Final Results - Part 2

Kingfisher PLC 27 March 2008 Consolidated income statement For the financial year ended 2 February 2008 2007/08 2006/07 Before Exceptional Total Before Exceptional Total exceptional items exceptional items Â£ millions Notes items (note 3) items (note 3) Continuing operations: Revenue 2 9,364 - 9,364 8,676 - 8,676 Cost of sales (6,093) - (6,093) (5,624) - (5,624) Gross profit 3,271 - 3,271 3,052 - 3,052 Selling and distribution (2,390) (35) (2,425) (2,207) - (2,207) expenses Administrative expenses (469) - (469) (434) - (434) Other income 22 44 66 24 49 73 Other expenses - (5) (5) - - - Share of post-tax results of 2 19 19 17 - 17 joint ventures and associates - Operating profit 453 4 457 452 49 501 Analysed as: Retail profit 2 498 (1) 497 504 49 553 Central costs (40) 5 (35) (39) - (39) Share of interest and tax of (5) (5) (13) - (13) joint ventures and associates - Finance income 33 33 25 - 25 - Finance costs (95) (95) (76) - (76) - Net finance costs 4 (62) (62) (51) - (51) - Profit before taxation 391 4 395 401 49 450 Income tax expense 5 (125) 2 (123) (120) 8 (112) Profit for the year 266 6 272 281 57 338 Attributable to: Equity shareholders of the 274 337 Company Minority interests (2) 1 272 338 Earnings per share 7 Basic 11.7p 14.4p Diluted 11.7p 14.4p Adjusted basic 11.3p 11.9p Adjusted diluted 11.3p 11.8p The proposed final dividend for the financial year ended 2 February 2008, subject to approval by shareholders at the Annual General Meeting, is 3.4p per share. Consolidated statement of recognised income and expense For the financial year ended 2 February 2008 Â£ millions Notes 2007/08 2006/07 Actuarial gains on post employment benefits 47 95 Currency translation differences Group 206 (60) Joint ventures and associates 26 (12) Losses transferred to income statement 3 - Cash flow hedges Fair value losses (6) (9) Losses transferred to inventories 8 3 Tax on items recognised directly in equity (19) (30) Net income/(expense) recognised directly in equity 265 (13) Profit for the year 272 338 Total recognised income for the year 537 325 Attributable to: Equity shareholders of the Company 9 537 324 Minority interests - 1 537 325 Consolidated balance sheet As at 2 February 2008 Â£ millions Notes 2007/08 2006/07 Non-current assets Goodwill 2,532 2,552 Other intangible assets 85 89 Property, plant and equipment 3,698 3,211 Investment property 29 29 Investments in joint ventures and associates 204 185 Post employment benefits 8 110 - Deferred tax assets 25 30 Derivative financial instruments 66 29 Other receivables 13 18 6,762 6,143 Current assets Inventories 1,873 1,531 Trade and other receivables 533 495 Current tax assets 1 15 Other investments 11 28 Derivative financial instruments 5 10 Cash and cash equivalents 218 395 2,641 2,474 Total assets 9,403 8,617 Current liabilities Trade and other payables (2,238) (1,953) Current tax liabilities (89) (87) Derivative financial instruments (10) (5) Borrowings (191) (242) Provisions (47) (56) (2,575) (2,343) Non-current liabilities Other payables (32) (4) Deferred tax liabilities (318) (263) Derivative financial instruments (52) (46) Borrowings (1,620) (1,432) Provisions (49) (53) Post employment benefits 8 (33) (55) (2,104) (1,853) Total liabilities (4,679) (4,196) Net assets 4,724 4,421 Equity Share capital 371 371 Share premium 2,188 2,185 Own shares held (66) (81) Reserves 9 2,220 1,939 Minority interests 11 7 Total equity 4,724 4,421 The financial statements were approved by the Board of Directors on 26 March 2008 and signed on its behalf by: Ian Cheshire Duncan Tatton-Brown Group Chief Executive Group Finance Director Consolidated cash flow statement For the financial year ended 2 February 2008 Â£ millions Notes 2007/08 2006/07 Net cash flows from operating activities 10 465 559 Cash flows from investing activities Purchase of minority interests (1) (2) Purchase of intangible assets (29) (28) Purchase of property, plant and equipment and investment property (499) (439) Disposal of property, plant and equipment and investment property 117 251 Disposal of investment in joint venture 50 - Net disposal/(purchase) of other investments 21 (29) Dividends received from joint ventures and associates 6 5 Net cash flows from investing activities (335) (242) Cash flows from financing activities Interest received 23 19 Interest paid (89) (71) Interest element of finance lease rental payments (6) (6) Net receipt on forward foreign exchange contracts 6 - Net receipt/(repayment) of bank loans 136 (133) Issue of Medium Term Notes and other fixed term debt - 252 Capital element of finance lease rental payments (11) (12) Issue of share capital to equity shareholders of the Company 3 11 Issue of share capital to minority interests 3 1 Disposal of own shares held 2 7 Dividends paid to equity shareholders of the Company (249) (248) Dividends paid to minority interests (4) (2) Net cash flows from financing activities (186) (182) Net (decrease)/increase in cash and cash equivalents and bank overdrafts (56) 135 Cash and cash equivalents and bank overdrafts at beginning of year 245 114 Exchange differences 6 (4) Cash and cash equivalents and bank overdrafts at end of year 11 195 245 Notes to the financial information For the financial year ended 2 February 2008 1. Basis of preparation The financial information which comprises the consolidated income statement, consolidated statement of recognised income and expense, consolidated balance sheet, consolidated cash flow statement and related notes do not constitute the Group's Annual Report and Accounts. The auditors have reported on the Group's statutory accounts for each of the years 2007/08 and 2006/07 under section 235 of the Companies Act 1985, which do not contain statements under sections 237 (2) or (3) of the Companies Act 1985 and are unqualified. The statutory accounts for 2006/07 have been delivered to the Registrar of Companies and the statutory accounts for 2007/08 will be filed with the Registrar in due course. Copies of the Annual Report and Accounts will be posted to shareholders during the week beginning 28 April 2008. The Group's financial reporting year ends on the nearest Saturday to 31 January each year. The current financial year is the 52 weeks ended 2 February 2008. The comparative financial year is the 53 weeks ended 3 February 2007. 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 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and post employment benefits. The principal accounting policies applied in the preparation of the consolidated financial statements are consistent with those set out in the statutory accounts for 2006/07. Use of adjusted measures Kingfisher believes that retail profit, adjusted pre-tax profit, adjusted post-tax profit and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items' and ' adjusted' are not defined terms under IFRS and may therefore not be comparable with similarly titled profit measures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measurements of profit. The term 'adjusted' refers to the relevant measure being reported excluding exceptional items, financing fair value remeasurements and amortisation of acquisition intangibles. Retail profit is defined as operating profit before central costs (principally the costs of the Group's head office), exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of joint ventures and associates. The separate reporting of non-recurring exceptional items, which are presented as exceptional within their relevant income statement category, helps provide an indication of the Group's underlying business performance. The principal items which will be included as exceptional items are: â€¢ non-trading items included in operating profit such as profits and losses on the disposal or closure of subsidiaries, joint ventures, associates and investments which do not form part of the Group's trading activities; â€¢ gains and losses on the disposal of properties; and â€¢ the costs of significant restructuring and incremental acquisition integration costs. 2. Segmental analysis Income statement Year ended 2 February 2008 Â£ millions United France Poland Rest of Asia Total Kingdom Europe External revenue 4,395 3,224 703 570 472 9,364 Retail profit 153 237 87 35 (14) 498 Exceptional items before central costs 38 1 - - (40) (1) Less: Share of operating profit of joint ventures and - - - (20) (4) (24) associates Segment result before joint ventures and associates 191 238 87 15 (58) 473 Share of post-tax results of joint ventures and - - - 16 3 19 associates Segment result 191 238 87 31 (55) 492 Central costs (35) Operating profit 457 Net finance costs (62) Profit before taxation 395 Income tax expense (123) Profit for the year 272 Year ended 3 February 2007 Â£ millions United France Poland Rest of Asia Total Kingdom Europe External revenue 4,262 2,955 508 494 457 8,676 Retail profit 183 206 58 52 5 504 Exceptional items before central costs 50 (1) - - - 49 Less: Share of operating profit of joint ventures and - (1) - (23) (6) (30) associates Segment result before joint ventures and associates 233 204 58 29 (1) 523 Share of post-tax results of joint ventures and - - - 13 4 17 associates Segment result 233 204 58 42 3 540 Central costs (39) Operating profit 501 Net finance costs (51) Profit before taxation 450 Income tax expense (112) Profit for the year 338 The Group's primary reporting segments are geographic, with the Group operating in four main geographical areas, being the UK, France, Rest of Europe and Asia. The Group only has one business segment, being retail, therefore no secondary segmental disclosure is given. The 'Rest of Europe' segment consists of B&Q Ireland, Castorama Poland, Castorama Italy, Castorama Russia, Brico Depot Spain, Koctas and Hornbach. Poland has been shown separately as it meets the reportable segment criteria as prescribed by IAS 14 Segment Reporting. The 'Asia' segment consists of B&Q China, B&Q Taiwan, B&Q Home in South Korea and the Asia head office. Central costs have not been allocated. These principally comprise the Head Office operations of Kingfisher plc. 3. Exceptional items Â£ millions 2007/08 2006/07 Included within selling and distribution expenses Loss on closure of B&Q Home in South Korea and Asia head office (13) - China restructuring (22) - (35) - Included within other income Profit on disposal of properties 39 49 Recovery of loan receivable previously written off 5 - 44 49 Included within other expenses Gross profit on disposal of B&Q Taiwan joint venture before goodwill 27 - Goodwill attributed to B&Q Taiwan joint venture (32) - Net loss on disposal of B&Q Taiwan joint venture (5) - Exceptional items 4 49 Closure costs of Â£13m have been expensed in relation to the closure of B&Q Home in South Korea and the Asia head office. A further Â£22m exceptional charge has been recognised as part of a restructuring project in B&Q China, comprising store impairment costs and onerous lease contracts. The Group has recorded Â£39m exceptional profit on disposal of properties, which includes a Â£40m profit on the sale and leaseback of the Worksop Distribution Centre by B&Q UK. In the prior year, total profits recognised on the disposal of properties totalled Â£49m. The Group recognised Â£43m profit on disposal of properties on the sale and leaseback of seven large UK stores to The British Land Company. The Group has recognised Â£5m income in relation to the repayment of a loan made to ProMarkt which had previously been written off as an exceptional item. On 4 January 2008, the Group disposed of its 50% interest in B&Q Taiwan (B&Q International Co. Ltd) to its joint venture partner, Test Rite International Co. Ltd, for cash consideration of Â£50m. This resulted in a Â£27m profit before goodwill being recognised and a Â£5m loss after goodwill. The goodwill was allocated to B&Q Taiwan on the Group's acquisition of the minority interests of Castorama in 2002/03. 4. Net finance costs Â£ millions 2007/08 2006/07 Cash and cash equivalents and current other investments 21 19 Expected net return on defined benefit pension schemes 12 6 Finance income 33 25 Bank overdrafts and bank loans (12) (7) Medium Term Notes and other fixed term debt (79) (65) Financing fair value remeasurements 5 4 Finance leases (6) (6) Unwinding of discount on provisions (3) (2) Finance costs (95) (76) Net finance costs (62) (51) 5. Income tax expense Â£ millions 2007/08 2006/07 UK corporation tax Current tax on profits for the year 21 36 Adjustments in respect of prior years (29) - (8) 36 Double taxation relief (1) (6) (9) 30 Overseas tax Current tax on profits for the year 99 80 Adjustments in respect of prior years - (2) 99 78 Deferred tax Current year 20 13 Adjustments in respect of prior years 22 (9) Adjustments in respect of changes in tax rates (9) - 33 4 Income tax expense 123 112 The effective rate of tax on profit before exceptional items and excluding tax adjustments in respect of prior years and changes in tax rates is 32.0% (2006/ 07: 32.0%). A tax credit of Â£2m has been recognised in the income statement relating to exceptional items, of which Â£14m is charged against the current year tax charge in relation to the Â£4m net exceptional income, with the remaining Â£16m credit in respect of prior periods, relating to tax previously provided on exceptional items. The tax credit on exceptional items for the year ended 3 February 2007 was Â£8m, of which Â£3m related to adjustments in respect of prior years. 6. Dividends Â£ millions 2007/08 2006/07 Dividends to equity shareholders of the Company Final dividend for the year ended 3 February 2007 of 6.8p per share (28 January 2006: 159 158 6.8p per share) Interim dividend for the year ended 2 February 2008 of 3.85p per share (3 February 2007: 90 90 3.85p per share) 249 248 Proposed final dividend for the year ended 2 February 2008 of 3.4p per share 80 The proposed final dividend for the year ended 2 February 2008 is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 7. Earnings per share 2007/08 2006/07 Earnings Weighted Per share Earnings Weighted Per average amount average number number share of shares of shares amount Â£ millions millions pence Â£ millions millions pence Basic earnings per share 274 2,342 11.7 337 2,333 14.4 Effect of dilutive share options 9 - 11 - Diluted earnings per share 274 2,351 11.7 337 2,344 14.4 Basic earnings per share 274 2,342 11.7 337 2,333 14.4 Effect of non-recurring costs Exceptional items (4) (0.2) (49) (2.1) Tax on exceptional items (2) (0.1) (8) (0.3) Financing fair value remeasurements (5) (0.2) (4) (0.2) Tax on financing fair value 2 0.1 1 0.1 remeasurements Adjusted basic earnings per share 265 2,342 11.3 277 2,333 11.9 Diluted earnings per share 274 2,351 11.7 337 2,344 14.4 Effect of non-recurring costs Exceptional items (4) (0.2) (49) (2.2) Tax on exceptional items (2) (0.1) (8) (0.3) Financing fair value remeasurements (5) (0.2) (4) (0.2) Tax on financing fair value 2 0.1 1 0.1 remeasurements Adjusted diluted earnings per share 265 2,351 11.3 277 2,344 11.8 Basic earnings per share is calculated by dividing the earnings attributable to ordinary equity shareholders of the Company by the weighted average number of ordinary shares in issue during the year, excluding those held in the Employee Share Ownership Plan Trust (ESOP) which for the purpose of this calculation are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's shares during the year. Adjusted earnings per share figures are also presented. These exclude the effects of exceptional items, financing fair value remeasurements and amortisation of acquisition intangibles, to allow comparison of underlying trading performance on a consistent basis. 8. Post employment benefits Movements in the present value of defined benefit (obligations)/assets on the balance sheet are as follows: 2007/08 2006/07 Â£ millions UK Other Total UK Other Total Deficit in scheme at beginning of year (28) (27) (55) (210) (29) (239) Total service cost charged in the income statement (26) (3) (29) (35) (5) (40) Interest cost (74) (2) (76) (66) (1) (67) Expected return on pension scheme assets 88 - 88 73 - 73 Actuarial gains/(losses) 49 (2) 47 92 3 95 Contributions paid 101 2 103 118 4 122 Settlements and curtailments - 1 1 - - - Exchange differences - (2) (2) - 1 1 Surplus/(deficit) in scheme at end of year 110 (33) 77 (28) (27) (55) The assumptions used in calculating the costs and obligations of the Group's defined benefit pension plans, as shown in the tables below, are set by the Directors after consultation with independent professionally qualified actuaries. 2007/08 2006/07 Annual % rate UK Other UK Other Discount rate 6.2 5.3 to 5.5 5.3 4.6 to 5.5 Salary escalation 4.1 2.0 to 6.6 4.5 3.5 to 6.7 Rate of pension increases 3.3 - 2.9 - Price inflation 3.3 2.0 to 2.5 2.9 2.0 to 2.5 2007/08 2006/07 % rate of return UK Other UK Other Equities 8.1 - 7.8 - Bonds 5.3 - 4.9 4.5 Property 6.7 - 6.3 - Other 4.3 4.0 3.9 4.0 Overall expected rate of return 6.8 4.0 6.5 4.0 The UK discount rate is based on the yield on the iBoxx over 15-year AA-rated Sterling corporate bond index. The overall expected rate of return on plan assets reflects market expectations at the valuation date of long-term asset returns and the mix of assets in the plans. 2007/08 2006/07 Age to which current pensioners are expected to live (60 now) - Male 87.2 85.1 - Female 85.9 86.3 Age to which future pensioners are expected to live (60 in 15 years time) - Male 88.8 86.2 - Female 87.1 87.5 The mortality assumptions used in the actuarial valuations of the Group's UK defined benefit pension liabilities have been selected with regard to the characteristics and experience of the membership of the plan from 2004 to 2007. The following table analyses, for the UK Plan, the estimated impact on plan obligations resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant. Assumption Change in assumption Impact on UK plan liabilities Discount rate Increase/decrease by 0.1% Decrease/increase by Â£24m Salary escalation Increase/decrease by 0.1% Increase/decrease by Â£3m Rate of pension increases Increase/decrease by 0.1% Increase/decrease by Â£14m Price inflation Increase/decrease by 0.1% Increase/decrease by Â£24m Mortality Increase in life expectancy by one year Increase by Â£40m 9. Reserves Â£ millions Cash flow Translation Other Retained Total hedge reserve reserve reserves earnings At 4 February 2007 (3) 20 159 1,763 1,939 Actuarial gains on post employment benefits - - - 47 47 Currency translation differences - Group - 204 - - 204 Currency translation differences - joint ventures and associates - 26 - - 26 Currency translation differences - losses transferred to income statement - 3 - - 3 Cash flow hedges - fair value losses (6) - - - (6) Cash flow hedges - losses transferred to inventories 8 - - - 8 Tax on items recognised directly in equity (1) (5) - (13) (19) Net income recognised directly in equity 1 228 - 34 263 Profit for the year - - - 274 274 Total recognised income for the year 1 228 - 308 537 Share-based compensation charge - - - 6 6 Own shares disposed - - - (13) (13) Dividends - - - (249) (249) At 2 February 2008 (2) 248 159 1,815 2,220 At 29 January 2006 1 92 159 1,609 1,861 Actuarial gains on post employment benefits - - - 95 95 Currency translation differences - Group - (60) - - (60) Currency translation differences - joint ventures and associates - (12) - - (12) Cash flow hedges - fair value losses (9) - - - (9) Cash flow hedges - losses transferred to inventories 3 - - - 3 Tax on items recognised directly in equity 2 - - (32) (30) Net (expense)/income recognised directly in equity (4) (72) - 63 (13) Profit for the year - - - 337 337 Total recognised (expense)/income for the year (4) (72) - 400 324 Share-based compensation charge - - - 9 9 Own shares disposed - - - (7) (7) Dividends - - - (248) (248) At 3 February 2007 (3) 20 159 1,763 1,939 10. Cash flows from operating activities Â£ millions 2007/08 2006/07 Operating profit 457 501 Share of post-tax results of joint ventures and associates (19) (17) Amortisation and depreciation 234 207 Impairment losses 19 1 Loss on disposal of intangible assets - 6 Profit on disposal of property, plant and equipment and investment property (29) (44) Loss on disposal of investment in joint venture 5 - Share-based compensation charge 6 9 Increase in inventories (215) (215) Decrease in trade and other receivables 6 44 Increase in trade and other payables 173 295 (Increase)/decrease in working capital (36) 124 Decrease in provisions (16) (48) Decrease in post employment benefits (75) (82) Cash generated by operations 546 657 Income tax paid (81) (98) Net cash flows from operating activities 465 559 11. Net debt Â£ millions 2007/08 2006/07 Cash and cash equivalents 218 395 Bank overdrafts (23) (150) Cash and cash equivalents and bank overdrafts 195 245 Current other investments 11 28 Bank loans (283) (146) Medium Term Notes and other fixed term debt (1,436) (1,307) Interest rate and cross currency swaps (excluding accrued interest) 23 (44) Finance leases (69) (70) Net debt (1,559) (1,294) Â£ millions 2007/08 2006/07 Net debt at beginning of year (1,294) (1,355) Net (decrease)/increase in cash and cash equivalents and bank overdrafts (56) 135 Net (disposal)/purchase of other investments (21) 29 Net (receipt)/repayment of bank loans (136) 133 Issue of Medium Term Notes and other fixed term debt - (252) Capital element of finance lease rental payments 11 12 Exchange differences and other non-cash movements (63) 4 Net debt at end of year (1,559) (1,294) This information is provided by RNS The company news service from the London Stock Exchange

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