KINGFISHER PLC

2014/15 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

 

		Half year ended 2 August 2014				Half year ended 3 August 2013 (restated - note 2)
		Before	Exceptional			Before	Exceptional
		exceptional	items			exceptional	items
£ millions	Notes	items	(note 5)	Total		items	(note 5)	Total
Sales	4	5,768	-	5,768		5,716	-	5,716
Cost of sales		(3,660)	-	(3,660)		(3,619)	-	(3,619)
Gross profit		2,108	-	2,108		2,097	-	2,097
Selling and distribution expenses		(1,464)	(11)	(1,475)		(1,468)	7	(1,461)
Administrative expenses		(297)	-	(297)		(283)	-	(283)
Other income		19	21	40		17	1	18
Share of post-tax results of joint ventures and associates		2	-	2		5	-	5
Operating profit		368	10	378		368	8	376
Analysed as:
Retail profit	4	390	10	400		390	8	398
Share of Hornbach operating profit		-	-	-		4	-	4
Central costs		(19)	-	(19)		(20)	-	(20)
Share of interest and tax of joint ventures and associates		(3)	-	(3)		(6)	-	(6)
Finance costs		(6)	-	(6)		(6)	-	(6)
Finance income		3	-	3		4	27	31
Net finance (costs)/income	6	(3)	-	(3)		(2)	27	25
Profit before taxation		365	10	375		366	35	401
Income tax (expense)/credit	7	(99)	1	(98)		(79)	118	39
Profit for the period		266	11	277		287	153	440
Attributable to:
Equity shareholders of the Company				278				440
Non-controlling interests				(1)				-
				277				440
Earnings per share	8
Basic				11.8p				18.7p
Diluted				11.7p				18.5p
Adjusted basic				11.3p				11.3p
Adjusted diluted				11.2p				11.2p

 

The proposed interim ordinary dividend for the period ended 2 August 2014 is 3.15p per share.

KINGFISHER PLC

2014/15 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

 

		Year ended 1 February 2014 (restated - note 2)
		Before	Exceptional
		exceptional	items
£ millions	Notes	items	(note 5)	Total
Sales	4	11,125	-	11,125
Cost of sales		(7,005)	-	(7,005)
Gross profit		4,120	-	4,120
Selling and distribution expenses		(2,883)	2	(2,881)
Administrative expenses		(550)	-	(550)
Other income		37	2	39
Share of post-tax results of joint ventures and associates		22	(14)	8
Operating profit		746	(10)	736
Analysed as:
Retail profit	4	779	4	783
Share of Hornbach operating profit		26	(14)	12
Central costs		(42)	-	(42)
Share of interest and tax of joint ventures and associates		(17)	-	(17)
Finance costs		(12)	-	(12)
Finance income		8	27	35
Net finance income	6	(4)	27	23
Profit before taxation		742	17	759
Income tax expense	7	(163)	114	(49)
Profit for the year		579	131	710
Attributable to:
Equity shareholders of the Company				709
Non-controlling interests				1
				710
Earnings per share	8
Basic				30.0p
Diluted				29.7p
Adjusted basic				22.8p
Adjusted diluted				22.6p

KINGFISHER PLC

2014/15 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

£ millions	Half year ended 2 August 2014	Half year ended 3 August 2013	Year ended 1 February 2014
Profit for the period	277	440	710
Actuarial gains/(losses) on post employment benefits	42	(17)	(127)
Tax on items that will not be reclassified	(39)	3	65
Total items that will not be reclassified subsequently to profit or loss	3	(14)	(62)
Currency translation differences
Group	(77)	(22)	(210)
Joint ventures and associates	-	(1)	(25)
Transferred to income statement	-	-	(31)
Cash flow hedges
Fair value (losses)/gains	(6)	13	(4)
Losses/(gains) transferred to inventories	16	(1)	9
Tax on items that may be reclassified	(3)	(2)	2
Total items that may be reclassified subsequently to profit or loss	(70)	(13)	(259)
Other comprehensive income for the period	(67)	(27)	(321)
Total comprehensive income for the period	210	413	389
Attributable to:
Equity shareholders of the Company	211	412	388
Non-controlling interests	(1)	1	1
	210	413	389

KINGFISHER PLC

2014/15 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 2 February 2014	373	2,209	(35)	3,495	266	6,308	9	6,317
Profit for the period	-	-	-	278	-	278	(1)	277
Other comprehensive income for the period	-	-	-	3	(70)	(67)	-	(67)
Total comprehensive income for the period	-	-	-	281	(70)	211	(1)	210
Share-based compensation	-	-	-	6	-	6	-	6
New shares issued under share schemes	-	1	-	-	-	1	-	1
Own shares issued under share schemes	-	-	11	(10)	-	1	-	1
Purchase of own shares for cancellation	(1)	-	-	(35)	1	(35)	-	(35)
Dividends	-	-	-	(259)	-	(259)	-	(259)
At 2 August 2014	372	2,210	(24)	3,478	197	6,233	8	6,241
At 3 February 2013	373	2,204	(60)	3,106	525	6,148	8	6,156
Profit for the period	-	-	-	440	-	440	-	440
Other comprehensive income for the period	-	-	-	(14)	(14)	(28)	1	(27)
Total comprehensive income for the period	-	-	-	426	(14)	412	1	413
Share-based compensation	-	-	-	7	-	7	-	7
New shares issued under share schemes	-	1	-	-	-	1	-	1
Own shares issued under share schemes	-	-	44	(38)	-	6	-	6
Dividends	-	-	-	(150)	-	(150)	-	(150)
At 3 August 2013	373	2,205	(16)	3,351	511	6,424	9	6,433
At 3 February 2013	373	2,204	(60)	3,106	525	6,148	8	6,156
Profit for the year	-	-	-	709	-	709	1	710
Other comprehensive income for the year	-	-	-	(62)	(259)	(321)	-	(321)
Total comprehensive income for the year	-	-	-	647	(259)	388	1	389
Share-based compensation	-	-	-	7	-	7	-	7
New shares issued under share schemes	-	5	-	-	-	5	-	5
Own shares issued under share schemes	-	-	49	(41)	-	8	-	8
Purchase of own shares for ESOP trust	-	-	(24)	-	-	(24)	-	(24)
Dividends	-	-	-	(224)	-	(224)	-	(224)
At 1 February 2014	373	2,209	(35)	3,495	266	6,308	9	6,317

KINGFISHER PLC

2014/15 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED BALANCE SHEET

£ millions	Notes	At 2 August 2014	At 3 August 2013	At 1 February 2014
Non-current assets
Goodwill		2,416	2,414	2,417
Other intangible assets		240	200	222
Property, plant and equipment		3,526	3,770	3,625
Investment property		40	63	50
Investments in joint ventures and associates		26	282	32
Post employment benefits	11	28	70	-
Deferred tax assets		11	16	12
Derivative assets	12	33	55	40
Other receivables		14	18	15
		6,334	6,888	6,413
Current assets
Inventories		2,199	2,167	2,054
Trade and other receivables		610	599	590
Derivative assets	12	11	12	5
Current tax assets		11	4	15
Short-term deposits	15	167	-	-
Cash and cash equivalents		627	559	535
Assets held for sale		11	-	208
		3,636	3,341	3,407
Total assets		9,970	10,229	9,820
Current liabilities
Trade and other payables		(2,691)	(2,695)	(2,486)
Borrowings	12	(103)	(15)	(94)
Derivative liabilities	12	(18)	(6)	(27)
Current tax liabilities		(203)	(208)	(175)
Provisions		(9)	(13)	(8)
		(3,024)	(2,937)	(2,790)
Non-current liabilities
Other payables		(85)	(87)	(86)
Borrowings	12	(218)	(329)	(230)
Derivative liabilities	12	-	(13)	-
Deferred tax liabilities		(286)	(304)	(251)
Provisions		(42)	(50)	(46)
Post employment benefits	11	(74)	(76)	(100)
		(705)	(859)	(713)
Total liabilities		(3,729)	(3,796)	(3,503)
Net assets		6,241	6,433	6,317
Equity
Share capital		372	373	373
Share premium		2,210	2,205	2,209
Own shares held in ESOP trust		(24)	(16)	(35)
Retained earnings		3,478	3,351	3,495
Other reserves	13	197	511	266
Total attributable to equity shareholders of the Company		6,233	6,424	6,308
Non-controlling interests		8	9	9
Total equity		6,241	6,433	6,317

 

The interim financial report was approved by the Board of Directors on 9 September 2014 and signed on its behalf by:

 

 

Sir Ian Cheshire, Group Chief Executive

Karen Witts, Group Finance Director

 

 

KINGFISHER PLC

2014/15 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED CASH FLOW STATEMENT

 

£ millions	Notes	Half year ended 2 August 2014	Half year ended 3 August 2013	Year ended 1 February 2014
Operating activities
Cash generated by operations	14	512	600	976
Income tax paid		(65)	(39)	(142)
Net cash flows from operating activities		447	561	834
Investing activities
Purchase of businesses, net of cash acquired	16	-	(28)	(28)
Purchase of property, plant and equipment, investment property and intangible assets		(119)	(147)	(304)
Disposal of property, plant and equipment, investment property, property assets held for sale and intangible assets		47	10	12
Disposal of Hornbach	16	198	-	-
Increase in short-term deposits	15	(167)	-	-
Interest received		2	3	8
Dividends received from joint ventures and associates		7	11	11
Net cash flows from investing activities		(32)	(151)	(301)
Financing activities
Interest paid		(3)	(6)	(12)
Interest element of finance lease rental payments		(2)	(2)	(4)
Repayment of bank loans		(2)	(89)	(89)
Repayment of Medium Term Notes and other fixed term debt		-	(33)	(33)
Receipt on financing derivatives		-	6	6
Capital element of finance lease rental payments		(7)	(6)	(13)
New shares issued under share schemes		1	1	5
Own shares issued under share schemes		1	6	8
Purchase of own shares for cancellation		(35)	-	-
Purchase of own shares for ESOP trust		-	-	(24)
Ordinary dividends paid to equity shareholders of the Company		(159)	(150)	(224)
Special dividend paid to equity shareholders of the Company		(100)	-	-
Net cash flows from financing activities		(306)	(273)	(380)
Net increase in cash and cash equivalents and bank overdrafts		109	137	153
Cash and cash equivalents and bank overdrafts at beginning of period		534	398	398
Exchange differences		(31)	23	(17)
Cash and cash equivalents and bank overdrafts at end of period	15	612	558	534

KINGFISHER PLC

2014/15 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, continental Europe and China.

 

Kingfisher plc is a company incorporated in the United Kingdom.

 

The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX.

 

The Company is listed on the London Stock Exchange.

 

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 1 February 2014 were approved by the Board of Directors on 24 March 2014 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 9 September 2014.

 

2.         Basis of preparation

 

The interim financial report for the 26 weeks ended 2 August 2014 ('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 1 February 2014, 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, '2013/14' refers to the prior half year.

The following non-GAAP measures have been restated in the comparatives to exclude the contribution of Hornbach, in order to improve comparability following its disposal in the current period:

 

	Half year ended 3 August 2013			Year ended 1 February 2014
£ millions	Before restatement	Restatement	After restatement	Before restatement	Restatement	After restatement
Retail profit - Group	394	(4)	390	805	(26)	779
Retail profit - Other International	62	(4)	58	171	(26)	145
Adjusted pre-tax profit	365	(1)	364	744	(14)	730
Adjusted earnings	266	(1)	265	552	(14)	538
Adjusted basic earnings per share	11.3p	-	11.3p	23.4p	(0.6)p	22.8p
Adjusted diluted earnings per share	11.2p	-	11.2p	23.2p	(0.6)p	22.6p
Segment assets - Group	3,994	(248)	3,746	3,894	(198)	3,696
Segment assets - Other International	1,172	(248)	924	1,174	(198)	976

 

There was no contribution from Hornbach to the current period adjusted (non-GAAP) results. Statutory (GAAP) measures have not been restated.

 

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

 

The Directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements for the half year ended 2 August 2014.

 

Principal rates of exchange against Sterling

 

	Half year ended 2 August 2014		Half year ended 3 August 2013		Year ended 1 February 2014
	Average rate	Period end rate	Average rate	Period end rate	Average rate	Year end rate
Euro	1.23	1.25	1.17	1.15	1.18	1.22
US Dollar	1.68	1.68	1.53	1.53	1.57	1.64
Polish Zloty	5.11	5.24	4.91	4.86	4.95	5.17
Chinese Renminbi	10.40	10.40	9.44	9.37	9.62	9.97

 

 

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 retail profit, adjusted pre-tax profit, effective tax rate, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These and other non-GAAP measures such as net debt/cash are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items', 'adjusted', 'effective tax rate' and 'net debt/cash' are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

 

Retail profit is defined as continuing operating profit before central costs (principally the costs of the Group's head office), exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of joint ventures and associates. 2013/14 comparatives have been restated to exclude the share of Hornbach operating profit.

 

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

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

·      profits and losses on the disposal of properties; and

·      the costs of significant restructuring and incremental acquisition integration costs.

 

The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). 2013/14 comparatives have been restated to exclude the share of Hornbach 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 underlying items of a financing nature.

 

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

 

Net debt/cash comprises borrowings and financing derivatives (excluding accrued interest), less cash and cash equivalents and short-term deposits.

 

3.         Accounting policies

 

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 1 February 2014, as described in note 2 of those financial statements.

 

There are no standards, amendments to standards or interpretations that are both mandatory for the first time for the financial year ending 31 January 2015 and expected to have a material impact on the Group's results.

 

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

4.         Segmental analysis

 

Income statement

	Half year ended 2 August 2014
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	2,419	2,205	554	590	5,768
Retail profit	166	182	54	(12)	390
Exceptional items					10
Central costs					(19)
Share of interest and tax of joint ventures and associates					(3)
Operating profit					378
Net finance costs					(3)
Profit before taxation					375

 

	Half year ended 3 August 2013 (restated - note 2)
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	2,270	2,306	557	583	5,716
Retail profit	141	191	54	4	390
Share of Hornbach operating profit					4
Exceptional items					8
Central costs					(20)
Share of interest and tax of joint ventures and associates					(6)
Operating profit					376
Net finance income					25
Profit before taxation					401

 

	Year ended 1 February 2014 (restated - note 2)
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Sales	4,363	4,423	1,109	1,230	11,125
Retail profit	238	396	123	22	779
Share of Hornbach operating profit					26
Exceptional items					(10)
Central costs					(42)
Share of interest and tax of joint ventures and associates					(17)
Operating profit					736
Net finance income					23
Profit before taxation					759

Balance sheet

	At 2 August 2014
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Segment assets	1,366	1,279	518	391	3,554
Central liabilities					(225)
Goodwill					2,416
Net cash					496
Net assets					6,241

 

	At 3 August 2013 (restated - note 2)
£ millions	UK & Ireland	France	Other International		Total
			Poland	Other
Segment assets	1,456	1,366	560	364	3,746
Investment in Hornbach					248
Central liabilities					(234)
Goodwill					2,414
Net cash					259
Net assets					6,433

 

	At 1 February 2014 (restated - note 2)
£ millions	UK & Ireland	France	Other International				Total
			Poland		Other
Segment assets	1,356	1,364	563		413		3,696
Investment in Hornbach						198
Central liabilities							(232)
Goodwill							2,417
Net cash							238
Net assets							6,317

 

The 'Other International' segment consists of Poland, China, 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. Central liabilities comprise unallocated head office and other central items including pensions, 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.

5.         Exceptional items

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013	1 February 2014
Included within selling and distribution expenses
UK restructuring	(6)	-	-
Acquisition and integration costs	(5)	-	(5)
Ireland restructuring	-	7	7
	(11)	7	2
Included within other income
Profit on disposal of properties	21	1	2
	21	1	2
Included within share of post-tax results of joint ventures and associates
Net impairment of investment in Hornbach	-	-	(14)
	-	-	(14)
Included within finance income
Kesa demerger French tax case - repayment supplement income	-	27	27
	-	27	27
Exceptional items before tax	10	35	17
Tax on exceptional items	1	-	(4)
Kesa demerger French tax case	-	118	118
Exceptional items	11	153	131

 

Current period exceptional items include a £6m restructuring charge in the UK relating to the transformation of B&Q, driven by productivity initiatives aimed at delivering a simpler, more efficient business with a lower cost operating model.

 

Current period acquisition and integration costs of £5m have been incurred, including fees relating to the acquisition of Mr Bricolage.

 

Profit on disposal of properties of £21m in the current period principally relates to the disposal of freehold assets in the UK and France.

 

Prior year acquisition and integration costs of £5m principally comprised costs of acquiring and integrating the Bricostore Romania business.

 

The prior year exceptional credit of £7m for Ireland restructuring reflected the release of provisions recorded in January 2013 when B&Q Ireland entered into an Examinership process. It successfully exited Examinership in May 2013 with the closure of only one store.

 

A net impairment loss of £14m was recognised in the prior year on the Group's investment in Hornbach. This comprised a loss of £45m on remeasurement of the investment to fair value, offset by a £31m gain on the transfer from reserves of cumulative foreign exchange gains since transition to IFRS.

 

In July 2013 the Conseil d'Etat, France's ultimate court, found in favour of Kingfisher regarding the Kesa demerger tax case, which concluded the matter. Whilst a refund was received from the French tax authorities following the first positive decision in 2009, the Group continued to provide against the risk while litigation was on-going. A £27m repayment supplement provision and £118m taxation provision related to the case were subsequently released and treated as exceptional.

 

6.         Net finance (costs)/income

	Half year ended		Half year ended	Year ended
£ millions	2 August 2014		3 August 2013	1 February 2014
Bank overdrafts and bank loans		(3)	(3)	(3)
Medium Term Notes and other fixed term debt		(1)	(2)	(3)
Finance leases		(2)	(2)	(4)
Financing fair value remeasurements		1	1	(2)
Unwinding of discount on provisions		(1)	-	-
Net interest expense on defined benefit pension schemes		(1)	-	-
Capitalised interest		1	-	-
Finance costs		(6)	(6)	(12)
Cash and cash equivalents and short-term deposits		3	3	6
Net interest income on defined benefit pension schemes		-	1	2
Kesa demerger French tax case - repayment supplement income		-	27	27
Finance income		3	31	35
Net finance (costs)/income		(3)	25	23

 

7.         Income tax

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013	1 February 2014
UK corporation tax
Current tax on profits for the period	35	30	47
Adjustments in respect of prior years	-	(1)	(7)
	35	29	40
Overseas tax
Current tax on profits for the period	64	66	131
Kesa demerger French tax case	-	(118)	(118)
Other adjustments in respect of prior years	1	(12)	(11)
	65	(64)	2
Deferred tax
Current period	(2)	3	16
Adjustments in respect of changes in tax rates	-	(7)	(9)
	(2)	(4)	7
Income tax expense/(credit)	98	(39)	49

 

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 27% (2013/14: 27%), 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 1 February 2014 was 26%. Exceptional tax items for the current period amount to a credit of £1m (2013/14: £118m credit, all of which related to prior year items). Exceptional tax items for the year ended 1 February 2014 amounted to a credit of £114m, £118m of which related to prior year items.

 

8.         Earnings per share

 

	Half year ended	Half year ended	Year ended
Pence	2 August 2014	3 August 2013 (restated - note 2)	1 February 2014 (restated - note 2)
Basic earnings per share	11.8	18.7	30.0
Effect of dilutive share options	(0.1)	(0.2)	(0.3)
Diluted earnings per share	11.7	18.5	29.7
Basic earnings per share	11.8	18.7	30.0
Share of Hornbach post-tax results	-	-	(0.6)
Exceptional items before tax	(0.4)	(1.5)	(0.7)
Tax on exceptional and prior year items	-	(5.9)	(6.0)
Financing fair value remeasurements	(0.1)	-	0.1
Adjusted basic earnings per share	11.3	11.3	22.8
Diluted earnings per share	11.7	18.5	29.7
Share of Hornbach post-tax results	-	-	(0.6)
Exceptional items before tax	(0.4)	(1.5)	(0.7)
Tax on exceptional and prior year items	-	(5.8)	(5.9)
Financing fair value remeasurements	(0.1)	-	0.1
Adjusted diluted earnings per share	11.2	11.2	22.6

 

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 earnings is set out below:

 

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013 (restated - note 2)	1 February 2014 (restated - note 2)
Earnings	278	440	709
Share of Hornbach post-tax results	-	(1)	(14)
Exceptional items before tax	(10)	(35)	(17)
Tax on exceptional and prior year items	-	(138)	(141)
Financing fair value remeasurements	(1)	(1)	2
Tax on financing fair value remeasurements	-	-	(1)
Adjusted earnings	267	265	538

 

The weighted average number of shares in issue during the period, excluding those held in the Employee Share Ownership Plan Trust (ESOP), is 2,364m (2013/14: 2,358m). The diluted weighted average number of shares in issue during the period is 2,375m (2013/14: 2,376m). For the year ended 1 February 2014, the weighted average number of shares in issue was 2,363m and the diluted weighted average number of shares in issue was 2,382m.

 

9.         Dividends

 

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013	1 February 2014
Dividends to equity shareholders of the Company
Special interim dividend of 4.2p per share paid 25 July 2014	100	-	-
Ordinary final dividend for the year ended 1 February 2014 of 6.78p per share	159	-	-
Ordinary interim dividend for the year ended 1 February 2014 of 3.12p per share	-	-	74
Ordinary final dividend for the year ended 2 February 2013 of 6.37p per share	-	150	150
	259	150	224

 

The proposed ordinary interim dividend for the period ended 2 August 2014 is 3.15p per share.

 

10.        Capital expenditure

 

Additions to the cost of property, plant and equipment, investment property and intangible assets, excluding assets acquired on the purchase of businesses, are £124m (2013/14: £146m) and for the year ended 1 February 2014 were £308m. Disposals in net book value of property, plant and equipment, investment property, property assets held for sale and intangible assets are £24m (2013/14: £9m) and for the year ended 1 February 2014 were £13m.

 

Capital commitments contracted but not provided for at the end of the period are £54m (2013/14: £48m) and at 1 February 2014 were £31m.

 

11.        Post employment benefits

 

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013	1 February 2014
Net deficit in schemes at beginning of period	(100)	-	-
Current service cost	(4)	(4)	(9)
Administration costs	(2)	(2)	(3)
Net interest (expense)/income	(1)	1	2
Net actuarial gains/(losses)	42	(17)	(127)
Contributions paid by employer	18	16	33
Exchange differences	1	-	4
Net deficit in schemes at end of period	(46)	(6)	(100)

 

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 1 February 2014.

 

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 based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference in term between iBoxx and scheme liabilities.

 

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

 

	At	At	At
Annual % rate	2 August 2014	3 August 2013	1 February 2014
Discount rate	4.2	4.6	4.4
Price inflation	3.2	3.3	3.3

  

12.        Financial instruments

 

The Group holds the following financial instruments at fair value:

	At	At	At
£ millions	2 August 2014	3 August 2013	1 February 2014
Cross-currency interest rate swaps	37	60	42
Foreign exchange contracts	7	7	3
Derivative assets	44	67	45

 

	At	At	At
£ millions	2 August 2014	3 August 2013	1 February 2014
Cross-currency interest rate swaps	(8)	(13)	(9)
Foreign exchange contracts	(10)	(6)	(18)
Derivative liabilities	(18)	(19)	(27)

 

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'. 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 a mix of Level 1 and Level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement'.

			Carrying amount
	At	At	At
£ millions	2 August 2014	3 August 2013	1 February 2014
Bank overdrafts	15	1	1
Bank loans	12	16	14
Medium Term Notes and other fixed term debt	238	264	247
Finance leases	56	63	62
Borrowings	321	344	324
			Fair value
	At	At	At
£ millions	2 August 2014	3 August 2013	1 February 2014
Bank overdrafts	15	1	1
Bank loans	13	17	16
Medium Term Notes and other fixed term debt	245	273	254
Finance leases	70	79	79
Borrowings	343	370	350

 

13.        Other reserves

 

£ millions	Cash flow hedge reserve	Translation reserve	Other	Total
At 2 February 2014	(5)	112	159	266
Currency translation differences Group	-	(77)	-	(77)
Cash flow hedges Fair value losses	(6)	-	-	(6)
Losses transferred to inventories	16	-	-	16
Tax on items that may be reclassified	(3)	-	-	(3)
Other comprehensive income for the period	7	(77)	-	(70)
Purchase of own shares for cancellation	-	-	1	1
At 2 August 2014	2	35	160	197
At 3 February 2013	(8)	374	159	525
Currency translation differences Group	-	(23)	-	(23)
Joint ventures and associates	-	(1)	-	(1)
Cash flow hedges Fair value gains	13	-	-	13
Gains transferred to inventories	(1)	-	-	(1)
Tax on items that may be reclassified	(4)	2	-	(2)
Other comprehensive income for the period	8	(22)	-	(14)
At 3 August 2013	-	352	159	511
At 3 February 2013	(8)	374	159	525
Currency translation differences Group	-	(210)	-	(210)
Joint ventures and associates	-	(25)	-	(25)
Transferred to income statement	-	(31)	-	(31)
Cash flow hedges Fair value losses	(4)	-	-	(4)
Losses transferred to inventories	9	-	-	9
Tax on items that may be reclassified	(2)	4	-	2
Other comprehensive income for the year	3	(262)	-	(259)
At 1 February 2014	(5)	112	159	266

14.        Cash generated by operations

 

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013	1 February 2014
Operating profit	378	376	736
Share of post-tax results of joint ventures and associates	(2)	(5)	(8)
Depreciation and amortisation	132	130	261
Impairment losses	-	-	2
(Profit)/loss on disposal of property, plant and equipment, investment property and intangible assets	(22)	(1)	1
Share-based compensation charge	6	7	7
Increase in inventories	(179)	(60)	(31)
Increase in trade and other receivables	(28)	(50)	(60)
Increase in trade and other payables	243	234	118
Movement in provisions	(4)	(21)	(29)
Movement in post employment benefits	(12)	(10)	(21)
Cash generated by operations	512	600	976

 

15.        Net cash

 

	At	At	At
£ millions	2 August 2014	3 August 2013	1 February 2014
Cash and cash equivalents	627	559	535
Bank overdrafts	(15)	(1)	(1)
Cash and cash equivalents and bank overdrafts	612	558	534
Short-term deposits	167	-	-
Bank loans	(12)	(16)	(14)
Medium Term Notes and other fixed term debt	(238)	(264)	(247)
Financing derivatives	23	44	27
Finance leases	(56)	(63)	(62)
Net cash	496	259	238

 

Short-term deposits comprise bank deposits with original maturities of between three and 12 months.

 

	Half year ended	Half year ended	Year ended
£ millions	2 August 2014	3 August 2013	1 February 2014
Net cash at beginning of period	238	38	38
Net increase in cash and cash equivalents and bank overdrafts	109	137	153
Increase in short-term deposits	167	-	-
Repayment of bank loans	2	89	89
Repayment of Medium Term Notes and other fixed term debt	-	33	33
Receipt on financing derivatives	-	(6)	(6)
Capital element of finance lease rental payments	7	6	13
Cash flow movement in net cash	285	259	282
Borrowings acquired	-	(35)	(35)
Exchange differences and other non-cash movements	(27)	(3)	(47)
Net cash at end of period	496	259	238

 

 

16.        Acquisitions and disposals

 

On 3 April 2014, Kingfisher announced it had entered into exclusive negotiations with the principal shareholders of Mr Bricolage, the French home improvement retailer, to acquire their shareholding. A non-binding memorandum of understanding was entered into, marking the start of exclusive negotiations during which the operating businesses of Mr Bricolage and of Kingfisher in France (Castorama and Brico Dépôt) would meet with their respective works councils and would propose improved commercial terms to the franchisees of Mr Bricolage. The outcome of these negotiations was successful and accordingly, a binding agreement was entered into on 23 July 2014.

 

The acquisition by Kingfisher of the shares of the principal shareholders of Mr Bricolage will now proceed subject to French anti-trust clearance. Subsequently, a mandatory offer will be made to acquire the shares held by the minority shareholders at the agreed price per share of €15, in accordance with applicable law. The closure of the acquisition of the shareholding of the principal shareholders is expected to be completed around the end of Kingfisher's 2014/15 financial year.

 

In the prior period, the Group acquired 100% of the share capital of the Bricostore Romania companies for cash consideration of £35m (along with a non-cash element of £16m) and acquired cash of £7m and borrowings of £35m.

 

The Group received proceeds of €236m (£198m) following the disposal of its 21% stake in Hornbach in March 2014.

 

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 (2013/14: £1m) would crystallise due to possible future events not wholly within the Group's control. At 1 February 2014 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 1 February 2014. There have been no significant changes in related parties or related party transactions in the period, except that Hornbach is no longer a related party.

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 1 February 2014. With the exception of Philippe Tible, who stepped down as a Director of Kingfisher plc on 31 July 2014, there have been no changes in the period.

 

By order of the Board

 

 

 

Sir Ian Cheshire                                                                  Karen Witts

Group Chief Executive                                                        Group Finance Director

9 September 2014                                                              9 September 2014

 

 

INDEPENDENT REVIEW REPORT TO KINGFISHER PLC

 

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the half year ended 2 August 2014 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 interim 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 interim financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the interim 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 interim 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 interim 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 interim financial report for the half year ended 2 August 2014 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

9 September 2014