Final Results

Kingfisher PLC 20 March 2002 Wednesday 20 March 2002 EMBARGOED UNTIL 0700 HOURS Preliminary results for the year ended 2 February 2002 2001 was a year of transformation for Kingfisher. The Group is now focused on two leading businesses in attractive growth markets, with a strengthened balance sheet, and is well-positioned to exploit future opportunities for growth. Despite the uncertain economic environment, Kingfisher faces the coming year with confidence. • Continuing operations retail sales growth of 11%, with like-for-like sales up 4% • Pre-tax profits ahead by 5% • Balance sheet strengthened by strong operating cash flow, along with the cash inflow as a result of the divestment of General Merchandise and other disposals, leading to net debt falling by 44% to £1.0 billion • Dividends at 12p per share are covered 1.8 times by adjusted earnings per share, in line with last year's cover 2002 2001 Change Continuing operations(1) £m £m Retail sales 9,618.7 8,658.4 11.1% Retail profit (2) 614.4 582.5 5.5% Profit before tax (2) 560.1 531.8 5.3% Earnings per share (2)(3) 21.2p 21.8p (4) (2.8)% (1) Excluding the results for the demerged Woolworths Group, Superdrug, Liberty Surf and the effect of the General Merchandise properties together with interest and taxation attributable to these operations. (2) Before exceptional items and acquisition goodwill amortisation. (3) Adjusted to reflect the 10 for 11 share consolidation. (4) As restated for the implementation of FRS 19 'Deferred Tax'. INTRODUCTION Kingfisher's new Chairman, Francis Mackay, said: 'I have enjoyed my first three months as Chairman learning about our great businesses and meeting a lot of people. I am convinced that there is a tremendous opportunity here to create real value and that we have the strength and depth of management to deliver it. We are currently reviewing key strategic issues, in the best interests of shareholders and employees, and will not comment further ahead of any decisions.' A YEAR OF DELIVERY Kingfisher today announced preliminary results, with retail sales from continuing operations up 11.1% to £9.6 billion and pre-tax profit growing by 5.3% to £560.1 million. The Group's Home Improvement sector, by far the largest such business in Europe, performed strongly with sales up 14.5% and retail profit ahead by 8.1% at £430.7 million. Within this the UK businesses, B&Q and Screwfix, had another outstanding year of growth with sales up by 16.2% and retail profit ahead by 14.3%. In France, the picture was mixed with Brico Depot continuing to out- perform the Castorama main chain. Electrical and Furniture, Europe's third largest electricals business with two thirds of sales arising outside the UK, grew sales by 6.2%. Retail profit held steady at £183.7 million, despite the more difficult conditions experienced in Continental Europe. In spite of the higher pre-tax profit, adjusted earnings per share for the continuing businesses were slightly down reflecting higher taxation and minority interests. Following the separation of the General Merchandise businesses, which last year contributed over 20% of the Group's operating profit, the dividend has been reduced to 12.0p per share in order to maintain a similar level of dividend cover to last year. The Group also reported further progress against its strategic and operational objectives. Kingfisher is now further advanced towards its vision of creating integrated international businesses, in home improvement and electricals & furniture that combine global scale with local marketing while operating to a consistent set of retailing principles. A 'category killing' home improvement warehouse format operating to the same retailing principles now exists in a number of markets; the Group's electricals businesses' ranges and retail operating principles are converging across Europe; most of the major businesses have now moved to centralised buying and logistics; and direct sourcing from the Far East is growing rapidly and generating substantial benefits. All of these are central to the Group's strategy of building businesses that can consistently offer customers best price, best choice and best service every day. Key operational achievements during the year include: the increased rate of roll-out of B&Q Warehouses; acquisition of 10 BUT franchises; acceleration of the store extension and opening programme at Darty; implementation of the first phase of the turnaround plan at ProMarkt; and further notable progress in e- commerce. In addition, strong progress was made as follows: B&Q's cost price reduction programme led to benefits of nearly £50 million being achieved; costs were tightly controlled throughout the Group; gross margins held firm; and the focus on cash management contributed to operating cash flow increasing by 47%. During the year, the Group completed the separation of the General Merchandise businesses. The associated cash inflow, along with the more recent disposal of the UK consumer credit operation and the strong rise in operational cash flow, meant that net debt fell sharply from £1.9 billion to £1.0 billion. This was achieved despite another year of significant investment in the continuing businesses. In December 2001, Kingfisher completed the acquisition of a strategic stake in Hornbach Holding AG, the leading warehouse player in the German home improvement market, with activities in several other European countries. This move gives the Group a significant presence in the key German market complementing the market- leading positions already held in the UK and France. Sir Geoffrey Mulcahy, Group Chief Executive, said 'With our strong brands and market leading positions in attractive home retailing markets, Kingfisher has produced a solid performance in terms of both sales and profits. This has been achieved despite a tough trading environment and continued investment in the stores and supply chain infrastructure of our existing businesses. Of particular note was the performance of B&Q which again grew its profit substantially in a year that also saw more new space opened by the business than ever before'. THE YEAR AHEAD The Group will continue to move forward with its vision of creating integrated pan-European businesses in home improvement and electricals & furniture with global sourcing and local marketing. For the coming year the operational agenda is aimed at: • maintaining the growth momentum of B&Q, BUT and Brico Depot; • continuing to accelerate the growth of Darty; • capitalising on the potential within the Castorama main chain stores; • turning around ProMarkt. Commenting on the outlook, Sir Geoff added: 'While we are cautious in the light of the uncertain market conditions, we have plans in place that lead us to expect to continue to perform well relative to our competitors during the coming year. Our anticipated sales growth is underpinned by new store space and we remain focused on cost and cash control.' -ends- This news release contains forward-looking statements based on current assumptions and forecasts made by Kingfisher's management. Various known and unknown risks, uncertainties and other factors could lead to substantial differences between the actual future results, financial situation, development or performance of the Group and the estimates given here. The Group accepts no obligation to continue to report or update these forward-looking statements or adjust them to future events or developments. Company profile 1. Kingfisher is Europe's leading home improvement retailer and is ranked number three in the world. The company operates more than 570 home improvement stores in 11 countries and enjoys market leading positions in the UK, France and Taiwan. Sales for the Home Improvement sector for the year to 2 February 2002 were over £5.8 billion, with retail profit of over £430 million. 2. Paris-based Kingfisher Electricals operates more than 820 stores in nine countries. It is Europe's third largest electrical retailing business by sales. As well as holding the leading position in France with Darty and BUT and the number two position in the UK through Comet, Kingfisher also enjoys leading positions in Belgium through Vanden Borre and in the Czech and Slovak Republics through Datart. Sales for the year to 2 February 2002 were over £3.7 billion with retail profit of £184 million. Further Enquiries: Broker and Institutional Enquiries Ian Harding, Director of Investor Relations +44 (0) 20 7725 4889 Media Enquiries Andrew Mills, Director of Corporate Affairs +44 (0) 20 7725 5776 Jonathan Miller, Head of Corporate Communications, UK +44 (0) 20 7725 5713 France Graham Fairbank, Head of Corporate Communications +33 (0) 1 43 18 52 26 Kingfisher plc +44 (0) 20 7724 7749 Kingfisher Website www.kingfisher.com The Maitland Consultancy Angus Maitland/Duncan Campbell-Smith +44 (0) 20 7379 5151 SUMMARY RESULTS SECTOR Retail sales (£m) Retail profit (£m) % % 2002 2001 Change 2002 2001 Change HOME IMPROVEMENT 5,833.9 5,093.5 14.5 430.7 398.5 8.1 ELECTRICAL AND FURNITURE 3,784.8 3,564.9 6.2 183.7 184.0 (0.2) TOTAL 9,618.7 8,658.4 11.1 614.4 582.5 5.5 Retail sectors only, excludes e-commerce, property, financial services, acquisition goodwill amortisation, exceptional items and other operating costs. SUMMARY OTHER DATA SECTOR No. of stores Selling space Net increase in Employees (000s sq. m.) store numbers (FTE) 2002 2001 2002 2001 2002 2001 2002 2001 HOME IMPROVEMENT 573 539 3,765.0 3,382.2 34 48 50,231 43,874 ELECTRICAL AND FURNITURE 824 803 1,037.6 940.4 21 70 26,307 26,155 TOTAL 1,397 1,342 4,802.6 4,322.6 55 118 76,538 70,029 HOME IMPROVEMENT Sales £m % Retail Profit £m % 2002 2001 Change 2002 2001 Change UK(1) 3,214.6 2,766.9 16.2 300.5 263.0 14.3 France 1,833.5 1,707.5 7.4 119.9 116.6 2.8 Other 785.8 619.1 26.9 10.3 18.9 (45.5) Total 5,833.9 5,093.5 14.5 430.7 398.5 8.1 (1) Includes Screwfix Kingfisher's Home Improvement business, by far the largest in Europe and third largest in the world, achieved sales growth of over 14% and grew retail profit by over 8%. Most of the growth again came from the UK businesses. The sector now has 573 stores worldwide. UK The UK repair, maintenance and improvement (RMI) market grew by 7% in the 12 months to the end of January 2002, with B& Q, the UK market leader, driving a significant proportion of the total market growth. Total UK sales growth of 16.2% was underpinned by the strong like-for-like growth of 10.8%. The like-for- like sales growth of the B&Q Warehouse format was 11.5% and 8.1% for Supercentres. Screwfix grew sales by 38.3%. During the year, B&Q continued the expansion of its range of exclusive products with the new take-away kitchen range, LOC laminate flooring and Performance Pro Power tools particular successes. Within six months of launch, Performance Pro became the UK's leading power tool brand. During the year, B&Q opened 21 new warehouses and added just over 230,000 square metres of space, representing growth of nearly 15%. B&Q ended the year with a 12.3% share of the RMI market, up from 11.2% last year. B&Q has retained its price advantage over its main competitors and during the year reduced its prices of the top 9,000 products on average by 2%. At the same time, gross margins increased slightly as a result of the cost price reduction programme which, principally by new ways of working in partnership with suppliers, produced a benefit of nearly £50 million in the year. There was also a focus on operational efficiencies including improving stock turns and reducing the investment costs of building new stores. However, there was a one-off increase in store pre-opening costs due to the cost of reformatting five ex-Homebase mega-stores. Investment was also made during the year in employee pay rates, with a consequent beneficial reduction in employee turnover levels. In the year ahead, B&Q plans to open a further 15 B&Q Warehouses. Screwfix, the specialist catalogue and internet business, recently voted UK e- tailer of the year by Retail Week, continued to perform well with sales and profits up strongly. With sales of screws and fixings averaging two million per day, the business now has a 10% UK market share in these categories. Internet sales amount to 14% of Screwfix sales. FRANCE Total sales in France, where the market grew by 3.1%, increased by 5.7% in local currency or 7.4% in sterling terms. Like-for-like sales were ahead by 3.4%. Castorama main chain stores in France reported sales down by 0.3% in local currency, reflecting in part the transfer of seven stores to Brico Depot. Like- for-like growth was a disappointing 0.5%. A number of product range reviews were implemented in the period and own label ranges were introduced for the first time, including paints and tools under the 'Casto' brand name. The implementation of centralised buying and distribution continued during the year. Obtaining the buying and efficiency benefits that centralisation brings is a key priority. The Castorama France warehouse format has continued its development with the opening of three more stores in the year in Chambery, Terville and Olivet. The in-store offer has been adapted, based on the experience from the first store at Claye Souilly which opened in October 2000. In particular, key ranges have been expanded to bring the overall number of stock units (SKUs) closer to that of a B&Q Warehouse, adding more authority. In the year ahead, there are plans to open another seven stores of this type. Brico Depot, the highly successful Every Day Low Pricing (EDLP) retail-based format, delivered excellent sales and retail profit growth, outperforming the market with like-for-like sales growth of 9.2%. There were nine new store openings, bringing the total number of stores to 43. A further 13 Brico Depot stores are planned to open in the coming year. INTERNATIONAL A total of 24 new stores opened and space grew by 16.9%. Overall international selling space now stands at 775,300 square metres. Sales growth was 26.9% of which 1.0% was like-for-like. Strong growth was achieved in Poland, Italy and China. The overall profit decline was mostly driven by the investment costs of expansion in new markets and the associated increase in central infrastructure. In Canada, six new stores were opened in the year, split evenly between Quebec and Ontario. Despite a downturn in the Polish economy, Castorama showed strong sales and retail profit growth during the year, with four store openings bringing the total to 12. B&Q Taiwan opened another four stores and grew retail profit, despite a very tough economic environment. Another three new stores were opened in China taking the total to five, including the biggest B&Q in the world, at 18,000 square metres, in Shanghai. A total of 24 additional stores are planned in countries outside the UK and France in the current year with the emphasis in Poland, Taiwan and China. ELECTRICAL AND FURNITURE Sales £m % Retail Profit £m % 2002 2001 Change 2002 2001 Change France 1,700.0 1,605.4 5.9 173.8 163.9 6.0 UK 1,253.2 1,135.1 10.4 43.7 40.3 8.4 Germany (1) 624.7 605.7 3.1 (27.7) (18.8) (47.3) Other 206.9 218.7 (5.4) (6.1) (1.4) n/a Total 3,784.8 3,564.9 6.2 183.7 184.0 (0.2) (1) Includes 13 months to 31 January 2002 (last year: 12 months to 31 December 2000) Kingfisher's Electrical and Furniture business, the third largest in Europe, achieved sales of nearly £3.8 billion, up 6.2%, and held retail profit steady at £183.7 million despite tougher trading conditions in continental Europe. The sector now operates 824 stores across nine countries. UK The UK core electronics market grew by 10% in the period February 2001 to January 2002, with Comet's share of this market growing by 0.2% points to 13.5%. Comet's total sales grew by 10.4%, with like-for-like sales ahead by 5.2%, driven by the solid performance of multimedia and brown goods. Large-screen televisions, DVD players, game consoles and accessories saw particularly strong growth. Comet's commitment to EDLP continued with over 1.8 million competitor prices checked during the year. Comet implemented a series of initiatives under the name 'Project Pulse', including improved in-store product information, more in-store customer-facing employee hours and a new employee incentive scheme. The result was an improved customer shopping experience which, coupled with an improved management of the product mix, resulted in increased average selling prices. During the year, Comet opened seven new destination stores and plans to open a further 11 in the current year. These interactive stores now account for 20% of sales. Comet also continued to invest in its customer service capability, both home delivery and after sales, with the opening of a further five after sales service centres, bringing the total to 17. A focus on margin and costs helped maintain the retail profit margin, despite continued investment in new stores and after sales service centres. FRANCE Consumer confidence dropped significantly in March 2001 and declined for much of the year despite a slight recovery in the last quarter. For the year to January 2002, Banque de France figures show that the French market for white goods was flat compared with last year and the market for brown goods increased by 2.4%. Against this background, Darty achieved total sales growth of 2.6% in local currency to £1,291.2 million including like-for-like growth of 0.2%. This performance was set against a tough comparative, with 10.9% like-for-like growth in the previous year. Strongest growth overall was achieved in brown goods which again benefited from technological innovation in DVD, large-screen TV, home cinema and computers. Growth was also achieved in white goods with strong gains in small domestic appliances. However, sales were impacted by the global slowdown in the PC and mobile phone markets, categories which make up around 10% of total sales. Despite this, Darty achieved strong growth in laptops. Gross margin rates improved due to a favourable product mix and a focus on product margin management. A cost reduction programme was also put in place early in the year in anticipation of tougher trading conditions. The combination of all these initiatives helped protect retail profit at £122.8 million, up £2.8 million on the prior year. During the year, eight new stores were opened, a further eight were refurbished, including seven extensions, and three were relocated. In total, space grew by just over 8%. In the coming year, Darty will continue this programme. BUT achieved sales growth of 11.4% to £408.8 million, up 2.8% on a like-for-like basis. BUT capitalised on its exposure to the furniture market along with growth categories in electrical goods, particularly vision. Additionally, strong sales growth was achieved in multi-media through the enhancement of ranges. Gross margins improved, reflecting the centralisation of sourcing and distribution for a larger number of product lines and a strengthening in the range of premium branded products. BUT continued to buy franchises with a further 10 acquisitions in the year, taking the total of owned stores to 89. BUT continued with a refurbishment programme with the objective of having all owned and franchise stores in the same format by the end of 2003. Retail profit for the year at BUT was £51.0 million, up 16.2% on last year. GERMANY In Germany, the market deteriorated throughout the year reflecting consumer concerns over recession. Against this backdrop, the new management team at ProMarkt, with added support from the sector's management team, have been implementing a turnaround plan. This aims to return the business to profit by focusing on product mix and margin management, improved cost control, range standardisation, and the introduction of centralised buying and distribution. However, results were adversely impacted by one-off redundancy costs and the inclusion of an extra month of trading to align the year-end with the remainder of the Group. This plan started to deliver progress in the second half with clear improvements in the margins being achieved. The priority for the coming year will be to continue the turnaround plan, with the aim of significantly reducing the level of losses. OTHER INTERNATIONAL This includes Vanden Borre in Belgium, BCC in the Netherlands and Datart in the Czech and Slovak Republics. The year-on-year decrease in sales primarily reflects the disposal of Electric City. BCC pursued an aggressive store expansion programme, growing space by 50%. The investment cost of this programme, along with the related infrastructure to support growth resulted in a loss for the year compared with a profit the year before. E-COMMERCE e-Kingfisher now has all major brands trading on-line. ProMarkt in Germany was brought on-line through the acquisition of Yagma.de, while B&Q and Castorama enjoyed their first year of trading. Internet sales tripled. The approach has been to develop a truly multi-channel approach to leverage the power of existing retail brands and the established sourcing networks to solve problems for customers in new ways. The Group's most advanced brand, e-Comet, has the combination of national store base, home delivery platform, call centre, and an easy-to-use website. Industry experience shows that customers using these types of multiple channels spend more, and shop more frequently than the average client. In particular, electrical customers are beginning to use the web to research purchases before visiting stores. e-Comet tripled sales compared to last year and increased conversion rates. The website, the fourth largest on- line retailer in the UK, is expected to break even in the coming year. Comet also launched an auction website, www.clearance-comet.co.uk. Today, nearly all the Group's websites are recognised as on-line leaders in their market places. e-Kingfisher will focus on driving profit and working with the businesses to develop the multi-channel retail strategies in order to re- integrate the e-commerce teams back into the businesses by the end of the year. Trials are underway on a variety of web-based processes to improve internal efficiencies through on-line auctions, on-line expenses and supplier extranets. PROPERTY The business increased continuing operating profits by 3.7% to £45.3 million. Total continuing returns, comprising operating profit, profit on investment property sales and the portfolio revaluation surplus were £74.0 million, down from £96.7 million last year. The reduction in total returns was due to lower capital growth, although the capital growth achieved exceeded the rates in the overall retail property market. Chartwell Land, Kingfisher's specialist property company, continues to provide new retail space for group businesses and a further four stores, including three B&Q Warehouses, are due to open in the first half of the current year. During the second half of the year, Chartwell Land contracted to dispose of a £614 million portfolio of high street stores. These properties increased in value by some £200 million during Kingfisher's ownership. This disposal has resulted in reduced rental income and reduced total operating profits in the year. Gross assets at the end of the year were valued at £1.2 billion compared to £1.7 billion at the end of the previous year, the reduction resulting from the high street property disposals. Chartwell Land is now a focused owner and developer of retail warehouse assets, a sector of the property market in which it has a strong track record. OTHER OPERATING COSTS These include the costs of central functions including corporate communications, business development, taxation, treasury, financial control and human resources. Also included are the statutory costs associated with a public listing. Other operating costs fell by 11.6% to £39.6 million primarily as a result of lower headcount. DISCONTINUED OPERATIONS Discontinued operations includes the results of: • Superdrug to the date of sale, 20 July 2001; • the Woolworths Group companies to the date of demerger, 28 August 2001; • the costs of their related e-commerce activities; • the net rental income on the high street property portfolio which was disposed of during the year; • interest attributable to these operations and assets; and • the exceptional losses and costs arising from the demerger, the loss on the sale of Superdrug, the loss on the disposals of shares in Tiscali and Think Natural and the net property loss on the sale of the high street portfolio. KINGFISHER DATA BY SECTOR AND COMPANY Home Improvement Store nos. Selling space Employees Sector (000s sq.m.) (FTE) UK 314 1,837.5 22,035 France 149 1,152.2 15,816 Other 110 775.3 12,380 TOTAL 573 3,765.0 50,231 Electrical and Furniture Store nos. Selling space Employees Sector (000s sq.m.) (FTE) France 275 485.0 12,807 UK 259 230.3 8,246 Germany 190 229.2 3,284 Other 100 93.1 1,970 TOTAL 824 1,037.6 26,307 KINGFISHER TOTAL 1,397 4,802.6 76,538 The figures for Electrical and Furniture France include only those stores consolidated in the Group's figures. The Group also operates 141 non- consolidated franchises in France with 354,000 sq metres of selling space and 3,600 (FTE) employees. FINANCIAL REVIEW Shareholder return and dividends Adjusted earnings per share for continuing operations before exceptional items and acquisition goodwill amortisation fell marginally from 21.8p to 21.2p per share. For continuing operations, adjusted earnings per share is calculated before exceptional items and goodwill amortisation, excluding the minority interests therein as follows: As restated+ 2002 2001 Basic earnings per share 14.4p 19.8p Exceptional items 5.7p 0.8p Goodwill amortisation 1.1p 1.2p Adjusted earnings per share 21.2p 21.8p The revaluation surplus of £27.9 million on the Group's property portfolio was equivalent to an increase in shareholder value of 2.2p per share. For the total Group the adjusted earnings per share, including discontinued operations, is made up as follows: As restated+ 2002 2001 Basic (loss)/earnings per share (19.8)p 32.9p Exceptional items 37.4p (8.0)p Goodwill amortisation 1.4p 1.4p Liberty Surf losses - 3.4p Adjusted earnings per share 19.0p 29.7p +As restated for the implementation of FRS 19 (Deferred Tax) The reduction in adjusted earnings per share arises primarily as a result of the £126.2 million reduction in adjusted profits after tax relating to discontinued operations. The adjustments are to exclude exceptional items and goodwill amortisation in both years and Liberty Surf operating losses in 2001 only. The Board has proposed a final dividend of 7.655p per share making the total dividend for the year of 12.0p per share. This dividend is covered 1.8 times by adjusted earnings before exceptional items and goodwill amortisation from continuing operations. Cashflow and investment in the businesses Net debt has been reduced from £1,873.8 million at the start of the year to £1,044.2 million at the year end. An amount of £428.1 million was received from the sale of subsidiaries (Superdrug and Time Retail Finance) and debt of £191.8 million was transferred to the Woolworths Group on demerger. A total of £632.4 million was received from the sale of tangible fixed assets and a further £101.7 million received from the disposal of investments in joint ventures and associated undertakings. Cash generation across the Group was healthy with a total of £825.3 million of net cash being generated from operating activities compared to £563.2 million in the previous year. Capital expenditure for the total Group was £732.3 million, down from £857.2 million in 2001, as the Group continues to expand and improve its store portfolio and supporting infrastructure. Of this, £599.5 million of net investment was attributable to continuing operations : £millions Continuing Discontinued Total operations operations Group Gross capital expenditure 685.7 46.6 732.3 Disposals (86.2) (546.2) (632.4) Net capital expenditure 599.5 (499.6) 99.9 Interest In a lower interest rate environment, and following the restructuring of the Group during the course of the year, the net interest charge for the total Group decreased to £68.4 million from £76.6 million in 2001, which incorporates an increase in the level of capitalised interest. The Group's borrowings and investments remained mainly at floating rates of interest during the year. Exceptional Items Exceptional items charged to the profit and loss account include the following: • Demerger costs of £41.0 million. Of this, £13.8 million of internal costs have been charged against operating profit and £27.2 million in respect of external costs has been charged as non-operating. • Impairment charged against the remaining goodwill in respect of the ProMarkt business of £93.7 million • Loss on sale of the Superdrug business of £342.5 million (including a non-cash adjustment of £287.5 million in respect of goodwill previously written off to reserves) • Profit on the sale of Time Retail Finance of £57.7 million (after deducting a non-cash adjustment of £15.9 million in respect of goodwill previously written off to reserves) • Net losses on the disposal of fixed assets amounting to £54.1 million The loss on disposal of fixed assets includes losses on the disposal of Virtueller Bau-Markt (£4.8 million) and Recommend Limited (£3.0 million) and the provision against the carrying value of the investment in Dekor (£23.2 million), all charged to continuing operations. It also includes the loss on the disposal of Think Natural (£4.5 million) and shares in Tiscali (£13.0 million), both charged to discontinued operations. Losses on the disposal of property of £5.6 million are also included. Taxation For continuing operations, the effective overall tax rate on profit before tax has increased to 35.7% from 31.3% in 2001 principally as a result of the exceptional items charged in the current year. The effective rate on profit before exceptional items and acquisition goodwill amortisation is 30.5% compared to 29.7% in 2001. Investments, acquisitions and disposals On 28 December 2001 the Group acquired an effective 12.5% share in Hornbach Holding AG, a German Home Improvement retail business for a consideration of £72.9 million giving rise to goodwill of £13.2 million. During the year, the Group made a number of acquisitions which included the following: - the acquisition of 10 BUT stores previously operated by franchisees - the buyout of the minority interest in NOMI - the acquisition of Yagma, a German electrical e-commerce business The total consideration for these and other acquisitions amounted to £18.0 million giving rise to goodwill of £8.2 million. During the year, the Group reorganised its consumer credit operations in France, combining the Castorama subsidiary, Castofi, with Darty's joint venture, Menafinance. As a result of the reorganisation, Menafinance (renamed Crealfi) became a subsidiary of the Group. At 2 February 2002, Crealfi's assets principally comprised customer receivables of £175.6 million and debt financing of £165.8 million. On 20 July 2001, the Group disposed of the Superdrug business. Consideration received was £252.0 million and an exceptional loss on the disposal of the business of £342.5 million (including an amount of £287.5 million previously written off to reserves in respect of goodwill) has been included in the profit and loss account. On 31 January 2002, the Group disposed of the Time Retail Finance business. Consideration received was £176.1 million and an exceptional profit on the disposal of the business of £57.7 million (after deducting an amount of £15.9 million previously written of to reserves in respect of goodwill) has been credited to the profit and loss account. During the year, the Group completed the disposal of its interest in Liberty Surf. Consideration received for this investment was initially a combination of cash and shares in Tiscali SpA, which have subsequently been disposed. Total consideration from these disposals was £97.2 million giving rise to a loss on disposal of £13.0 million. Demerger On 24 August 2001, the shareholders of Kingfisher plc approved the demerger of the Group's General Merchandise business to Woolworths Group plc. Shares in Woolworths Group plc were admitted to the official list and commenced trading on the London Stock Exchange on 28 August 2001. On demerger, the Company declared a dividend in specie which was satisfied by the issue of shares in Woolworths Group plc. The dividend in specie of £455.2 million represented the net assets of the business transferred to Woolworths Group plc at the date of demerger. The existing shareholders of Kingfisher plc were given shares in Woolworths Group plc on a ratio of one share in Woolworths Group plc for every one share held in Kingfisher plc. Dividend The final dividend for the year ended 2 February 2002 will be paid on 14 June 2002 to shareholders on the register at close of business on 5 April 2002, subject to approval of shareholders at the Company's Annual General Meeting, to be held at 11.00 am on 12 June 2002 at the Millennium Hotel, London. A scrip dividend alternative will be offered to shareholders. Share consolidation At an extraordinary general meeting held on 24 August 2001, the shareholders of Kingfisher plc approved the consolidation of ordinary shares of 12.5p on a 10 for 11 basis into ordinary shares of 13.75p. The weighted average number of shares for the purpose of calculating earnings per share has been adjusted to reflect the share consolidation and prior year figures have been restated accordingly. Pensions The introduction of FRS 17 'Retirement Benefits' during the year has raised the profile of debate on pension issues when at the same time it has been a difficult year for investment returns. The Group's UK defined benefit pension scheme represents the vast majority of the defined benefit arrangements within the Group. In the Group's overseas companies, any defined benefit arrangements are generally funded by way of annual premiums into group pension arrangements managed by insurance companies. Actuarial Valuation and MFR The actuary of the Group's UK defined benefit pension scheme carried out a formal valuation of the scheme as at 31 March 2001. Further details of this will be contained in the notes to the accounts. This valuation confirmed that, using certain assumptions about the future, the assets of the scheme were more than sufficient to cover 100% of the scheme's liabilities. The actuary also assessed the Minimum Funding Requirement (MFR) level at the valuation date to have been 114%. We estimate that the fall in investment values over the course of last year will have reduced the MFR funding level from the 114%, calculated by the actuary at 31 March 2001, to approximately 110% at the end of the year. Impact of FRS 17 In the accounts this year, the Group is required to disclose certain information regarding the FRS 17 valuation of the pension scheme net assets or liabilities and these will be included in the notes to the accounts as required. The changes to the Group during the year, with the sale of Superdrug and the demerger of the Woolworths Group, will have a material impact on the shape of the Group's pension arrangements for the year ahead. To allow these companies to put in place new pension scheme arrangements for their current employees, these companies have remained members of the Group scheme throughout the year and will formally separate from 1 April 2002. As a result, the Group's disclosures under FRS 17 in the accounts as at 2 February 2002 are for the scheme as a whole including those elements relating to the separated General Merchandise businesses that will transfer out on 1 April 2002. At the start of the year, the FRS 17 valuation amounted to a net pension surplus of £25 million (after deducting potential deferred tax at 30%). Primarily as a result of the adverse return on assets experienced during the year, the FRS 17 valuation at the end of the year was a net pension deficit of £112 million, after the benefit of potential deferred tax at 30% amounting to £48 million. The expected transfer of Woolworths Group and Superdrug members will reduce this net liability by up to one third. All of the change in the net FRS 17 position for the scheme over the year is attributable to the actuarial loss that would have been recognised through the Statement of Total Recognised Gains and Losses, if FRS 17 had been fully implemented. The FRS 17 net pension liability has no impact on pension funding and as a consequence has no impact on the Group's current or future cash flow or reported earnings. Had the Group charged pension costs to the profit and loss account under the FRS 17 basis, the charge would have been just under £48 million (c.12% of pensionable salary costs for the total scheme) compared with the contributions paid and SSAP 24 charge of just under £49 million. Next year's profit and loss charge will also be calculated on a SSAP 24 basis. The effect of FRS 17 which will be disclosed next year will be slightly greater than for this year because of the fall in bond yields from 5.9% to 5.7%. Accounting changes Financial Reporting Standard 17 - 'Retirement Benefits' was issued in November 2000 by the Accounting Standards Board to replace SSAP 24 'Accounting for pension costs' and is fully effective for accounting periods ending on or after 22 June 2003. In accordance with the transitional arrangements certain additional disclosures are included in the notes to the accounts. Financial Reporting Standard 18 - 'Accounting Policies' has been adopted for these financial statements. The Directors have reviewed the accounting policies used by the Group and have confirmed that they are the most appropriate to the particular circumstances of Kingfisher plc. There is no change to previously reported numbers as a result of the adoption of this Standard. Financial Reporting Standard 19 - 'Deferred Tax' has been adopted for the first time in these financial statements. As required by the Standard, deferred taxation has been calculated using the full provision approach rather than the partial provision approach previously employed. This change has been accounted for as a prior period adjustment and previously reported figures have been restated accordingly. If the previous policy had been adopted in the current year, the impact would have been to increase profit after tax by £5.7 million. The impact of adopting the new policy on the year ended 3 February 2001 has been to reduce profit after tax by £6.5 million. The cumulative effect of this change on reserves at 3 February 2001 is a decrease of £46.4 million and this change has been accounted for as a prior period adjustment. Annual report and accounts The consolidated profit and loss account, consolidated balance sheet, consolidated cash flow statement, consolidated statement of total recognised gains and losses and extracts from the notes to the accounts are extracted from the Group's Annual Report and Accounts. The auditors have made a report on the Group's statutory accounts under section 235 of the Companies Act 1985 which does not contain a statement under sections 237 (2) or (3) of the Companies Act and is unqualified. The statutory accounts will be filed with the Registrar of Companies in due course. Copies of the annual report and accounts will be posted to shareholders during the week beginning 13 May 2002. Further copies of this announcement can be downloaded from the website www.kingfisher.com or by application to: The Company Secretary Kingfisher plc North West House 119 Marylebone Road London NW1 5PX Consolidated profit and loss account For the financial year ended 2 February 2002 As restated+ 2002 2001 £ millions Notes Total Discontinued Continuing Total Discontinued Continuing Operations Operations Operations Operations Group turnover 1 11,238.1 1,528.6 9,709.5 12,134.2 3,368.8 8,765.4 Group operating profit/(loss) 448.8 (26.0) 474.8 704.5 160.3 544.2 Share of operating profit/(loss) in Joint ventures 9.4 9.4 5.7 - 5.7 Associates 4.3 4.3 (39.9) (42.0) 2.1 Total operating profit/(loss) including 2 462.5 (26.0) 488.5 670.3 118.3 552.0 share of joint ventures and associates Analysed as: Home Improvement 430.7 - 430.7 398.5 - 398.5 Electrical and Furniture 183.7 - 183.7 184.0 - 184.0 General Merchandise (29.6) (29.6) - 140.7 140.7 - Poperty 74.3 29.0 45.3 85.9 42.2 43.7 E-commerce and other new channels (30.8) (12.0) (18.8) (81.9) (61.3) (20.6) Other operating costs (39.6) - (39.6) (44.8) - (44.8) Exceptional items - operating 3 (107.5) (9.6) (97.9) 5.8 - 5.8 Acquisition goodwill amortisation (18.7) (3.8) (14.9) (17.9) (3.3) (14.6) Total operating profit/(loss) including 462.5 (26.0) 488.5 670.3 118.3 552.0 share of joint ventures and associates Exceptional items - non-operating Demerger costs (27.2) (27.2) - (8.8) (8.8) - (Loss)/profit of the sale of operations 3 (284.8) (342.5) 57.7 (14.7) (1.4) (13.3) (Loss)/profit on the disposal of fixed 3 (54.1) (19.4) (34.7) 0.2 - 0.2 assets Gain on deemed disposal of Liberty Surf - - - 120.8 120.8 - Profit/(loss) on ordinary activities 96.4 (415.1) 511.5 767.8 228.9 538.9 before interest Net interest payable 4 (68.4) (27.2) (41.2) (76.6) (47.6) (29.0) Profit/(loss) on ordinary activities 28.0 (442.3) 470.3 691.2 181.3 509.9 before taxation Tax on profit/(loss) on ordinary 5 (156.0) 12.1 (168.1) (177.3) (17.5) (159.8) activities (Loss)/profit on ordinary activities (128.0) (430.2) 302.2 513.9 163.8 350.1 after taxation Equity minority interests (120.8) - (120.8) (103.8) - (103.8) (Loss)/profit for the financial year attributable to the members of Kingfisher plc (248.8) (430.2) 181.4 410.1 163.8 246.3 (Loss)/earnings per share (pence) 6 Basic (19.8) 14.4 32.9 19.8 Diluted (19.9) 14.0 32.1 19.1 Basic - adjusted* 19.0 21.2 29.7 21.8 Diluted - adjusted* 18.5 20.7 28.9 21.1 * Adjusted earnings per share is before exceptional items, acquisition goodwill amortisation (and Liberty Surf losses for 2001 only) Dividends for the financial year ended 2 February 2002 are ordinary dividends on equity shares of £152.3m (2001:£214.8m) and a dividend in specie relating to the demerger of Woolworths Group plc of £455.2m + As restated for the implementation of FRS 19 ' Deferred Tax' Consolidated balance sheet As at 2 February 2002 As restated+ £ millions Note 2002 2001 Fixed assets Intangible assets 295.4 508.9 Tangible assets 3,503.9 4,139.6 Investments in joint ventures Share of gross assets 66.9 142.3 Share of gross liabilities (40.8) 26.1 (107.1) 35.2 Investments in associates 87.6 123.4 Other investments 122.4 135.9 4,035.4 4,943.0 Current assets Development work in progress 61.5 89.2 Stocks 1,575.3 2,095.5 Debtors due within one year 904.5 973.5 Debtors due after more than one year 57.5 22.2 Securitised consumer receivables - 261.1 Less: non-recourse secured notes - - (211.8) 49.3 Investments 174.7 168.6 Cash at bank and in hand 387.4 120.1 3,160.9 3,518.4 Creditors Amounts falling due within one year (3,233.2) (4,003.9) Net current liabilities (72.3) (485.5) Total assets less current liabilities 3,963.1 4,457.5 Creditors Amounts falling due after more than (780.2) (881.1) one year Provisions for liabilities and charges (44.9) (73.7) 3,138.0 3,502.7 Capital and reserves Called up share capital 177.7 174.6 Share premium account 365.3 345.9 Revaluation reserve 405.1 574.1 Non-distributable reserves 148.2 148.2 Profit and loss account 1,376.4 1,693.9 Equity shareholders' funds 7 2,472.7 2,936.7 Equity minority interests 665.3 566.0 3,138.0 3,502.7 +As restated for the implementation of FRS 19 'Deferred Tax' Consolidated cash flow statement For the financial year ended 2 February 2002 £ millions Note 2002 2001 Net cash inflow from operating activities 8 825.3 563.2 Dividends from joint ventures 2.0 - Returns on investment and servicing of finance Interest received 25.6 26.8 Interest paid (106.5) (112.0) Interest element of finance lease rental payments (3.4) (1.2) Dividends paid by subsidiaries to minorities (31.2) (27.9) Net cash outflow from returns on investment and (115.5) (114.3) servicing of finance Taxation UK Corporation tax paid (78.4) (109.9) Overseas tax paid (87.5) (51.5) Tax paid (165.9) (161.4) Capital expenditure and financial investment Payments to acquire intangible fixed assets (0.5) (22.5) Payments to acquire tangible fixed assets (732.3) (857.2) Receipts from the sale of tangible fixed assets 632.4 47.5 Payments for additions to investments (10.5) (31.2) Receipts from sale of investments 10.5 - Purchase of own shares (29.0) (64.4) Net cash outflow from capital expenditure and financial investment (129.4) (927.8) Acquisitions and disposals Purchase of subsidiary and business undertakings (18.0) (117.3) Cash acquired on joint venture becoming a subsidiary 12.9 - Purchase of associates and joint ventures (77.9) (15.7) Non-operating demerger costs (27.2) (3.2) Disposal of subsidiary undertakings 428.1 5.9 Disposal of associates and joint ventures 101.7 - Issue of shares by group companies to minority shareholders 10.3 29.1 Net cash inflow/(outflow) from acquisitions and disposals 429.9 (101.2) Equity dividends paid to shareholders (148.4) (146.6) Management of liquid resources (Increase)/decrease in short term deposits (276.3) 4.2 (Increase)/decrease in short term investments (1.6) 183.7 Net cash (outflow)/inflow from management of liquid resources (277.9) 187.9 Financing Issue of ordinary share capital 18.0 53.2 Capital element of finance lease rental payments (6.2) (2.4) (Decrease)/increase in loans (372.7) 630.5 Net cash (outflow)/inflow from financing (360.9) 681.3 Increase/(decrease) in cash 59.2 (18.9) Reconciliation of net cash flow to movement in net debt For the financial year ended 2 February 2002 £ millions 2002 2001 Net debt at start of year (1,873.8) (1,020.8) Increase/(decrease) in cash 59.2 (18.9) Debt in joint venture becoming a subsidiary/ in subsidiaries acquired (102.3) (0.8) Increase/(decrease) in short-term deposits 276.3 (4.2) Increase/(decrease) in short-term investments 1.6 (183.7) Decrease/(increase) in debt and lease financing 378.9 (630.5) Debt demerged with Woolworths Group plc 191.8 - Foreign exchange effects 17.9 (14.9) Increase in market value of investments 6.2 - Net debt at end of year (1,044.2) (1,873.8) Consolidated statement of total recognised gains and losses For the financial year ended 2 February 2002 £ millions 2002 2001 (Loss)/profit for the financial year (248.8) 410.1 Unrealised surplus on revaluation of properties 27.9 53.9 Minority decrease/(increase) in Castorama 2.7 (0.9) Net foreign exchange adjustments offset in reserves (26.4) 7.9 Tax on exchange adjustments offset in reserves (2.9) 2.9 Total recognised (losses) and gains relating to the year (247.5) 473.9 Prior period adjustments: - Deferred taxation (FRS 19) (46.4) - - Store pre-opening costs (UITF 24) - (19.1) Total recognised (losses) and gains since last annual report (293.9) 454.8 Notes to the accounts 2002 2001 Total Discontinued Continuing Total Discontinued Continuing Operations Operations Operations Operations 1. Turnover £ millions Home Improvement 5,833.9 - 5,833.9 5,093.5 - 5,093.5 Electrical and Furniture 3,784.8 - 3,784.8 3,564.9 - 3,564.9 General Merchandise 1,498.6 1,498.6 - 3,358.4 3,358.4 - Retail Sales 11,117.3 1,498.6 9,618.7 12,016.8 3,358.4 8,658.4 Property 65.7 30.0 35.7 59.2 10.4 48.8 Financial Services 55.1 - 55.1 58.2 - 58.2 11,238.1 1,528.6 9,709.5 12,134.2 3,368.8 8,765.4 2. Operating profit £ millions Group turnover 11,238.1 1,528.6 9,709.5 12,134.2 3,368.8 8,765.4 Cost of sales (7,609.2) (1,073.5) (6,535.7) (8,245.3) (2,262.0) (5,983.3) Gross profit 3,628.9 455.1 3,173.8 3,888.9 1,106.8 2,782.1 Other income and expenses (3,072.6) (471.5) (2,601.1) (3,190.2) (946.5) (2,243.7) Exceptional items - (107.5) (9.6) (97.9) 5.8 - 5.8 operating Share of joint ventures and 13.7 - 13.7 (34.2) (42.0) 7.8 associates 462.5 (26.0) 488.5 670.3 118.3 552.0 3. Exceptional items £ millions Operating exceptionals Demerger costs (13.8) (9.6) (4.2) - - - ProMarkt goodwill (93.7) - (93.7) - - - Non-recurring reduction - - - 5.8 - 5.8 in French business tax (107.5) (9.6) (97.9) 5.8 - 5.8 (Loss)/profit on the sale of operations Disposal of Superdrug (342.5) (342.5) - - - - Disposal of Time Retail 57.7 - 57.7 - - - Finance Disposal of Electric City - - - (13.3) - (13.3) Disposal of Andre Deutsch - - - (1.4) (1.4) - (284.8) (342.5) 57.7 (14.7) (1.4) (13.3) (Loss)/profit on the disposal of fixed assets Disposal of Virtueller (4.8) - (4.8) - - - Bau-Markt AG Disposal of Recommend (3.0) - (3.0) - - - Limited Provision against the - - - - - carrying value of Dekor Inc (23.2) (23.2) Disposal of Think Natural (4.5) (4.5) - - - - Limited Disposal of shares in (13.0) - - - - Tiscali SpA Property (losses)/profits (5.6) (1.9) (3.7) 0.2 - 0.2 (54.1) (19.4) (34.7) 0.2 - 0.2 Demerger costs of £13.8m charged to operating profit relate to internal costs directly attributable to the demerger. In 2001 the Group recognised a profit on the deemed disposal of Liberty Surf. Prior to the year end, the Group entered into an agreement to sell its entire shareholding in Liberty Surf to Tiscali SpA for consideration of cash and shares in Tiscali SpA. In 2002 all of the Tiscali SpA shares have been disposed for a loss of £13.0m. 4. Net interest payable £ millions 2002 2001 Interest payable 111.9 112.1 Interest receivable (27.9) (26.8) 84.0 85.3 Interest capitalised (15.6) (8.7) Net interest payable 68.4 76.6 Of the net interest payable set out above, a total of £27.2m (2001: £47.6m) has been charged to discontinued operations. 5. Taxation As restated £ millions 2002 2001 UK corporation tax Current tax on profits of the period 142.5 101.4 Adjustments in respect of prior periods 4.8 (0.3) 147.3 101.1 Double taxation relief (65.0) (0.5) 82.3 100.6 Foreign tax Current tax on profits of the period 65.1 68.9 Adjustments in respect of prior periods (1.4) (1.6) 63.7 67.3 Deferred tax 6.1 7.3 Associated undertakings 1.5 0.7 Joint ventures 2.4 1.4 156.0 177.3 Of the taxation set out above, a total of £(12.1)m (2001:£17.5m) has been (credited)/charged to discontinued operations. 6. Earnings per share Continuing operations 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 £181.4m (2001: £246.3m) and the weighted average number of shares in issue during the period of 1,258.3m (2001:1,245.0m). The diluted earnings per share for continuing operations is based on the diluted profit on ordinary activities, after taxation and minority interests of £177.8m (2001:£240.3m) and the diluted weighted average number of shares in issue during the period of 1,271.4m (2001:1,258.8m). Supplementary earnings per share figures are presented. These exclude the effects of exceptional items to allow comparison to prior year on a like-for- like basis; and of acquisition goodwill amortisation. The difference between the basic and diluted earnings per share is reconciled as follows: As restated pence 2002 2001 Basic earnings per share 14.4 19.8 Attributable to exceptional items 5.9 0.6 Attributable to acquisition goodwill amortisation 1.1 1.2 Taxation arising on exceptional items (0.1) 0.1 Minority share of exceptional items (0.1) 0.1 Basic - adjusted earnings per share 21.2 21.8 Diluted earnings per share 14.0 19.1 Attributable to exceptional items 5.8 0.6 Attributable to acquisition goodwill amortisation 1.1 1.2 Taxation arising on exceptional items (0.1) 0.1 Minority share of exceptional items (0.1) 0.1 Diluted - adjusted earnings per share 20.7 21.1 Total Group The calculation of basic earnings per share for the total Group is based on the loss on ordinary activities, after taxation and minority interests of £(248.8)m (2001: profit of £410.1m) and the weighted average number of shares in issue during the period of 1,258.3m (2001: 1,245.0m). The diluted earnings per share for the total Group is based on the diluted loss on ordinary activities, after taxation and minority interests of £(252.4)m (2001: profit of £404.1m) and the diluted weighted average number of shares in issue during the period of 1,271.4m (2001: 1,258.8m). Supplementary earnings per share figures are presented. These exclude the effects of exceptional items (and in 2001 Liberty Surf losses) to allow comparison to prior year on a like-for-like basis; and of acquisition goodwill amortisation. As restated pence 2002 2001 Basic (loss)/earnings per share (19.8) 32.9 Attributable to exceptional items 37.6 (8.2) Attributable to acquisition goodwill amortisation 1.4 1.4 Attributable to Liberty Surf losses - 3.4 Taxation arising on exceptional items (0.1) 0.1 Minority share of exceptional items (0.1) 0.1 Basic - adjusted earnings per share 19.0 29.7 Diluted (loss)/earnings per share (19.9) 32.1 Attributable to exceptional items 37.2 (8.1) Attributable to acquisition goodwill amortisation 1.4 1.4 Attributable to Liberty Surf losses - 3.3 Taxation arising on exceptional items (0.1) 0.1 Minority share of exceptional items (0.1) 0.1 Diluted - adjusted earnings per share 18.5 28.9 7. Reconciliation of movement in equity shareholders' funds As restated £ millions 2002 2001 (Loss)/profit for the financial year attributable to the members of Kingfisher plc (248.8) 410.1 Ordinary dividends on equity shares (152.3) (214.8) (401.1) 195.3 Foreign exchange adjustments (net of tax) (29.3) 10.8 Unrealised surplus on revaluation of properties 27.9 53.9 Shares issued under option schemes 15.7 51.3 Scrip issue 64.4 57.8 Minority decrease/(increase) in Castorama 2.7 (0.9) Goodwill resurrected on disposal of subsidiaries 303.4 - Dividend in specie relating to demerger (455.2) - Goodwill resurrected on demerger 7.5 - Net (reduction in)/addition to shareholders' funds (464.0) 368.2 Opening shareholders' funds (originally £2,983.1m before deducting prior year adjustments of £46.4m) 2,936.7 2,568.5 Closing shareholders' funds 2,472.7 2,936.7 8. Net cash flow from operating activities £ millions 2002 2001 Group operating profit 448.8 704.5 Depreciation and amortisation 232.2 233.7 ProMarkt goodwill written off 93.7 - Decrease in development work in progress 27.7 7.5 Increase in stocks (72.3) (377.3) Increase in debtors (119.1) (143.6) Increase in creditors 210.6 127.8 Loss on disposal of fixed assets 3.7 10.6 Net cash inflow from operating activities 825.3 563.2 9. Pension costs Pension schemes operated and regular pension costs - SSAP24 The Group operates a variety of pension arrangements covering both funded and unfunded defined benefit schemes and funded defined contribution schemes. By far the most significant are the funded defined benefit and defined contribution schemes for the Group's UK employees. The total pension charge in the profit and loss account of £48.1m (2001: £46.1m) includes £3.0m (2001: £2.6m) for the UK defined contribution scheme. A formal actuarial valuation of the UK defined benefit scheme was carried out by an independent professionally qualified actuary, at 31 March 2001, using the projected unit method of funding. In this valuation, the assets were taken at their market value of £1,077m (excluding AVCs). A value was placed on the liabilities by discounting the anticipated future benefits, including allowance where appropriate for future increases in pension and pensionable salaries, using assumptions derived by reference to market conditions as at 31 March 2001. The principal assumptions adopted for the future were an inflation rate of 3% p.a., an investment return on existing assets of 6.5% p.a., an investment return on future contributions of 6.6% p.a., pensionable pay increases of 4.6% p.a. and pension increases of 2.75% p.a.. On this basis, the assets were sufficient to cover over 101% of the scheme's liabilities. The next valuation will be made on or before 31 March 2004. The pension cost for this scheme charged in the profit and loss account of £38.9m (2001: £37.5m) is based on the formal actuarial valuation described above and in accordance with SSAP 24 'Accounting for pension costs'. Variations against regular cost have been amortised using the straight line method. The pension cost for the scheme is the same as contributions paid into the scheme by the Group during the year. The contribution rate as advised by the Actuary will increase from the current rate of 12.5% of pensionable salary costs to 13.5% from 1 April 2002. There are also funded defined benefit arrangements covering senior executives in France, for which the charge in the profit and loss account was £5.4m (2001: £4.9m). A further £0.8m charge (2001: £1.1m) has been reflected in the profit and loss account in respect of other overseas pension arrangements. FRS 17 disclosures In November 2000 the Accounting Standards Board issued FRS 17 'Retirement Benefits' replacing SSAP 24 ' Accounting for pension costs'. FRS 17 is fully effective for periods ending on or after 22 June 2003, though certain disclosures are required in the transition period. These further disclosures are included below for the scheme as a whole (including the assets and liabilities relating to those active members who were employees of the Woolworths Group and Superdrug at 31 March 2001 and who have the option to transfer their past service benefit to new schemes being set up by those companies from 31 March 2002). The valuation used for FRS 17 disclosures has been based on the most recent actuarial valuation at 31 March 2001 and updated to 2 February 2002 and to take account of the requirements of FRS 17. The financial assumptions used to calculate estimated scheme liabilities under FRS 17 are: Discount rate 5.7% p.a. Salary escalation 4.0% p.a. Rate of pension increases 2.4% p.a. Price inflation 2.4% p.a. The assets in the scheme at 2 February 2002 and the expected future rates of return on them were: £ millions % Equities 702 8.0 Bonds 143 5.0 Other (principally cash) 223 4.0 Total market value of assets 1,068 6.8 Present value of scheme liabilities (1,228) Deficit in the scheme (160) Related deferred tax asset 48 Net pension liability (112) As noted above, these net liabilities include those of active members of Woolworths Group and Superdrug who were employed by those companies at 31 March 2001. Those members who are still employed by these companies at 31 March 2002 have the option to transfer their past service benefit to new arrangements on 31 March 2002. Based on the membership at 31 March 2001, the net liabilities at 31 January 2002 were attributable as follows: £ millions Kingfisher Continuing Woolworths Group Total Business and Superdrug Total market value of assets 841 227 1,068 Present value of scheme liabilities (944) (284) (1,228) Deficit in the scheme (103) (57) (160) Related deferred tax asset 31 17 48 Net pension liability (72) (40) (112) If the above amounts had been recognised in the financial statements, the Group's net assets and profit and loss reserve at 2 February 2002 would be as follows: Net assets £ millions Net assets excluding net pension liability 3,138 Pension provision under SSAP 24 6 Net pension liability (112) Net assets including net pension liability 3,032 Reserves Profit and loss reserve excluding net pension liability 1,376 Pension provision under SSAP 24 6 Net pension liability (112) Profit and loss reserve including net pension liability 1,270 This information is provided by RNS The company news service from the London Stock Exchange ZFFGRGZZG

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