TIDMKGF
RNS Number : 6857M
Kingfisher PLC
18 September 2019
Kingfisher plc
2019/20 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Half year ended 31 July 2018
Half year ended 31 July 2019 restated (note 18)
-------------------------------------------- --------------------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
GBP millions Notes items items Total items items Total
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Sales 4 5,997 - 5,997 6,080 - 6,080
Cost of sales (3,776) - (3,776) (3,864) - (3,864)
---------------- -------- ---------------- --------
Gross profit 2,221 - 2,221 2,216 - 2,216
Selling and
distribution
expenses (1,414) (94) (1,508) (1,412) 4 (1,408)
Administrative
expenses (396) - (396) (402) (46) (448)
Other income 10 1 11 11 - 11
Share of
post-tax
results of
joint ventures
and associates - - - (2) - (2)
Operating
profit 4 421 (93) 328 411 (42) 369
Finance costs (93) - (93) (97) - (97)
Finance income 10 - 10 8 - 8
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Net finance
costs 6 (83) - (83) (89) - (89)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Profit before
taxation 338 (93) 245 322 (42) 280
Income tax
expense 7 (93) 19 (74) (87) 13 (74)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Profit for the
period 245 (74) 171 235 (29) 206
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Earnings per
share 8
Basic 8.1p 9.6p
Diluted 8.1p 9.6p
Adjusted basic 11.8p 11.0p
Adjusted
diluted 11.8p 11.0p
Underlying
basic 12.3p 12.8p
Underlying
diluted 12.3p 12.7p
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
--------------------------------------------------------------------------------------------------------------------
Underlying
pre-tax profit 353 377
Transformation
costs before
exceptional
items 4 (16) (52)
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
Adjusted
pre-tax profit 337 325
Exchange
differences on
lease
liabilities 1 (3)
Exceptional
items 5 (93) (42)
Profit before
taxation 245 280
---------------- ------ ---------------- ---------------- -------- ---------------- ---------------- --------
The proposed interim ordinary dividend for the period ended 31
July 2019 is 3.33p per share.
Kingfisher plc
2019/20 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Year ended 31 January 2019
restated (note 18)
-------------------------------------------
Before exceptional Exceptional
GBP millions Notes items items Total
------------------------------------------------------ ------ ------------------- ------------ --------
Sales 4 11,685 - 11,685
Cost of sales (7,367) - (7,367)
Gross profit 4,318 - 4,318
Selling and distribution expenses (2,800) (174) (2,974)
Administrative expenses (799) (63) (862)
Other income 27 27 54
Other expenses - (57) (57)
Share of post-tax results of joint ventures and associates 1 - 1
Operating profit 4 747 (267) 480
Finance costs (196) - (196)
Finance income 16 - 16
------------------------------------------------------ ------ ------------------- ------------ --------
Net finance costs 6 (180) - (180)
------------------------------------------------------ ------ ------------------- ------------ --------
Profit before taxation 567 (267) 300
Income tax expense 7 (170) 63 (107)
------------------------------------------------------ ------ ------------------- ------------ --------
Profit for the year 397 (204) 193
------------------------------------------------------ ------ ------------------- ------------ --------
Earnings per share 8
Basic 9.1p
Diluted 9.0p
Adjusted basic 19.8p
Adjusted diluted 19.7p
Underlying basic 23.9p
Underlying diluted 23.8p
------------------------------------------------------ ------ ------------------- ------------ --------
Reconciliation of non-GAAP underlying and adjusted pre-tax profit:
-----------------------------------------------------------------------------------------------------------
Underlying pre-tax profit 694
Transformation costs before exceptional items 4 (120)
------------------------------------------------------ ------ ------------------- ------------ --------
Adjusted pre-tax profit 574
Exchange differences on lease liabilities (7)
Exceptional items 5 (267)
Profit before taxation 300
------------------------------------------------------ ------ ------------------- ------------ --------
Kingfisher plc
2019/20 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half year ended Year ended
31 July 2018 31 January 2019
Half year ended restated restated
GBP millions Notes 31 July 2019 (note 18) (note 18)
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Profit for the period 171 206 193
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Actuarial gains on post-employment benefits 11 73 86 78
Inventory cash flow hedges - fair value gains 47 63 85
Tax on items that will not be reclassified (37) (47) (53)
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Total items that will not be reclassified
subsequently to profit or loss 83 102 110
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Currency translation differences
Group 153 34 (46)
Other cash flow hedges
Fair value gains/(losses) 4 - (2)
(Gains)/losses transferred to income statement (4) - 2
Tax on items that may be reclassified - (1) -
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Total items that may be reclassified
subsequently to profit or loss 153 33 (46)
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Other comprehensive income for the period 236 135 64
Total comprehensive income for the period 407 341 257
-------------------------------------------------- -------- ---------------- ---------------- -----------------
Kingfisher plc
2019/20 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Half year ended 31 July
2019
---------- ---------- -------- ----------- ----------------------------------
Other
Own Capital reserves
Share Share shares Retained redemption (note Total
GBP millions capital premium held earnings reserve 13) equity
--------------------------- ---------- ---------- -------- ----------- ------------ ---------- --------
At 1 February 2019 332 2,228 (25) 3,192 43 379 6,149
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Profit for the period - - - 171 - - 171
Other comprehensive income
for the period - - - 45 - 191 236
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Total comprehensive income
for the period - - - 216 - 191 407
Inventory cash flow hedges
- gains transferred to
inventories - - - - - (24) (24)
Share-based compensation - - - 8 - - 8
Own shares issued under
share
schemes - - 9 (9) - - -
Purchase of own shares for
ESOP trust - - (10) - - - (10)
Dividends (note 9) - - - (157) - - (157)
Tax on equity items - - - - - 5 5
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
At 31 July 2019 332 2,228 (26) 3,250 43 551 6,378
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Half year ended 31 July 2018 restated (note
18)
----------- ---------------------------------------------------------------------
Other
Own Capital reserves
Share Share shares Retained redemption (note Total
GBP millions capital premium held earnings reserve 13) equity
-------------------------- ----------- ---------- -------- ----------- ------------ ---------- --------
At 1 February 2018 340 2,228 (29) 3,311 35 378 6,263
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Profit for the period - - - 206 - - 206
Other comprehensive income
for the period - - - 54 - 81 135
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Total comprehensive income
for the period - - - 260 - 81 341
Inventory cash flow hedges
- losses transferred to
inventories - - - - - 15 15
Share-based compensation - - - 10 - - 10
New shares issued under
share
schemes - - - 2 - - 2
Own shares issued under
share
schemes - - 3 (3) - - -
Purchase of own shares for
cancellation (5) - - (90) 5 - (90)
Dividends (note 9) - - - (160) - - (160)
Tax on equity items - - - - - (4) (4)
At 31 July 2018 335 2,228 (26) 3,330 40 470 6,377
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Year ended 31 January 2019 restated (note
18)
--------- ---------------------------------------------------------------------
Other
Own Capital reserves
Share Share shares Retained redemption (note Total
GBP millions capital premium held earnings reserve 13) equity
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
At 1 February 2018 340 2,228 (29) 3,311 35 378 6,263
Profit for the year - - - 193 - - 193
Other comprehensive income
for the year - - - 46 - 18 64
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Total comprehensive income
for the year - - - 239 - 18 257
Inventory cash flow hedges
- gains transferred to
inventories - - - - - (22) (22)
Share-based compensation - - - 15 - - 15
New shares issued under
share
schemes - - - 2 - - 2
Own shares issued under
share
schemes - - 4 (4) - - -
Purchase of own shares for
cancellation (8) - - (140) 8 - (140)
Dividends (note 9) - - - (231) - - (231)
Tax on equity items - - - - - 5 5
At 31 January 2019 332 2,228 (25) 3,192 43 379 6,149
---------------------------- --------- ---------- -------- ----------- ------------ ---------- --------
Kingfisher plc
2019/20 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED BALANCE SHEET
At 31 July 2018 At 31 January 2019
restated restated
GBP millions Notes At 31 July 2019 (note 18) (note 18)
---------------------------------------------- ------ ---------------- ---------------- -------------------
Non-current assets
Goodwill 2,439 2,438 2,436
Other intangible assets 10 374 375 371
Property, plant and equipment 10 3,356 3,567 3,302
Right-of-use assets 2,030 2,221 2,017
Investment property 10 8 21 8
Investments in joint ventures and associates 13 12 15
Post-employment benefits 11 413 318 320
Deferred tax assets 13 40 13
Derivative assets 12 2 - -
Other receivables 40 53 41
---------------------------------------------- ------ ---------------- ---------------- -------------------
8,688 9,045 8,523
Current assets
Inventories 2,765 2,718 2,574
Trade and other receivables 415 472 406
Derivative assets 12 62 47 26
Current tax assets 3 1 1
Cash and cash equivalents 385 181 229
Assets held for sale 58 - 89
3,688 3,419 3,325
---------------------------------------------- ------ ---------------- ---------------- -------------------
Total assets 12,376 12,464 11,848
---------------------------------------------- ------ ---------------- ---------------- -------------------
Current liabilities
Trade and other payables (2,554) (2,657) (2,415)
Borrowings 12 (47) (2) (1)
Lease liabilities (318) (363) (308)
Derivative liabilities 12 (19) (16) (21)
Current tax liabilities (148) (145) (118)
Provisions (84) (38) (27)
(3,170) (3,221) (2,890)
Non-current liabilities
Other payables (4) (6) (6)
Borrowings 12 (97) (47) (139)
Lease liabilities (2,320) (2,437) (2,318)
Derivative liabilities 12 - - (2)
Deferred tax liabilities (242) (220) (192)
Provisions (39) (34) (37)
Post-employment benefits 11 (126) (122) (115)
(2,828) (2,866) (2,809)
---------------------------------------------- ------ ---------------- ---------------- -------------------
Total liabilities (5,998) (6,087) (5,699)
---------------------------------------------- ------ ---------------- ---------------- -------------------
Net assets 6,378 6,377 6,149
---------------------------------------------- ------ ---------------- ---------------- -------------------
Equity
Share capital 332 335 332
Share premium 2,228 2,228 2,228
Own shares held in ESOP trust (26) (26) (25)
Retained earnings 3,250 3,330 3,192
Capital redemption reserve 43 40 43
Other reserves 13 551 470 379
---------------------------------------------- ------ ---------------- ---------------- -------------------
Total equity 6,378 6,377 6,149
---------------------------------------------- ------ ---------------- ---------------- -------------------
The interim financial report was approved by the Board of
Directors on 17 September 2019 and signed on its behalf by:
Veronique Laury, Chief Executive Andy Cosslett, Chairman
Officer
Kingfisher plc
2019/20 INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED CASH FLOW STATEMENT
Half year ended Year ended
31 July 2018 31 January 2019
Half year ended restated restated
GBP millions Notes 31 July 2019 (note 18) (note 18)
------------------------------------------------------- ------ ---------------- ---------------- -----------------
Operating activities
Cash generated by operations 14 613 716 1,243
Income tax paid (34) (77) (132)
Net cash flows from operating activities 579 639 1,111
Investing activities
Purchase of property, plant and equipment and
intangible assets (163) (164) (332)
Disposal of property, plant and equipment, investment
property, assets held for sale and intangible
assets 125 4 45
Interest received 6 4 11
Interest element of lease rental receipts 1 2 3
Principal element of lease rental receipts 2 3 6
Advance payments on right-of-use assets - (1) (4)
Dividends received from joint ventures and associates 2 5 5
Net cash flows used in investing activities (27) (147) (266)
Financing activities
Interest paid (13) (7) (19)
Interest element of lease rental payments (82) (87) (174)
Principal element of lease rental payments (158) (137) (312)
Repayment of bank loans (1) (1) (1)
Issue of fixed term debt - 44 139
Repayment of fixed term debt - (134) (134)
Receipt on financing derivatives - 37 37
New shares issued under share schemes - 2 2
Purchase of own shares for ESOP trust (10) - -
Purchase of own shares for cancellation - (90) (140)
Ordinary dividends paid to equity shareholders of the
Company 9 (157) (160) (231)
Net cash flows from financing activities (421) (533) (833)
Net increase/(decrease) in cash and cash equivalents 131 (41) 12
Cash and cash equivalents at beginning of period 229 230 230
Exchange differences 25 (8) (13)
------------------------------------------------------- ------ ---------------- ---------------- -----------------
Cash and cash equivalents at end of period 385 181 229
------------------------------------------------------- ------ ---------------- ---------------- -----------------
Kingfisher plc
2019/20 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 2019
were approved by the Board of Directors on 19 March 2019 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 17 September 2019.
2. Basis of preparation
The interim financial report for the six months ended 31 July
2019 ('the half year') has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
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
2019, 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, '2018/19' refers to the six months ended 31
July 2018.
New and amended accounting standards
The Group adopted IFRS 16 'Leases' on 1 February 2019 on a fully
retrospective basis, resulting in the restatement of comparatives
for the six months ended 31 July 2018 and year ended 31 January
2019. The cumulative effect of initial application is recognised as
an adjustment to opening equity on the date of transition (1
February 2018). Refer to note 18 for further details of the Group's
initial application of IFRS 16.
The statement of comprehensive income and statement of changes
in equity for the half year ended 31 July 2018 have been adjusted
to reflect changes to presentation required under IFRS 9 'Financial
Instruments'.
Other new standards, amendments and interpretations are in issue
and effective for the Group's financial year ended 31 January
2020, but they do not have a material impact on the consolidated
financial statements.
Going concern
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 2019.
Principal rates of exchange against Sterling
Half year ended 31 Half year ended 31 Year ended 31 January
July 2019 July 2018 2019
--------------------- --------------------- ------------------------
Average Period end Average Period end Average Year end
rate rate rate rate rate rate
---------------- -------- ----------- -------- ----------- ----------- -----------
Euro 1.14 1.10 1.14 1.12 1.13 1.15
US Dollar 1.29 1.22 1.37 1.31 1.33 1.31
Polish Zloty 4.90 4.70 4.83 4.79 4.83 4.88
Russian Rouble 83.14 77.46 82.55 81.81 84.34 86.01
---------------- -------- ----------- -------- ----------- ----------- -----------
Risks and uncertainties
The principal risks and uncertainties to which the Group is
exposed are set out on pages 44-51 of the Kingfisher plc Annual
Report and Accounts for the year ended 31 January 2019. These have
been reviewed as part of the Group's half year procedures and are
listed in the Financial Review.
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, underlying pre-tax
profit, adjusted pre-tax profit, adjusted 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 (also known as
'Alternative Performance Measures'), such as net debt, are used by
Kingfisher for internal performance analysis and incentive
compensation arrangements for employees. The terms 'retail profit',
'exceptional items', 'transformation costs', 'underlying',
'adjusted', 'adjusted effective tax rate' and 'net debt' 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 and exceptional
items. It includes the sustainable benefits of the transformation
plan. Central costs principally comprise the costs of the Group's
head office before transformation costs.
The separate reporting of 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, exit or impairment of
subsidiaries, joint ventures, associates and investments which do
not form part of the Group's ongoing 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 plan
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,
exchange differences on lease liabilities, financing fair value
remeasurements, related tax items and prior year tax items
(including the impact of changes in tax rates on deferred tax).
Exchange differences on lease liabilities represent the income
statement impact of translating lease liabilities denominated in
non-functional currencies (e.g. a dollar-denominated lease in
Russia) which are not able to be designated as net investment
hedges. 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 additional costs
that arise only as a result of the transformation plan 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 plan.
The adjusted 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. The exclusion of items
relating to prior years, and those not in the ordinary course of
business, helps provide a better indication of the Group's ongoing
rate of tax.
Net debt comprises lease liabilities, 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 31 January 2019, as
described in note 2 of those financial statements, except where set
out below. The critical accounting estimates and judgements are set
out in note 3 of the annual financial statements for the year ended
31 January 2019 and remain unchanged, with the exception of those
relating to IFRS 16 'Leases' as described in note 18.
Taxes on income for interim periods are accrued using the best
estimate of the effective tax rate that would be applicable to
expected total annual earnings.
IFRS 16 was issued by the IASB in January 2016 and has been
endorsed by the European Union. The standard supersedes IAS 17
'Leases' and is effective for periods beginning on or after 1
January 2019. The adoption of IFRS 16 has had a material impact on
the Group's primary financial statements, including impacts on the
operating profit, profit before taxation, total assets and total
liabilities lines. Further details of the Group's initial
application of IFRS 16 are included in note 18, including details
on the effect of initial application on the Group's financial
results and the critical accounting estimates and judgements
arising from application of the standard.
4. Segmental analysis
Income statement
Half year ended 31 July 2019
------------------------------------------------------
Other International
-------------------------------------------------------------- ------------- ------- ---------------------- ------
GBP millions UK & Ireland France Poland Other Total
-------------------------------------------------------------- ------------- ------- ----------- --------- ------
Sales 2,655 2,158 753 431 5,997
-------------------------------------------------------------- ------------- ------- ----------- --------- ------
Retail profit 277 114 88 (13) 466
Central costs (25)
Share of interest and tax of joint ventures and associates
before exchange differences on
lease liabilities (5)
Exchange differences on lease liabilities of joint ventures
and associates 1
Transformation costs before exceptional items (16)
Exceptional items (93)
Operating profit 328
Net finance costs (83)
-------------------------------------------------------------- ------------- ------- ----------- --------- ------
Profit before taxation 245
-------------------------------------------------------------- ------------- ------- ----------- --------- ------
Half year ended 31 July 2018 restated (note18)
------------------------------------------------------------
Other International
-------------------------------------------------------- ---------------- --------- ---------------------- -------
GBP millions UK & Ireland France Poland Other Total
-------------------------------------------------------- ---------------- --------- ----------- --------- -------
Sales 2,635 2,267 726 452 6,080
Retail profit 282 131 90 (13) 490
Central costs (23)
Share of interest and tax of joint ventures and
associates before exchange differences on
lease liabilities (3)
Exchange differences on lease liabilities of joint
ventures and associates (1)
Transformation costs before exceptional items (52)
Exceptional items (42)
Operating profit 369
Net finance costs (89)
-------------------------------------------------------- ---------------- --------- ----------- --------- -------
Profit before taxation 280
-------------------------------------------------------- ---------------- --------- ----------- --------- -------
Year ended 31 January 2019 restated (note 18)
------------------------------------------------------------
Other International
-------------------------------------------------------- --------------- --------- ---------------------- --------
GBP millions UK & Ireland France Poland Other Total
-------------------------------------------------------- --------------- --------- ------------ -------- --------
Sales 5,061 4,272 1,431 921 11,685
-------------------------------------------------------- --------------- --------- ------------ -------- --------
Retail profit 530 221 185 (12) 924
Central costs (49)
Share of interest and tax of joint ventures and
associates before exchange differences on
lease liabilities (5)
Exchange differences on lease liabilities of joint
ventures and associates (3)
Transformation costs before exceptional items (120)
Exceptional items (267)
Operating profit 480
Net finance costs (180)
-------------------------------------------------------- --------------- --------- ------------ -------- --------
Profit before taxation 300
-------------------------------------------------------- --------------- --------- ------------ -------- --------
Balance sheet
At 31 July 2019
--------------------------------------------------------
Other International
--------------------- ------------- ------- ---------------------- --------
GBP millions UK & Ireland France Poland Other Total
--------------------- ------------- ------- ----------- --------- --------
Segment assets 3,083 1,858 867 677 6,485
Central liabilities (162)
Goodwill 2,439
Net debt (2,384)
--------------------- ------------- ------- ----------- --------- --------
Net assets 6,378
--------------------- ------------- ------- ----------- --------- --------
At 31 July 2018 restated (note 18)
--------------------------------------------------------
Other International
--------------------- ------------- ------- ---------------------- --------
GBP millions UK & Ireland France Poland Other Total
--------------------- ------------- ------- ----------- --------- --------
Segment assets 3,174 2,045 781 759 6,759
Central liabilities (159)
Goodwill 2,438
Net debt (2,661)
--------------------- ------------- ------- ----------- --------- --------
Net assets 6,377
--------------------- ------------- ------- ----------- --------- --------
At 31 January 2019 restated (note 18)
--------------------------------------------------------
Other International
--------------------- ------------- ------- ---------------------- --------
GBP millions UK & Ireland France Poland Other Total
--------------------- ------------- ------- ----------- --------- --------
Segment assets 3,062 1,865 791 697 6,415
Central liabilities (160)
Goodwill 2,436
Net debt (2,542)
--------------------- ------------- ------- ----------- --------- --------
Net assets 6,149
--------------------- ------------- ------- ----------- --------- --------
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 majority of the
sales in each geographical area are derived from in-store sales of
products.
The 'Other International' segment consists of Poland, Iberia,
Germany, Russia, Romania and the joint venture Koçta 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 central
assets, pensions, insurance, interest and tax.
Transformation costs before exceptional items principally relate
to the unified and unique offer range implementation and the
digital strategic pillar, with GBP1m (2018/19: GBP21m) included
within selling and distribution expenses and GBP15m (2018/19:
GBP31m) included within administrative expenses.
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 Year ended
31 July 2018 31 January 2019
Half year ended restated restated
GBP millions 31 July 2019 (note 18) (note 18)
--------------------------------------------------- ---------------- ---------------- ----------------
Included within selling and distribution expenses
UK & Ireland and continental Europe restructuring (68) 4 (124)
Impairments of Russia and Iberia assets (26) - (16)
B&Q store replenishment - - (12)
Romania acquisition integration - - (16)
France exceptional employee bonus - - (6)
(94) 4 (174)
--------------------------------------------------- ---------------- ---------------- ----------------
Included within administrative expenses
Transformation exceptional costs - (46) (58)
UK guaranteed minimum pension charge - - (5)
- (46) (63)
Included within other income
Profit on disposal of properties 1 - 27
1 - 27
--------------------------------------------------- ---------------- ---------------- ----------------
Included within other expenses
Impairments of properties held for sale - - (57)
--------------------------------------------------- ---------------- ---------------- ----------------
- - (57)
--------------------------------------------------- ---------------- ---------------- ----------------
Exceptional items before tax (93) (42) (267)
Tax on exceptional items 19 13 63
Exceptional items (74) (29) (204)
--------------------------------------------------- ---------------- ---------------- ----------------
Current period exceptional items include a GBP68m net
restructuring charge principally relating to redundancy costs
following formal consultation with employee representatives
regarding the Group's plans to close 11 stores in France and 19
Screwfix Germany outlets.
Additional impairments of GBP26m have been recorded in the
period primarily relating to store assets in Russia following a
deterioration in trading. The Group announced the decision to exit
Russia and Iberia in November 2018 and recorded impairments of
GBP16m to store and non-operational assets in the prior year.
A profit of GBP1m has been recorded in the period on the
disposal of properties in the UK.
6. Net finance costs
Half year ended Year ended
31 July 2018 31 January 2019
restated restated
GBP millions Half year ended 31 July 2019 (note 18) (note 18)
------------------------------------------------ ------------------------------ ---------------- ----------------
Bank overdrafts and bank loans (10) (7) (15)
Fixed term debt (2) (1) (3)
Lease liabilities (82) (87) (174)
Exchange differences on lease liabilities - (2) (4)
Unwinding of discount on provisions - - (2)
Capitalised interest 1 2 2
Other interest payable - (2) -
Finance costs (93) (97) (196)
------------------------------------------------- ----------------------------- ---------------- ----------------
Cash and cash equivalents and short-term
deposits 6 4 9
Net interest income on defined benefit pension
schemes 3 2 4
Finance lease income 1 2 3
Finance income 10 8 16
------------------------------------------------- ----------------------------- ---------------- ----------------
Net finance costs (83) (89) (180)
------------------------------------------------- ----------------------------- ---------------- ----------------
7. Income tax expense
Half year ended Year ended
31 July 2018 31 January 2019
Half year ended restated restated
GBP millions 31 July 2019 (note 18) (note 18)
--------------------------------------- ---------------- ---------------- -----------------
UK corporation tax
Current tax on profits for the period (30) (49) (52)
Adjustments in respect of prior years - - (1)
--------------------------------------- ---------------- ---------------- -----------------
(30) (49) (53)
--------------------------------------- ---------------- ---------------- -----------------
Overseas tax
Current tax on profits for the period (29) (31) (66)
Adjustments in respect of prior years (2) - 7
(31) (31) (59)
--------------------------------------- ---------------- ---------------- -----------------
Deferred tax
Current period (11) 6 30
Adjustments in respect of prior years (2) - (25)
(13) 6 5
--------------------------------------- ---------------- ---------------- -----------------
Income tax expense (74) (74) (107)
--------------------------------------- ---------------- ---------------- -----------------
The adjusted effective tax rate on profit before exceptional
items and excluding prior year tax adjustments and the impact of
changes in tax rates on deferred tax is 26% (2018/19: 27%),
representing the best estimate of the effective rate for the full
financial year. The adjusted effective tax rate on the same basis
for the year ended 31 January 2019 was 27%. Exceptional tax items
for the current period amount to a credit of GBP19m, none of which
relates to prior year items (2018/19: GBP13m credit, none of which
related to prior year items). Exceptional tax items for the year
ended 31 January 2019 amounted to a credit of GBP63m, none of which
related to prior year items.
8. Earnings per share
Half year ended Year ended
31 July 2018 31 January 2019
Half year ended restated restated
Pence 31 July 2019 (note 18) (note 18)
------------------------------------------------------ ---------------- ---------------- ----------------
Basic earnings per share 8.1 9.6 9.1
Effect of dilutive share options - - (0.1)
Diluted earnings per share 8.1 9.6 9.0
------------------------------------------------------ ---------------- ---------------- ----------------
Basic earnings per share 8.1 9.6 9.1
Exceptional items before tax 4.4 1.9 12.6
Tax on exceptional and prior year items (0.7) (0.6) (2.1)
Exchange differences on lease liabilities - 0.1 0.3
Tax on exchange differences on lease liabilities - - (0.1)
Adjusted basic earnings per share 11.8 11.0 19.8
Transformation costs before exceptional items 0.7 2.5 5.6
Tax on transformation costs before exceptional items (0.2) (0.7) (1.5)
------------------------------------------------------ ---------------- ---------------- ----------------
Underlying basic earnings per share 12.3 12.8 23.9
------------------------------------------------------ ---------------- ---------------- ----------------
Diluted earnings per share 8.1 9.6 9.0
Exceptional items before tax 4.4 1.9 12.6
Tax on exceptional and prior year items (0.7) (0.6) (2.1)
Exchange differences on lease liabilities - 0.1 0.3
Tax on exchange differences on lease liabilities - - (0.1)
Adjusted diluted earnings per share 11.8 11.0 19.7
Transformation costs before exceptional items 0.7 2.4 5.6
Tax on transformation costs before exceptional items (0.2) (0.7) (1.5)
------------------------------------------------------ ---------------- ---------------- ----------------
Underlying diluted earnings per share 12.3 12.7 23.8
------------------------------------------------------ ---------------- ---------------- ----------------
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 Year ended
31 July 2018 31 January 2019
restated restated
GBP millions Half year ended 31 July 2019 (note 18) (note 18)
--------------------------------------------------- ----------------------------- ---------------- ----------------
Earnings 171 206 193
Exceptional items before tax 93 42 267
Tax on exceptional and prior year items (15) (13) (44)
Exchange differences on lease liabilities (1) 3 7
Tax on exchange differences on lease liabilities - (1) (2)
Adjusted earnings 248 237 421
Transformation costs before exceptional items 16 52 120
Tax on transformation costs before exceptional
items (4) (14) (32)
--------------------------------------------------- ----------------------------- ---------------- ----------------
Underlying earnings 260 275 509
--------------------------------------------------- ----------------------------- ---------------- ----------------
The weighted average number of shares in issue during the
period, excluding those held in the Employee Share Ownership Plan
Trust ('ESOP trust'), is 2,101m (2018/19: 2,141m). The diluted
weighted average number of shares in issue during the period is
2,112m (2018/19: 2,151m). For the year ended 31 January 2019, the
weighted average number of shares in issue was 2,129m and the
diluted weighted average number of shares in issue was 2,140m.
9. Dividends
Half year ended Half year ended Year ended
GBP millions 31 July 2019 31 July 2018 31 January 2019
---------------------------------------------------------------- ---------------- ---------------- ----------------
Dividends to equity shareholders of the Company
Ordinary final dividend for the year ended 31 January 2019 of
7.49p per share 157 - -
Ordinary interim dividend for the year ended 31 January 2019 of
3.33p per share - - 71
Ordinary final dividend for the year ended 31 January 2018 of
7.49p per share - 160 160
157 160 231
---------------------------------------------------------------- ---------------- ---------------- ----------------
The proposed ordinary interim dividend for the period ended 31
July 2019 is 3.33p 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 GBP144m
(2018/19: GBP152m) and for the year ended 31 January 2019 were
GBP334m. Disposals in net book value of property, plant and
equipment, investment property, property assets held for sale and
other intangible assets are GBP77m (2018/19: GBP6m) and for the
year ended 31 January 2019 were GBP68m.
Capital commitments contracted but not provided for at the end
of the period are GBP161m (2018/19: GBP90m) and at 31 January 2019
were GBP40m.
11. Post-employment benefits
Half year ended Half year ended Year ended
GBP millions 31 July 2019 31 July 2018 31 January 2019
Net surplus in schemes at beginning of period 205 99 99
Current service cost (5) (6) (11)
Past service cost - - (2)
Administration costs (2) (2) (4)
Net interest income 3 2 4
Net actuarial gains 73 86 78
Contributions paid by employer 19 19 40
Exchange differences (6) (2) 1
----------------------------------------------- ---------------- ---------------- ----------------
Net surplus in schemes at end of period 287 196 205
----------------------------------------------- ---------------- ---------------- ----------------
UK 413 318 320
Overseas (126) (122) (115)
----------------------------------------- ------ ------ ------
Net surplus in schemes at end of period 287 196 205
----------------------------------------- ------ ------ ------
Present value of defined benefit obligations (3,249) (3,036) (2,977)
Fair value of scheme assets 3,536 3,232 3,182
---------------------------------------------- -------- -------- --------
Net surplus in schemes at end of period 287 196 205
---------------------------------------------- -------- -------- --------
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 26 of the annual financial
statements for the year ended 31 January 2019.
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 2019 31 July 2018 31 January 2019
----------------- ------------- ------------- ----------------
Discount rate 2.1 2.5 2.5
Price inflation 3.4 3.3 3.3
----------------- ------------- ------------- ----------------
12. Financial instruments
The Group holds the following derivative financial instruments
at fair value:
At At At
GBP millions 31 July 2019 31 July 2018 31 January 2019
------------------------------------ ------------- ------------- ----------------
Cross currency interest rate swaps 1 - -
Foreign exchange contracts 63 47 26
------------------------------------ ------------- ------------- ----------------
Derivative assets 64 47 26
------------------------------------ ------------- ------------- ----------------
At At At
GBP millions 31 July 2019 31 July 2018 31 January 2019
------------------------------------ ------------- ------------- ----------------
Cross currency interest rate swaps - - (2)
Foreign exchange contracts (19) (16) (21)
------------------------------------ ------------- ------------- ----------------
Derivative liabilities (19) (16) (23)
------------------------------------ ------------- ------------- ----------------
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
carrying amounts of financial instruments (excluding lease
liabilities) 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
31 July 2018 31 January 2019
At restated restated
GBP millions 31 July 2019 (note 18) (note 18)
----------------- -------------- ------------- ----------------
Bank loans 4 5 4
Fixed term debt 140 44 136
Borrowings 144 49 140
----------------- -------------- ------------- ----------------
Fair value
-------------- ------------- ----------------
At At
31 July 2018 31 January 2019
At restated restated
GBP millions 31 July 2019 (note 18) (note 18)
----------------- -------------- ------------- ----------------
Bank loans 4 5 5
Fixed term debt 143 44 138
Borrowings 147 49 143
----------------- -------------- ------------- ----------------
At 31 July 2019, the Group had undrawn revolving credit
facilities of GBP550 million due to expire in August 2021 and
GBP225 million due to expire in March 2022. In August 2019, the
Group completed an extension of the GBP550 million revolving credit
facility, taking the term to August 2022.
13. Other reserves
Half year ended 31 July 2019
----------------------------------------------------------------
Cash flow
GBP millions Translation reserve hedge reserve Other Total
------------------------------------------------ -------------------- ------------------------ ------ --------
At 1 February 2019 210 10 159 379
------------------------------------------------ -------------------- ------------------------ ------ --------
Inventory cash flow hedges - fair value gains - 47 - 47
Tax on items that will not be reclassified
subsequently to profit or loss - (9) - (9)
Currency translation differences
Group 153 - - 153
Other cash flow hedges
Fair value gains - 4 - 4
Gains transferred to income statement - (4) - (4)
Other comprehensive income for the period 153 38 - 191
Inventory cash flow hedges - gains transferred
to inventories - (24) - (24)
Tax on equity items - 5 - 5
------------------------------------------------ -------------------- ------------------------ ------ --------
At 31 July 2019 363 29 159 551
------------------------------------------------ -------------------- ------------------------ ------ --------
Half year ended 31 July 2018 restated (note 18)
----------------------------------------------------------------
Cash flow
GBP millions Translation reserve hedge reserve Other Total
------------------------------------------------ -------------------- ------------------------ ------ --------
At 1 February 2018 256 (37) 159 378
------------------------------------------------ -------------------- ------------------------ ------ --------
Inventory cash flow hedges - fair value gains - 63 - 63
Tax on items that will not be reclassified
subsequently to profit or loss - (15) - (15)
Currency translation differences
Group 34 - - 34
Tax on items that may be reclassified (1) - - (1)
Other comprehensive income for the period 33 48 - 81
Inventory cash flow hedges - losses transferred
to inventories - 15 - 15
Tax on equity items - (4) - (4)
At 31 July 2018 289 22 159 470
------------------------------------------------ -------------------- ------------------------ ------ --------
Year ended 31 January 2019 restated (note 18)
----------------------------------------------------------------
Translation reserve Cash flow hedge reserve Other Total
------------------------------------------------ -------------------- ------------------------ ------ --------
At 1 February 2018 256 (37) 159 378
------------------------------------------------ -------------------- ------------------------ ------ --------
Inventory cash flow hedges - fair value gains - 85 - 85
Tax on items that will not be reclassified
subsequently to profit or loss - (21) - (21)
Currency translation differences
Group (46) - - (46)
Other cash flow hedges
Fair value losses - (2) - (2)
Losses transferred to income statement - 2 - 2
Other comprehensive income for the year (46) 64 - 18
Inventory cash flow hedges - gains transferred
to inventories - (22) - (22)
Tax on equity items - 5 - 5
At 31 January 2019 210 10 159 379
------------------------------------------------ -------------------- ------------------------ ------ --------
14. Cash generated by operations
Half year ended Year ended
31 July 2018 31 January 2019
Half year ended restated restated
GBP millions 31 July 2019 (note 18) (note 18)
--------------------------------------------------------------- ---------------- ---------------- -----------------
Operating profit 328 369 480
Share of post-tax results of joint ventures and associates - 2 (1)
Depreciation and amortisation 270 261 535
Net impairment losses 24 - 201
(Gain)/loss on disposal of property, plant and equipment,
investment property, assets held
for sale and intangible assets (2) 2 (25)
Lease losses 2 - 2
Share-based compensation charge 8 10 15
(Increase)/decrease in inventories (111) 3 95
(Increase)/decrease in trade and other receivables (43) 41 142
Increase/(decrease) in trade and other payables 94 12 (197)
Movement in provisions 55 27 19
Movement in post-employment benefits (12) (11) (23)
--------------------------------------------------------------- ---------------- ---------------- -----------------
Cash generated by operations 613 716 1,243
--------------------------------------------------------------- ---------------- ---------------- -----------------
15. Net debt
At At
31 July 2018 31 January 2019
At restated restated
GBP millions 31 July 2019 (note 18) (note 18)
--------------------------- -------------- ------------- ----------------
Cash and cash equivalents 385 181 229
Bank loans (4) (5) (4)
Fixed term debt (140) (44) (136)
Lease liabilities (2,638) (2,800) (2,626)
Financing derivatives 13 7 (5)
Net debt (2,384) (2,661) (2,542)
--------------------------- -------------- ------------- ----------------
At At
31 July 2018 31 January 2019
At restated restated
GBP millions 31 July 2019 (note 18) (note 18)
------------------------------------------------------ -------------- ------------- ----------------
Net debt at beginning of period (2,542) (2,678) (2,678)
------------------------------------------------------ -------------- ------------- ----------------
Net increase/(decrease) in cash and cash equivalents 131 (41) 12
Repayment of bank loans 1 1 1
Issue of fixed term debt - (44) (139)
Repayment of fixed term debt - 134 134
Receipt on financing derivatives - (37) (37)
------------------------------------------------------ -------------- ------------- ----------------
Net cash flow 132 13 (29)
Movement in lease liabilities 18 1 157
Exchange differences and other non-cash movements 8 3 8
------------------------------------------------------ -------------- ------------- ----------------
Net debt at end of period (2,384) (2,661) (2,542)
------------------------------------------------------ -------------- ------------- ----------------
16. Contingent liabilities
The Group has arranged for certain guarantees to be provided to
third parties in the ordinary course of business. Of these
guarantees, GBP45m (2018/19: GBP44m) would crystallise due to
possible future events not wholly within the Group's control. At 31
January 2019, the amount was GBP43m.
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.
The Group files tax returns in many jurisdictions around the
world and at any one time, is subject to periodic tax audits in the
ordinary course of its business. Applicable tax laws and
regulations are subject to differing interpretations and the
resolution of a final tax position can take several years to
complete. Where it is considered that future tax liabilities are
more likely than not to arise, an appropriate provision is
recognised in the financial statements.
Included within these audits is a dispute with the French Tax
Authority regarding the treatment of interest paid since the 2010
year end, where additional French tax of EUR49m (GBP45m) has been
assessed and for which a bank guarantee is now in place. At the
balance sheet date, interest and penalties of EUR52m (GBP47m) would
be due on this assessment if not challenged successfully. Having
taken external professional advice, the Group disagrees with the
assessment and intends to defend its position through the courts.
The Group does not consider it necessary to make provision for the
amounts assessed at the current time, nor for any potential further
amounts which may be assessed for subsequent years.
In October 2017, the European Commission opened a state aid
investigation into the Group Financing Exemption section of the UK
controlled foreign company rules. While the Group has complied with
the requirements of UK tax law in force at the time, in April 2019
the European Commission concluded that aspects of the UK controlled
foreign company regime partially constitutes state aid. Along with
many other UK-based international companies, the Group may be
affected by the Commission's decision.
In June 2019, the UK government submitted an appeal to the
European Courts against the decision. The Group has calculated its
maximum potential liability (including compound interest) to be
GBP62m in the event that all appeals against the position are
unsuccessful. The final impact on the Group remains uncertain but
based upon advice taken, the Group considers that no provision is
required at this time. The Group will continue to monitor the
position as it develops.
Whilst the procedures that must be followed to resolve these
types of tax issues make it likely that it will be some years
before the eventual outcome is known, the Group does not currently
expect the outcome of these contingent liabilities to have a
material effect on the Group's financial position.
17. Related party transactions
The Group's significant related parties are its joint venture,
associate and pension schemes as disclosed in note 36 of the annual
financial statements for the year ended 31 January 2019. There have
been no significant changes in related parties or related party
transactions in the period.
18. Impact of the adoption of IFRS 16 'Leases'
Initial adoption of IFRS 16 'Leases'
The Group has adopted IFRS 16 from 1 February 2019 using the
full retrospective method. Comparatives for the half year ended 31
July 2018 and the year ended 31 January 2019 have been
restated.
The Group applied the practical expedient available for
low-value items and short-term leases, recognising rental payments
for these leases on a straight-line basis in the income statement
and not recognising a right-of-use asset or lease liability. This
presentation of these expenses remains consistent with the annual
financial statements for the year ended 31 January 2019.
Following the adoption of IFRS 16, the Group's accounting policy
in respect of leases is as follows:
Lessee accounting
The Group assesses whether a contract is or contains a lease at
inception of the contract. Typically, lease contracts relate to
properties such as stores and distribution centres, and equipment
leases such as mechanical handling equipment and vehicles. For
leases in which the Group is a lessee, the Group recognises a
right-of-use asset and a lease liability.
The liability is initially measured as the present value of the
lease payments not yet paid at the commencement date, discounted at
an appropriate discount rate. Where the implicit rate in the lease
is not readily determinable, an incremental borrowing rate is
calculated and applied. The calculation methodology is based upon
applying a financing spread to a risk-free rate, with the resulting
rate including the effect of the credit worthiness of the operating
company in which the lease is contracted, as well as the underlying
term, currency and start date of the lease agreement.
Lease payments used in the measurement of the lease liability
principally comprise fixed lease payments (subject to
indexation/rent reviews) less any incentives. The lease liability
is subsequently measured using an effective interest method whereby
the carrying amount of the lease liability is measured on an
amortised cost basis, and the interest expense is allocated over
the lease term. The lease term comprises the non-cancellable lease
term, in addition to optional periods when the Group is reasonably
certain to exercise an option to extend (or not to terminate) a
lease.
The Group remeasures the lease liability and makes a
corresponding adjustment to the related right-of-use asset whenever
an event occurs that changes the term or payment profile of a
lease, such as the renewal of an existing lease, the exercise of
lease term options, market rent reviews and indexation. A lease
liability which is denominated in a currency that is not the
functional currency of the relevant Group entity (e.g. a
dollar-denominated lease in Castorama Russia) is translated into
that entity's functional currency with foreign exchange gains and
losses recorded in the income statement, unless the lease liability
is able to be designated as a net investment hedge with foreign
exchange gains and losses recorded in other comprehensive
income.
The right-of-use assets are initially measured at the amount
equal to the lease liability, adjusted by any upfront lease
payments or incentives and any initial direct costs incurred.
Subsequently, the assets are measured at cost less accumulated
depreciation and impairment losses.
Lessor accounting
Lessor accounting is broadly consistent with the annual
financial statements for the year ended 31 January 2019. However,
where the Group subleases assets, it is determined whether the
sublease should be classified as an operating lease or a finance
lease, with reference to the right-of-use asset (not the underlying
asset as per IAS 17).
Critical accounting estimates and judgements
For IFRS 16, judgement and estimates are applied to the
calculation of incremental borrowing rates for lease contracts.
Given that risk-free rates such as government bonds are based on
specified terms, the range of lease terms in the Group's portfolio
has required the Group to apply judgement and estimate appropriate
adjustments to available risk-free rates. Additionally, the
application of financing spreads which are specific to operating
companies requires an estimation of the credit quality of those
companies. Given that the Group has applied the full retrospective
approach to IFRS 16, these judgements and estimates have been
applied in the calculation of historical discount rates.
The Group expects to continue to apply judgement and estimates
to the calculation of incremental borrowing rates.
Impact on the financial statements on transition
The Group adopted IFRS 16 on 1 February 2019 on a fully
retrospective basis, resulting in the restatement of comparatives
for the six months ended 31 July 2018 and year ended 31 January
2019. The cumulative effect of initial application is recognised as
an adjustment to opening equity on the date of transition (1
February 2018).
The effect of the changes made to the Group's comparative
consolidated income statements, balance sheets and cash flow
statements are as follows:
Consolidated income statements - IFRS 16 restatements
Half year ended 31 July 2018 Year ended 31 January 2019
------------------------------------------------ ------------------------------------------------
As previously As previously
GBP millions reported Impact of IFRS 16 Restated reported Impact of IFRS 16 Restated
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Sales 6,080 - 6,080 11,685 - 11,685
Cost of sales (3,868) 4 (3,864) (7,376) 9 (7,367)
------------------ --------- ------------------ ---------
Gross profit 2,212 4 2,216 4,309 9 4,318
Selling and
distribution
expenses (1,486) 78 (1,408) (3,114) 140 (2,974)
Administrative
expenses (452) 4 (448) (867) 5 (862)
Other income 11 - 11 56 (2) 54
Other expenses - - - (57) - (57)
Share of post-tax
results of joint
ventures and
associates (1) (1) (2) 2 (1) 1
Operating profit 284 85 369 329 151 480
Finance costs (9) (88) (97) (20) (176) (196)
Finance income 6 2 8 13 3 16
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Net finance costs (3) (86) (89) (7) (173) (180)
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Profit before
taxation 281 (1) 280 322 (22) 300
Income tax
expense (73) (1) (74) (104) (3) (107)
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Profit for the
period 208 (2) 206 218 (25) 193
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Earnings per
share
Basic 9.7p (0.1)p 9.6p 10.3p (1.2)p 9.1p
Diluted 9.7p (0.1)p 9.6p 10.2p (1.2)p 9.0p
Adjusted basic 11.0p - 11.0p 19.8p - 19.8p
Adjusted diluted 11.0p - 11.0p 19.7p - 19.7p
Underlying basic 12.8p - 12.8p 23.9p - 23.9p
Underlying
diluted 12.7p - 12.7p 23.8p - 23.8p
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Underlying
pre-tax profit 375 2 377 693 1 694
Transformation
costs before
exceptional
items (52) - (52) (120) - (120)
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Adjusted pre-tax
profit 323 2 325 573 1 574
Exchange
differences on
lease
liabilities - (3) (3) - (7) (7)
Exceptional items (42) - (42) (251) (16) (267)
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Profit before
taxation 281 (1) 280 322 (22) 300
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Segmental
analysis
UK & Ireland 218 64 282 399 131 530
France 122 9 131 209 12 221
Poland 88 2 90 181 4 185
Other (24) 11 (13) (36) 24 (12)
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Retail profit 404 86 490 753 171 924
Central costs (24) 1 (23) (49) - (49)
Share of interest
and tax of joint
ventures and
associates
before exchange
differences on
lease
liabilities (2) (1) (3) (4) (1) (5)
Exchange
differences on
lease
liabilities of
joint ventures
and associates - (1) (1) - (3) (3)
Transformation
costs before
exceptional
items (52) - (52) (120) - (120)
Exceptional items (42) - (42) (251) (16) (267)
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Operating profit 284 85 369 329 151 480
------------------ ----------------- ------------------ --------- ----------------- ------------------ ---------
Consolidated balance sheets - IFRS 16 restatements
At 31 July 2018 At 31 January 2019 At 31 January 2018
--------------------------------- -------------------------------- ---------------------------------
As Impact As Impact As Impact
previously of IFRS previously of IFRS previously of IFRS
GBP millions reported 16 Restated reported 16 Restated reported 16 Restated
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Non-current
assets
Goodwill 2,438 - 2,438 2,436 - 2,436 2,437 - 2,437
Other intangible
assets 375 - 375 371 - 371 355 - 355
Property,
plant and
equipment 3,757 (190) 3,567 3,454 (152) 3,302 3,736 (200) 3,536
Right-of-use
assets - 2,221 2,221 - 2,017 2,017 - 2,218 2,218
Investment
property 21 - 21 8 - 8 20 - 20
Investments
in joint
ventures
and associates 18 (6) 12 20 (5) 15 25 (6) 19
Post-employment
benefits 318 - 318 320 - 320 214 - 214
Deferred tax
assets 31 9 40 9 4 13 30 9 39
Derivative
assets - - - - - - - - -
Other
receivables 8 45 53 10 31 41 8 47 55
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
6,966 2,079 9,045 6,628 1,895 8,523 6,825 2,068 8,893
Current assets
Inventories 2,718 - 2,718 2,574 - 2,574 2,701 - 2,701
Trade and
other
receivables 521 (49) 472 453 (47) 406 550 (49) 501
Derivative
assets 47 - 47 26 - 26 41 - 41
Current tax
assets 1 - 1 1 - 1 - - -
Cash and cash
equivalents 181 - 181 229 - 229 230 - 230
Assets held
for sale - - - 89 - 89 - - -
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
3,468 (49) 3,419 3,372 (47) 3,325 3,522 (49) 3,473
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Total assets 10,434 2,030 12,464 10,000 1,848 11,848 10,347 2,019 12,366
Current
liabilities
Trade and
other payables (2,701) 44 (2,657) (2,444) 29 (2,415) (2,666) 36 (2,630)
Borrowings (17) 15 (2) (14) 13 (1) (140) 13 (127)
Lease
liabilities - (363) (363) - (308) (308) - (309) (309)
Derivative
liabilities (16) - (16) (21) - (21) (79) - (79)
Current tax
liabilities (145) - (145) (118) - (118) (140) - (140)
Provisions (44) 6 (38) (35) 8 (27) (25) 10 (15)
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
(2,923) (298) (3,221) (2,632) (258) (2,890) (3,050) (250) (3,300)
Non-current
liabilities
Other payables (64) 58 (6) (64) 58 (6) (61) 59 (2)
Borrowings (72) 25 (47) (162) 23 (139) (36) 32 (4)
Lease
liabilities - (2,437) (2,437) - (2,318) (2,318) - (2,482) (2,482)
Derivative
liabilities - - - (2) - (2) - - -
Deferred tax
liabilities (313) 93 (220) (286) 94 (192) (264) 93 (171)
Provisions (77) 43 (34) (82) 45 (37) (73) 44 (29)
Post-employment
benefits (122) - (122) (115) - (115) (115) - (115)
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
(648) (2,218) (2,866) (711) (2,098) (2,809) (549) (2,254) (2,803)
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Total
liabilities (3,571) (2,516) (6,087) (3,343) (2,356) (5,699) (3,599) (2,504) (6,103)
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Net assets 6,863 (486) 6,377 6,657 (508) 6,149 6,748 (485) 6,263
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Equity
Share capital 335 - 335 332 - 332 340 - 340
Share premium 2,228 - 2,228 2,228 - 2,228 2,228 - 2,228
Own shares
held in ESOP
trust (26) - (26) (25) - (25) (29) - (29)
Retained
earnings 3,811 (481) 3,330 3,696 (504) 3,192 3,790 (479) 3,311
Capital
redemption
reserve 40 - 40 43 - 43 35 - 35
Other reserves 475 (5) 470 383 (4) 379 384 (6) 378
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Total equity 6,863 (486) 6,377 6,657 (508) 6,149 6,748 (485) 6,263
----------------- ----------- --------- --------- ----------- -------- --------- ----------- --------- ---------
Consolidated cash flow statements - IFRS 16 restatements
Half year ended 31 July 2018 Year ended 31 January 2019
As previously Impact of IFRS As previously Impact of IFRS
GBP millions reported 16 Restated reported 16 Restated
Operating activities
Cash generated by
operations 503 213 716 781 462 1,243
Income tax paid (77) - (77) (132) - (132)
Net cash flows from
operating
activities 426 213 639 649 462 1,111
Investing activities
Purchase of
property, plant and
equipment and
intangible assets (165) 1 (164) (339) 7 (332)
Disposal of
property, plant and
equipment,
investment
property, assets
held for sale and
intangible
assets 4 - 4 45 - 45
Interest received 4 - 4 11 - 11
Interest element of
lease rental
receipts - 2 2 - 3 3
Principal element of
lease rental
receipts - 3 3 - 6 6
Advance payments on
right-of-use assets - (1) (1) - (4) (4)
Dividends received
from joint ventures
and associates 5 - 5 5 - 5
Net cash flows used
in investing
activities (152) 5 (147) (278) 12 (266)
Financing activities
Interest paid (7) - (7) (19) - (19)
Interest element of
lease rental
payments (1) (86) (87) (2) (172) (174)
Principal element of
lease rental
payments (5) (132) (137) (10) (302) (312)
Repayment of bank
loans (1) - (1) (1) - (1)
Issue of fixed term
debt 44 - 44 139 - 139
Repayment of fixed
term debt (134) - (134) (134) - (134)
Receipt on financing
derivatives 37 - 37 37 - 37
New shares issued
under share schemes 2 - 2 2 - 2
Purchase of own
shares for
cancellation (90) - (90) (140) - (140)
Ordinary dividends
paid to equity
shareholders of the
Company (160) - (160) (231) - (231)
--------------------- ---------------- ----------------- --------- ----------------- ----------------- ---------
Net cash flows from
financing
activities (315) (218) (533) (359) (474) (833)
--------------------- ---------------- ----------------- --------- ----------------- ----------------- ---------
Net
(decrease)/increase
in cash and cash
equivalents (41) - (41) 12 - 12
Cash and cash
equivalents at
beginning of period 230 - 230 230 - 230
Exchange differences (8) - (8) (13) - (13)
--------------------- ---------------- ----------------- --------- ----------------- ----------------- ---------
Cash and cash
equivalents at end
of period 181 - 181 229 - 229
--------------------- ---------------- ----------------- --------- ----------------- ----------------- ---------
Operating profit 284 85 369 329 151 480
Share of post-tax
results of joint
ventures and
associates 1 1 2 (2) 1 (1)
Depreciation and
amortisation 132 129 261 272 263 535
Net impairment
losses - - - 160 41 201
Loss/(gain) on
disposal of
property, plant and
equipment,
investment
property, assets
held
for sale and
intangible assets 2 - 2 (25) - (25)
Lease losses - - - - 2 2
Share-based
compensation charge 10 - 10 15 - 15
Decrease in
inventories 3 - 3 95 - 95
Decrease in trade
and other
receivables 41 - 41 144 (2) 142
Increase/(decrease)
in trade and other
payables 20 (8) 12 (203) 6 (197)
Movement in
provisions 21 6 27 19 - 19
Movement in
post-employment
benefits (11) - (11) (23) - (23)
--------------------- ---------------- ----------------- --------- ----------------- ----------------- ---------
Cash generated by
operations 503 213 716 781 462 1,243
--------------------- ---------------- ----------------- --------- ----------------- ----------------- ---------
Notes to the restatement tables
Income statement
-- There is no impact on sales.
-- The reduction in cost of sales, selling and distribution
expenses and administrative expenses is due to the removal of the
IAS 17 operating lease rental expense, partially offset by the IFRS
16 depreciation charge on in-scope property and equipment lease
right-of-use assets. The leased properties principally comprise
stores, hence the significant impact on selling and distribution
expenses, but also include certain distribution centres and
offices. The majority of the impact on operating profit (and the
Group's alternative measure of retail profit) arises in the UK, due
to the high proportion of leasehold stores.
-- The increase in net finance costs is driven by the IFRS 16
interest expense on lease liabilities. Other impacts include a
small increase in finance income from IFRS 16 interest income on
sublease assets, the removal of IAS 17 finance lease interest
expense and the recognition of IFRS 16 exchange differences on
lease liabilities ('lease FX').
-- Lease FX represents the impact of translating leases
denominated in non-functional currencies (e.g. a dollar-denominated
lease in Russia) which are not able to be designated as net
investment hedges and has been excluded from the Group's adjusted
and underlying performance measures due to its fluctuating
nature.
-- The movement in exceptional items mainly reflects the
recognition of IFRS 16 impairments to right-of-use assets,
partially offset by the derecognition of IAS 17 charges to onerous
lease rental provisions.
-- The impact on deferred tax of the above adjustments has been
recorded. Note that the Group's alternative measure of adjusted
effective tax rate remains broadly unchanged.
-- Earnings per share reflects the net impact of the above
adjustments on post-tax results. The Group's alternative measures
of underlying and adjusted earnings per share remain unchanged,
reflecting the broadly neutral impacts on underlying and adjusted
pre-tax profits and adjusted effective tax rate.
Balance sheet
-- IFRS 16 right-of-use assets and lease liabilities have been
recognised for in-scope property and equipment lease contracts.
-- IAS 17 finance lease assets, upfront lease premiums and
capitalised costs incurred to secure leases have been derecognised
from property, plant and equipment.
-- IAS 17 finance lease liabilities have been derecognised from borrowings.
-- IAS 17 rental prepayments and accruals have been derecognised
from other receivables and payables respectively, the former
partially offset by recognition of sublease assets.
-- IAS 17 onerous lease rental provisions have been derecognised.
-- The impact on deferred tax of the above adjustments has been recorded.
-- Retained earnings have reduced, reflecting the higher cumulative expenses under IFRS 16.
Cash flow statement
-- No change in reported cash and cash equivalent balances and net movement in these.
-- The presentational changes to the cash flow statement
principally comprise the reclassification of lease rental payments
from net cash flows from operating activities to net cash flows
from financing activities, with payments split between interest and
principal elements.
-- Other presentational changes include the increased add-back
to operating profit for IFRS 16 right-of-use asset depreciation and
impairment losses.
-- Note that the Group's alternative measure of net debt
increases significantly with the inclusion of IFRS 16 lease
liabilities. The ratio of net debt to EBITDA, previously 'lease
adjusted net debt to EBITDAR', reduces due to a lower lease
liability than the previous '8x' rent assumption.
-- Note that the Group's alternative measure of free cash flow
reduces slightly under IFRS 16 to reflect the inclusion of the
principal element of rental payments related to IAS 17 finance
leases.
Note that the impacts on the statement of comprehensive income
and statement of changes in equity are limited to the restatement
of profits and adjustments for exchange differences.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge 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 2019. Karen Witts
resigned as Chief Financial Officer on 21 March 2019 and Anders
Dahlvig resigned as a non-Executive Director on 12 June 2019.
By order of the Board
Veronique Laury Andy Cosslett
Chief Executive Officer Chairman
17 September 2019 17 September 2019
INDEPENT 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 2019 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
changes in equity, the condensed consolidated balance sheet, the
condensed 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 Financial
Reporting Council. 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 Guidance 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 Financial Reporting Council 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 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 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
17 September 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DMGMLLNNGLZM
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September 18, 2019 02:01 ET (06:01 GMT)
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