Final Results
Kingfisher PLC
17 March 2005
EMBARGOED UNTIL 0700 HOURS
Thursday 17th March 2005
Kingfisher plc
Preliminary results for the 52 weeks ended 29 January 2005
Group Financial Highlights (Continuing operations 1,2)
• Sales up 8.7% to £7.7 billion (2003/04: £7.1 billion), up 9.9% in constant currencies and up 3.9%
like-for-like (LFL)
• Retail profit(3) up 10.7% to £706.5 million (2003/04: £638.2 million), up 11.8% in constant currencies
• Adjusted pre-tax profit (4) up 16.2% to £686.5 million (2003/04: £590.7 million)
• Pre-tax profit up 17.5% to £670.9 million (2003/04: £570.8 million)
• Post-tax profit up 1.3% to £469.5 million (2003/04: £463.5 million including a £75.2 million exceptional tax
credit), up 20.9% excluding the prior year exceptional tax credit
• Adjusted basic earnings per share(4) up 16.9% to 20.8p (2003/04: 17.8p)
• Basic earnings per share unchanged at 20.3p (2003/04: 20.3p)
• Final dividend of 6.8p (2003/04: 6.15p), full year dividend up 10.4% to 10.65p
• Underlying return on invested capital (ROIC) improved to 8.9% (2003/04: 8.7%)
• Total net debt reduced to £794.3 million (£843.8 million at 31 January 2004)
• Additional contributions to the UK pension scheme totalling £250 million over next 3 years
• Today in a separate press release, Kingfisher will provide these results restated under International
Financial Reporting Standards (IFRS).
(1) Continuing home improvement business only; excludes businesses sold or demerged during 2003/04
(2) Prior year total Group retail sales, including businesses sold or demerged during 2003/04, were £8.8 billion.
Before goodwill amortisation and exceptionals, pre-tax profits were £640.7 million. Post-tax profits were
£229.3 million as shown in the consolidated profit and loss account.
(3) Retail profit is stated before property, central costs, exceptional items, and goodwill amortisation
(4) Before goodwill amortisation and exceptionals
Operating Highlights (all figures in constant currencies)
UK and Ireland (56.4% of Group Sales)
• Total sales up 4.8% (1.5% LFL), retail profit up 4.4%.
• B&Q's enhanced ranges of kitchens, bathrooms, electricals and joinery
performed well, but seasonal sales were weak all year.
• The mini-Warehouse format continued to perform well. A further 26
conversions were completed and six new mini-Warehouses opened.
• Twelve new Warehouse stores opened including one relocation. Trials on
the next generation of Warehouse stores began, with two 'stretch' stores opened.
• Screwfix Direct was impacted in the second half by the transfer to its
new fulfilment centre which was completed in December, after which sales growth
resumed.
France (33.3% of Group Sales)
• Total Sales up 12.0% (7.7% LFL), retail profit up 18.6%.
• Castorama's revitalisation continued with seven store revamps and three
relocations, new product launches, lower prices and stronger marketing.
• Brico Depot sales were boosted by the launch of a new catalogue and
further promotional mailings.
• Six new Brico Depot stores opened, including two transferred from
Castorama.
Rest of World (10.3% of Group Sales)
• Total sales up 38.6% (6.5% LFL), retail profit up 38.8%.
• 20 new stores opened in five countries
• Strong LFL growth driven by Castorama Italy and B&Q China.
• B&Q China profit increased to £4.6 million (2003/04: £0.4 million).
Gerry Murphy, Chief Executive, said:
'Overall, Kingfisher made solid progress in the year with sales up 10%, pre-tax
profits up more than 16% and with return on invested capital continuing to
improve. In the UK, B&Q delivered good profit growth, though its sales in the
second half were affected by slowing growth in consumer spending and a more
price competitive and promotional market. In an increasingly discount-led
French market, Castorama's revitalisation made further progress and Brico Depot
continued its rapid growth. Kingfisher's other European and Asian businesses
performed well, with particularly strong performances in Italy and China.
'The colder than average weather across Northern Europe has meant B&Q and
Castorama have had a weak start to the new financial year and an early Easter
presents an added challenge in the first quarter. However, all of Kingfisher's
businesses are well prepared for the upcoming spring and summer peak trading
periods.
'In home improvement markets which are increasingly dynamic and competitive,
Kingfisher's scale and international reach are great strengths. Kingfisher is
delivering value to customers, as well as delivering growth and returns to
shareholders.'
Enquiries:
Ian Harding, Group Communications Director 020 7644 1029
Nigel Cope, Head of Communications 020 7644 1030
Heather Ward, Head of Investor Relations 020 7644 1032
Further copies of this announcement can be downloaded from www.kingfisher.com
or by application to: The Company Secretary, Kingfisher plc, 3 Sheldon Square,
London, W2 6PX.
Company Profile
Kingfisher plc is Europe's leading home improvement retail group and the third
largest in the world, with nearly 600 stores in nine countries in Europe and
Asia. Its main retail brands are B&Q, Castorama, Brico Depot and Screwfix
Direct. Kingfisher also has a 21% interest in, and strategic alliance with,
Hornbach, Germany's leading DIY Warehouse retailer, with 117 stores across
Europe.
UK & IRELAND
For the 52 weeks ended 29 January 2005
Retail Sales £m % Total % LFL Retail Profit £m % Total
Change Change Change
2004/5 2003/4 2004/5 2003/4
B&Q 4,087.7 3,896.8 4.9% 1.3% 400.5 371.8 7.7%
Screwfix Direct 228.6 220.6 3.6% 3.6% 7.7 19.1 (59.7)%
Total UK 4,316.3 4,117.4 4.8% 1.5% 408.2 390.9 4.4%
B&Q's total sales grew 4.9% to £4.1 billion (LFL +1.3%) and retail profit grew
7.7% to £400.5 million. Sales growth weakened during the year reflecting a
slowdown in consumer spending as well as an increasingly competitive and
promotional market.
Market share - B&Q's share of the UK's repair, maintenance and improvement
market (RMI) increased to 14.7% (14.4% for the 12 months ended 31 January 2004).
B&Q estimates that the UK RMI market grew by 2.0% in the year.
Sales of kitchen, bathroom and bedroom ranges were strong, as were sales of
joinery and electrical ranges. Poor weather affected sales of B&Q's seasonal
ranges, which were due for renewal in 2005.
New product ranges - B&Q has recently launched substantially renewed
horticultural and garden leisure ranges, ahead of the key spring season. Other
new innovative and price-competitive products are also in store, including
Airforce DIY fixed air conditioning, easy-to-lay Edge tiling and Speedstone
granite worktops. More ranges will be updated during 2005, including flooring,
lighting and wall decorations.
Marketing - In early February, B&Q launched a major marketing campaign - 'Price
Reverse'. This campaign marks a planned rebalancing of B&Q's price message back
towards Every Day Low Pricing (EDLP) and features 5,000 price reductions to
reinforce customers' perceptions of B&Q's leadership in value for money. B&Q
has also launched a new 'Do More' marketing campaign to broaden its appeal to
both the female customer and the more serious DIY enthusiast, and to increase
the focus on new products.
Store development - B&Q opened 12 new Warehouse stores, closed two, and revamped
one during the year. These included the UK's largest DIY store at Trafford
Park, and two new concept 'stretch' stores which are testing new approaches to
providing home improvement inspiration to consumers and a more compelling offer
to B&Q's professional trade customers. B&Q also opened six new mini-Warehouses
and extended two others. Twenty six Supercentre stores were converted to the
mini-Warehouse format. The results of the mini-Warehouse conversion programme
are encouraging, with the stores delivering a 12% sales uplift compared with a
control group of similar stores. B&Q now has 112 Warehouse stores, 62
mini-Warehouses and 163 of the original supercentres. A further 22 conversions
are planned in 2005. B&Q also plans to open five new Warehouse stores and 10
mini-Warehouses in the current year.
Retail margin improved from 9.5% to 9.8%. The costs of reducing prices for
customers and revamping stores were more than offset by further progress in
Strategic Supplier Management (SSM), reduced shrinkage and a strong focus on
cost control. In addition, an overhead efficiency drive saved £10m in the year.
SCREWFIX DIRECT grew its catalogue and online sales of tools and trade materials
by 3.6% to £228.6 million. However, retail profit declined by £11.4 million to
£7.7 million following operational disruption during a complete reconfiguration
of its fulfilment operations.
Screwfix Direct's three older fulfilment centres were closed and replaced by a
new semi-automated centre near Stoke, which will increase capacity by 40%.
Order taking through the call centre and the internet was restricted during the
changeover to ensure that Screwfix Direct met its overnight delivery promise,
impacting sales and profits. The new fulfilment centre and all sales channels
were fully operational from December, and sales growth has been positive since
then.
Screwfix Direct opened a trial 'Trade Counter', a possible new route to market,
offering immediate local availability of the catalogue range. The early results
are encouraging and Screwfix Direct will conduct further trials during 2005.
UK TRADE - In February 2005, George Adams was appointed head of UK Trade, a new
role aimed at accelerating Kingfisher's development in the UK trade and business
to business markets. The new UK trade team will include Screwfix Direct and
will work closely with B&Q to optimise Kingfisher's overall competitive position
in the UK across the consumer and trade markets. George Adams will also
continue to oversee Kingfisher's SSM programme which is now fully established
across the Group.
FRANCE
For the 52 weeks ended 29 January 2005
Retail sales £m 2004/5 2003/4 % Change % Change % LFL
(Reported) (Constant) Change
Castorama 1,571.1 1,541.8 1.9% 4.4% 2.6%
Brico Depot 975.6 786.0 24.1% 27.1% 17.7%
Total France 2,546.7 2,327.8 9.4% 12.0% 7.7%
Retail profit £m 2004/5 2003/4 % Change % Change
(Reported) (Constant)
Castorama 134.2 125.8 6.7% 9.2%
Brico Depot 80.7 59.7 35.2% 38.4%
Total France 214.9 185.5 15.8% 18.6%
2004/05 £1 =1.4739 Euro 2003/04 £1 = 1.4392 Euro
All sales and profit growth figures are in constant currencies.
In France, total sales growth of 12.0% (LFL +7.7%) and profit growth of 18.6%
benefited from a combination of an increasingly revitalised Castorama, with its
broad range and high service offer, and an expanding network of hard discount
Brico Depot stores.
Market share - According to Banque de France, DIY comparable store sales growth
in France was 2.8% in the year. Kingfisher's market share grew, with LFL sales
up 7.7%.
CASTORAMA's revitalisation continued, delivering sales growth of 4.4% (LFL
+2.6%) to £1,571.1 million and retail profit growth of 9.2% to £134.2 million.
Sales of those categories where Castorama has greater range authority, such as
Hardware and Seasonal, were strong, particularly in the first half of the year.
The Hardware category was boosted by sales of air conditioning products and
pressure washers. Seasonal sales were driven by garden furniture and
maintenance equipment. In the second half, as the emphasis moved to Decorative
and Showroom, sales were weaker, ahead of the planned re-launch of these
categories in the first quarter of 2005.
New ranges - As part of the product revitalisation process, the focus in 2004
was on developing improved Decorative and Showroom ranges. During the first
quarter of 2005, Castorama will complete seven major range reviews in the
Decorative category, changing nearly half of these ranges. In addition,
Castorama will make significant improvements to bathroom, shower and kitchen
ranges during 2005.
Store development - Castorama revamped seven stores, relocated three, and
transferred two to Brico Depot. In total, 13 stores were revitalised by the
year end. The three stores relocated in 2003 continue to trade well with 16%
higher sales and a similar increase in store profit compared with a control
group of comparable stores. After a period of disruption, the revamped stores
have delivered encouraging single digit sales uplifts compared with those stores
yet to be revamped and are gathering pace. In 2005 seven store revamps, which
started in December 2004, will open for the key spring season and a further two
store relocations and two new stores are planned.
Marketing - With a continued focus on price competitiveness, Castorama improved
its ranking amongst consumers for price perception from ninth to fifth,
demonstrating the success of recent initiatives. These included the introduction
of 'premier prix' (entry-price) products and 'HIT Casto' (quality at a better
price) products, as well as more prominent EDLP communication of value in stores
and in marketing. In 2005, Castorama will continue to reinforce a competitive
price message and its growing range authority with an increase in promotional
mailings and the distribution of three major catalogues (Outdoor, Decoration and
Showroom).
Retail margin increased from 8.2% to 8.5%, with SSM and other cost-productivity
savings more than funding the cost of lower selling prices for customers and
store refurbishment. Castorama France increased its participation in Group
sourcing programmes; own brand product sales grew to over 14% and direct imports
to over 7%.
During 2004 Castorama improved its supply chain and logistics operations,
increasing central distribution capacity by more than 25%. The proportion of
deliveries to store via Castorama's centralised distribution system has
increased to 40% as its integrated logistics network takes shape.
BRICO DEPOT continued to deliver strong growth, recording sales of £975.6
million, up 27.1% (LFL +17.7%), and retail profit of £80.7 million, up 38.4%.
Sales were strong in all categories, stimulated by the launch in April of Brico
Depot's first national catalogue and related promotional activity, including
increased 'arrivages' (special buys) and further promotional mailings. Its
powerful discount offer proved increasingly popular and Brico Depot was
confirmed in surveys as the lowest price DIY retailer in France for the third
year running. Brico Depot also benefited from strong growth in the building
materials market.
Store development - Brico Depot opened four new stores, revamped two and
converted two ex-Castorama stores. Six new stores and four revamps are planned
for 2005.
Brico Depot continued to benefit from growing scale efficiencies and Group
buying synergies, boosting retail profit margins from 7.6% to 8.3%. Brico
Depot's first central distribution centre will be fully operational in April and
new IT systems are being introduced to support its continued growth.
REST OF WORLD
For the 52 weeks ended 29 January 2005
Retail sales £m 2004/5 2003/4 % Change % Change % LFL
(Reported) (Constant) Change
Castorama Poland 321.9 285.6 12.7% 16.1% 2.9%
Castorama Italy 229.5 173.7 32.1% 35.3% 6.1%
B&Q China 211.7 131.5 61.0% 78.5% 15.5%
Other Int'l (1) 23.5 2.2 n/a n/a n/a
Total 786.6 593.0 32.6% 38.6% 6.5%
Retail profit £m 2004/5 2003/4 % Change % Change
(Reported) (Constant)
Castorama Poland 46.4 41.4 12.1% 15.5%
Castorama Italy 19.8 13.5 46.7% 50.5%
B&Q China 4.6 0.4 n/a n/a
B&Q Taiwan (JV) 6.0 5.4 11.1% 21.3%
Other Int'l (1) 6.6 1.1 n/a n/a
Total 83.4 61.8 35.0% 38.8%
(1) Other international includes Hornbach in Germany, Koctas in Turkey, B&Q Home
in Korea and Brico Depot in Spain.
All sales and profit growth figures are in constant currencies.
Total Rest of World sales grew 38.6%, (LFL +6.5%) to £786.6 million with retail
profit up 38.8% to £83.4 million.
Castorama Poland sales increased by 16.1% (+2.9% LFL) to £321.9 million and
retail profit by 15.5% to £46.4 million with higher pre-opening costs offset by
lower shrinkage costs and good cost control. Castorama Poland had an
exceptionally strong start to the year with customers purchasing ahead of higher
VAT rates which came into effect with EU accession in May 2004. This generated
like-for-like sales growth of over 50% in the first three months of the year and
consequent weakness in the following months. Consumer spending has weakened
generally in Poland due to the higher VAT rates, rising interest rates and
higher inflation. On a two year basis, Castorama Poland's like-for-like sales
were up 14.4%.
Over 50 own-brand products were introduced, an increase of 20%, and sales of
MacAllister power tools more than doubled. Space expansion accelerated with six
new stores opened during the year (2003/04: three stores), consolidating
Castorama's position as the market leader. Six new stores are planned for 2005.
Castorama Italy - Sales increased by 35.3% (+6.1% LFL) to £229.5 million and
retail profit by 50.5% to £19.8 million. All categories performed well,
particularly new ranges of doors and windows. Sales also benefited from improved
stock availability and cross-marketing.
Four new stores opened and one was relocated during the year (2003/04: four new
stores). Two of these were smaller 'Medium Box' stores, trading under the name
Castorama Market. These build on experience gained from the mini-Warehouse
format in the UK and Taiwan and have proven popular with customers. Four new
stores and one relocation are planned for 2005, two of which will be 'Medium
Box' stores. Retail profit margins increased from 7.8% to 8.6% due to the
benefits of the SSM programme and volume-related cost efficiencies.
B&Q China sales were 78.5% higher (+15.5% LFL) at £211.7 million and retail
profit increased from £0.4 million to £4.6 million. Installation service sales
grew over 30% during the year and sales to trade customers also increased
strongly. Six new stores opened (2003/04: seven stores), three in new cities.
In November, B&Q China purchased an option to acquire five leasehold hypermarket
stores for conversion to the B&Q format. A further eight new stores are planned
for 2005, taking the expected total to 34 by the end of the year.
B&Q Taiwan, a 50% joint venture, delivered 21.3% profit growth, driven by good
sales growth and benefits of the SSM programme. Customers continued to choose
the 'Total Solutions' installation service which grew by over 30%. One new
store opened during the year and three were revamped with good sales uplifts.
Two new stores are planned for 2005.
Other International includes Hornbach, the leading German DIY warehouse retailer
in which Kingfisher has a 21% economic interest. Hornbach increased its
contribution to profits by 38.7% to £19.2 million, driven by strong
like-for-like sales growth, expansion in Germany, Switzerland and Slovakia, and
participation in Kingfisher's SSM programme. In Spain, Brico Depot continues to
expand and three new stores were opened, taking the total to four. Four new
stores are planned for 2005. In Turkey, Koctas, a 50% joint venture, benefited
from introducing exclusive, competitively priced, direct-sourced products from
Kingfisher's global supply base. Work continues on constructing a new store in
Ankara. The first B&Q Home store in South Korea is expected to open in July
2005. Castorama Russia has been established and is working towards its first
store opening in 2006.
DATA BY COUNTRY as at 29 January 2005
Store numbers Selling space Employees
(000s sq.m.) (FTE)
B&Q 337 2,277 27,577
Screwfix Direct - - 1,423
Total UK & Ireland 337 2,277 29,000
Castorama 103 978 12,452
Brico Depot 64 325 4,290
Total France 167 1,303 16,742
Castorama Poland 25 227 4,887
Castorama Italy 22 140 2,102
B&Q China 21 243 5,222
B&Q Taiwan 18 90 1,783
Other International (1) 9 43 735
Total Rest of World 95 743 14,729
Total 599 4,323 60,471
FULL YEAR - 52 weeks to 29 January 2005
Retail Sales £m % Total % LFL Retail Profit £m % Total
2004/05 2003/04 Change Change 2004/05 2003/04 Change
(Reported)
(Reported)
B&Q 4,087.7 3,896.8 4.9% 1.3% 400.5 371.8 7.7%
Screwfix Direct 228.6 220.6 3.6% 3.6% 7.7 19.1 (59.7)%
Total UK & Ireland 4,316.3 4,117.4 4.8% 1.5% 408.2 390.9 4.4%
Castorama 1,571.1 1,541.8 1.9% 2.6% 134.2 125.8 6.7%
Brico Depot 975.6 786.0 24.1% 17.7% 80.7 59.7 35.2%
Total France 2,546.7 2,327.8 9.4% 7.7% 214.9 185.5 15.8%
Castorama Poland 321.9 285.6 12.7% 2.9% 46.4 41.4 12.1%
Castorama Italy 229.5 173.7 32.1% 6.1% 19.8 13.5 46.7%
B&Q China 211.7 131.5 61.0% 15.5% 4.6 0.4 n/a
B&Q Taiwan (2) - - - - 6.0 5.4 11.1%
Other Int'l (1) (2) 23.5 2.2 n/a 4.5% 6.6 1.1 n/a
Rest of World 786.6 593.0 32.6% 6.5% 83.4 61.8 35.0%
Total 7,649.6 7,038.2 8.7% 3.9% 706.5 638.2 10.7%
(1) Other international includes Hornbach in Germany, Koctas in Turkey, B&Q
Home in Korea and Brico Depot in Spain.
(2) Joint venture sales not consolidated
FINANCIAL REVIEW
Kingfisher's reported financial highlights for continuing operations for the
year ended 29 January 2005 are set out below.
2005 2004 Increase
Turnover (including share of joint ventures) 7,755.5 7,177.4 8.1%
Operating profit 712.8 608.7 17.1%
Profit before tax 670.9 570.8 17.5%
Adjusted earnings per share 20.8p 17.8p 16.9%
Dividend per share 10.65p 9.65p 10.4%
Underlying Return on Invested Capital (ROIC) 8.9% 8.7% 0.2pps
Earnings per share and dividends
Basic earnings per share for continuing operations were flat at 20.3p. Adjusted
earnings per share, which removes the impact of exceptional items and
acquisition goodwill amortisation, increased 16.9% from 17.8p to 20.8p per
share.
2005 2004
Basic earnings per share 20.3p 20.3p
Exceptional items 0.6p (2.7)p
Goodwill amortisation (0.1)p 0.2p
Adjusted earnings per share 20.8p 17.8 p
The full year dividend of 10.65p per share, up 10.4% year on year, is covered
1.95 times by adjusted earnings before exceptional items and goodwill
amortisation.
Kingfisher will replace the scrip dividend alternative with the option to have
the payment of this dividend made via a dividend reinvestment plan (DRIP). This
is available to all shareholders who would prefer to invest their dividends in
the shares of the Company. Further details of the dividend reinvestment plan
are being circulated separately to all shareholders with the Annual Report and
Notice of Annual General Meeting.
The final dividend for the year ended 29 January 2005 will be paid on 3 June
2005 to shareholders on the register at close of business on 1 April 2005,
subject to approval of shareholders at the Company's Annual General Meeting, to
be held on 27 May 2005.
Return on invested capital
Underlying Return on Invested Capital (ROIC) improved in the year from 8.7% to
8.9%. Underlying ROIC assumes properties appreciate in value at a steady rate
over the long-term. When calculating the underlying ROIC, short-term variations
in property values more or less than the long-term mean are excluded.
ROIC is defined as net operating profit less adjusted taxes (operating profit
excluding goodwill amortisation, exceptionals, property lease and depreciation
costs less tax at the Group's effective tax rate, plus property revaluation in
the year) divided by average invested capital (average holding in the year of
fixed and net current assets invested in the business, plus property operating
lease costs capitalised at the market property yield).
Cashflow and investment in the businesses
Net debt decreased from £843.8 million at the start of the year to £794.3
million at the year end.
A total of £689.5 million of net cash was generated from operating activities
compared to £777.4 million in the previous year which included the cashflows of
Kesa Electricals for the first five months of the year. Working capital
increased during the year driven by a higher level of stock held reflecting
growth in the number of stores, an increase in the level of fulfilment capacity
and increasing the level of stock in January in anticipation of the earlier
Easter in 2005. Capital expenditure for the Group was £407.4 million, up from
£389.1 million in the previous year. A total of £20.5 million (2004: £819.2
million) was received during the year in respect of the sale of tangible fixed
assets. The prior year receipts included the proceeds of the disposal of the
Chartwell Land property portfolio.
Financing
In November 2004, a committed bank facility for £180 million was cancelled as it
was no longer required by the Group. At 29 January 2005, the Group had a £540
million committed bank facility, maturing in February 2007. Since the year end,
the Group has refinanced this facility, replacing it with a new committed bank
revolving credit facility totalling £500 million, provided by a number of banks.
This facility provides committed funding on improved terms, and in addition
has extended the maturity to August 2010. The facility is available to be drawn
to support the general corporate purposes of the Group.
Investments, acquisitions and disposals
There were no material acquisitions or disposals during the year.
Property
Property income (primarily rent charged to B&Q on UK properties owned by
Kingfisher) grew 28.2% to £41.4 million (2003/04: £32.3 million) reflecting
rental inflation and some additional properties.
Kingfisher owns a significant property portfolio, substantially all of which is
now used for trading purposes and which, at the year end, had a value of £2.4
billion. Kingfisher has continued its normal practice of externally valuing (on
an existing use basis) one-third of the property portfolio on a rolling basis,
with internal valuations being performed for the other two-thirds. In both
cases, these revalued amounts have been incorporated into the accounts, giving
rise to a revaluation surplus in the year of £175.8 million.
Other Operating Costs
Other operating costs (principally Group central costs) fell 21.9% to £36.1
million (2003/04: £46.2 million) following last year's reorganisation of the
corporate offices in London and Lille.
Interest
The net interest charge from continuing operations for the year was £25.3
million, down £8.3 million from the prior year. The current year interest charge
has benefited primarily from a lower average net debt during the year.
Exceptional items
Exceptional items are detailed in note 4 to the accounts. A charge of £17.7
million has been incurred in respect of the outstanding unsecured working
capital loan made in connection with the disposal of ProMarkt. The loan was due
to be repaid in January 2005, however due to difficult trading conditions
experienced by ProMarkt, they were unable to repay the loan in full by that
date. The term of the loan has been extended, however given the uncertainty
surrounding its recoverability, the remaining balance of the loan was fully
provided against in the current year.
Taxation
The effective overall tax rate on profit has decreased from 46.3% in the prior
year to 30.0%. The high rate in the prior year was due to exceptional items
charged not qualifying for tax relief. The effective tax rate on profit for
continuing operations before exceptional items and acquisition goodwill
excluding prior year tax adjustments is 31.6%, consistent with the prior year.
Pensions
Kingfisher continues to account for pension costs on the basis of the
requirements of SSAP 24 and provides the disclosures regarding the FRS 17
valuation of Kingfisher's UK defined benefit pension scheme ('the Scheme') net
assets and liabilities. At the start of the year, the FRS 17 valuation for the
Scheme showed a deficit, net of deferred tax, of £189 million. The Kesa
Electricals section of the Scheme was transferred to a new Kesa Pension Scheme
during the year resulting in a reduction in the deficit, net of deferred tax, of
£44 million. However, this reduction was more than offset by the impact of
lower assumed corporate bond rates and changes in financial and demographic
assumptions. The revised deficit, net of deferred tax was £209 million at 29
January 2005.
Kingfisher, in consultation with the Trustees, has decided to make additional
contributions to the Scheme (over and above the normal annual contributions)
totalling £250m over the next three years. The additional funds will be
invested by the Scheme in assets designed to match its expected liability
profile. The funding will reduce Kingfisher's exposure to future funding risks
while increasing pension scheme solvency. The initial financial impact of these
additional contributions will be to reduce Kingfisher's pension deficit and
replace it with debt.
Accounting changes
There have been no new accounting standards adopted during the year ended 29
January 2005.
International Financial Reporting Standards
Kingfisher will adopt International Financial Reporting Standards (IFRS) for the
financial year ending 28 January 2006 and, as a result, has restated under IFRS
the financial information for the year ended 29 January 2005 which will form the
comparatives for next year's consolidated financial statements. Kingfisher has
elected to defer the application of the financial instrument standards (IAS 32
and IAS 39) until the financial year ending 28 January 2006 and therefore there
is no impact from the standards on the restated 2004/05 IFRS financial
statements.
For the year ended 29 January 2005 the impact on profits from the adoption of
IFRS would be to reduce retail profit by less than 1% and profit after tax by
3%, with an underlying reduction in profit after tax of 5% excluding a
functional currency benefit under IAS 21. Net assets would be reduced by 7% at
1 February 2004 and by 11% at 21 January 2005 after the reversal of the property
revaluation uplift recorded under UK GAAP.
A separate announcement detailing the impacts of IFRS and providing restated
primary statements will be made on 17 March 2005.
Consolidated profit and loss account
For the financial year ended 29 January 2005
2005
£ millions Notes Total Continuing Discontinued Total
operations operations
Turnover including share of joint ventures 7,755.5 7,177.4 1,756.3 8,933.7
Less: share of joint ventures (99.9) (126.9) (8.2) (135.1)
Group turnover 2 7,655.6 7,050.5 1,748.1 8,798.6
Group operating profit 3 685.3 585.1 50.1 635.2
Share of operating profit in:
Joint ventures 7.3 7.5 2.3 9.8
Associates 20.2 16.1 2.4 18.5
Total operating profit including share of
joint ventures and associates 712.8 608.7 54.8 663.5
Analysed as:
Home Improvement 706.5 638.2 21.6 659.8
Electrical and Furniture - - 38.9 38.9
Property 41.4 32.3 - 32.3
Other operating costs (36.1) (46.2) - (46.2)
Exceptional items - operating 4 - (11.6) (3.5) (15.1)
Acquisition goodwill amortisation (net) 1.0 (4.0) (2.2) (6.2)
Total operating profit including share of
joint ventures and associates 712.8 608.7 54.8 663.5
Exceptional items - non-operating
Demerger costs 4 - - (43.2) (43.2)
Loss on the sale or termination of 4 (17.7) - (58.3) (58.3)
operations
Profit on the disposal of fixed assets 4 1.1 2.0 - 2.0
Exceptional amounts written off fixed asset 4 - (6.3) - (6.3)
investments
Profit/(loss) on ordinary activities before 696.2 604.4 (46.7) 557.7
interest
Net interest payable (excluding exceptional (25.3) (33.6) (10.5) (44.1)
financing charges)
Exceptional financing charges - - (86.9) (86.9)
Net interest payable 5 (25.3) (33.6) (97.4) (131.0)
Profit/(loss) on ordinary activities before 670.9 570.8 (144.1) 426.7
taxation
Tax on profit/(loss) on ordinary activities (201.4) (182.5) 8.4 (174.1)
(excluding exceptional tax)
Exceptional tax - 75.2 (98.5) (23.3)
Tax on profit / (loss) on ordinary 6 (201.4) (107.3) (90.1) (197.4)
activities
Profit/(loss) on ordinary activities after 469.5 463.5 (234.2) 229.3
taxation
Equity minority interests (0.5) (0.2) 0.5 0.3
Profit/(loss) for the financial year 469.0 463.3 (233.7) 229.6
attributable to shareholders
Dividends
Ordinary dividends on equity shares (246.5) (221.1)
Dividend in specie relating to the demerger - (1,592.9)
of Kesa Electricals
Retained profit/(loss) for the financial 222.5 (1,584.4)
year
Earnings per share (pence) 7
Basic 20.3 20.3 10.1
Diluted 20.2 20.2 10.0
Basic - adjusted 20.8 17.8 19.2
Diluted - adjusted 20.6 17.7 19.1
The profit and loss account for the year ended 29 January 2005 relates entirely
to continuing operations.
Consolidated balance sheet
As at 29 January 2005
£ millions Note 2005 2005 2004 2004
Fixed assets
Intangible assets - goodwill 2,463.1 2,455.3
Tangible assets 3,270.7 2,781.2
Investments in joint ventures
Share of gross assets 54.3
50.6
Share of gross liabilities (27.8) 26.5 (30.0) 20.6
Investments in associates 131.8 125.1
Other investments - 0.2
Total investments 158.3 145.9
5,892.1 5,382.4
Current assets
Stocks 1,333.0 1,071.7
Debtors due within one year 460.4 493.0
Debtors due after more than one year 26.6 25.8
Investments 9.4 23.8
Cash at bank and in hand 152.7 144.2
1,982.1 1,758.5
Creditors
Amounts falling due within one year (2,114.0) (1,925.2)
Net current liabilities (131.9) (166.7)
Total assets less current liabilities 5,760.2 5,215.7
Creditors
Amounts falling due after more than one year (773.3) (744.9)
Provisions for liabilities and charges (62.7) (64.2)
4,924.2 4,406.6
Capital and reserves
Called up share capital 369.0 366.3
Share premium account 2,166.2 2,150.9
Revaluation reserve 611.7 441.3
Non-distributable reserves 159.0 159.0
Profit and loss account 1,615.6 1,286.2
Equity shareholders' funds 8 4,921.5 4,403.7
Equity minority interests 2.7 2.9
4,924.2 4,406.6
Consolidated cash flow statement
For the financial year ended 29 January 2005
£ millions Note 2005 2004
Net cash inflow from operating activities 9 689.5 777.4
Dividends received from joint ventures and associates 2.3 2.4
Returns on investment and servicing of finance
Interest received 25.2 26.5
Interest paid (37.5) (82.4)
Exceptional financing receipt/(payment) 23.9 (111.2)
Interest element of finance lease rental payments (1.5) (2.7)
Dividends paid by subsidiaries to minorities (0.7) -
Net cash inflow/(outflow) from returns on investment and servicing of 9.4 (169.8)
finance
Taxation
UK Corporation tax paid (67.9) (134.5)
Overseas tax paid (99.4) (53.7)
Exceptional tax paid - (98.5)
Tax paid (167.3) (286.7)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (407.4) (389.1)
Receipts from the sale of tangible fixed assets 20.5 819.2
Receipts from the sale of investments 0.4 -
Net cash (outflow)/inflow from capital expenditure and financial investment (386.5) 430.1
Acquisitions and disposals
Purchase of subsidiary and business undertakings (0.4) (63.7)
Sale of subsidiary and business undertakings 10.4 203.0
Loan to former subsidiary net of repayment - (18.1)
Purchase of associates and joint ventures (3.4) (1.8)
Disposal of associates and joint ventures 4.8 0.6
Non-operating demerger costs - (40.7)
Cash disposed on sale of subsidiary undertakings - (27.3)
Net cash inflow from acquisitions and disposals 11.4 52.0
Equity dividends paid to shareholders (204.8) (119.2)
Net cash (outflow)/inflow before use of liquid resources and financing (46.0) 686.2
Management of liquid resources
Increase in short-term deposits (11.1) (41.4)
Decrease/(increase) in short-term investments 12.3 (41.7)
Net cash inflow/(outflow) from management of liquid resources 1.2 (83.1)
Financing
Issue of ordinary share capital 18.0 2.7
Capital element of finance lease rental payments (10.4) (11.6)
Receipts from sale of own shares 14.0 17.6
Increase/(decrease) in loans 93.3 (584.6)
Net cash inflow/(outflow) from financing 114.9 (575.9)
Increase in cash 70.1 27.2
Reconciliation of net cash flow to movement in net debt
For the financial year ended 29 January 2005
£ millions 2005 2004
Net debt at start of year (843.8) (1,926.4)
Increase in cash 70.1 27.2
Debt demerged with Kesa Electricals - 423.0
Increase in short-term deposits 11.1 41.4
(Increase)/decrease in debt and lease financing (29.8) 597.7
Amortisation of underwriting and issue costs of new debt - (1.5)
(Decrease)/increase in short-term investments (12.3) 41.7
Foreign exchange effects 10.4 (46.9)
Net debt at end of year (794.3) (843.8)
Consolidated statement of total recognised gains and losses
For the financial year ended 29 January 2005
£ millions Note 2005 2004
Profit for the financial year 469.0 229.6
Unrealised surplus on revaluation of properties 8 175.8 295.7
Net foreign exchange adjustments offset in reserves 8 65.2 (15.1)
Tax effect of exchange adjustments offset in reserves 8 (2.5) 23.4
Total recognised gains relating to the financial year 707.5 533.6
Notes to the accounts
1. Basis of preparation
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 29 January 2005
and 31 January 2004 do not constitute the Group's Annual Report & Accounts. The
auditors have reported on the Group's statutory accounts for each of the years
2005 and 2004 under section 235 of the Companies Act 1985, which do not contain
statements under sections 237 (2) or (3) of the Companies Act and are
unqualified. The statutory accounts for 2004 have been delivered to the
Registrar of Companies and the statutory accounts for 2005 will be filed with
the Registrar in due course. Copies of the Annual Report & Accounts will be
posted to shareholders during the week beginning 18 April 2004.
The accounts for the year ended 29 January 2005 have been prepared using the
same accounting policies as were used in the preparation of the accounts for the
year ended 31 January 2004.
2. Turnover
2005 2004
Total Continuing Discontinued Total
operations
£ millions operations
Home Improvement 7,649.6 7,038.2 436.2 7,474.4
Electrical and Furniture - - 1,311.9 1,311.9
Retail Sales 7,649.6 7,038.2 1,748.1 8,786.3
Property 6.0 12.3 - 12.3
7,655.6 7,050.5 1,748.1 8,798.6
Property turnover comprises:
Third party rental
income 6.0 10.1 - 10.1
Property development - 2.2 - 2.2
sales
6.0 12.3 - 12.3
3. Operating Profit
2005 2004
Total Continuing Discontinued Total
operations
£ millions operations
Group turnover 7,655.6 7,050.5 1,748.1 8,798.6
Cost of sales (4,783.3) (4,377.9) (1,183.1) (5,561.0)
Gross profit 2,872.3 2,672.6 565.0 3,237.6
Selling expenses (1,834.4) (1,750.0) (419.6) (2,169.6)
Administrative expenses (363.4) (338.4) (110.0) (448.4)
Exceptional items -
operating (administrative
expenses) - (11.6) (3.5) (15.1)
Administrative expenses - (363.4) (350.0) (113.5) (463.5)
total
Other income 10.8 12.5 18.2 30.7
Group operating profit 685.3 585.1 50.1 635.2
4. Exceptional Items
2005 2004
Total Continuing Discontinued Total
operations
£ millions operations
Operating exceptionals
Demerger costs - (1.8) (3.5) (5.3)
Group restructuring - (9.8) - (9.8)
Total operating exceptionals - (11.6) (3.5) (15.1)
Non-operating exceptionals
Demerger costs - - (43.2) (43.2)
Loss on the sale or termination of (17.7) - (58.3) (58.3)
operations
Disposal of fixed asset investments 0.9 1.3 - 1.3
Profit on the disposal of properties 0.2 0.7 - 0.7
Profit on the disposal of fixed assets 1.1 2.0 - 2.0
Exceptional amounts written off fixed asset - (6.3) - (6.3)
investments
Total non-operating exceptionals (16.6) (4.3) (101.5) (105.8)
Exceptional financing charges (see note 5) - - (86.9) (86.9)
Total exceptional items (16.6) (15.9) (191.9) (207.8)
During the current year, the Group provided £17.7 million against the remaining
balance of the unsecured working capital loan advanced to the purchasers of the
ProMarkt business in the prior year as part of the disposal. In the prior year,
ProMarkt was classified as discontinued operations.
5. Net interest payable
£ millions 2005 2004
Interest payable 44.3 72.2
Interest receivable (15.2) (25.2)
29.1 47.0
Interest capitalised (3.8) (2.9)
Net interest payable (before exceptional financing charges) 25.3 44.1
Exceptional financing charges - 86.9
Net interest payable 25.3 131.0
The share of net interest payable by joint ventures included above is £0.3
million (2004: £0.4 million).
The share of net interest payable by associates included above is £5.8 million
(2004: £5.7 million).
Interest payable includes amortisation of underwriting and issue costs of new
debt of £nil (2004: £1.5 million).
The exceptional financing charges in 2004 of £86.9 million were charged to
discontinued operations. These costs related to the impacts from the demerger
of Kesa Electricals.
6. Taxation
2005 2004
£ millions Total Continuing Discontinued Total
operations
operations
UK Corporation tax
Current tax on profits for the period 278.5 113.5 (27.5) 86.0
Adjustments in respect of prior periods (6.1) (0.4) - (0.4)
272.4 113.1 (27.5) 85.6
Double taxation relief (156.1) (9.5) - (9.5)
116.3 103.6 (27.5) 76.1
Foreign tax
Current tax on profits for the period 76.2 72.9 18.1 91.0
Adjustments in respect of prior periods (2.0) 4.2 - 4.2
74.2 77.1 18.1 95.2
Exceptional tax - UK - (75.2) - (75.2)
Exceptional tax - overseas - - 98.5 98.5
Deferred tax - current year 5.9 1.0 - 1.0
Deferred tax - adjustments in respect of (1.8) (4.7) - (4.7)
prior periods
Associated undertakings 5.7 3.6 0.8 4.4
Joint ventures 1.1 1.9 0.2 2.1
201.4 107.3 90.1 197.4
7. 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
£469.0 million (2004: £463.3 million) and the weighted average number of shares
in issue during the period of 2,307.5 million (2004: 2,277.4 million).
The diluted earnings per share for continuing operations is based on the diluted
profit on ordinary activities, after taxation and minority interests of £469.0
million (2004: £463.3 million) and the diluted weighted average number of shares
in issue during the period of 2,324.4 million (2004: 2,290.4 million).
Adjusted earnings per share figures are presented to allow comparison of
underlying trading performance 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:
2005 2004 2004
pence Total Continuing Total
Basic earnings per share 20.3 20.3 10.1
Effect of exceptionals
Operating exceptional items - 0.5 0.7
Demerger costs - - 1.9
Loss on sale of operations 0.9 - 2.5
Profit on the disposal of fixed assets (0.1) (0.1) (0.1)
Amounts written off fixed asset investments - 0.3 0.3
Tax impact arising on exceptional items (0.2) (0.1) (1.3)
Exceptional tax - (3.3) 1.0
Exceptional financing charges - - 3.8
Acquisition goodwill amortisation (0.1) 0.2 0.3
Basic - adjusted earnings per share 20.8 17.8 19.2
Diluted earnings per share 20.2 20.2 10.0
Effect of exceptionals
Operating exceptional items - 0.5 0.7
Demerger costs - - 1.9
Loss on sale of operations 0.8 - 2.5
Profit on the disposal of fixed assets (0.1) (0.1) (0.1)
Amounts written off fixed asset investments - 0.3 0.3
Tax impact arising on exceptional items (0.2) (0.1) (1.3)
Exceptional tax - (3.3) 1.0
Exceptional financing charges - - 3.8
Acquisition goodwill amortisation (0.1) 0.2 0.3
Diluted - adjusted earnings per share 20.6 17.7 19.1
8. Reconciliation of movement in equity shareholders' funds
£ millions 2005 2004
Profit for the financial year attributable to the members of Kingfisher 469.0 229.6
plc
Ordinary dividends on equity shares (246.5) (221.1)
Dividend in specie on demerger - (1,592.9)
222.5 (1,584.4)
Shares issued under option schemes 18.0 2.7
Scrip issue 25.4 118.3
Addition to ESOP shares due to scrip dividend - (1.7)
ESOP shares disposed 13.4 17.6
Unrealised surplus on revaluation of properties 175.8 295.7
Goodwill resurrected on demerger - 1,230.3
Foreign exchange adjustments (net of tax) 62.7 8.3
Net addition to shareholders' funds 517.8 86.8
Opening shareholders' funds 4,403.7 4,316.9
Closing shareholders' funds 4,921.5 4,403.7
9. Net cash inflow from operating activities
£ millions 2005 2004
Group operating profit 685.3 635.2
Depreciation and amortisation 152.7 175.2
Decrease in development work in progress - 5.1
Increase in stocks (248.8) (74.5)
(Increase)/decrease in debtors (70.3) 1.1
Increase in creditors 164.4 41.3
Loss/(profit) on disposal of fixed assets 6.2 (6.0)
Net cash inflow from operating activities 689.5 777.4
10. Operating leases
The operating lease charge for the Group's continuing operations were as follows:
£ millions 2005 2004
Land and buildings 285.1 221.4
Plant and equipment 22.9 23.9
11. Pension costs
Pension schemes operated and regular pension costs - SSAP 24
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 £39.6 million (2004:
£44.7 million) includes £1.2 million (2004: £2.3 million) for the UK defined
contribution scheme and £33.2 million (2004: £37.9 million) in respect of the UK
deferred benefit scheme in accordance with SSAP 24 'Accounting for pension
costs'.
There are also funded and unfunded defined benefit overseas arrangements, for
which the charge in the profit and loss account was £5.2 million (2004: £4.5
million).
FRS 17 disclosures
The Accounting Standards Board has deferred the full mandatory adoption of FRS
17 following the planned move to International Financial Reporting Standards and
the Group has continued to provide the transitional disclosure requirements of
FRS 17. The valuation of the Scheme used for FRS 17 disclosures has been based
on the most recent actuarial valuation of the Group's UK Scheme at 31 March 2002
and updated to 29 January 2005.
The financial assumptions used to calculate estimated Scheme liabilities under
FRS 17 are:
2005 2004
Discount rate 5.3% 5.6%
Salary escalation 4.3% 4.3%
Rate of pension increases 2.7% 2.7%
Price inflation 2.7% 2.7%
The assets in the Scheme at 29 January 2005 and the expected future rates of
return on them were:
2005 2004
£ millions % £ millions %
Equities 511 7.8 566 8.0
Bonds 263 4.7 254 5.0
Property 81 6.2 32 6.5
Other (principally cash) 32 3.7 57 3.7
Total market value of assets 887 6.6 909 6.8
Present value of scheme liabilities (1,185) (1,179)
Deficit in the scheme (298) (270)
Related deferred tax asset 89 81
Net pension liability (209) (189)
Movement in deficit during the year
£ millions 2005 2004
Deficit in Scheme at start of year (before tax) (270) (268)
Current service cost (36) (37)
Employer contributions 42 29
Settlement gain 63 -
Other finance charge (3) (6)
Actuarial (loss)/gain (94) 12
Deficit in Scheme at end of year (before tax) (298) (270)
Comparison between SSAP24 and FRS17
FRS17 total profit and loss account charge excluding settlement gains arising on bulk (40) (43)
transfer
SSAP24 profit and loss account charge (33) (37)
For the Group's remaining defined benefit plans, the market value of assets held
by insurance companies was £10 million (2004: £10 million), the Group balance
sheet provisions totalled £12 million (2004: £12 million) and the aggregate
unfunded obligations for the plans were £12 million (2004: £7 million).
This information is provided by RNS
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