Source - RNS
RNS Number : 2527K
Kingfisher PLC
20 September 2016
 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

 

 

 

 

 

 

 

 

Half year ended 31 July 2016

 

Half year ended 1 August 2015

 

 

Before

Exceptional

 

 

Before

Exceptional

 

 

 

exceptional

items

 

 

exceptional

items

 

£ millions

Notes

items

(note 5)

Total

 

items

(note 5)

Total

Sales

4

5,749

-

5,749

 

5,492

-

5,492

Cost of sales

 

(3,623)

-

(3,623)

 

(3,474)

-

(3,474)

Gross profit

 

2,126

-

2,126

 

2,018

-

2,018

Selling and distribution expenses

 

(1,386)

15

(1,371)

 

(1,360)

(151)

(1,511)

Administrative expenses

 

(326)

(1)

(327)

 

(288)

-

(288)

Other income

 

9

3

12

 

15

160

175

Share of post-tax results of joint ventures and associates

 

 

(1)

-

(1)

 

-

-

-

Operating profit

 

422

17

439

 

385

9

394

Finance costs

 

(13)

(6)

(19)

 

(11)

-

(11)

Finance income

 

7

-

7

 

3

-

3

Net finance costs

6

(6)

(6)

(12)

 

(8)

-

(8)

Profit before taxation

 

416

11

427

 

377

9

386

Income tax expense

7

(104)

(2)

(106)

 

(97)

29

(68)

Profit for the period

 

312

9

321

 

280

38

318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

8

 

 

 

 

 

 

 

Basic

 

 

 

14.1p

 

 

 

13.6p

Diluted

 

 

 

14.1p

 

 

 

13.6p

Adjusted basic

 

 

 

13.6p

 

 

 

12.3p

Adjusted diluted

 

 

 

13.6p

 

 

 

12.3p

Underlying basic

 

 

 

14.2p

 

 

 

12.3p

Underlying diluted

 

 

 

14.2p

 

 

 

12.3p

 

 

 

 

 

 

 

 

 

Reconciliation of non-GAAP underlying and adjusted pre-tax profit:

Underlying pre-tax profit

 

 

 

436

 

 

 

384

Transformation costs before exceptional items

(18)

 

 

 

-

Adjusted pre-tax profit

 

 

 

418

 

 

 

384

B&Q China operating loss

 

 

 

-

 

 

 

(4)

Financing fair value remeasurements

(2)

 

 

 

(3)

Exceptional items

 

 

 

11

 

 

 

9

Profit before taxation

 

 

 

427

 

 

 

386

 

 

 

The proposed interim ordinary dividend for the period ended 31 July 2016 is 3.25p per share.

 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

 

 

 

 

Year ended 31 January 2016

 

 

Before

Exceptional

 

 

 

exceptional

items

 

£ millions

Notes

items

(note 5)

Total

Sales

4

10,441

-

10,441

Cost of sales

 

(6,545)

-

(6,545)

Gross profit

 

3,896

-

3,896

Selling and distribution expenses

 

(2,666)

(308)

(2,974)

Administrative expenses

 

(567)

(15)

(582)

Other income

 

26

157

183

Share of post-tax results of joint ventures and associates

3

-

3

Operating profit

 

692

(166)

526

Finance costs

 

(22)

-

(22)

Finance income

 

8

-

8

Net finance costs

6

(14)

-

(14)

Profit before taxation

 

678

(166)

512

Income tax expense

7

(167)

67

(100)

Profit for the year

 

511

(99)

412

 

 

 

 

 

Earnings per share

8

 

 

 

Basic

 

 

 

17.8p

Diluted

 

 

 

17.8p

Adjusted basic

 

 

 

22.0p

Adjusted diluted

 

 

 

22.0p

Underlying basic

 

 

 

22.0p

Underlying diluted

 

 

 

22.0p

 

 

 

 

 

Reconciliation of non-GAAP underlying and adjusted pre-tax profit:

Underlying pre-tax profit

 

 

 

686

Transformation costs before exceptional items

 

 

 

-

Adjusted pre-tax profit

 

 

 

686

B&Q China operating loss

 

 

 

(4)

Financing fair value remeasurements

 

 

 

(4)

Exceptional items

 

 

 

(166)

Profit before taxation

 

 

 

512

 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

£ millions

 

 

Notes

Half year ended

31 July 2016

Half year ended

1 August 2015

Year ended

31 January 2016

Profit for the period

 

321

318

412

Actuarial (losses)/gains on post-employment benefits

11

(87)

(72)

19

Tax on items that will not be reclassified

 

29

23

(8)

Total items that will not be reclassified

subsequently to profit or loss

 

(58)

(49)

11

Currency translation differences

 

 

 

 

Group

 

304

(136)

1

Joint ventures and associates

 

2

(3)

(3)

Transferred to income statement

 

-

(7)

(7)

Cash flow hedges

 

 

 

 

Fair value gains/(losses)

 

26

(21)

24

Gains transferred to inventories

 

(18)

(30)

(50)

Available-for-sale financial assets

 

 

 

 

Fair value gains

 

5

-

2

Transferred to income statement

16

(7)

-

-

Tax on items that may be reclassified

 

1

12

8

Total items that may be reclassified

subsequently to profit or loss

 

313

(185)

(25)

Other comprehensive income for the period

 

255

(234)

(14)

Total comprehensive income for the period

 

576

84

398

 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

Attributable to equity shareholders of the Company

 

 

£ millions

Share capital

 

Share

premium

Own shares held

 

Retained earnings

Other reserves (note 13)

Total

Non-controlling interests

Total equity

At 1 February 2016

361

2,218

(24)

3,637

(6)

6,186

-

6,186

Profit for the period

-

-

-

321

-

321

-

321

Other comprehensive income for the period

-

-

-

(58)

313

255

-

255

Total comprehensive income for the period

-

-

-

263

313

576

-

576

Share-based compensation

-

-

-

9

-

9

-

9

New shares issued under share schemes

-

1

-

-

-

1

-

1

Own shares issued under share schemes

-

-

6

(5)

-

1

-

1

Purchase of own shares for cancellation

(6)

-

-

(111)

6

(111)

-

(111)

Dividends (note 9)

-

-

-

(157)

-

(157)

-

(157)

At 31 July 2016

355

2,219

(18)

3,636

313

6,505

-

6,505

 

 

 

 

 

 

 

 

 

At 1 February 2015

369

2,214

(26)

3,652

11

6,220

10

6,230

Profit for the period

-

-

-

318

-

318

-

318

Other comprehensive income for the period

-

-

-

(49)

(185)

(234)

-

(234)

Total comprehensive income for the period

-

-

-

269

(185)

84

-

84

Disposal of B&Q China (note 16)

-

-

-

-

-

-

(10)

(10)

Share-based compensation

-

-

-

7

-

7

-

7

New shares issued under share schemes

-

1

-

-

-

1

-

1

Own shares issued under share schemes

-

-

15

(14)

-

1

-

1

Purchase of own shares for cancellation

(6)

-

-

(111)

6

(111)

-

(111)

Purchase of own shares for ESOP trust

-

-

(11)

-

-

(11)

-

(11)

Dividends (note 9)

-

-

-

(160)

-

(160)

-

(160)

At 1 August 2015

363

2,215

(22)

3,643

(168)

6,031

-

6,031

                   

 

At 1 February 2015

369

2,214

(26)

3,652

11

6,220

10

6,230

Profit for the year

-

-

-

412

-

412

-

412

Other comprehensive income for the year

-

-

-

11

(25)

(14)

-

(14)

Total comprehensive income for the year

-

-

-

423

(25)

398

-

398

Disposal of B&Q China (note 16)

-

-

-

-

-

(10)

(10)

Share-based compensation

-

-

-

11

-

-

11

New shares issued under share schemes

-

4

-

-

-

-

4

Own shares issued under share schemes

-

-

18

(17)

-

-

1

Purchase of own shares for cancellation

(8)

-

-

(200)

8

-

(200)

Purchase of own shares for ESOP trust

-

-

(16)

-

-

-

(16)

Dividends (note 9)

-

-

-

(232)

-

-

(232)

At 31 January 2016

361

2,218

(24)

3,637

(6)

6,186

-

6,186

 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED BALANCE SHEET

£ millions

Notes

At 31 July 2016

At 1 August 2015

At 31 January 2016

Non-current assets

 

 

 

 

Goodwill

 

2,399

2,412

2,397

Other intangible assets

10

290

270

276

Property, plant and equipment

10

3,433

3,088

3,212

Investment property

10

23

53

25

Investments in joint ventures and associates

 

24

19

23

B&Q China investment

16

-

60

62

Post-employment benefits

11

178

140

246

Deferred tax assets

 

17

9

11

Derivative assets

12

51

31

43

Other receivables

 

7

7

7

 

 

6,422

6,089

6,302

Current assets

 

 

 

 

Inventories

 

2,154

2,064

1,957

Trade and other receivables

 

566

558

568

Derivative assets

12

76

33

56

Current tax assets

 

11

7

5

Short-term deposits

 

-

123

70

Cash and cash equivalents

 

1,134

537

730

Assets held for sale

 

5

-

6

 

 

3,946

3,322

3,392

Total assets

 

10,368

9,411

9,694

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

(2,733)

(2,431)

(2,369)

Borrowings

12

(132)

(102)

(138)

Derivative liabilities

12

(13)

(17)

(6)

Current tax liabilities

 

(116)

(97)

(66)

Provisions

 

(95)

(40)

(69)

 

 

(3,089)

(2,687)

(2,648)

Non-current liabilities

 

 

 

 

Other payables

 

(52)

(62)

(53)

Borrowings

12

(181)

(168)

(179)

Deferred tax liabilities

 

(322)

(276)

(333)

Provisions

 

(119)

(106)

(208)

Post-employment benefits

11

(100)

(81)

(87)

 

 

(774)

(693)

(860)

Total liabilities

 

(3,863)

(3,380)

(3,508)

Net assets

 

6,505

6,031

6,186

 

 

 

 

 

Equity

 

 

 

 

Share capital

 

355

363

361

Share premium

 

2,219

2,215

2,218

Own shares held in ESOP trust

 

(18)

(22)

(24)

Retained earnings

 

3,636

3,643

3,637

Other reserves

13

313

(168)

(6)

Total equity

 

6,505

6,031

6,186

           

 

The interim financial report was approved by the Board of Directors on 19 September 2016 and signed on its behalf by:

 

Véronique Laury, Chief Executive Officer

Karen Witts, Chief Financial Officer

 

 

 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED CASH FLOW STATEMENT

 

£ millions

Notes

Half year ended

31 July 2016

Half year ended

1 August 2015

Year ended

31 January 2016

Operating activities

 

 

 

 

Cash generated by operations

14

697

531

931

Income tax paid

 

(63)

(65)

(118)

Net cash flows from operating activities

 

634

466

813

 

 

 

 

 

Investing activities

 

 

 

 

Purchase of property, plant and equipment and intangible assets

 

(141)

(177)

(333)

Disposal of property, plant and equipment, investment property and assets held for sale

 

5

2

25

Disposal of property company

16

-

18

18

Disposal of B&Q China:

16

 

 

 

Proceeds (net of costs and cash disposed)

 

63

105

102

Deposit repaid

 

-

(12)

(12)

Decrease/(increase) in short-term deposits

 

70

(75)

(22)

Interest received

 

3

1

3

Dividends received from joint ventures and associates

 

-

6

5

Net cash flows from investing activities

 

-

(132)

(214)

 

 

 

 

 

Financing activities

 

 

 

 

Interest paid

 

(6)

(6)

(12)

Interest element of finance lease rental payments

 

(1)

(2)

(3)

Repayment of bank loans

 

(2)

(1)

(1)

Repayment of fixed term debt

 

(47)

-

-

Receipt on financing derivatives

 

10

-

-

Capital element of finance lease rental payments

 

(7)

(6)

(13)

New shares issued under share schemes

 

1

1

4

Own shares issued under share schemes

 

1

1

1

Purchase of own shares for ESOP trust

 

-

(11)

(16)

Purchase of own shares for cancellation

 

(126)

(139)

(200)

Ordinary dividends paid to equity shareholders of the Company

9

(157)

(160)

(232)

Net cash flows from financing activities

 

(334)

(323)

(472)

 

 

 

 

 

Net increase in cash and cash equivalents and bank overdrafts, including amounts classified as held for sale

 

300

11

127

Cash and cash equivalents and bank overdrafts, including amounts classified as held for sale, at beginning of period

 

654

527

527

Exchange differences

 

63

(44)

-

Cash and cash equivalents and bank overdrafts at end of period

15

1,017

494

654

 

KINGFISHER PLC

2016/17 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.         General information

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

 

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

 

The interim financial report does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Audited statutory accounts for the year ended 31 January 2016 were approved by the Board of Directors on 23 March 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498(2) or (3) of the Companies Act 2006. The interim financial report has been reviewed, not audited, and was approved by the Board of Directors on 19 September 2016.

 

2.         Basis of preparation

 

The interim financial report for the six months ended 31 July 2016 ('the half year') has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. It should be read in conjunction with the annual financial statements for the year ended 31 January 2016, which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The consolidated income statement and related notes represent results for continuing operations, there being no discontinued operations in the periods presented. Where comparatives are given, '2015/16' refers to the 26 weeks ended 1 August 2015.

 

The Directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements for the half year ended 31 July 2016.

 

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

 

Principal rates of exchange against Sterling

 

 

Half year ended
31 July 2016

Half year ended
1 August 2015

Year ended
31 January 2016

 

Average

rate

Period end

rate

Average

rate

Period end

rate

Average

rate

Year end

rate

Euro

1.26

1.19

1.38

1.41

1.38

1.31

US Dollar

1.41

1.31

1.53

1.57

1.52

1.42

Polish Zloty

5.51

5.18

5.70

5.87

5.78

5.78

Russian Rouble

96.27

87.74

86.58

95.18

94.54

107.52

 

Risks and uncertainties

 

The principal risks and uncertainties to which the Group is exposed are set out on pages 31-35 of the Kingfisher plc Annual Report and Accounts for the year ended 31 January 2016 and remain unchanged. As noted in the Financial Review, the Group is monitoring developments following the EU referendum, which has resulted in uncertainty for the UK economic outlook. The weakening of Sterling against other currencies following the EU referendum has had a beneficial impact on translation of the Group's reported results, cash flows and net cash position. UK earnings have not been significantly impacted in the period due to foreign currency hedging in place prior to the referendum. The weakening of Sterling has also resulted in significant foreign exchange gains recognised in other comprehensive income from the retranslation of the Group's overseas businesses' net assets and an increase in the value of foreign exchange contracts hedging US dollar denominated inventory purchases for our UK businesses. The fall in long-term bond yields has resulted in a lower discount rate used to value the UK defined benefit pension scheme obligation, increasing the gross liability, but this has been largely offset by the growth in asset values over the period due to interest rate hedging in place. Lower discount rates have also increased the balance, before other movements, of the UK restructuring provisions, resulting in an exceptional interest charge.

 

Use of non-GAAP measures

 

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

 

Retail profit is defined as continuing operating profit before central costs, the Group's share of interest and tax of joint ventures and associates, transformation costs, exceptional items and amortisation of acquisition intangibles. It includes the sustainable benefits of the transformation programme. 2015/16 comparatives exclude B&Q China's operating results. Central costs principally comprise the costs of the Group's head office before transformation costs.

 

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

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

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

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

 

The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). 2015/16 comparatives exclude B&Q China's operating results. Financing fair value remeasurements represent changes in the fair value of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying amount of borrowings and other hedged items under fair value hedge relationships. Financing derivatives are those that relate to hedged items of a financing nature.

 

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

 

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

 

Net cash comprises cash and cash equivalents and short-term deposits less borrowings and financing derivatives (excluding accrued interest). It excludes balances classified as assets and liabilities held for sale.

 

3.         Accounting policies

 

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 January 2016, as described in note 2 of those financial statements.

 

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

 

The most significant areas of accounting estimates and judgements are set out in note 3 of the annual financial statements for the year ended 31 January 2016 and remain unchanged.

 

  

4.         Segmental analysis

 

Income statement

 

Half year ended 31 July 2016

£ millions

UK & Ireland

France

Other International

 

Total

Poland

Other

Adjusted sales

2,609

2,175

587

378

5,749

B&Q China sales

 

 

 

 

-

Sales

2,609

2,175

587

378

5,749

Retail profit

211

187

73

(7)

464

Central costs

 

 

 

 

(22)

Share of interest and tax of joint ventures and associates

 

 

 

 

(2)

Transformation costs before exceptional items

 

 

 

 

(18)

Exceptional items

 

 

 

 

17

Operating profit

 

 

 

 

439

Net finance costs

 

 

 

 

(12)

Profit before taxation

 

 

 

 

427

 

 

Half year ended 1 August 2015

£ millions

UK & Ireland

France

Other International

 

Total

Poland

Other

Adjusted sales

2,527

1,976

508

371

5,382

B&Q China sales

 

 

 

 

110

Sales

 

 

 

 

5,492

Retail profit

194

167

53

(4)

410

Central costs

 

 

 

 

(19)

Share of interest and tax of joint ventures and associates

 

 

 

 

(2)

B&Q China operating loss

 

 

 

 

(4)

Exceptional items

 

 

 

 

9

Operating profit

 

 

 

 

394

Net finance costs

 

 

 

 

(8)

Profit before taxation

 

 

 

 

386

 

 

 

Year ended 31 January 2016

£ millions

UK & Ireland

France

Other International

 

Total

Poland

Other

Adjusted sales

4,853

3,786

987

705

10,331

B&Q China sales

 

 

 

 

110

Sales

 

 

 

 

10,441

Retail profit

326

311

113

(4)

746

Central costs

 

 

 

 

(45)

Share of interest and tax of joint ventures and associates

 

 

 

 

(5)

B&Q China operating loss

 

 

 

 

(4)

Exceptional items

 

 

 

 

(166)

Operating profit

 

 

 

 

526

Net finance costs

 

 

 

 

(14)

Profit before taxation

 

 

 

 

512

 

  

Balance sheet

 

At 31 July 2016

£ millions

UK & Ireland

France

Other International

 

Total

Poland

Other

Segment assets

1,183

1,341

515

376

3,415

Central liabilities

 

 

 

 

(207)

Goodwill

 

 

 

 

2,399

Net cash

 

 

 

 

898

Net assets

 

 

 

 

6,505

 

 

At 1 August 2015

£ millions

UK & Ireland

France

Other International

 

Total

Poland

Other

Segment assets

1,343

1,162

463

340

3,308

B&Q China investment

 

 

 

 

60

Central liabilities

 

 

 

 

(184)

Goodwill

 

 

 

 

2,412

Net cash

 

 

 

 

435

Net assets

 

 

 

 

6,031

 

 

At 31 January 2016

£ millions

UK & Ireland

France

Other International

 

Total

Poland

Other

Segment assets

1,264

1,313

476

347

3,400

B&Q China investment

 

 

 

 

62

Central liabilities

 

 

 

 

(219)

Goodwill

 

 

 

 

2,397

Net cash

 

 

 

 

546

Net assets

 

 

 

 

6,186

 

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

 

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

 

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

 

The Group's sales, although generally not highly seasonal on a half-yearly basis, do increase over the Easter period and during the summer months leading to slightly higher sales usually being recognised in the first half of the year. In the half year ended 31 July 2016, France operating costs were increased by £9m due to a change in legislation relating to a levy (TASCOM) which has resulted in the levy being recognised evenly across the year rather than only in the second half. Comparatives for 2015/16 have not been restated.

5.         Exceptional items

 

 

Half year ended

Half year ended

Year ended

£ millions

31 July 2016

1 August 2015

31 January 2016

Included within selling and distribution expenses

 

 

 

UK & Ireland and continental Europe restructuring

15

(151)

(305)

Brico Dépôt Romania impairment

-

-

(3)

 

15

(151)

(308)

Included within administrative expenses

 

 

 

Transformation exceptional costs

(1)

-

-

Brico Dépôt Romania impairment

-

-

(15)

 

(1)

-

(15)

Included within other income

 

 

 

Profit on disposal of B&Q China

3

143

143

Profit on disposal of property and other companies

-

16

13

Disposal of properties and non-operational asset losses

-

1

1

 

3

160

157

Included within net finance costs

 

 

 

UK & Ireland and continental Europe restructuring - unwinding of discount on provisions

(6)

-

-

 

(6)

-

-

Exceptional items before tax

11

9

(166)

Exceptional tax items

(2)

29

67

Exceptional items

9

38

(99)

 

Current period exceptional items include a £15m net credit principally due to the reversal of a restructuring provision relating to the B&Q store closure programme in the UK, following the announcement that one of the stores originally earmarked for closure would remain open, and a £6m interest charge relating to the reduction in discount rate used to measure the overall UK provision. In the prior period a charge of £151m (£305m for the full year) was recognised relating principally to the closure of B&Q stores and loss-making stores in continental Europe.

 

Transformation exceptional costs of £1m have been recorded in the period relating to the initial costs of setting up the Group's new offer and supply chain organisation.

 

A profit of £3m on disposal was recognised on disposal of the Group's remaining 30% stake in B&Q China - refer to note 16 for further information. In the prior period a profit of £143m was recorded on disposal of the Group's controlling 70% stake.

 

6.         Net finance costs

 

 

Half year ended

Half year ended

Year ended  

£ millions

31 July 2016

1 August 2015

31 January 2016

Bank overdrafts and bank loans

(5)

(5)

(8)

Fixed term debt

(1)

(1)

(3)

Finance leases

(1)

(2)

(3)

Financing fair value remeasurements

(2)

(3)

(4)

Unwinding of discount on provisions

(7)

-

(1)

Other interest payable

(3)

-

(3)

Finance costs

(19)

(11)

(22)

 

 

 

 

Cash and cash equivalents and short-term deposits

3

1

3

Net interest income on defined benefit pension schemes

4

2

5

Finance income

7

3

8

 

 

 

 

Net finance costs

(12)

(8)

(14)

         

 

The £7m charge relating to the unwinding of discount on provisions includes a £6m exceptional charge relating to the restructuring provisions for the UK & Ireland and continental Europe businesses.
 

7.         Income tax expense

 

£ millions

Half year ended
31 July 2016

Half year ended

1 August 2015

Year ended
31 January 2016

UK corporation tax

 

 

 

Current tax on profits for the period

(44)

(15)

(7)

Adjustments in respect of prior years

-

-

4

 

(44)

(15)

(3)

Overseas tax

 

 

 

Current tax on profits for the period

(65)

(59)

(117)

Adjustments in respect of prior years

-

1

7

 

(65)

(58)

(110)

Deferred tax

 

 

 

Current period

(1)

5

14

Adjustments in respect of prior years

2

-

-

Adjustments in respect of changes in tax rates

2

-

(1)

 

3

5

13

 

 

 

 

(106)

(68)

(100)

 

The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 26% (2015/16: 26%), representing the best estimate of the effective rate for the full financial year. The effective tax rate on the same basis for the year ended 31 January 2016 was 26%. Exceptional tax items for the current period amount to a charge of £2m, none of which relates to prior year items (2015/16: £29m credit, none of which related to prior year items). Exceptional tax items for the year ended 31 January 2016 amounted to a credit of £67m, £1m of which related to prior year items.

 

 

8.         Earnings per share

 

 

Half year ended

Half year ended

Year ended  

Pence

31 July 2016

 1 August 2015

31 January 2016

Basic earnings per share

14.1

13.6

17.8

Effect of dilutive share options

-

-

-

Diluted earnings per share

14.1

13.6

17.8

 

 

 

 

Basic earnings per share

14.1

13.6

17.8

B&Q China operating loss

-

0.2

0.2

Exceptional items before tax

(0.5)

(0.4)

7.2

Tax on exceptional and prior year items

(0.1)

(1.2)

(3.3)

Financing fair value remeasurements

0.1

0.2

0.2

Tax on financing fair value remeasurements

-

(0.1)

(0.1)

Adjusted basic earnings per share

13.6

12.3

22.0

Transformation costs before exceptional items

0.8

-

-

Tax on transformation costs before exceptional items

(0.2)

-

-

Underlying basic earnings per share

14.2

12.3

22.0

 

 

 

 

Diluted earnings per share

14.1

13.6

17.8

B&Q China operating loss

-

0.2

0.2

Exceptional items before tax

(0.5)

(0.4)

7.2

Tax on exceptional and prior year items

(0.1)

(1.2)

(3.3)

Financing fair value remeasurements

0.1

0.2

0.2

Tax on financing fair value remeasurements

-

(0.1)

(0.1)

Adjusted diluted earnings per share

13.6

12.3

22.0

Transformation costs before exceptional items

0.8

-

-

Tax on transformation costs before exceptional items

(0.2)

-

-

Underlying diluted earnings per share

14.2

12.3

22.0

 

 

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

 

 

Half year ended

Half year ended

Year ended  

£ millions

31 July 2016

1 August 2015

31 January 2016

Earnings

321

318

412

B&Q China operating loss

-

4

4

Exceptional items before tax

(11)

(9)

166

Tax on exceptional and prior year items

(2)

(30)

(76)

Financing fair value remeasurements

2

3

4

Tax on financing fair value remeasurements

-

(1)

(1)

Adjusted earnings

310

285

509

Transformation costs before exceptional items

18

-

-

Tax on transformation costs before exceptional items

(5)

-

-

Underlying earnings

323

285

509

 

The weighted average number of shares in issue during the period, excluding those held in the Employee Share Ownership Plan Trust ('ESOP trust'), is 2,271m (2015/16: 2,327m). The diluted weighted average number of shares in issue during the period is 2,275m (2015/16: 2,329m). For the year ended 31 January 2016, the weighted average number of shares in issue was 2,311m and the diluted weighted average number of shares in issue was 2,319m.

 

 

9.         Dividends

 

 

Half year ended

Half year ended

Year ended  

£ millions

31 July 2016

1 August 2015

31 January 2016

Dividends to equity shareholders of the Company

 

 

 

Ordinary final dividend for the year ended 31 January 2016 of

6.92p per share

157

-

-

Ordinary interim dividend for the year ended 31 January 2016 of 3.18p per share

-

-

72

Ordinary final dividend for the year ended 31 January 2015 of

6.85p per share

-

160

160

 

157

160

232

 

The proposed ordinary interim dividend for the period ended 31 July 2016 is 3.25p per share.

 

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

 

Additions to the cost of property, plant and equipment, investment property and other intangible assets are £136m (2015/16: £178m) and for the year ended 31 January 2016 were £331m. Disposals in net book value of property, plant and equipment, investment property, property assets held for sale and other intangible assets are £5m (2015/16: £2m) and for the year ended 31 January 2016 were £28m.

 

Capital commitments contracted but not provided for at the end of the period are £36m (2015/16: £50m) and at 31 January 2016 were £46m.

 

  

11.        Post-employment benefits

 

 

Half year ended

Half year ended

Year ended  

£ millions

31 July 2016

1 August 2015

31 January 2016

Net surplus in schemes at beginning of period

159

112

112

Current service cost

(5)

(4)

(8)

Administration costs

(2)

(2)

(4)

Net interest income

4

2

5

Net actuarial (losses)/gains

(87)

(72)

19

Contributions paid by employer

18

18

37

Exchange differences

(9)

5

(2)

Net surplus in schemes at end of period

78

59

159

 

UK

178

140

246

Overseas

(100)

(81)

(87)

Net surplus in schemes at end of period

78

59

159

 

Present value of defined benefit obligations

(3,075)

(2,637)

(2,476)

Fair value of scheme assets

3,153

2,696

2,635

Net surplus in schemes at end of period

78

59

159

 

The assumptions used in calculating the costs and obligations of the Group's defined benefit pension schemes are set by the Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the sensitivity analysis provided in note 27 of the annual financial statements for the year ended 31 January 2016.

 

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

 

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

 

 

At 

At 

At 

Annual % rate

31 July 2016

1 August 2015

31 January 2016

Discount rate

2.4

3.6

3.6

Price inflation

2.9

3.3

3.1

 

 

12.        Financial instruments

 

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

 

At

At

At  

 

 

£ millions

31 July 2016

1 August 2015

31 January 2016

 

 

Cross currency interest rate swaps

52

42

56

 

 

Foreign exchange contracts

75

22

43

 

 

Derivative assets

127

64

99

 

 

 

 

At

At

At  

 

 

£ millions

31 July 2016

1 August 2015

31 January 2016

 

 

Foreign exchange contracts

(13)

(17)

(6)

 

 

Derivative liabilities

(13)

(17)

(6)

 

 

 

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

 

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

 

 

 

 

Carrying amount

 

 

 

At

At

At  

 

 

£ millions

31 July 2016

1 August 2015

31 January 2016

 

 

Bank overdrafts

117

43

76

 

 

Bank loans

9

10

10

 

 

Fixed term debt

146

170

185

 

 

Finance leases

41

47

46

 

 

Borrowings

313

270

317

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

 

 

At

At

At  

 

 

£ millions

31 July 2016

1 August 2015

31 January 2016

 

 

Bank overdrafts

117

43

76

 

 

Bank loans

9

10

11

 

 

Fixed term debt

151

177

192

 

 

Finance leases

52

59

56

 

 

Borrowings

329

289

335

 

 

 

 

13.        Other reserves

 

 

£ millions

Translation reserve

Cash flow

hedge reserve

Available-for- sale reserve

Other

 

Total

At 1 February 2016

(205)

25

2

172

(6)

Currency translation differences

Group

304

-

-

-

304

Joint ventures and associates

2

-

-

-

2

Cash flow hedges

Fair value gains

-

26

-

-

26

Gains transferred to inventories

-

(18)

-

-

(18)

Available-for-sale financial assets

 

 

 

 

 

Fair value gains

-

-

5

-

5

Transferred to income statement

-

-

(7)

-

(7)

Tax on items that may be reclassified

2

(1)

-

-

1

Other comprehensive income for the period

308

7

(2)

-

313

Purchase of own shares for cancellation

-

-

-

6

6

At 31 July 2016

103

32

-

178

313

 

 

 

 

 

 

At 1 February 2015

(194)

41

-

164

11

Currency translation differences

Group

Joint ventures and associates

Transferred to income statement

(136)

(3)

(7)

-

-

-

-

-

-

-

-

-

(136)

(3)

(7)

Cash flow hedges

Fair value losses

-

(21)

-

-

(21)

Gains transferred to inventories

-

(30)

-

-

(30)

Tax on items that may be reclassified

(2)

14

-

-

12

Other comprehensive income for the period

(148)

(37)

-

-

(185)

Purchase of own shares for cancellation

-

-

-

6

6

At 1 August 2015

(342)

4

-

170

(168)

 

 

 

 

 

 

At 1 February 2015

(194)

41

-

164

11

Currency translation differences

Group

1

-

-

-

1

     Joint ventures and associates

(3)

-

-

-

(3)

     Transferred to income statement

(7)

-

-

-

(7)

Cash flow hedges

Fair value gains

-

24

-

-

24

Gains transferred to inventories

-

(50)

-

-

(50)

Available-for-sale financial assets

 

 

 

 

 

Fair value gains

-

-

2

-

2

Tax on items that may be reclassified

(2)

10

-

-

8

Other comprehensive income for the year

(11)

(16)

2

-

(25)

Purchase of own shares for cancellation

-

-

-

8

8

At 31 January 2016

(205)

25

2

172

(6)

 

14.        Cash generated by operations

 

£ millions

Half year ended
31 July 2016

Half year ended
1 August 2015

Year ended
31 January 2016

Operating profit

439

394

526

Share of post-tax results of joint ventures and associates

1

-

(3)

Depreciation and amortisation

121

120

240

Impairment losses

1

39

55

Loss on disposal of property, plant and equipment, property held for sale and intangible assets

-

-

3

Profit on disposal of property and other companies

-

(16)

(13)

Profit on disposal of B&Q China

(3)

(143)

(143)

Share-based compensation charge

9

7

11

(Increase)/decrease in inventories

(65)

(111)

56

Decrease/(increase) in trade and other receivables

30

(40)

(36)

Increase in trade and other payables

238

191

27

Movement in provisions

(63)

102

233

Movement in post-employment benefits

(11)

(12)

(25)

Cash generated by operations

697

531

931

 

15.        Net cash

 

 

At 

At 

At 

£ millions

31 July 2016

1 August 2015

31 January 2016

Cash and cash equivalents

1,134

537

730

Bank overdrafts

(117)

(43)

(76)

Cash and cash equivalents and bank overdrafts

1,017

494

654

Short-term deposits

-

123

70

Bank loans

(9)

(10)

(10)

Fixed term debt

(146)

(170)

(185)

Financing derivatives

77

45

63

Finance leases

(41)

(47)

(46)

Net cash

898

435

546

 

 

Half year ended 

Half year ended 

Year ended 

£ millions

31 July 2016

1 August 2015

31 January 2016

Net cash at beginning of period

546

329

329

Net increase in cash and cash equivalents and

bank overdrafts, including amounts classified as held for sale

300

11

127

(Decrease)/increase in short-term deposits

(70)

75

22

Repayment of bank loans

2

1

1

Repayment of fixed term debt

47

-

-

Receipt on financing derivatives

(10)

-

-

Capital element of finance lease rental payments

7

6

13

Cash flow movement in net cash

276

93

163

Adjustment for cash classified as held for sale (B&Q China)

-

57

57

Exchange differences and other non-cash movements

76

(44)

(3)

Net cash at end of period

898

435

546

 

 

16.        Disposals

 

On 5 July 2016, the Group disposed of its remaining 30% interest in the B&Q China business to Wumei Holdings Inc for a gross consideration of £67m, being the Sterling equivalent of RMB 582m. The profit on disposal of £3m is analysed as follows:

 

£ millions

 

 

 

Proceeds

 

 

67

Disposal costs

 

 

(4)

Net disposal proceeds

 

 

63

Fair value of investment disposed

 

 

(67)

Fair value gains transferred from available-for-sale reserve

 

 

7

Exceptional profit on disposal

 

 

3

           

 

In the prior year, the Group received gross proceeds of £140m and recognised a profit on disposal of £143m in respect of Wumei Holdings Inc acquiring a controlling 70% stake in the B&Q China business. In the prior year, the Group also completed the sale of a property company for proceeds of £18m and a profit of £16m.

 

17.        Contingent assets and liabilities

 

The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees, only £1m (2015/16: £1m) would crystallise due to possible future events not wholly within the Group's control. At 31 January 2016 the amount was £1m.

 

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

 

18.        Related party transactions

 

The Group's significant related parties are its joint ventures, associates and pension schemes as disclosed in note 37 of the annual financial statements for the year ended 31 January 2016. There have been no significant changes in related parties or related party transactions in the period.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

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

 

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

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

 

The Directors of Kingfisher plc were listed in the Kingfisher plc Annual Report for the year ended 31 January 2016, which noted that Janis Kong stepped down as a Director and Rakhi Goss-Custard was appointed as a Director, both effective 1 February 2016. There have been no other changes in the period.

 

By order of the Board

 

 

 

Véronique Laury                                                                  Karen Witts

Chief Executive Officer                                                        Chief Financial Officer

19 September 2016                                                            19 September 2016

 

 

 

INDEPENDENT REVIEW REPORT TO KINGFISHER PLC

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2016 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

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

 

 

Directors' responsibilities

 

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

 

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

 

Our responsibility

 

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

 

Scope of review

 

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

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

19 September 2016


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