Preliminary Results - Part 2

RNS Number : 5218D

Kingfisher PLC

24 March 2011

 



Consolidated income statement
Year ended 29 January 2011
				2010/11			2009/10
		Before	Exceptional		Before	Exceptional
		exceptional	items		exceptional	items
£ millions	Notes	items	(note 4)	Total	items	(note 4)	Total
Continuing operations:
Sales	3	10,450	-	10,450	10,503	-	10,503
Cost of sales		(6,545)	-	(6,545)	(6,706)	-	(6,706)
Gross profit		3,905	-	3,905	3,797	-	3,797
Selling and distribution expenses		(2,739)	(9)	(2,748)	(2,712)	-	(2,712)
Administrative expenses		(527)	-	(527)	(536)	-	(536)
Other income		34	3	37	31	17	48
Share of post-tax results of joint ventures and associates		31	-	31	26	-	26
Operating profit		704	(6)	698	606	17	623
Analysed as:
Retail profit	3	762	(6)	756	664	17	681
Central costs		(41)	-	(41)	(41)	-	(41)
Share of interest and tax of joint ventures and associates		(17)	-	(17)	(17)	-	(17)
Finance costs		(46)	-	(46)	(76)	-	(76)
Finance income		19	-	19	19	-	19
Net finance costs	5	(27)	-	(27)	(57)	-	(57)
Profit before taxation		677	(6)	671	549	17	566
Income tax expense	6	(183)	3	(180)	(174)	(7)	(181)
Profit for the year		494	(3)	491	375	10	385
Attributable to:
Equity shareholders of the Company				494			388
Non-controlling interests				(3)			(3)
				491			385
Earnings per share	7
Basic				21.0p			16.5p
Diluted				20.7p			16.4p
Adjusted basic				20.5p			16.4p
Adjusted diluted				20.2p			16.3p

The proposed final dividend for the year ended 29 January 2011, subject to approval by shareholders at the Annual General Meeting, is 5.145p per share.

Consolidated statement of comprehensive income Year ended 29 January 2011
£ millions	Notes		2010/11	2009/10
Profit for the year			491	385
Actuarial gains/(losses) on post employment benefits	9		128	(165)
Currency translation differences
Group			32	15
Joint ventures and associates			-	(6)
Cash flow hedges
Fair value gains/(losses)			5	(13)
Gains transferred to inventories			(14)	(5)
Tax on other comprehensive income			(33)	55
Other comprehensive income for the year			118	(119)
Total comprehensive income for the year			609	266
Attributable to:
Equity shareholders of the Company			611	271
Non-controlling interests			(2)	(5)
			609	266

Consolidated statement of changes in equity Year ended 29 January 2011
	Attributable to equity shareholders of the Company
£ millions	Notes	Share capital	Share premium	Own shares held	Retained earnings	Other reserves	Total	Non-controlling interests	Total equity
At 31 January 2010		371	2,191	(54)	1,921	516	4,945	10	4,955
Profit for the year		-	-	-	494	-	494	(3)	491
Actuarial gains on post employment benefits	9	-	-	-	128	-	128	-	128
Currency translation differences Group		-	-	-	-	31	31	1	32
Cash flow hedges Fair value gains		-	-	-	-	5	5	-	5
Gains transferred to inventories		-	-	-	-	(14)	(14)	-	(14)
Tax on other comprehensive income		-	-	-	(34)	1	(33)	-	(33)
Other comprehensive income for the year		-	-	-	94	23	117	1	118
Total comprehensive income for the year		-	-	-	588	23	611	(2)	609
Share-based compensation		-	-	-	21	-	21	-	21
Shares issued under share schemes		-	3	-	-	-	3	-	3
Own shares disposed		-	-	12	(11)	-	1	-	1
Dividends		-	-	-	(129)	-	(129)	-	(129)
At 29 January 2011		371	2,194	(42)	2,390	539	5,452	8	5,460
At 1 February 2009		371	2,188	(57)	1,768	513	4,783	15	4,798
Profit for the year		-	-	-	388	-	388	(3)	385
Actuarial losses on post employment benefits	9	-	-	-	(165)	-	(165)	-	(165)
Currency translation differences     Group		-	-	-	-	17	17	(2)	15
Joint ventures and associates		-	-	-	-	(6)	(6)	-	(6)
Cash flow hedges Fair value losses		-	-	-	-	(13)	(13)	-	(13)
Gains transferred to     inventories		-	-	-	-	(5)	(5)	-	(5)
Tax on other comprehensive income		-	-	-	45	10	55	-	55
Other comprehensive income for the year		-	-	-	(120)	3	(117)	(2)	(119)
Total comprehensive income for the year		-	-	-	268	3	271	(5)	266
Share-based compensation		-	-	-	20	-	20	-	20
Shares issued under share schemes		-	3	-	-	-	3	-	3
Own shares purchased		-	-	(7)	-	-	(7)	-	(7)
Own shares disposed		-	-	10	(10)	-	-	-	-
Dividends		-	-	-	(125)	-	(125)	-	(125)
At 30 January 2010		371	2,191	(54)	1,921	516	4,945	10	4,955

Consolidated balance sheet
At 29 January 2011
£ millions	Notes	2010/11	2009/10
Non-current assets
Goodwill		2,395	2,395
Other intangible assets		86	70
Property, plant and equipment		3,632	3,612
Investment property		32	24
Investments in joint ventures and associates		259	234
Deferred tax assets		27	27
Derivatives		62	81
Other receivables		15	22
		6,508	6,465
Current assets
Inventories		1,791	1,545
Trade and other receivables		513	494
Derivatives		15	24
Current tax assets		45	58
Cash and cash equivalents		731	1,260
		3,095	3,381
Total assets		9,603	9,846
Current liabilities
Trade and other payables		(2,519)	(2,374)
Borrowings		(196)	(647)
Derivatives		(11)	(25)
Current tax liabilities		(372)	(348)
Provisions		(27)	(36)
		(3,125)	(3,430)
Non-current liabilities
Other payables		(76)	(74)
Borrowings		(577)	(883)
Derivatives		(17)	(47)
Deferred tax liabilities		(238)	(197)
Provisions		(52)	(62)
Post employment benefits	9	(58)	(198)
		(1,018)	(1,461)
Total liabilities		(4,143)	(4,891)
Net assets		5,460	4,955
Equity
Share capital		371	371
Share premium		2,194	2,191
Own shares held		(42)	(54)
Retained earnings		2,390	1,921
Other reserves		539	516
Total attributable to equity shareholders of the Company		5,452	4,945
Non-controlling interests		8	10
Total equity		5,460	4,955

The financial statements were approved by the Board of Directors on 23 March 2011 and signed on its behalf by:

Ian Cheshire                                                                        Kevin O'Byrne

Group Chief Executive                                                        Group Finance Director

Consolidated cash flow statement
Year ended 29 January 2011
£ millions	Notes	2010/11	2009/10
Operating activities
Cash generated by operations	10	763	1,130
Income tax paid		(133)	(151)
French tax receipt	6	-	148
Net cash flows from operating activities		630	1,127
Investing activities
Purchase of property, plant and equipment, investment property and intangible assets		(310)	(256)
Disposal of property, plant and equipment, investment property and intangible assets		87	59
Interest received		19	14
Dividends received from joint ventures and associates		6	5
Net cash flows from investing activities		(198)	(178)
Financing activities
Interest paid		(33)	(72)
Interest element of finance lease rental payments		(5)	(5)
Repayment of bank loans		(57)	(130)
Repayment of Medium Term Notes and other fixed term debt		(696)	(500)
Receipt on financing derivatives		6	78
Capital element of finance lease rental payments		(12)	(14)
Issue of share capital under share schemes		3	-
Purchase of own shares		-	(7)
Disposal of own shares		1	-
Dividends paid to equity shareholders of the Company		(129)	(125)
Net cash flows from financing activities		(922)	(775)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts		(490)	174
Cash and cash equivalents and bank overdrafts at beginning of year		1,135	994
Exchange differences		(9)	(33)
Cash and cash equivalents and bank overdrafts at end of year	11	636	1,135

Notes to the 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, continental Europe and China.

Kingfisher plc is a Company incorporated in the United Kingdom. The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX.

The Company is listed on the London Stock Exchange.

2          Basis of preparation

The consolidated financial statements of the Company, its subsidiaries, joint ventures and associates are made up to the nearest Saturday to 31 January each year.  The current financial year is the 52 weeks ended 29 January 2011 ('the year').  The comparative financial year is the 52 weeks ended 30 January 2010 ('the prior year'). This only impacts the UK operations with all the other operations reporting on a calendar basis as a result of local statutory requirements.

The directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the year ended 29 January 2011.

The condensed financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and related notes do not constitute statutory financial statements for the 52 weeks ended 29 January 2011, but are derived from those statements. Statutory financial statements for 2010/11 will be filed with the Registrar of Companies in due course. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006. Statutory financial statements for 2009/10 have been filed with the Registrar of Companies. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006. 

The condensed financial information has been abridged from the 2010/11 statutory financial statements, which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The condensed financial information has been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and post employment benefits.

The following new standards and amendments, which are mandatory for the first time for the financial year ended 29 January 2011, are relevant for the Group:

IAS 27 (amendment)	Consolidated and separate financial statements - Non-controlling interests (effective from 1 July 2009)	Requires the effects of all transactions with non-controlling (minority) interests to be recorded in equity if there is no change in control. They will no longer result in goodwill or gains and losses. The amended standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value and a gain or loss is recognised in profit or loss. The impact of this on the results presented has not been significant.
IFRS 3 (amendment)	Business combinations (effective from 1 July 2009)	Harmonises business combination accounting with US GAAP. The amended standard will continue to apply the acquisition method to business combinations, but with certain significant changes. All payments to purchase a business will be recorded at fair value at the acquisition date, with some contingent payments subsequently remeasured at fair value through income. Goodwill and non-controlling (minority) interests may be calculated on a gross or net basis. All transaction costs will be expensed. The impact of this on the results presented has not been significant.

Principal rates of exchange

		2010/11		2009/10
	Average rate	Year end rate	Average rate	Year end rate
Euro/£	1.17	1.16	1.13	1.15
US Dollar/£	1.54	1.59	1.58	1.61
Polish Zloty/£	4.65	4.52	4.86	4.69
Chinese Renminbi/£	10.41	10.45	10.79	11.01

Use of non-GAAP measures

Kingfisher believes that retail profit, adjusted pre-tax profit, effective tax rate, adjusted post-tax profit and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These and other non-GAAP measures such as net debt/cash are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items', 'adjusted', 'effective tax rate' and 'net debt/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 (principally the costs of the Group's head office), exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of joint ventures and associates.

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 underlying 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

·      the costs of significant restructuring 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. 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 underlying items of a financing nature.

The effective tax rate represents the effective income tax expense as a percentage of continuing profit before taxation excluding exceptional items. Effective income tax expense is the continuing income tax expense excluding tax on exceptional items and tax adjustments in respect of prior years and changes in tax rates.

Net debt/cash comprises borrowings and financing derivatives (excluding accrued interest), less cash and cash equivalents and current other investments.

3          Segmental analysis

Income statement

	2010/11
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	4,333	4,204	1,062	851	10,450
Retail profit	243	348	134	37	762
Exceptional items					(6)
Central costs					(41)
Share of interest and tax of joint ventures and associates					(17)
Operating profit					698
Net finance costs					(27)
Profit before taxation					671

	2009/10
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	4,442	4,242	1,012	807	10,503
Retail profit	217	322	125	-	664
Exceptional items					17
Central costs					(41)
Share of interest and tax of joint ventures and associates					(17)
Operating profit					623
Net finance costs					(57)
Profit before taxation					566

 

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

The 'Other International' segment consists of Poland, China, Spain, Russia, the joint venture Koçtaş in Turkey and the associate Hornbach which has operations in Germany and other European countries. Poland has been shown separately due to its significance.

Central costs principally comprise the costs of the Group's head office.

 

4        Exceptional items

£ millions	2010/11	2009/10
Included within selling and distribution expenses
UK restructuring	(9)	-
	(9)	-
Included within other income
Profit on disposal of properties	3	17
	3	17
Exceptional items before tax	(6)	17
Tax on exceptional items	3	(7)
Exceptional items	(3)	10

The UK restructuring charge of £9m reflects plans announced by the Group to consolidate its distribution network in the UK through the construction of a new regional distribution centre in the south of England and the closure of other sites. The provision covers primarily future costs of redundancies and dilapidations on the sites to be exited.

The Group has recorded an exceptional profit of £3m on the disposal of properties (2009/10: £17m profit).

5        Net finance costs

 

£ millions	2010/11	2009/10
Bank overdrafts and bank loans	(18)	(25)
Medium Term Notes and other fixed term debt	(21)	(43)
Financing fair value remeasurements	7	2
Finance leases	(5)	(5)
Unwinding of discount on provisions	(3)	(4)
Expected net interest charge on defined benefit pension schemes	(7)	(4)
Capitalised interest	1	3
Finance costs	(46)	(76)
Cash and cash equivalents and current other investments	19	19
Finance income	19	19
Net finance costs	(27)	(57)

6        Income tax expense

£ millions	2010/11	2009/10
UK corporation tax
Current tax on profits for the year	73	66
Adjustments in respect of prior years	(10)	(7)
	63	59
Overseas tax
Current tax on profits for the year	118	104
Adjustments in respect of prior years	(5)	(1)
	113	103
Deferred tax
Current year	-	4
Adjustments in respect of prior years	5	15
Adjustments in respect of changes in tax rates	(1)	-
	4	19
Income tax expense	180	181

The effective rate of tax on profit before exceptional items and excluding tax adjustments in respect of prior years and changes in tax rates is 29% (2009/10: 30%). Tax on exceptional items for the year is a credit of £3m, all of which relates to current year items. In 2009/10 tax on exceptional items was a charge of £7m, all of which related to current year items.

Kingfisher paid €138m tax to the French tax authorities in the year ended 31 January 2004 as a consequence of the Kesa Electricals demerger and recorded this as an exceptional tax charge. Kingfisher appealed against this tax liability and the tribunal found in favour of Kingfisher in June 2009. As a result, on 7 September 2009 the Group received €169m (£148m) from the French tax authorities, representing a refund of the €138m and €31m of repayment supplement. The French tax authorities have appealed against this decision and the appeal court hearing date is awaited. No income has therefore been recognised in respect of this receipt.

7          Earnings per share

		2010/11			2009/10
	Earnings	Weighted average number of shares	Earnings per share	Earnings	Weighted average number of shares	Earnings per share
	£ millions	millions	pence	£ millions	millions	pence
Basic earnings per share	494	2,349	21.0	388	2,347	16.5
Dilutive share options		38	(0.3)		22	(0.1)
Diluted earnings per share	494	2,387	20.7	388	2,369	16.4
Basic earnings per share	494	2,349	21.0	388	2,347	16.5
Exceptional items	6		0.3	(17)		(0.7)
Tax on exceptional and prior year items	(14)		(0.6)	14		0.7
Financing fair value remeasurements	(7)		(0.3)	(2)		(0.1)
Tax on financing fair value remeasurements	2		0.1	1		-
Adjusted basic earnings per share	481	2,349	20.5	384	2,347	16.4
Diluted earnings per share	494	2,387	20.7	388	2,369	16.4
Exceptional items	6		0.3	(17)		(0.7)
Tax on exceptional and prior year items	(14)		(0.6)	14		0.7
Financing fair value remeasurements	(7)		(0.3)	(2)		(0.1)
Tax on financing fair value remeasurements	2		0.1	1		-
Adjusted diluted earnings per share	481	2,387	20.2	384	2,369	16.3

Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders of the Company by the weighted average number of shares in issue during the year, excluding those held in the Employee Share Ownership Plan Trust ('ESOP') which for the purpose of this calculation are treated as cancelled.

For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where both the exercise price is less than the average market price of the Company's shares during the year and any related performance conditions have been met.

8          Dividends

£ millions	2010/11	2009/10
Dividends to equity shareholders of the Company
Final dividend for the year ended 30 January 2010 of 3.575p per share (31 January 2009: 3.4p per share)	84	80
Interim dividend for the year ended 29 January 2011 of 1.925p per share (30 January 2010: 1.925p per share)	45	45
	129	125

The proposed final dividend for the year ended 29 January 2011 of 5.145p per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability.

 9         Post employment benefits

	2010/11			2009/10
£ millions	UK	Other	Total	UK	Other	Total
Deficit in scheme at beginning of year	(171)	(27)	(198)	(40)	(34)	(74)
Current service cost	(23)	(4)	(27)	(19)	(3)	(22)
Interest on defined benefit obligations	(90)	(2)	(92)	(88)	(3)	(91)
Expected return on pension scheme assets	84	1	85	87	-	87
Actuarial gains/(losses)	134	(6)	128	(160)	(5)	(165)
Contributions paid by employer	45	1	46	49	17	66
Exchange differences	-	-	-	-	1	1
Deficit in scheme at end of year	(21)	(37)	(58)	(171)	(27)	(198)

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.

The UK scheme discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference in term between iBoxx and scheme liabilities. The overall expected rate of return on scheme assets reflects market expectations at the valuation date of long term asset returns and the mix of assets in the schemes.

		2010/11		2009/10
Annual % rate		UK	Other	UK	Other
Discount rate		5.6	4.4	5.5	5.3
Salary escalation		4.3	2.0 to 6.7	4.2	2.0 to 6.6
Rate of pension increases		3.5	-	3.4	-
Price inflation		3.5	2.0	3.4	2.0
Overall expected rate of return on assets		6.0	3.5	5.9	3.5

For the UK scheme, the mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics and experience of the membership of the scheme from 2007 to 2010. The assumptions for life expectancy of UK scheme members are as follows:

Years	2010/11	2009/10
Age to which current pensioners are expected to live (60 now)
- Male	86.4	87.2
- Female	87.1	85.9
Age to which future pensioners are expected to live (60 in 15 years' time)
- Male	87.1	88.8
- Female	88.7	87.1

The following sensitivity analysis for the UK scheme shows the estimated impact on obligations resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.

Assumption	Change in assumption	Impact on defined benefit obligation
Discount rate	Increase/decrease by 0.1%	Decrease/increase by £31m
Salary escalation	Increase/decrease by 0.1%	Increase/decrease by £3m
Rate of pension increases	Increase/decrease by 0.1%	Increase/decrease by £20m
Price inflation	Increase/decrease by 0.1%	Increase/decrease by £31m
Mortality	Increase in life expectancy by one year	Increase by £45m

10       Cash generated by operations

£ millions	2010/11	2009/10
Operating profit	698	623
Share of post-tax results of joint ventures and associates	(31)	(26)
Depreciation and amortisation	238	260
Impairment losses	14	4
Loss/(profit) on disposal of property, plant and equipment, investment property and intangible assets	4	(1)
Share-based compensation charge	21	20
(Increase)/decrease in inventories	(238)	234
Increase in trade and other receivables	(10)	(18)
Increase in trade and other payables	107	102
Movement in provisions	(21)	(24)
Movement in post employment benefits	(19)	(44)
Cash generated by operations	763	1,130

11        Net cash/(debt)

£ millions	2010/11	2009/10
Cash and cash equivalents	731	1,260
Bank overdrafts	(95)	(125)
Cash and cash equivalents and bank overdrafts	636	1,135
Bank loans	(104)	(154)
Medium Term Notes and other fixed term debt	(504)	(1,186)
Financing derivatives	56	20
Finance leases	(70)	(65)
Net cash/(debt)	14	(250)
£ millions	2010/11	2009/10
Net debt at beginning of year	(250)	(1,004)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts	(490)	174
Repayment of bank loans	57	130
Repayment of Medium Term Notes and other fixed term debt	696	500
Receipt on financing derivatives	(6)	(78)
Capital element of finance lease rental payments	12	14
Cash flow movement in net debt	269	740
Exchange differences and other non-cash movements	(5)	14
Net cash/(debt) at end of year	14	(250)

 

END

 

 

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