Half-Year Results (Part 2 of 2)

RNS Number : 2164R

Kingfisher PLC

20 September 2017

 

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

		Half year ended 31 July 2017				Half year ended 31 July 2016
		Before	Exceptional			Before	Exceptional
		exceptional	items			exceptional	items
£ millions	Notes	items	(note 5)	Total		items	(note 5)	Total
Sales	4	6,008	-	6,008		5,749	-	5,749
Cost of sales		(3,798)	-	(3,798)		(3,623)	-	(3,623)
Gross profit		2,210	-	2,210		2,126	-	2,126
Selling and distribution expenses		(1,439)	13	(1,426)		(1,386)	15	(1,371)
Administrative expenses		(390)	(5)	(395)		(326)	(1)	(327)
Other income		11	-	11		9	3	12
Share of post-tax results of joint ventures and associates		1	-	1		(1)	-	(1)
Operating profit		393	8	401		422	17	439
Finance costs		(8)	-	(8)		(13)	(6)	(19)
Finance income		9	-	9		7	-	7
Net finance income/(costs)	6	1	-	1		(6)	(6)	(12)
Profit before taxation		394	8	402		416	11	427
Income tax expense	7	(106)	(1)	(107)		(104)	(2)	(106)
Profit for the period		288	7	295		312	9	321
Earnings per share	8
Basic				13.3p				14.1p
Diluted				13.3p				14.1p
Adjusted basic				13.0p				13.6p
Adjusted diluted				13.0p				13.6p
Underlying basic				14.5p				14.2p
Underlying diluted				14.5p				14.2p
Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
Underlying pre-tax profit				440				436
Transformation costs before exceptional items				(46)				(18)
Adjusted pre-tax profit				394				418
Financing fair value remeasurements				-				(2)
Exceptional items				8				11
Profit before taxation				402				427

The proposed interim ordinary dividend for the period ended 31 July 2017 is 3.33p per share.

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

		Year ended 31 January 2017
		Before	Exceptional
		exceptional	items
£ millions	Notes	items	(note 5)	Total
Sales	4	11,225	-	11,225
Cost of sales		(7,050)	-	(7,050)
Gross profit		4,175	-	4,175
Selling and distribution expenses		(2,758)	21	(2,737)
Administrative expenses		(687)	(5)	(692)
Other income		19	7	26
Share of post-tax results of joint ventures and associates		1	-	1
Operating profit		750	23	773
Finance costs		(21)	(6)	(27)
Finance income		13	-	13
Net finance costs	6	(8)	(6)	(14)
Profit before taxation		742	17	759
Income tax expense	7	(143)	(6)	(149)
Profit for the year		599	11	610
Earnings per share	8
Basic				27.1p
Diluted				27.0p
Adjusted basic				24.4p
Adjusted diluted				24.3p
Underlying basic				25.9p
Underlying diluted				25.8p
Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
Underlying pre-tax profit				787
Transformation costs before exceptional items				(44)
Adjusted pre-tax profit				743
Financing fair value remeasurements				(1)
Exceptional items				17
Profit before taxation				759

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

£ millions	Notes	Half year ended 31 July 2017	Half year ended 31 July 2016	Year ended 31 January 2017
Profit for the period		295	321	610
Actuarial losses on post-employment benefits	11	(21)	(87)	(50)
Tax on items that will not be reclassified		5	29	11
Total items that will not be reclassified subsequently to profit or loss		(16)	(58)	(39)
Currency translation differences
Group		137	304	390
Joint ventures and associates		1	2	(1)
Cash flow hedges
Fair value (losses)/gains		(37)	26	52
Gains transferred to inventories		(14)	(18)	(60)
Available-for-sale financial assets
Fair value gains		-	5	5
Transferred to income statement		-	(7)	(7)
Tax on items that may be reclassified		12	1	2
Total items that may be reclassified subsequently to profit or loss		99	313	381
Other comprehensive income for the period		83	255	342
Total comprehensive income for the period		378	576	952

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

£ millions	Share capital		Share premium	Own shares held	Retained earnings	Other reserves (note 13)	Total equity
At 1 February 2017		352	2,221	(23)	3,837	384	6,771
Profit for the period		-	-	-	295	-	295
Other comprehensive income for the period		-	-	-	(16)	99	83
Total comprehensive income for the period		-	-	-	279	99	378
Share-based compensation		-	-	-	12	-	12
New shares issued under share schemes		-	2	-	-	-	2
Own shares issued under share schemes		-	-	4	(4)	-	-
Purchase of own shares for cancellation		(7)	-	-	(200)	7	(200)
Dividends (note 9)		-	-	-	(159)	-	(159)
At 31 July 2017		345	2,223	(19)	3,765	490	6,804
At 1 February 2016		361	2,218	(24)	3,637	(6)	6,186
Profit for the period		-	-	-	321	-	321
Other comprehensive income for the period		-	-	-	(58)	313	255
Total comprehensive income for the period		-	-	-	263	313	576
Share-based compensation		-	-	-	9	-	9
New shares issued under share schemes		-	1	-	-	-	1
Own shares issued under share schemes		-	-	6	(5)	-	1
Purchase of own shares for cancellation		(6)	-	-	(111)	6	(111)
Dividends (note 9)		-	-	-	(157)	-	(157)
At 31 July 2016		355	2,219	(18)	3,636	313	6,505
At 1 February 2016		361	2,218	(24)	3,637	(6)	6,186
Profit for the year		-	-	-	610	-	610
Other comprehensive income for the year		-	-	-	(39)	381	342
Total comprehensive income for the year		-	-	-	571	381	952
Share-based compensation		-	-	-	15	-	15
New shares issued under share schemes		-	3	-	-	-	3
Own shares issued under share schemes		-	-	7	(6)	-	1
Purchase of own shares for cancellation		(9)	-	-	(150)	9	(150)
Purchase of own shares for ESOP trust		-	-	(6)	-	-	(6)
Dividends (note 9)		-	-	-	(230)	-	(230)
At 31 January 2017		352	2,221	(23)	3,837	384	6,771

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED BALANCE SHEET

£ millions	Notes		At 31 July 2017	At 31 July 2016	At 31 January 2017
Non-current assets
Goodwill			2,400	2,399	2,399
Other intangible assets	10		332	290	308
Property, plant and equipment	10		3,657	3,433	3,589
Investment property	10		21	23	24
Investments in joint ventures and associates			25	24	23
Post-employment benefits	11		236	178	239
Deferred tax assets			29	17	28
Derivative assets	12		-	51	54
Other receivables			9	7	8
			6,709	6,422	6,672
Current assets
Inventories			2,522	2,154	2,173
Trade and other receivables			545	566	551
Derivative assets	12		71	76	36
Current tax assets			1	11	6
Cash and cash equivalents			776	1,134	795
Assets held for sale			-	5	-
			3,915	3,946	3,561
Total assets			10,624	10,368	10,233
Current liabilities
Trade and other payables			(2,906)	(2,733)	(2,495)
Borrowings	12		(160)	(132)	(14)
Derivative liabilities	12		(36)	(13)	(26)
Current tax liabilities			(133)	(116)	(141)
Provisions			(31)	(95)	(63)
			(3,266)	(3,089)	(2,739)
Non-current liabilities
Other payables			(56)	(52)	(50)
Borrowings	12		(31)	(181)	(184)
Deferred tax liabilities			(279)	(322)	(282)
Provisions			(71)	(119)	(99)
Post-employment benefits	11		(117)	(100)	(108)
			(554)	(774)	(723)
Total liabilities			(3,820)	(3,863)	(3,462)
Net assets			6,804	6,505	6,771
Equity
Share capital			345	355	352
Share premium			2,223	2,219	2,221
Own shares held in ESOP trust			(19)	(18)	(23)
Retained earnings			3,765	3,636	3,837
Other reserves	13		490	313	384
Total equity			6,804	6,505	6,771

The interim financial report was approved by the Board of Directors on 19 September 2017 and signed on its behalf by:

Véronique Laury, Chief Executive Officer

Karen Witts, Chief Financial Officer

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED CASH FLOW STATEMENT

£ millions	Notes	Half year ended 31 July 2017	Half year ended 31 July 2016	Year ended 31 January 2017
Operating activities
Cash generated by operations	14	497	697	925
Income tax paid		(99)	(63)	(144)
Net cash flows from operating activities		398	634	781
Investing activities
Purchase of property, plant and equipment and intangible assets		(129)	(141)	(406)
Disposal of property, plant and equipment, investment property and assets held for sale		1	5	20
Proceeds on disposal of B&Q China	16	-	63	63
Decrease in short-term deposits		-	70	70
Interest received		6	3	5
Net cash flows used in investing activities		(122)	-	(248)
Financing activities
Interest paid		(6)	(6)	(10)
Interest element of finance lease rental payments		(1)	(1)	(2)
Repayment of bank loans		(3)	(2)	(2)
Repayment of fixed term debt		-	(47)	(47)
Receipt on financing derivatives		-	10	10
Capital element of finance lease rental payments		(6)	(7)	(12)
New shares issued under share schemes		2	1	3
Own shares issued under share schemes		-	1	1
Purchase of own shares for ESOP trust		-	-	(6)
Purchase of own shares for cancellation		(149)	(126)	(200)
Ordinary dividends paid to equity shareholders of the Company	9	(159)	(157)	(230)
Net cash flows from financing activities		(322)	(334)	(495)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts		(46)	300	38
Cash and cash equivalents and bank overdrafts at beginning of period		795	654	654
Exchange differences		19	63	103
Cash and cash equivalents and bank overdrafts at end of period	15	768	1,017	795

Kingfisher plc

2017/18 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.         General information

Kingfisher plc ('the Company'), its subsidiaries, joint ventures and associates (together 'the Group') supply home improvement products and services through a network of retail stores and other channels, located mainly in the United Kingdom and continental Europe.

The Company is incorporated in the United Kingdom and is listed on the London Stock Exchange. The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX.

The interim financial report does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Audited statutory accounts for the year ended 31 January 2017 were approved by the Board of Directors on 21 March 2017 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006. The interim financial report has been reviewed, not audited, and was approved by the Board of Directors on 19 September 2017.

2.         Basis of preparation

The interim financial report for the six months ended 31 July 2017 ('the half year') has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. It should be read in conjunction with the annual financial statements for the year ended 31 January 2017, which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The consolidated income statement and related notes represent results for continuing operations, there being no discontinued operations in the periods presented. Where comparatives are given, '2016/17' refers to the six months ended 31 July 2016.

Going concern

The Directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements for the half year ended 31 July 2017.

Changes in accounting policies and estimates

There have been no changes in estimates of amounts reported in prior periods that have had a material effect in the current period.

There are no new standards, amendments or interpretations which are mandatory for the first time for the half year ended 31 July 2017 that are relevant or material for the Group.

Amendments to IAS 7, 'Statement of Cash Flows' will be effective for the Group's annual financial statements for the year ended 31 January 2018, requiring additional disclosures relating to movements in liabilities associated with financing activities.

The following new standards will be effective for the Group's 2018/19 financial year:

IFRS 9, 'Financial Instruments' supersedes IAS 39 'Financial Instruments: Recognition and Measurement' and changes some requirements for the measurement and classification of financial instruments, impairment of financial assets and certain elements of hedge accounting. A high-level assessment of the standard has been undertaken, and it is not expected that it will have a material effect on the Group's financial statements, except for additional disclosures relating to hedge accounting, credit risk management and impairment of financial assets.

IFRS 15, 'Revenue from Contracts with Customers' supersedes IAS 18 'Revenue' and establishes a principles-based approach to revenue recognition and measurement based on the concept of recognising revenue when performance obligations are satisfied. As the majority of the Group's revenue is recognised at the point of sale, it is not expected that the new standard will have a material effect on its financial statements or the amount, timing or nature of revenue recognised by the Group.

The following new standard will be effective for the Group's 2019/20 financial year:

IFRS 16, 'Leases' supersedes IAS 17 'Leases'. It has not yet been endorsed by the European Union. The most significant changes are in relation to lessee accounting. Under IFRS 16 the lessee will recognise a right-of-use asset and a lease liability for all leases currently accounted for as operating leases, with the exception of leases for a short period (less than 12 months) and those for items of low value. The asset will be depreciated over the term of the lease, whilst interest will be charged on the liability over the same period. The Group anticipates that the adoption of IFRS 16 will have a significant impact on the primary financial statements, including an impact on the operating profit, profit before tax, total assets and total liabilities lines. The impact of the standard on the Group is currently being assessed and therefore it is not yet practicable to provide a full estimate of its effect. The

undiscounted amount of the Group's operating lease commitments at 31 January 2017 disclosed under IAS 17, the current leasing standard, was £3.4 billion.

Other new standards and interpretations which are in issue but not yet effective are not expected to have a material impact on the consolidated financial statements.

Principal rates of exchange against Sterling

	Half year ended 31 July 2017		Half year ended 31 July 2016		Year ended 31 January 2017
	Average rate	Period end rate	Average rate	Period end rate	Average rate	Year end rate
Euro	1.16	1.12	1.26	1.19	1.21	1.16
US Dollar	1.27	1.31	1.41	1.31	1.34	1.26
Polish Zloty	4.91	4.76	5.51	5.18	5.28	5.03
Russian Rouble	73.57	77.75	96.27	87.74	87.98	75.72

Risks and uncertainties

The principal risks and uncertainties to which the Group is exposed are set out on pages 38-46 of the Kingfisher plc Annual Report and Accounts for the year ended 31 January 2017. These have been reviewed and updated as part of the Group's half year procedures and are listed in the Financial Review.

Use of non-GAAP measures

In the reporting of financial information, the Group uses certain measures that are not required under IFRS, the generally accepted accounting principles ('GAAP') under which the Group reports. Kingfisher believes that retail profit, underlying pre-tax profit, adjusted pre-tax profit, effective tax rate, underlying earnings per share and adjusted earnings per share provide additional useful information on performance and trends to shareholders. These and other non-GAAP measures, such as net cash, are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items', 'transformation costs', 'underlying', 'adjusted', 'effective tax rate' and 'net cash' are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

Retail profit is defined as continuing operating profit before central costs, the Group's share of interest and tax of joint ventures and associates, transformation costs, exceptional items and amortisation of acquisition intangibles. It includes the sustainable benefits of the transformation programme. Central costs principally comprise the costs of the Group's head office before transformation costs.

The separate reporting of non-recurring exceptional items, which are presented as exceptional within their relevant income statement category, helps provide an indication of the Group's ongoing business performance. The principal items which are included as exceptional items are:

·      non-trading items included in operating profit such as profits and losses on the disposal, closure or impairment of subsidiaries, joint ventures, associates and investments which do not form part of the Group's trading activities;

·      profits and losses on the disposal of properties and impairment losses on non-operational assets; and

·      the costs of significant restructuring, including certain restructuring costs of the Group's five-year transformation programme launched in 2016/17, and incremental acquisition integration costs.

The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). Financing fair value remeasurements represent changes in the fair value of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying amount of borrowings and other hedged items under fair value hedge relationships. Financing derivatives are those that relate to hedged items of a financing nature.

The term 'underlying' refers to the relevant adjusted measure being reported before non-exceptional transformation costs. Non-exceptional transformation costs represent the short-term additional costs that arise only as a result of the transformation programme launched in 2016/17, which either because of their nature or the length of the period over which they are incurred are not considered as exceptional items. These costs principally relate to the unified and unique offer range implementation and the digital strategic initiative. The separate reporting of such costs (in addition to exceptional items) helps provide an indication of the Group's underlying business performance, which includes the sustainable benefits of the transformation programme.

The effective tax rate is calculated as continuing income tax expense excluding tax on exceptional items and adjustments in respect of prior years and the impact of changes in tax rates on deferred tax, divided by continuing profit before taxation excluding exceptional items.

Net cash comprises cash and cash equivalents and short-term deposits less borrowings and financing derivatives (excluding accrued interest).

3.         Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 January 2017, as described in note 2 of those financial statements. The critical accounting estimates and judgements are set out in note 3 of the annual financial statements for the year ended 31 January 2017 and remain unchanged.

Taxes on income for interim periods are accrued using the best estimate of the effective tax rate that would be applicable to expected total annual earnings.

4.         Segmental analysis

Income statement

	Half year ended 31 July 2017
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	2,602	2,273	694	439	6,008
Retail profit	215	174	84	(6)	467
Central costs					(25)
Share of interest and tax of joint ventures and associates					(3)
Transformation costs before exceptional items					(46)
Exceptional items					8
Operating profit					401
Net finance income					1
Profit before taxation					402

	Half year ended 31 July 2016
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	2,609	2,175	587	378	5,749
Retail profit	211	187	73	(7)	464
Central costs					(22)
Share of interest and tax of joint ventures and associates					(2)
Transformation costs before exceptional items					(18)
Exceptional items					17
Operating profit					439
Net finance costs					(12)
Profit before taxation					427

	Year ended 31 January 2017
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	4,979	4,254	1,191	801	11,225
Retail profit	358	353	144	(8)	847
Central costs					(48)
Share of interest and tax of joint ventures and associates					(5)
Transformation costs before exceptional items					(44)
Exceptional items					23
Operating profit					773
Net finance costs					(14)
Profit before taxation					759

Balance sheet

	At 31 July 2017
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Segment assets	1,433	1,485	619	419	3,956
Central liabilities					(202)
Goodwill					2,400
Net cash					650
Net assets					6,804

	At 31 July 2016
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Segment assets	1,183	1,341	515	376	3,415
Central liabilities					(207)
Goodwill					2,399
Net cash					898
Net assets					6,505

	At 31 January 2017
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Segment assets	1,416	1,410	606	454	3,886
Central liabilities					(155)
Goodwill					2,399
Net cash					641
Net assets					6,771

The operating segments disclosed above are based on the information reported internally to the Board of Directors and Group Executive, representing the geographical areas in which the Group operates. The Group only has one business segment being the supply of home improvement products and services.

The 'Other International' segment consists of Poland, Spain, Portugal, Germany, Russia, Romania and the joint venture Koçtaş in Turkey. Poland has been shown separately due to its significance.

Central costs principally comprise the costs of the Group's head office before transformation costs. Central liabilities comprise unallocated head office and other central items including contracts to purchase own shares, central assets, pensions, insurance, interest and tax.

Transformation costs before exceptional items principally relate to the unified and unique offer range implementation and the digital strategic initiative.

The Group's sales, although generally not highly seasonal on a half-yearly basis, do increase over the Easter period and during the summer months leading to slightly higher sales usually being recognised in the first half of the year.

5.         Exceptional items

	Half year ended	Half year ended	Year ended
£ millions	31 July 2017	31 July 2016	31 January 2017
Included within selling and distribution expenses
UK & Ireland and continental Europe restructuring	13	15	21
	13	15	21
Included within administrative expenses
Transformation exceptional costs	(5)	(1)	(5)
	(5)	(1)	(5)
Included within other income
Profit on disposal of B&Q China	-	3	3
Disposal of properties	-	-	4
	-	3	7
Included within net finance income/(costs)
UK & Ireland and continental Europe restructuring - unwinding of discount on provisions	-	(6)	(6)
	-	(6)	(6)
Exceptional items before tax	8	11	17
Exceptional tax items	(1)	(2)	(6)
Exceptional items	7	9	11

Current period exceptional items include a £13m net credit principally arising due to savings on B&Q store exit costs as compared with the original restructuring provisions recognised.

In the prior period, a net credit of £15m (£21m for the full year) was recognised relating principally to savings on B&Q store exit costs, offset by store asset impairments relating to the closure of loss-making stores in continental Europe. In addition, a £6m exceptional interest charge relating to the reduction in discount rate used to measure the overall UK restructuring provision was recognised.

Transformation exceptional costs of £5m have been recorded in the period driven by changes associated with the Group's new offer and supply chain organisation, and other restructuring and efficiency costs in the UK relating to the Group's five-year transformation programme.

In the prior periods, a profit of £3m was recorded on disposal of the Group's remaining 30% stake in B&Q China.

6.         Net finance income/costs

	Half year ended		Half year ended	Year ended
£ millions	31 July 2017		31 July 2016	31 January 2017
Bank overdrafts and bank loans		(5)	(5)	(10)
Fixed term debt		(1)	(1)	(2)
Finance leases		(1)	(1)	(2)
Financing fair value remeasurements		-	(2)	(1)
Unwinding of discount on provisions		-	(7)	(7)
Other interest payable		(1)	(3)	(5)
Finance costs		(8)	(19)	(27)
Cash and cash equivalents and short-term deposits		3	3	6
Net interest income on defined benefit pension schemes		3	4	7
Other interest income		3	-	-
Finance income		9	7	13
Net finance income/(costs)		1	(12)	(14)

In the prior periods, the £7m charge relating to the unwinding of discount on provisions included a £6m exceptional charge relating to the reduction in discount rate used to measure the overall UK restructuring provision.

7.         Income tax expense

£ millions	Half year ended 31 July 2017	Half year ended 31 July 2016	Year ended 31 January 2017
UK corporation tax
Current tax on profits for the period	(43)	(44)	(66)
Adjustments in respect of prior years	(2)	-	10
	(45)	(44)	(56)
Overseas tax
Current tax on profits for the period	(56)	(65)	(155)
Adjustments in respect of prior years	1	-	(11)
	(55)	(65)	(166)
Deferred tax
Current period	(8)	(1)	22
Adjustments in respect of prior years	1	2	16
Adjustments in respect of changes in tax rates	-	2	35
	(7)	3	73
Income tax expense	(107)	(106)	(149)

The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 27% (2016/17: 26%), representing the best estimate of the effective rate for the full financial year. The effective tax rate on the same basis for the year ended 31 January 2017 was 26%. Exceptional tax items for the current period amount to a charge of £1m, none of which relates to prior year items (2016/17: £2m charge, none of which related to prior year items). Exceptional tax items for the year ended 31 January 2017 amounted to a net charge of £6m, of which a £1m credit related to prior year items.

8.         Earnings per share

	Half year ended	Half year ended	Year ended
Pence	31 July 2017	31 July 2016	31 January 2017
Basic earnings per share	13.3	14.1	27.1
Effect of dilutive share options	-	-	(0.1)
Diluted earnings per share	13.3	14.1	27.0
Basic earnings per share	13.3	14.1	27.1
Exceptional items before tax	(0.3)	(0.5)	(0.8)
Tax on exceptional and prior year items	-	(0.1)	(2.0)
Financing fair value remeasurements	-	0.1	0.1
Adjusted basic earnings per share	13.0	13.6	24.4
Transformation costs before exceptional items	2.1	0.8	2.0
Tax on transformation costs before exceptional items	(0.6)	(0.2)	(0.5)
Underlying basic earnings per share	14.5	14.2	25.9
Diluted earnings per share	13.3	14.1	27.0
Exceptional items before tax	(0.3)	(0.5)	(0.8)
Tax on exceptional and prior year items	-	(0.1)	(2.0)
Financing fair value remeasurements	-	0.1	0.1
Adjusted diluted earnings per share	13.0	13.6	24.3
Transformation costs before exceptional items	2.1	0.8	2.0
Tax on transformation costs before exceptional items	(0.6)	(0.2)	(0.5)
Underlying diluted earnings per share	14.5	14.2	25.8

The calculation of basic and diluted earnings per share is based on the profit for the period attributable to equity shareholders of the Company. A reconciliation of statutory earnings to adjusted and underlying earnings is set out below:

	Half year ended	Half year ended	Year ended
£ millions	31 July 2017	31 July 2016	31 January 2017
Earnings	295	321	610
Exceptional items before tax	(8)	(11)	(17)
Tax on exceptional and prior year items	1	(2)	(43)
Financing fair value remeasurements	-	2	1
Adjusted earnings	288	310	551
Transformation costs before exceptional items	46	18	44
Tax on transformation costs before exceptional items	(12)	(5)	(11)
Underlying earnings	322	323	584

The weighted average number of shares in issue during the period, excluding those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is 2,216m (2016/17: 2,271m). The diluted weighted average number of shares in issue during the period is 2,225m (2016/17: 2,275m). For the year ended 31 January 2017, the weighted average number of shares in issue was 2,256m and the diluted weighted average number of shares in issue was 2,263m.

9.         Dividends

	Half year ended	Half year ended	Year ended
£ millions	31 July 2017	31 July 2016	31 January 2017
Dividends to equity shareholders of the Company
Ordinary final dividend for the year ended 31 January 2017 of 7.15p per share	159	-	-
Ordinary interim dividend for the year ended 31 January 2017 of 3.25p per share	-	-	73
Ordinary final dividend for the year ended 31 January 2016 of 6.92p per share	-	157	157
	159	157	230

The proposed ordinary interim dividend for the period ended 31 July 2017 is 3.33p per share.

10.        Property, plant and equipment, investment property and other intangible assets

Additions to the cost of property, plant and equipment, investment property and other intangible assets are £125m (2016/17: £136m) and for the year ended 31 January 2017 were £410m. Disposals in net book value of property, plant and equipment, investment property, property assets held for sale and other intangible assets are £2m (2016/17: £5m) and for the year ended 31 January 2017 were £24m.

Capital commitments contracted but not provided for at the end of the period are £101m (2016/17: £36m) and at 31 January 2017 were £31m.

11.        Post-employment benefits

	Half year ended	Half year ended	Year ended
£ millions	31 July 2017	31 July 2016	31 January 2017
Net surplus in schemes at beginning of period	131	159	159
Current service cost	(6)	(5)	(9)
Administration costs	(2)	(2)	(4)
Net interest income	3	4	7
Net actuarial losses	(21)	(87)	(50)
Contributions paid by employer	18	18	38
Exchange differences	(4)	(9)	(10)
Net surplus in schemes at end of period	119	78	131

UK	236	178	239
Overseas	(117)	(100)	(108)
Net surplus in schemes at end of period	119	78	131

Present value of defined benefit obligations	(3,142)	(3,075)	(3,125)
Fair value of scheme assets	3,261	3,153	3,256
Net surplus in schemes at end of period	119	78	131

The assumptions used in calculating the costs and obligations of the Group's defined benefit pension schemes are set by the Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the sensitivity analysis provided in note 27 of the annual financial statements for the year ended 31 January 2017.

A key assumption in valuing the pension obligation is the discount rate. Accounting standards require this to be set based on market yields on high quality corporate bonds at the balance sheet date. The UK scheme discount rate is derived using a single equivalent discount rate approach, based on the yields available on a portfolio of high-quality Sterling corporate bonds with the same duration as that of the scheme liabilities.

The principal financial assumptions for the UK scheme, being the Group's principal defined benefit scheme, are set out below:

	At	At	At
Annual % rate	31 July 2017	31 July 2016	31 January 2017
Discount rate	2.5	2.4	2.7
Price inflation	3.4	2.9	3.6

12.        Financial instruments

The Group holds the following derivative financial instruments at fair value:

	At	At	At
£ millions	31 July 2017	31 July 2016	31 January 2017
Cross currency interest rate swaps	47	52	55
Foreign exchange contracts	24	75	35
Derivative assets	71	127	90

	At	At	At
£ millions	31 July 2017	31 July 2016	31 January 2017
Foreign exchange contracts	(36)	(13)	(26)
Derivative liabilities	(36)	(13)	(26)

The fair values are calculated by discounting future cash flows arising from the instruments and adjusted for credit risk. These fair value measurements are all made using observable market rates of interest, foreign exchange and credit risk. All the derivatives held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement', representing significant observable inputs other than quoted prices in active markets for identical assets or liabilities. There are no non-recurring fair value measurements nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy.

Except as detailed in the following table of borrowings, the carrying amounts of financial instruments recorded at amortised cost in the financial statements are approximately equal to their fair values. Where available, market values have been used to determine the fair values of borrowings. Where market values are not available or are not reliable, fair values have been calculated by discounting cash flows at prevailing interest and foreign exchange rates. This has resulted in level 2 inputs for borrowings as defined by the IFRS 13 fair value hierarchy.

			Carrying amount
	At	At	At
£ millions	31 July 2017	31 July 2016	31 January 2017
Bank overdrafts	8	117	-
Bank loans	6	9	9
Fixed term debt	139	146	147
Finance leases	38	41	42
Borrowings	191	313	198
			Fair value
	At	At	At
£ millions	31 July 2017	31 July 2016	31 January 2017
Bank overdrafts	8	117	-
Bank loans	6	9	9
Fixed term debt	144	151	153
Finance leases	44	52	49
Borrowings	202	329	211

13.        Other reserves

£ millions	Translation reserve	Cash flow hedge reserve	Available-for- sale reserve	Other	Total
At 1 February 2017	184	19	-	181	384
Currency translation differences Group	137	-	-	-	137
Joint ventures and associates	1	-	-	-	1
Cash flow hedges Fair value losses	-	(37)	-	-	(37)
Gains transferred to inventories	-	(14)	-	-	(14)
Tax on items that may be reclassified	-	12	-	-	12
Other comprehensive income for the period	138	(39)	-	-	99
Purchase of own shares for cancellation	-	-	-	7	7
At 31 July 2017	322	(20)	-	188	490
At 1 February 2016	(205)	25	2	172	(6)
Currency translation differences
Group	304	-	-	-	304
Joint ventures and associates	2	-	-	-	2
Cash flow hedges Fair value gains	-	26	-	-	26
Gains transferred to inventories	-	(18)	-	-	(18)
Available-for-sale financial assets
Fair value gains	-	-	5	-	5
Transferred to income statement	-	-	(7)	-	(7)
Tax on items that may be reclassified	2	(1)	-	-	1
Other comprehensive income for the period	308	7	(2)	-	313
Purchase of own shares for cancellation	-	-	-	6	6
At 31 July 2016	103	32	-	178	313
At 1 February 2016	(205)	25	2	172	(6)
Currency translation differences Group	390	-	-	-	390
Joint ventures and associates	(1)	-	-	-	(1)
Cash flow hedges Fair value gains	-	52	-	-	52
Gains transferred to inventories	-	(60)	-	-	(60)
Available-for-sale financial assets
Fair value gains	-	-	5	-	5
Transferred to income statement	-	-	(7)	-	(7)
Tax on items that may be reclassified	-	2	-	-	2
Other comprehensive income for the year	389	(6)	(2)	-	381
Purchase of own shares for cancellation	-	-	-	9	9
At 31 January 2017	184	19	-	181	384

14.        Cash generated by operations

£ millions	Half year ended 31 July 2017	Half year ended 31 July 2016	Year ended 31 January 2017
Operating profit	401	439	773
Share of post-tax results of joint ventures and associates	(1)	1	(1)
Depreciation and amortisation	122	121	253
Impairment losses	-	1	14
Loss on disposal of property, plant and equipment, property held for sale and intangible assets	1	-	4
Profit on disposal of B&Q China	-	(3)	(3)
Share-based compensation charge	12	9	15
Increase in inventories	(295)	(65)	(46)
Decrease in trade and other receivables	16	30	62
Increase in trade and other payables	313	238	4
Movement in provisions	(62)	(63)	(125)
Movement in post-employment benefits	(10)	(11)	(25)
Cash generated by operations	497	697	925

15.        Net cash

	At	At	At
£ millions	31 July 2017	31 July 2016	31 January 2017
Cash and cash equivalents	776	1,134	795
Bank overdrafts	(8)	(117)	-
Cash and cash equivalents and bank overdrafts	768	1,017	795
Bank loans	(6)	(9)	(9)
Fixed term debt	(139)	(146)	(147)
Financing derivatives	65	77	44
Finance leases	(38)	(41)	(42)
Net cash	650	898	641

	Half year ended	Half year ended	Year ended
£ millions	31 July 2017	31 July 2016	31 January 2017
Net cash at beginning of period	641	546	546
Net (decrease)/increase in cash and cash equivalents and bank overdrafts	(46)	300	38
Decrease in short-term deposits	-	(70)	(70)
Repayment of bank loans	3	2	2
Repayment of fixed term debt	-	47	47
Receipt on financing derivatives	-	(10)	(10)
Capital element of finance lease rental payments	6	7	12
Cash flow movement in net cash	(37)	276	19
Exchange differences and other non-cash movements	46	76	76
Net cash at end of period	650	898	641

16.        Disposals

In the prior period, the Group disposed of its remaining 30% interest in the B&Q China business to Wumei Holdings Inc. for a consideration (net of disposal costs) of £63m, recognising a profit on disposal of £3m.

17.        Contingent liabilities

The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees, £44m (2016/17: £1m) would crystallise due to possible future events not wholly within the Group's control. At 31 January 2017, the amount was £1m.

The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are considered likely to arise on the basis of current information and legal advice.

The Group files tax returns in many jurisdictions around the world and at any one time, is subject to periodic tax audits in the ordinary course of its business. Applicable tax laws and regulations are subject to differing interpretations and the resolution of a final tax position can take several years to complete. Where it is considered that future tax liabilities are more likely than not to arise, an appropriate provision is recognised in the financial statements.

Included within these audits is a dispute with the French Tax Authority regarding the treatment of interest paid since the 2010 year-end, where additional French tax of €49m has been assessed and for which a bank guarantee is now in place. Interest and penalties of €47m would arise on this assessment if not challenged successfully. Having taken external professional advice, the Group disagrees with the assessment and intends to defend its position through the courts. The Group does not consider it necessary to make provision for the amounts assessed at the current time, nor for any potential further amounts which may be assessed for subsequent years.

Whilst the procedures that must be followed to resolve these sort of tax issues make it likely that it will be some years before the eventual outcome is known, the Group does not currently expect the final outcome of these contingent liabilities to have a material effect on the Group's financial position.

18.        Related party transactions

The Group's significant related parties are its joint ventures, associates and pension schemes as disclosed in note 37 of the annual financial statements for the year ended 31 January 2017. There have been no significant changes in related parties or related party transactions in the period.

19.        Post balance sheet event

On 1 August 2017, the Group signed an agreement to purchase 100% of the shares in Praktiker Romania SRL, a home improvement retailer with 27 stores and a turnover in 2016 of approximately €140m. Subject to regulatory approval, the transaction is expected to complete towards the end of the Group's 2017/18 financial year.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that to the best of their knowledge this set of interim condensed financial statements has been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

·      an indication of important events that have occurred during the period and their impact on the interim condensed financial statements, and a description of the principal risks and uncertainties for the remainder of the financial year; and

·      material related party transactions in the period and any material changes in the related party transactions described in the last annual report.

The Directors of Kingfisher plc were listed in the Kingfisher plc Annual Report for the year ended 31 January 2017, which noted that Andy Cosslett would join the Board as a non-executive Director and Chairman-designate on 1 April 2017. Andy Cosslett became Chairman at the conclusion of the Annual General Meeting on 13 June 2017, replacing Daniel Bernard who resigned as a Director on that date.

By order of the Board

Véronique Laury                                                                  Karen Witts

Chief Executive Officer                                                        Chief Financial Officer

19 September 2017                                                            19 September 2017

INDEPENDENT REVIEW REPORT TO KINGFISHER PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2017 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 19. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Statutory Auditor

London, United Kingdom

19 September 2017

 

END

 

 

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