share for continuing operations is presented in order to provide a
more meaningful comparison.
The calculation of basic earnings per share for continuing operations is based
on the profit on ordinary activities, after taxation and minority interests of
£169.7 million (2002: £181.4 million) and the weighted average number of shares
in issue during the period of 2,122.1 million (2002: 1,666.3 million).
The diluted earnings per share for continuing operations is based on the diluted
profit on ordinary activities, after taxation and minority interests of £166.1
million (2002: £177.8 million) and the diluted weighted average number of
shares in issue during the period of 2,131.9 million (2002: 1,683.6 million).
Adjusted earnings per share figures are presented to allow comparison to prior
year on a comparable basis. These exclude the effects of exceptional items and
acquisition goodwill amortisation.
The difference between the basic and diluted earnings per share is reconciled as
follows:
2003 2002 2002
pence Continuing Total
Basic earnings per share 8.0 10.9 (14.9)
Attributable to exceptional items 7.1 4.5 28.4
Attributable to acquisition goodwill amortisation 0.5 0.8 1.1
Taxation arising on exceptional items 1.2 (0.1) (0.1)
Minority share of exceptional items (0.1) (0.1) (0.1)
Basic - adjusted earnings per share 16.7 16.0 14.4
Diluted earnings per share 7.8 10.6 (15.0)
Attributable to exceptional items 7.0 4.4 28.1
Attributable to acquisition goodwill amortisation 0.5 0.8 1.1
Taxation arising on exceptional items 1.2 (0.1) (0.1)
Minority share of exceptional items (0.1) (0.1) (0.1)
Diluted - adjusted earnings per share 16.4 15.6 14.0
The number of shares used in the calculation set out above has been adjusted to
reflect the bonus element of the rights issue during the year.
7. Reconciliation of movement in equity shareholders' funds
£ millions 2003 2002
Profit/(loss) for the financial year attributable to shareholders 169.7 (248.8)
Ordinary dividends on equity shares (244.0) (152.3)
Dividend in specie - demerger of Woolworths Group plc - (455.2)
(74.3) (856.3)
Foreign exchange adjustments (net of tax) 5.9 (29.3)
Unrealised surplus on revaluation of properties 39.3 27.9
Tax on realised revaluation surplus (7.4) -
Shares issued under option schemes 6.1 15.7
Net proceeds from rights issue 1,961.2 -
Gain on disposal of nil-paid rights 10.8 -
Scrip issue 49.1 64.4
Minority interest movement on issue of shares in Castorama (0.9) 2.7
Goodwill resurrected on disposal of subsidiaries - 303.4
Goodwill resurrected on demerger of Woolworths Group plc - 7.5
Net addition to/(reduction in) shareholders' funds 1,989.8 (464.0)
Opening shareholders' funds 2,472.7 2,936.7
Closing shareholders' funds 4,462.5 2,472.7
8. Net cash inflow from operating activities
£ millions 2003 2002
Group operating profit 612.7 448.8
Depreciation and amortisation 221.6 232.2
Goodwill impairment 20.0 93.7
Decrease in development work in progress 56.4 27.7
Increase in stocks (100.1) (72.3)
Decrease/(increase) in debtors 58.2 (119.1)
Increase in creditors 20.9 210.6
Loss on disposal of fixed assets 5.3 3.7
Net cash inflow from operating activities 895.0 825.3
9. Pension costs
Pension schemes operated and regular pension costs - SSAP24
The Group operates a variety of pension arrangements covering both funded and
unfunded defined benefit schemes and funded defined contribution schemes. By
far the most significant are the funded defined benefit and defined contribution
schemes for the Group's UK employees.
The total pension charge in the profit and loss account of £43.8 million (2002:
£48.1 million) includes £3.2 million (2002: £3.0 million) for the UK defined
contribution scheme.
A formal actuarial valuation of the UK defined benefit scheme ('the Scheme') was
carried out by an independent professionally qualified actuary at 31 March 2002,
using the projected unit method of funding. In this valuation, the assets were
taken at their market value of £900 million (excluding AVCs). A value was
placed on the liabilities by discounting the anticipated future benefits,
including allowance where appropriate for future increases in pension and
pensionable salaries, using assumptions derived by reference to market
conditions as at 31 March 2002. The principal assumptions adopted for the
future were an inflation rate of 3.0% per annum, an investment return on
existing assets of 6.6% per annum, an investment return on future contributions
of 6.6% per annum, pensionable pay increases of 4.6% per annum and pension
increases of 2.75% per annum. On this basis, the assets were sufficient to
cover over 101% of the Scheme's liabilities. The next valuation will be made on
or before 31 March 2005.
The pension cost for this Scheme charged in the profit and loss account of £35.2
million (2002: £38.9 million) is based on the formal actuarial valuation
described above, adjusted to reflect market movements since the date of this
valuation, and in accordance with SSAP24 'Accounting for pension costs'.
Variations against regular cost have been amortised using the straight line
method. The pension cost for the Scheme is £3.6 million higher than the
contributions paid into the Scheme by the Group during the year. The
contributions paid into the scheme are in line with the contribution rate as
advised by the actuary following the recent valuation.
There are also funded and unfunded defined benefit arrangements covering senior
executives in France, for which the charge in the profit and loss account was
£4.8 million (2002: £5.4 million). A further £0.6 million charge (2002: £0.8
million) has been reflected in the profit and loss account in respect of other
overseas pension arrangements.
FRS17 disclosures
The Accounting Standards Board has announced a deferral of full mandatory
adoption of FRS17 following the notification of intention by the International
Accounting Standards Board that it is to review IAS19, the present international
standard for post employment benefits. Instead, the transitional disclosure
requirements will continue.
The valuation of the Scheme used for FRS17 disclosures has been based on the
most recent actuarial valuation at 31 March 2002 and updated to 1 February 2003.
It takes into account the transitional requirements of FRS17.
The financial assumptions used to calculate estimated Scheme liabilities under
FRS17 are:
2003 2002
Discount rate 5.5% 5.7%
Salary escalation 3.9% 4.0%
Rate of pension increases 2.3% 2.4%
Price inflation 2.3% 2.4%
The assets in the Scheme at 1 February 2003 and the expected future rates of
return on them were:
2003 2002
£ millions % £ millions %
Equities 388 8.5 702 8.0
Bonds 288 4.7 143 5.0
Property 7 7.0 - -
Other (principally cash) 99 3.8 223 4.0
Total market value of assets 782 6.5 1,068 6.8
Present value of scheme liabilities (1,050) (1,228)
Deficit in the scheme (268) (160)
Related deferred tax asset 80 48
Net pension liability (188) (112)
If FRS17 had been adopted in the financial statements, the Group's net assets
and profit and loss reserve at 1 February 2003 would be as follows:
Net assets 2003 2002
£ millions £ millions
Net assets excluding net pension liability 4,485 3,138
Pension provision under SSAP24 7 3
Net pension liability (188) (112)
Net assets including net pension liability 4,304 3,029
Reserves
Profit and loss reserve excluding net pension liability 1,623 1,376
Pension provision under SSAP24 7 3
Net pension liability (188) (112)
Profit and loss reserve including net pension liability 1,442 1,267
If FRS17 had been adopted for the financial statements, the following amounts
would have been recognised in the year to 1 February 2003
Amounts credited to operating profit in respect of defined benefit Scheme
£ millions
2003
Amounts credited/(charged) to operating profit
Current service cost (38)
Past service cost -
Gain on settlements 95
Gain on curtailment 1
Total operating credit 58
Amounts credited/(charged) to other finance income
Expected return on pension Scheme assets 71
Interest on pension Scheme liabilities (65)
Net return 6
Total credited to profit and loss account before deduction for tax 64
Amounts recognised in Statement of Total Recognised Gains and Losses (STRGL)
£ millions 2003
Actual return less expected return on pension scheme assets (201)
As % of Scheme assets 25.7%
Experience gain arising on the Scheme liabilities 25
As % of present value of Scheme liabilities 2.4%
Changes in assumptions underlying the present value of the Scheme liabilities (financial and demographic) (27)
Actuarial loss recognised in the STRGL (203)
As % of present value of Scheme liabilities 19.3%
Movement in deficit during the year
£ millions 2003
Deficit in Scheme at start of year (before tax) (160)
Current service cost (38)
Employer contributions 31
Settlement gain 95
Curtailment gain 1
Other finance income (net) 6
Actuarial loss recognised in STRGL (203)
Deficit in Scheme at end of year (before tax) (268)
Comparison between SSAP24 and FRS17 for the Scheme
FRS17 total profit and loss account charge excluding settlement gains arising on
bulk transfer (31)
SSAP24 profit and loss account charge (35)
For the Group's remaining defined benefit plans, the market value of assets held
by insurance companies was £24 million, Group balance sheet provision totalled
£11 million and the aggregate unfunded obligations for the plans was £15
million.
10. Property turnover and third party rental income
2003 2002
£ millions
Third party rental income 34.4 31.7
Property development sales 22.7 4.0
Property turnover 57.1 35.7
11. Operating leases
The operating lease costs for the Group's continuing operations were as follows:
2003 2002
£ millions
Land and buildings 315.2 272.6
Plant and equipment 38.8 37.5
12. Pledged cash
Included in the Group's cash balances at 1 February 2003 is cash of £81.3
million (2002: £96.1 million) which is pledged to meet certain insurance
liabilities.
This information is provided by RNS
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