Final Results - Part 1
Kingfisher PLC
29 March 2007
EMBARGOED UNTIL 0700 HOURS
Thursday 29 March 2007
Kingfisher plc
Preliminary results for the year ended 3 February 2007
Group Financial Summary
2006/07 2005/06 Reported Constant Like-for-like
(1) Change Currency Change (LFL) change
(52 weeks)
Retail sales £8,676m £8,010m +8.3% +7.4% +0.9%
Retail profit (2) £503.7m £533.1m (5.5)% (5.3)%
Adjusted pre-tax profit (3) £396.6m £445.7m (11.0)%
Adjusted post-tax profit (3) £277.0m £285.1m (2.8)%
Adjusted basic EPS (3) 11.9p 12.3p (3.3)%
Full year dividend 10.65p 10.65p -
Net debt £1,293.8m £1,355.2m (4.5)%
(1) For UK businesses, reported results are for the 53 weeks ended 3
February 2007. Outside the UK, results are reported on a calendar month basis.
(2) Retail profit is stated before central costs, exceptional items,
amortisation of acquisition intangibles and share of joint venture and associate
interest and tax.
(3) Adjusted measures are before exceptional items, financing fair value
remeasurements and amortisation of acquisition intangibles. A reconciliation to
statutory amounts is set out in the Financial Review.
Financial highlights
• Retail sales up 7.4% on a 52 week basis, +0.9% LFL.
• Adjusted pre-tax profit down 11% but up 13% in the second half.
• Group tax rate 32% (2005/06: 34%).
• Net debt lower than last year following working capital improvements and
£252 million of property disposals.
• Dividend maintained for the full year.
• Property market values up 9% in constant currencies to £3.2 billion.
• UK pension scheme deficit down to £28 million (2005/06: deficit £211 million).
Operating highlights
• The UK market stabilised during the year. B&Q delivered sales and profit
growth in the second half with good progress in its development programme.
• In France, Kingfisher sales grew 9%, ahead of the market. Retail profit was
lower reflecting accelerated development and continuing price pressure.
• Elsewhere in Europe and Asia, sales grew by 30% and retail profit by 37%.
Statutory reporting
2006/07 2005/06 Reported
Change
Pre-tax profit £450.5m £231.8m +94.3%
Post-tax profit attributable to equity shareholders £336.8m £139.5m +141.4%
Basic EPS 14.4p 6.0p +140.0%
Gerry Murphy, Group Chief Executive, said:
'The UK home improvement market stabilised during the year and B&Q delivered
sales and profit growth in the second half. B&Q's development programme is
encouraging and the pace of activity is accelerating in 2007/08. I remain
convinced that these initiatives will make B&Q more attractive to its customers
and more valuable for shareholders.
'In France, Castorama made good progress in developing its stores and ranges and
Brico Depot expanded further and strengthened its infrastructure. Elsewhere in
Europe and Asia, our international expansion continued with 27 new stores in
nine countries, including our first stores in Russia.
Outlook
'Whilst trading conditions for our biggest businesses continue to be
challenging, the longer-term outlook remains positive for home improvement
retailing. Kingfisher's leading market positions in the UK and France, and
fast-developing positions elsewhere in Europe and Asia, provide a powerful
platform from which to deliver sustainable long-term growth and returns for
shareholders.
'Ahead of the key Easter trading period, early 2007/08 trading has been stronger
in our major markets, supported by better weather.'
REVIEW OF THE YEAR
The remainder of this release sets out Kingfisher's performance for the year in
three main sections:
• Progress on key strategic priorities
• Operational Review
• Financial Review and preliminary Financial Statements. Included for the
first time are Kingfisher's invested capital and returns by strategic
priority.
Progress on key strategic priorities
1) Strengthening developed businesses
Includes B&Q UK and Castorama France, representing almost two thirds of
Kingfisher's sales.
These established businesses are focused on strengthening their leadership
positions by improving sales productivity of existing store space and cost
efficiency. The majority of current investment in these businesses is in
modernising existing stores and business infrastructure, with modest capacity
expansion.
B&Q made progress on its four operational drivers - price competitiveness,
customer service, new products and store environment. A key development in the
year was the successful trial of a new large store format which will form the
blueprint for revamping all of B&Q's 115 large stores. With new customer service
initiatives and new ranges also performing well, management remains confident
that an eventual 25% improvement in sales productivity from existing larger
stores is achievable. By the end of the year, two new stores and nine revamped
stores were trading in the new format. B&Q plans to convert all the remaining
large stores to this format over the next four years with a further 25
conversions planned for 2007/08.
In France, Castorama continued its revitalisation programme with two new store
openings and a further seven stores converted to its latest format. Six stores
not suitable for revamping were closed prior to conversion to Brico Depots.
Castorama now trades from 98 stores and it will continue its programme of
revamping or relocating its remaining 65 older stores over the coming years.
Ranges continue to be updated including the recent launch of a wider selection
of contemporary kitchens.
2) Expanding proven growth businesses
Includes Brico Depot France, Castorama Poland and Italy, B&Q China, Taiwan and
Ireland and Screwfix Direct in the UK. In total they generate over one third of
Kingfisher's sales.
These younger businesses already enjoy leading market positions and have reached
a scale where they contribute strongly to Kingfisher's sales and profit growth
and deliver good economic returns. Their main priority is to continue to expand
quickly to capitalise on their market leadership. In total, these businesses
generated cash after funding their cost of expansion in 2006/07.
To support continued expansion, £182 million, 40% of Kingfisher's total capital
spend for the year, was invested in these businesses. Fifty-six net new stores
were opened in the year, taking the total in this category to nearly 270, with a
similar number planned to open in 2007/08.
In France, Brico Depot added 10 new stores taking the total to 81 and
implemented a major new system upgrade to enhance the competitiveness and
productivity of the business. In the UK, Screwfix Direct opened 31 of the
successful new trade counter stores, taking the total to 38.
Elsewhere in Europe, Castorama Poland, which is aimed at the mainstream
consumer, continued to grow strongly. The first trial Brico Depot store was
opened in Warsaw to target the trade professional. Castorama Italy and B&Q
Ireland also achieved strong growth.
In China, B&Q completed the integration of the OBI stores acquired during 2005
and returned to profitability for the year. In total, 58 stores are now trading,
consolidating B&Q's position as the largest home improvement retailer in China.
B&Q Taiwan, a 50% joint venture, now operates 21 stores across the country and
is the clear market leader. A smaller store format has been successfully
trialled which provides further opportunities for expansion in smaller towns.
3) Establishing new opportunities for the future
Includes Brico Depot Spain, Castorama Russia, Koctas Turkey and Trade Depot in
the UK.
During the year, investment of £51 million (11% of Kingfisher's total capital
spend) was made in these developing businesses. Twelve stores opened in the year
taking the total trading to 29. Koctas is now profitable after expansion costs
and Brico Depot Spain is also on track to overall profitability within the next
12-18 months. Trials continued into the second year at Trade Depot which opened
two more stores to serve the UK professional market. In Russia, three stores
opened during the year, marking Kingfisher's entry into this fast-developing
market.
A further 12 stores are planned to open in 2007/08 in these development
businesses.
4) Capitalising on buying scale and international diversity
During the year, Kingfisher continued to bring new products to market, develop
its own-brands and extend direct sourcing from low-cost producers. Kingfisher
continued to develop its network of overseas sourcing offices in Europe and
Asia. Direct sourcing shipments totalled around US$700 million, an increase of
over 20% on the previous year.
Kingfisher companies also continued to share ideas, management talent and best
practice, as shown during the year in the development of the new B&Q large
format store in the UK, the launch of Brico Depot in Poland and the entry of
Castorama into Russia.
Operational Review - UK
Retail sales £m 2006/07 2005/06 % Change % Change % LFL
(Reported) (52 week basis) Change
UK 4,261.5 4,172.0 2.1% 0.2% (1.8)%
Retail profit £m 2006/07 2005/06 % Change
(Reported)
UK 182.6 219.4 (16.8)%
UK includes B&Q in the UK, Screwfix Direct and Trade Depot.
UK Market
The UK home improvement market* remained challenging in 2006/07, declining
further during the first half, before stabilising over the summer and then
starting to show signs of modest growth towards the end of the year. Across the
full year the market declined around 0.5%, having fallen by 4% in the previous
year. B&Q's market share was broadly stable.
*Market data from GfK for the major store home improvement operators
B&Q
B&Q's total reported sales were £3.9 billion, down 1.7% (52 weeks) and down 2.9%
LFL. Total sales showed an improving trend as the year progressed, declining
4.4% in the first half but growing 1.3% in the second half (26 weeks).
Retail profit was £162.9 million (2005/6: £208.5 million), reflecting the lower
sales and a flat gross margin rate compared with last year. Retail profit
benefited from £6 million of one-off gains in the fourth quarter (£2 million
government compensation for damage at a Northern Ireland store in 2005, and a
net £4 million incentive payment on transfer of financial services business to a
new provider).
Total costs grew 3% (52 weeks) with underlying cost inflation of 3%, net new
space growth of 2% and the additional costs for the normalisation of staff bonus
and store revamping offset by cost savings.
Development programme update
Progress continued with the programme launched last year to reduce B&Q's cost
base and to develop the business for the future. Price competitiveness,
improving customer service, introducing new product ranges and improving store
environment were prioritised to ensure B&Q is the first and only store for a
greater proportion of customers' home improvement spend.
Price competitiveness - B&Q maintained its long-term 'Every Day Low Pricing'
strategy for everyday products and also introduced targeted promotions for less
frequent purchases such as kitchens, bathrooms and associated products.
New product ranges performed well, including updated ranges of kitchens,
bathrooms, tiles, wooden floors and heating. The award winning 'Energy
Efficiency Made Easy at B&Q' campaign, aimed at helping customers reduce
household carbon emissions, featured wind turbines and solar panels and the
recent 'Water Efficiency Made Easy at B&Q' campaign includes underground water
storage tanks, shower timers and water butts. Towards the end of the year new
financial service products were launched including home, van and small business
insurance.
In 2007/08 the programme of range change will accelerate and will include
premium paints and more contemporary wall papers, curtains and blinds and the
introduction of new consumer and trade credit products.
Customer service - Good progress was made on helping customers find products
more quickly and making available more specialist trained staff to assist
customers undertaking major projects. Service Squads (staff wholly dedicated to
customer service, equipped with radio communications) were in operation in the
top 240 stores and independent research confirms that customers' perception of
service levels and satisfaction is at a recent high.
Trials deploying more staff in kitchen, bathroom, flooring and power tools,
where customers need more assistance and advice, were encouraging with one of
the original six pilot stores recently winning the Scottish Retail Excellence
Award for customer service. This initiative has now been extended to 51 stores
with more planned for 2007/08.
A B&Q branded 'Handyman' trial was launched in two London stores, helping
customers with small home improvement jobs including fitting lights and hanging
doors. Results have been encouraging and the trial will be extended to a further
25 stores during the first quarter of 2007/08.
Store development - An existing large store at Wednesbury in the West Midlands
was extensively revamped with more clearly defined shop-within-shop sections,
room-set displays and more space allocated to kitchens, bathrooms, flooring and
tiling areas. Early results from this trial, and from two new stores in the same
format, were encouraging and a further eight revamps were completed in the
fourth quarter.
As previously indicated, each revamp project is expected to require £2.5 million
capital expenditure, £0.5 million increased stock and an average net disruption
and re-launch revenue cost of £1 million per store in the year of revamping. The
new format stores also deploy around 15% more staff hours to improve service to
customers. Results from the original three trial stores have exceeded
expectations. Sales are outperforming comparable older stores, driven primarily
by higher average transaction values as customers spend more in the expanded
kitchen, bathroom and associated project areas. B&Q continues to target an
eventual 25% increase in large store sales densities from the combined benefits
of extensive revamps, new product ranges and improved service levels.
At the same time a further 29 medium store revamps (formerly known as
mini-Warehouse revamps) were completed, including 16 less extensive projects.
One Supercentre was closed.
B&Q now has 115 large stores (11 in the latest format) and 209 medium stores (of
which 117 have been modernised). Overall net space increased 2% during the year.
In 2007/08, 25 large store revamps are planned with eight currently underway.
With 36 Supercentre revamps and relocations, two new medium stores and six large
store downsizes also planned, B&Q expects to have 114 large stores (36 in the
latest format) and 209 medium stores (of which 154 will have been modernised) by
the end of 2007/08. Total space growth for 2007/08 is expected to be around 2%.
UK Trade
Screwfix Direct total reported sales were up 25.3% (52 weeks), supported by the
roll out of trade counters, catalogue expansion and new ranges of bathroom
suites and power tools. Retail profit increased over 60%, driven by strong sales
growth and fulfilment efficiency gains.
The Screwfix trade counter programme, aimed at customers needing immediate
availability, continued on track. An additional 31 outlets opened during the
year taking the total to 38, with a similar number of openings planned for 2007/
08. To support continued growth, a second distribution centre is due to open in
Stafford during summer 2007/08.
The Trade Depot trial, which targets the general builder and specialist trade
customer, continued with two more branches opening during the year taking the
total to four. A further two new branches are planned for 2007/08.
Operational Review - FRANCE
Retail sales £m 2006/07 2005/06 % Change % Change % LFL
(Reported) (Constant) Change
France 2,955.2 2,724.9 8.5% 9.0% 2.0%
Retail profit £m 2006/07 2005/06 % Change % Change
(Reported) (Constant)
France 206.3 230.0 (10.3)% (9.9)%
2006/07 £1 =1.4720 euro 2005/06 £1 = 1.4649 euro
All percentage movements below are in constant currencies.
In France, Kingfisher's total sales grew 9.0% (LFL + 2.0%). Twelve new stores
were opened in the year and seven relocated, adding 5% new space. Banque de
France data shows that growth in comparable DIY store sales* was around 3% for
the full year, with Kingfisher's business outperforming the market by delivering
comparable stores sales growth of 3.4%. However, the market became more price
competitive as the year progressed, compressing Kingfisher's overall French
gross margin by around 100 basis points in the second half. This pressure is
expected to continue into 2007/08.
*Banque de France data including relocated and extended stores
Retail profit of £206.3 million was lower than last year with retail profit of
both businesses declining by around 10%. This reflected gross margin compression
and £14 million of development costs for the transfer to Brico Depot of six
smaller Castorama stores and the implementation of a major new technology
platform at Brico Depot. With a high level of freehold stores and strong cost
control, Kingfisher's net cost inflation in France is running at around 2%.
CASTORAMA
Castorama grew total reported sales by 3.6% to £1.6 billion (up 1.3% LFL), up 5%
excluding the six transfers to Brico Depot during the year. Further progress was
made improving price competitiveness, product ranges, store environment and cost
productivity.
More contemporary ranges of bathrooms and kitchens, indoor lighting, paint and
textiles were introduced as part of an ongoing range development programme. The
participation of own-brand product sales as a proportion of overall sales grew
to 19% (2005/06: 16%).
Castorama continued with its store modernisation programme, with two new stores
opened and seven older existing stores relocated to new sites. Six stores not
suitable for revamping were closed prior to conversion to the Brico Depot
format.
Thirty-six per cent of total selling space is now in the new format and these
stores continue to outperform comparable outlets. Results from store development
have improved as the new format has evolved, with stores relocated during the
year on track to deliver sales density uplifts of over 20% on top of a 25%
increase in space. A further six revamps are planned for 2007/08, five scheduled
to begin in the first quarter. Approximately half of the remaining Castorama
stores will be revamped over the next four years, with the balance relocated to
new sites as these are secured and approved by planning authorities.
BRICO DEPOT
Sales increased 16.5% to £1.3 billion, benefiting from new stores and more
widely distributed product catalogues. LFL sales growth was +2.8% against strong
comparatives (2005/06: +7.3% LFL; 2004/05: +17.7%) reflecting the size of the
business, internal cannibalisation of around 3% and focus in the year on the
successful implementation of new systems and logistics infrastructure. Sales
were strong in building categories, supported by new ranges of insulation
products and aluminium windows.
Ten new stores opened in the year taking the total to 81, including the opening
of three of the six stores transferred from Castorama. In 2007/08 store
expansion will continue with eight new store openings planned (seven in the
first half) including the three remaining store transfers from Castorama.
A major new information technology platform to improve store replenishment and
stock availability was implemented during the year. This was the biggest
transformation project in Brico Depot's history and required significant
management focus to ensure successful delivery. Two thirds of stores are now
operating on the new technology platform with the remainder joining during the
first half of 2007/08. In addition, Brico Depot opened a second central
distribution centre in southern France during the fourth quarter. Around half of
all deliveries to stores are now centrally controlled.
Operational Review - REST OF EUROPE
Retail sales £m 2006/07 2005/06 % Change % Change % LFL
(Reported) (Constant) Change
Rest of Europe 1,002.5 795.2 26.1% 25.0% 7.4%
Retail profit £m 2006/07 2005/06 % Change % Change
(Reported) (Constant)
Rest of Europe 110.4 86.6 27.5% 26.6%
Rest of Europe includes Poland, Italy, Spain, Koctas JV in Turkey, Ireland,
Russia and Hornbach in Germany. Sales from Koctas and Hornbach are not
consolidated.
All percentage movements below are in constant currencies.
Kingfisher's businesses in the Rest of Europe increased sales by 25.0% (+7.4%
LFL) to just over £1 billion. Retail profits increased by 26.6% to £110.4
million, reflecting strong performances in Italy and Poland and a higher
associate contribution from Hornbach. Development losses in Russia and Spain
were in line with the previous year.
Fifteen new stores were opened in the year across six countries, including three
in Russia, three in Spain and three in Turkey.
Poland
Sales increased 19.2% to £507.8 million (+9.3% LFL) boosted by buoyant consumer
spending and strong property and construction markets. Retail profit increased
9.0% to £58.4 million as good cost control, group sourcing and increased
own-brand penetration helped to offset increasing wage inflation. New ranges,
including exclusive own-brand professional tools performed well.
Five new stores opened including the first Brico Depot in Warsaw in June,
launched to test the demand for a more trade-orientated offer. Five new stores
are planned for 2007/08, including one Brico Depot.
Italy
Castorama Italy grew sales 17.6% to £312.4 million (+4.6% LFL) in a generally
weak Italian retail market. Sales benefited from new ranges of lighting, sheds
and fencing, together with targeted promotional activity in gardening and
building categories. Retail profit increased 9.8% to £31.3m, with improved
sourcing helping to offset pricing pressure in a slow market.
One new store was opened taking the total to 27. A further two new stores are
planned for 2007/08.
In Ireland, where B&Q has seven stores, sales grew 28.0%, reflecting new store
openings in the second half of last year. One new store is planned for 2007/08.
Brico Depot's expansion into Spain continued with 10 stores now trading and a
further four planned for 2007/08. Good underlying trading was boosted by a
strong construction market. In Russia, two Castorama stores were opened, in St
Petersburg and Samara, a large provincial city. A third was acquired in Moscow
in December and will be relaunched under the Castorama banner in the first half
of 2007/08. A further two stores are planned to open in 2007/08.
Koctas in Turkey, a 50% joint venture, continued to grow sales and retail
profit, benefiting from increased buying power and new group sourced own-brands.
Three new stores opened taking the total to 10 with four planned for 2007/08.
Hornbach, in which Kingfisher has a 21% interest, contributed £19.2 million to
retail profit, £7.4 million higher than last year, fuelled by a stronger home
improvement market in Germany.
Operational Review - ASIA
Retail sales £m 2006/07 2005/06 % Change % Change % LFL
(Reported) (Constant) Change
Asia 456.7 318.0 43.6% 42.2% 10.9%
Retail profit £m 2006/07 2005/06 % Change % Change
(Reported) (Constant)
Asia 4.4 (2.9) n/a n/a
Asia includes China, Taiwan, and South Korea. Taiwan JV sales are not
consolidated.
All percentage movements below are in constant currencies.
Asia sales increased 42.2% to £456.7 million (+10.9% LFL) with retail profit of
£4.4m benefiting from strong profit growth in China following the completion and
integration of the acquisition of the OBI China business during 2005.
B&Q China
Sales increased 41.3% to £445.8 million (+11.1% LFL), reflecting new store
openings, continuing strong consumer demand and the development of new ranges. B
&Q China's home decoration service designed and fitted out 30,000 apartments in
2006, double the previous year's number, representing a third of total sales.
Retail profit was £8.3 million (2005/06: £0.3 million). During the first half of
2006/07, B&Q China completed the conversion and integration of the OBI stores
ahead of schedule, returning to profit in the balance of the year with gross
margins benefiting from increased group own-brand and sourcing programmes.
Store numbers increased by 10 to 58, further consolidating its position as
market leader. A further seven new stores are planned for 2007/08, including the
first Hong Kong store in June.
Other Asia
B&Q Taiwan, a 50% joint venture, delivered a creditable performance in a market
affected by weak consumer confidence and credit restrictions. One store opened
during the year taking the total to 21. Two new stores are planned for 2007/08.
B&Q Home in South Korea opened a second trial store during the year.
Financial Review
Financial summary
A summary of the reported financial results for the year ended 3 February 2007
is set out below.
2006/07 2005/06 Increase /
(decrease)
£m £m
Revenue 8,675.9 8,010.1 8.3%
Operating profit 501.3 269.5 86.0%
Profit before taxation 450.5 231.8 94.3%
Adjusted pre-tax profit 396.6 445.7 (11.0)%
Basic earnings per share 14.4p 6.0p 140%
Adjusted earnings per share 11.9p 12.3p (3.3)%
Dividends 10.65p 10.65p -
Underlying Return on Invested Capital (ROIC) 6.9% 7.3% (0.4)pps
A reconciliation of statutory profit to adjusted profit is set out below:
2006/07 2005/06 Increase /
(decrease)
£m £m
Profit before taxation 450.5 231.8 94.3%
Exceptional items (49.5) 215.4
Profit before exceptional items and taxation 401.0 447.2 (10.3)%
Financing fair value remeasurements (4.7) (1.6)
Amortisation of acquisition intangibles 0.3 0.1
Adjusted pre-tax profit 396.6 445.7 (11.0)%
Income tax expense on pre-exceptional profit (119.4) (161.6)
Income tax on fair value remeasurements 1.4 0.5
Minority interest (1.6) 0.5
Adjusted post-tax profit 277.0 285.1 (2.8)%
Reporting period
The Group's financial reporting year ends on the nearest Saturday to 31 January.
The current year is for the 53 weeks ended 3 February 2007 with the comparative
financial period being the 52 weeks ended 28 January 2006. This only impacts the
UK operations with all of the other operations reporting on a calendar basis as
a result of local statutory requirements.
The effect of the 53rd week on the results of the Group is the inclusion of an
additional £79.5 million sales and £0.2 million operating profit.
So that the results are more readily comparable, all of the UK like-for-like
analysis has been calculated comparing the 53 weeks against 53 weeks last year.
Total reported sales grew 8.3% to £8.7 billion, up 7.4% on a 52 week constant
currency basis. During the year, an additional 73 net new stores were added,
taking the store network to 718. On an LFL basis, sales were up 0.9%.
Operating profit grew 86.0% principally reflecting the B&Q restructuring
exceptional charge last year of £205.3 million.
The net interest charge for the year was £50.8 million, up £13.1 million from
the prior year reflecting higher average net debt during the year and higher
euro and sterling interest rates. The net interest charge benefited from a net
interest return on the defined benefit schemes of £6.3m (2005/06: £3.8m
expense).
Adjusted pre-tax profit declined 11.0% reflecting challenging trading conditions
in the UK and France.
Taxation
The effective overall rate of tax on profit has decreased from 40.0% in the
prior year to 24.9% primarily reflecting exceptional costs not qualifying for
tax relief in the prior year. The effective rate of tax on profit before
exceptional items and excluding prior year tax adjustments is 32.0% (2005/06:
34.4%) reflecting group profit mix and use of losses in start up jurisdictions.
Exceptional items
The Group recorded an exceptional profit in the year of £49.5 million on the
disposal of properties and investments of which £42.7 million was recognised on
the sale and leaseback of seven large UK stores to The British Land Company.
Earnings per share
Basic earnings per share increased by 140% to 14.4p. Adjusted earnings per share
as calculated below declined 3.3% from 12.3p to 11.9p per share.
2006/07 2005/06
Basic earnings per share 14.4p 6.0p
Exceptional items (net of tax) (2.4)p 6.4p
Financing fair value remeasurements (net of tax) (0.1)p (0.1)p
Adjusted earnings per share 11.9p 12.3p
Dividends
The Board has proposed a final dividend of 6.8p per share, making the total
dividend for the year 10.65p per share, unchanged on the prior year. This
dividend is covered 1.1 times by adjusted earnings (2005/06: 1.2 times).
The final dividend for the year ended 3 February 2007 will be paid on 8 June
2007 to shareholders on the register at close of business on 10 April 2007,
subject to approval of shareholders at the Company's Annual General Meeting, to
be held on 31 May 2007. A dividend reinvestment plan (DRIP) is available to all
shareholders who would prefer to invest their dividends in the shares of the
Company.
The shares will go ex-dividend on 4 April 2007. For those shareholders electing
to receive the DRIP the last date for receipt of electing is 17 May 2007.
Dividend cheques and tax vouchers will be posted on 6 June 2007. Certificates
for shareholders electing for the DRIP will be posted no later than 21 June
2007.
Return on invested capital (ROIC)
ROIC is defined as net operating profit less adjusted taxes (adjusted operating
profit excluding property lease and property depreciation costs less tax, plus
property revaluation increases in the year) divided by average invested capital
(average net assets less financing related balances and pension provisions plus
property operating lease costs capitalised at the long term property yield).
Following the transition to IFRS, the Group elected not to revalue properties
from 1 February 2004. However, property appreciation is an integral part of a
ROIC measure and therefore Kingfisher continues to include revaluation gains and
the current market value of our properties in ROIC calculations.
ROIC declined from 9.0% to 8.7%, compared to the Group's weighted average cost
of capital of 7.4%, down 0.5 percentage points on last year primarily due to a
fall in property yields.
Underlying ROIC declined from 7.3% to 6.9%. Underlying ROIC assumes properties
appreciate in value at a steady rate over the long-term. When calculating the
underlying ROIC, short-term variations in property values more or less than the
long-term mean are excluded.
ROIC excluding goodwill
Kingfisher's sales, projected space growth for 2007/08, invested capital and
underlying ROIC excluding goodwill are disclosed below by strategic priority:
Retail Sales Proportion of Invested Proportion of Returns % Space growth
£bn Group sales % Capital Group IC % (ROIC) (2) next year %
(1) (IC)
£bn (2)
Strengthening developed
businesses
- B&Q UK 3.9 45% 5.7 66% 7% 2%
- Castorama France 1.6 19% 1.1 13% 10% 1%
Sub-total 5.5 64% 6.8 79% 8% 2%
Expanding proven growth
businesses 3.1 35% 1.6 19% 13% 11%
Establishing new
opportunities for the future 0.1 1% 0.2 2% (2)% 47%
Group total 8.7 100% 8.6 100% 9% 6%
1) For the UK businesses, reported total sales figures are for the 53 weeks
ended 3 February 2007. Outside the UK, figures are on a calendar month basis.
2) Excluding goodwill of £2.6 billion but including smoothed property
appreciation and leases capitalised at long- term yields.
Cashflow
The Group generated £559.4 million of cash from operating activities in the
year, up £255.3 million on the prior year (2005/06: cash generated £304.1
million), despite paying additional post employment contributions of £82.5
million (2005/06: £135.2 million) and £47.0 million on items provided against as
exceptional costs in 2005/06. Included within this improvement is £124.1 million
generated from working capital management (2005/06: £103.3 million utilised).
This was mainly driven by creditors which rose by £295.1 million (2005/06: £27.3
million) whilst stock levels rose by £215.0 million (2005/06: £33.3m).
Net capital expenditure was £215.8 million (2005/06: £395.4 million) which has
fallen year on year as a result of disposals within the Group's property
portfolio.
The resulting year end net debt was £1,293.8 million (2005/06: £1,355.2
million).
Capital expenditure
Gross capital expenditure (excluding business acquisitions) for the Group was
£466.9 million (2005/06: £507.0 million). £219.5 million was spent on property
(2005/06: £188.0 million) and £247.4 million on fixtures, fittings and
intangibles (2005/06: £319.0 million). A total of £251.1 million (2005/06:
£111.6 million) of proceeds from disposals were received during the year, £251.0
million of which came from property disposals.
Payments to acquire businesses in the year amounted to £2.2 million (2005/06:
£167.5 million) which related to the purchase of three minorities in China.
Financing
Kingfisher aims to smooth the maturity profile of its debt by issuing debt with
different maturities and by utilising committed bank revolving credit facilities
to provide additional liquidity.
In March 2006, the Group obtained a further £300 million committed bank
facility, which provided short-term funding, but this was subsequently repaid
and cancelled.
In May 2006, the Group issued US$466.5 million of fixed term debt through the US
Private Placement market. The debt was issued in three tranches, with maturities
of 7, 10 and 12 years, and the proceeds were swapped to sterling at floating
interest rates. The proceeds were used to repay the £300 million short-term
committed bank facility entered into in March 2006.
The Group has access to a £500 million committed revolving credit facility,
maturing in August 2011, provided by a number of banks. This facility is
available to be drawn to support the general corporate purposes of the Group
including working capital requirements.
Since the year end the Group has entered into new committed revolving credit
facilities totalling £275 million with a number of banks, and a £25 million bank
committed term loan facility. These new facilities mature in March 2010 and are
available to be drawn to support the general corporate purposes of the Group.
Property
During the year the Group disposed of properties for cash consideration of £251
million including £198 million on the sale of seven B&Q UK large stores which it
retained the right to lease for 20 years. Through this transaction, the Group
took advantage of the current buoyancy in the property investment market in the
UK to finance its operational business at attractive rates going forward. The
proceeds of the transaction were used to repay existing debt and to invest in
Kingfisher's worldwide store opening programme, including further freehold
acquisitions.
The Group owns a significant property portfolio, most of which is used for
trading purposes. If the Group had continued to revalue this it would have had
a market value of £3.2 billion at year end, compared to the net book value of
£2.3 billion recorded in the financial statements. This represents a £170
million increase against the prior year and a £249 million increase on a
constant currency basis.
The values are based on valuations performed by external qualified valuers where
the key assumption is the estimated yields. The average income yields used were
5.5% in the UK, 6.75% in France and Italy, 6.8% in Poland and 7.7% in China.
Pensions
The Group holds a provision on its balance sheet of £54.6 million in relation to
defined benefit pension arrangements which is a reduction of £185.0 million on
the provision held in 2005/06. This reduction was as a result of additional
payments to the UK pension scheme (£118.3 million was paid compared to a normal
contribution of around £40 million per annum) and increases in the discount rate
used to calculate the defined benefit obligation from 4.7% to 5.3% as a result
of increases to corporate bond rates over the year. This was partly offset by
changed mortality rates with an assumption that people will live longer. This
change increased the obligation by approximately 4% and ensures that these
assumptions remain in line with current market best estimates. Further
disclosures of the assumptions used (including mortality assumptions) will be
provided in note 8. A formal actuarial valuation is scheduled as at 31 March
2007 with the results expected towards the end of 2007.
Operational Review - DATA BY COUNTRY as at 3 February 2007
Store numbers Selling space Employees
(000s sq.m.) (FTE)
B&Q 324 2,315 26,273
UK Trade 42 19 2,212
Total UK 366 2,334 28,485
Castorama 98 959 11,943
Brico Depot 81 434 5,641
Total France 179 1,393 17,584
Castorama Poland 35 291 6,156
Castorama Italy 27 171 2,043
B&Q Ireland 7 46 494
Brico Depot Spain 10 51 557
Castorama Russia 3 27 773
Koctas Turkey 10 55 1,139
Total Rest of Europe 92 641 11,162
B&Q China 58 553 10,675
B&Q Taiwan 21 97 1,841
South Korea 2 12 182
Total Asia 81 662 12,697
Total 718 5,030 69,928
Operational Review - FULL YEAR BY GEOGRAPHY - year ended 3 February 2007
Retail sales £m % % %LFL Retail profit £m %
2006/07 2005/06 Change Change Change 2006/07 2005/06 Change
(1) (Reported) (52 week (Reported)
basis,
Constant
currency)
UK 4,261.5 4,172.0 2.1% 0.2% (1.8)% 182.6 219.4 (16.8)%
France 2,955.2 2,724.9 8.5% 9.0% 2.0% 206.3 230.0 (10.3)%
Rest of 1,002.5 795.2 26.1% 25.0% 7.4% 110.4 86.6 27.5%
Europe (2)
Asia (3) 456.7 318.0 43.6% 42.2% 10.9% 4.4 (2.9) n/a
Total 8,675.9 8,010.1 8.3% 7.4% 0.9% 503.7 533.1 (5.5)%
(1) For the UK businesses, reported total sales figures are for the 53 weeks
ended 3 February 2007. Outside the UK, figures are on a calendar month basis.
(2) Rest of Europe includes Poland, Italy, Spain, Koctas JV in Turkey,
Ireland, Russia and Hornbach in Germany. Sales from Koctas and Hornbach are not
consolidated.
(3) Asia includes China, Taiwan, and South Korea. Taiwan JV sales are not
consolidated.
Enquiries:
Ian Harding, Group Communications Director 020 7644 1029
Nigel Cope, Head of Communications 020 7644 1030
Sarah Gerrand, Head of Investor Relations 020 7644 1032
Further copies of this announcement can be downloaded from www.kingfisher.com
or are available from The Company Secretary, Kingfisher plc, 3 Sheldon Square,
London, W2 6PX.
Company Profile
Kingfisher plc is Europe's leading home improvement retail group and the third
largest in the world, with over 700 stores in 11 countries in Europe and Asia.
Its main retail brands are B&Q, Castorama, Brico Depot and Screwfix Direct.
Kingfisher also has a 21% interest in, and strategic alliance with, Hornbach,
Germany's leading large format DIY retailer, with over 120 stores in Germany and
seven neighbouring countries.
This information is provided by RNS
The company news service from the London Stock Exchange
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