17th Mar 2005 07:03
Kingfisher PLC17 March 2005 EMBARGOED UNTIL 0700 HOURSThursday 17th March 2005 Kingfisher plc Preliminary results for the 52 weeks ended 29 January 2005 Group Financial Highlights (Continuing operations 1,2) • Sales up 8.7% to £7.7 billion (2003/04: £7.1 billion), up 9.9% in constant currencies and up 3.9% like-for-like (LFL) • Retail profit(3) up 10.7% to £706.5 million (2003/04: £638.2 million), up 11.8% in constant currencies • Adjusted pre-tax profit (4) up 16.2% to £686.5 million (2003/04: £590.7 million) • Pre-tax profit up 17.5% to £670.9 million (2003/04: £570.8 million) • Post-tax profit up 1.3% to £469.5 million (2003/04: £463.5 million including a £75.2 million exceptional tax credit), up 20.9% excluding the prior year exceptional tax credit• Adjusted basic earnings per share(4) up 16.9% to 20.8p (2003/04: 17.8p) • Basic earnings per share unchanged at 20.3p (2003/04: 20.3p) • Final dividend of 6.8p (2003/04: 6.15p), full year dividend up 10.4% to 10.65p • Underlying return on invested capital (ROIC) improved to 8.9% (2003/04: 8.7%) • Total net debt reduced to £794.3 million (£843.8 million at 31 January 2004) • Additional contributions to the UK pension scheme totalling £250 million over next 3 years • Today in a separate press release, Kingfisher will provide these results restated under International Financial Reporting Standards (IFRS). (1) Continuing home improvement business only; excludes businesses sold or demerged during 2003/04 (2) Prior year total Group retail sales, including businesses sold or demerged during 2003/04, were £8.8 billion. Before goodwill amortisation and exceptionals, pre-tax profits were £640.7 million. Post-tax profits were £229.3 million as shown in the consolidated profit and loss account. (3) Retail profit is stated before property, central costs, exceptional items, and goodwill amortisation (4) Before goodwill amortisation and exceptionals Operating Highlights (all figures in constant currencies) UK and Ireland (56.4% of Group Sales) • Total sales up 4.8% (1.5% LFL), retail profit up 4.4%. • B&Q's enhanced ranges of kitchens, bathrooms, electricals and joineryperformed well, but seasonal sales were weak all year. • The mini-Warehouse format continued to perform well. A further 26conversions were completed and six new mini-Warehouses opened. • Twelve new Warehouse stores opened including one relocation. Trials onthe next generation of Warehouse stores began, with two "stretch" stores opened. • Screwfix Direct was impacted in the second half by the transfer to itsnew fulfilment centre which was completed in December, after which sales growthresumed. France (33.3% of Group Sales) • Total Sales up 12.0% (7.7% LFL), retail profit up 18.6%. • Castorama's revitalisation continued with seven store revamps and threerelocations, new product launches, lower prices and stronger marketing. • Brico Depot sales were boosted by the launch of a new catalogue andfurther promotional mailings. • Six new Brico Depot stores opened, including two transferred fromCastorama. Rest of World (10.3% of Group Sales) • Total sales up 38.6% (6.5% LFL), retail profit up 38.8%. • 20 new stores opened in five countries • Strong LFL growth driven by Castorama Italy and B&Q China. • B&Q China profit increased to £4.6 million (2003/04: £0.4 million). Gerry Murphy, Chief Executive, said: "Overall, Kingfisher made solid progress in the year with sales up 10%, pre-taxprofits up more than 16% and with return on invested capital continuing toimprove. In the UK, B&Q delivered good profit growth, though its sales in thesecond half were affected by slowing growth in consumer spending and a moreprice competitive and promotional market. In an increasingly discount-ledFrench market, Castorama's revitalisation made further progress and Brico Depotcontinued its rapid growth. Kingfisher's other European and Asian businessesperformed well, with particularly strong performances in Italy and China. "The colder than average weather across Northern Europe has meant B&Q andCastorama have had a weak start to the new financial year and an early Easterpresents an added challenge in the first quarter. However, all of Kingfisher'sbusinesses are well prepared for the upcoming spring and summer peak tradingperiods. "In home improvement markets which are increasingly dynamic and competitive,Kingfisher's scale and international reach are great strengths. Kingfisher isdelivering value to customers, as well as delivering growth and returns toshareholders." Enquiries: Ian Harding, Group Communications Director 020 7644 1029Nigel Cope, Head of Communications 020 7644 1030 Heather Ward, Head of Investor Relations 020 7644 1032 Further copies of this announcement can be downloaded from www.kingfisher.comor by application to: The Company Secretary, Kingfisher plc, 3 Sheldon Square,London, W2 6PX. Company Profile Kingfisher plc is Europe's leading home improvement retail group and the thirdlargest in the world, with nearly 600 stores in nine countries in Europe andAsia. Its main retail brands are B&Q, Castorama, Brico Depot and ScrewfixDirect. Kingfisher also has a 21% interest in, and strategic alliance with,Hornbach, Germany's leading DIY Warehouse retailer, with 117 stores acrossEurope. UK & IRELAND For the 52 weeks ended 29 January 2005 Retail Sales £m % Total % LFL Retail Profit £m % Total Change Change Change 2004/5 2003/4 2004/5 2003/4B&Q 4,087.7 3,896.8 4.9% 1.3% 400.5 371.8 7.7%Screwfix Direct 228.6 220.6 3.6% 3.6% 7.7 19.1 (59.7)%Total UK 4,316.3 4,117.4 4.8% 1.5% 408.2 390.9 4.4% B&Q's total sales grew 4.9% to £4.1 billion (LFL +1.3%) and retail profit grew7.7% to £400.5 million. Sales growth weakened during the year reflecting aslowdown in consumer spending as well as an increasingly competitive andpromotional market. Market share - B&Q's share of the UK's repair, maintenance and improvementmarket (RMI) increased to 14.7% (14.4% for the 12 months ended 31 January 2004).B&Q estimates that the UK RMI market grew by 2.0% in the year. Sales of kitchen, bathroom and bedroom ranges were strong, as were sales ofjoinery and electrical ranges. Poor weather affected sales of B&Q's seasonalranges, which were due for renewal in 2005. New product ranges - B&Q has recently launched substantially renewedhorticultural and garden leisure ranges, ahead of the key spring season. Othernew innovative and price-competitive products are also in store, includingAirforce DIY fixed air conditioning, easy-to-lay Edge tiling and Speedstonegranite worktops. More ranges will be updated during 2005, including flooring,lighting and wall decorations. Marketing - In early February, B&Q launched a major marketing campaign - "PriceReverse". This campaign marks a planned rebalancing of B&Q's price message backtowards Every Day Low Pricing (EDLP) and features 5,000 price reductions toreinforce customers' perceptions of B&Q's leadership in value for money. B&Qhas also launched a new 'Do More' marketing campaign to broaden its appeal toboth the female customer and the more serious DIY enthusiast, and to increasethe focus on new products. Store development - B&Q opened 12 new Warehouse stores, closed two, and revampedone during the year. These included the UK's largest DIY store at TraffordPark, and two new concept "stretch" stores which are testing new approaches toproviding home improvement inspiration to consumers and a more compelling offerto B&Q's professional trade customers. B&Q also opened six new mini-Warehousesand extended two others. Twenty six Supercentre stores were converted to themini-Warehouse format. The results of the mini-Warehouse conversion programmeare encouraging, with the stores delivering a 12% sales uplift compared with acontrol group of similar stores. B&Q now has 112 Warehouse stores, 62mini-Warehouses and 163 of the original supercentres. A further 22 conversionsare planned in 2005. B&Q also plans to open five new Warehouse stores and 10mini-Warehouses in the current year. Retail margin improved from 9.5% to 9.8%. The costs of reducing prices forcustomers and revamping stores were more than offset by further progress inStrategic Supplier Management (SSM), reduced shrinkage and a strong focus oncost control. In addition, an overhead efficiency drive saved £10m in the year. SCREWFIX DIRECT grew its catalogue and online sales of tools and trade materialsby 3.6% to £228.6 million. However, retail profit declined by £11.4 million to£7.7 million following operational disruption during a complete reconfigurationof its fulfilment operations. Screwfix Direct's three older fulfilment centres were closed and replaced by anew semi-automated centre near Stoke, which will increase capacity by 40%. Order taking through the call centre and the internet was restricted during thechangeover to ensure that Screwfix Direct met its overnight delivery promise,impacting sales and profits. The new fulfilment centre and all sales channelswere fully operational from December, and sales growth has been positive sincethen. Screwfix Direct opened a trial 'Trade Counter', a possible new route to market,offering immediate local availability of the catalogue range. The early resultsare encouraging and Screwfix Direct will conduct further trials during 2005. UK TRADE - In February 2005, George Adams was appointed head of UK Trade, a newrole aimed at accelerating Kingfisher's development in the UK trade and businessto business markets. The new UK trade team will include Screwfix Direct andwill work closely with B&Q to optimise Kingfisher's overall competitive positionin the UK across the consumer and trade markets. George Adams will alsocontinue to oversee Kingfisher's SSM programme which is now fully establishedacross the Group. FRANCE For the 52 weeks ended 29 January 2005 Retail sales £m 2004/5 2003/4 % Change % Change % LFL (Reported) (Constant) ChangeCastorama 1,571.1 1,541.8 1.9% 4.4% 2.6%Brico Depot 975.6 786.0 24.1% 27.1% 17.7%Total France 2,546.7 2,327.8 9.4% 12.0% 7.7% Retail profit £m 2004/5 2003/4 % Change % Change (Reported) (Constant)Castorama 134.2 125.8 6.7% 9.2%Brico Depot 80.7 59.7 35.2% 38.4%Total France 214.9 185.5 15.8% 18.6% 2004/05 £1 =1.4739 Euro 2003/04 £1 = 1.4392 Euro All sales and profit growth figures are in constant currencies. In France, total sales growth of 12.0% (LFL +7.7%) and profit growth of 18.6%benefited from a combination of an increasingly revitalised Castorama, with itsbroad range and high service offer, and an expanding network of hard discountBrico Depot stores. Market share - According to Banque de France, DIY comparable store sales growthin France was 2.8% in the year. Kingfisher's market share grew, with LFL salesup 7.7%. CASTORAMA's revitalisation continued, delivering sales growth of 4.4% (LFL+2.6%) to £1,571.1 million and retail profit growth of 9.2% to £134.2 million. Sales of those categories where Castorama has greater range authority, such asHardware and Seasonal, were strong, particularly in the first half of the year.The Hardware category was boosted by sales of air conditioning products andpressure washers. Seasonal sales were driven by garden furniture andmaintenance equipment. In the second half, as the emphasis moved to Decorativeand Showroom, sales were weaker, ahead of the planned re-launch of thesecategories in the first quarter of 2005. New ranges - As part of the product revitalisation process, the focus in 2004was on developing improved Decorative and Showroom ranges. During the firstquarter of 2005, Castorama will complete seven major range reviews in theDecorative category, changing nearly half of these ranges. In addition,Castorama will make significant improvements to bathroom, shower and kitchenranges during 2005. Store development - Castorama revamped seven stores, relocated three, andtransferred two to Brico Depot. In total, 13 stores were revitalised by theyear end. The three stores relocated in 2003 continue to trade well with 16%higher sales and a similar increase in store profit compared with a controlgroup of comparable stores. After a period of disruption, the revamped storeshave delivered encouraging single digit sales uplifts compared with those storesyet to be revamped and are gathering pace. In 2005 seven store revamps, whichstarted in December 2004, will open for the key spring season and a further twostore relocations and two new stores are planned. Marketing - With a continued focus on price competitiveness, Castorama improvedits ranking amongst consumers for price perception from ninth to fifth,demonstrating the success of recent initiatives. These included the introductionof "premier prix" (entry-price) products and "HIT Casto" (quality at a betterprice) products, as well as more prominent EDLP communication of value in storesand in marketing. In 2005, Castorama will continue to reinforce a competitiveprice message and its growing range authority with an increase in promotionalmailings and the distribution of three major catalogues (Outdoor, Decoration andShowroom). Retail margin increased from 8.2% to 8.5%, with SSM and other cost-productivitysavings more than funding the cost of lower selling prices for customers andstore refurbishment. Castorama France increased its participation in Groupsourcing programmes; own brand product sales grew to over 14% and direct importsto over 7%. During 2004 Castorama improved its supply chain and logistics operations,increasing central distribution capacity by more than 25%. The proportion ofdeliveries to store via Castorama's centralised distribution system hasincreased to 40% as its integrated logistics network takes shape. BRICO DEPOT continued to deliver strong growth, recording sales of £975.6million, up 27.1% (LFL +17.7%), and retail profit of £80.7 million, up 38.4%. Sales were strong in all categories, stimulated by the launch in April of BricoDepot's first national catalogue and related promotional activity, includingincreased "arrivages" (special buys) and further promotional mailings. Itspowerful discount offer proved increasingly popular and Brico Depot wasconfirmed in surveys as the lowest price DIY retailer in France for the thirdyear running. Brico Depot also benefited from strong growth in the buildingmaterials market. Store development - Brico Depot opened four new stores, revamped two andconverted two ex-Castorama stores. Six new stores and four revamps are plannedfor 2005. Brico Depot continued to benefit from growing scale efficiencies and Groupbuying synergies, boosting retail profit margins from 7.6% to 8.3%. BricoDepot's first central distribution centre will be fully operational in April andnew IT systems are being introduced to support its continued growth. REST OF WORLD For the 52 weeks ended 29 January 2005 Retail sales £m 2004/5 2003/4 % Change % Change % LFL (Reported) (Constant) ChangeCastorama Poland 321.9 285.6 12.7% 16.1% 2.9%Castorama Italy 229.5 173.7 32.1% 35.3% 6.1%B&Q China 211.7 131.5 61.0% 78.5% 15.5%Other Int'l (1) 23.5 2.2 n/a n/a n/aTotal 786.6 593.0 32.6% 38.6% 6.5% Retail profit £m 2004/5 2003/4 % Change % Change (Reported) (Constant)Castorama Poland 46.4 41.4 12.1% 15.5%Castorama Italy 19.8 13.5 46.7% 50.5%B&Q China 4.6 0.4 n/a n/aB&Q Taiwan (JV) 6.0 5.4 11.1% 21.3%Other Int'l (1) 6.6 1.1 n/a n/aTotal 83.4 61.8 35.0% 38.8% (1) Other international includes Hornbach in Germany, Koctas in Turkey, B&Q Homein Korea and Brico Depot in Spain. All sales and profit growth figures are in constant currencies. Total Rest of World sales grew 38.6%, (LFL +6.5%) to £786.6 million with retailprofit up 38.8% to £83.4 million. Castorama Poland sales increased by 16.1% (+2.9% LFL) to £321.9 million andretail profit by 15.5% to £46.4 million with higher pre-opening costs offset bylower shrinkage costs and good cost control. Castorama Poland had anexceptionally strong start to the year with customers purchasing ahead of higherVAT rates which came into effect with EU accession in May 2004. This generatedlike-for-like sales growth of over 50% in the first three months of the year andconsequent weakness in the following months. Consumer spending has weakenedgenerally in Poland due to the higher VAT rates, rising interest rates andhigher inflation. On a two year basis, Castorama Poland's like-for-like saleswere up 14.4%. Over 50 own-brand products were introduced, an increase of 20%, and sales ofMacAllister power tools more than doubled. Space expansion accelerated with sixnew stores opened during the year (2003/04: three stores), consolidatingCastorama's position as the market leader. Six new stores are planned for 2005. Castorama Italy - Sales increased by 35.3% (+6.1% LFL) to £229.5 million andretail profit by 50.5% to £19.8 million. All categories performed well,particularly new ranges of doors and windows. Sales also benefited from improvedstock availability and cross-marketing. Four new stores opened and one was relocated during the year (2003/04: four newstores). Two of these were smaller 'Medium Box' stores, trading under the nameCastorama Market. These build on experience gained from the mini-Warehouseformat in the UK and Taiwan and have proven popular with customers. Four newstores and one relocation are planned for 2005, two of which will be 'MediumBox' stores. Retail profit margins increased from 7.8% to 8.6% due to thebenefits of the SSM programme and volume-related cost efficiencies. B&Q China sales were 78.5% higher (+15.5% LFL) at £211.7 million and retailprofit increased from £0.4 million to £4.6 million. Installation service salesgrew over 30% during the year and sales to trade customers also increasedstrongly. Six new stores opened (2003/04: seven stores), three in new cities. In November, B&Q China purchased an option to acquire five leasehold hypermarketstores for conversion to the B&Q format. A further eight new stores are plannedfor 2005, taking the expected total to 34 by the end of the year. B&Q Taiwan, a 50% joint venture, delivered 21.3% profit growth, driven by goodsales growth and benefits of the SSM programme. Customers continued to choosethe 'Total Solutions' installation service which grew by over 30%. One newstore opened during the year and three were revamped with good sales uplifts.Two new stores are planned for 2005. Other International includes Hornbach, the leading German DIY warehouse retailerin which Kingfisher has a 21% economic interest. Hornbach increased itscontribution to profits by 38.7% to £19.2 million, driven by stronglike-for-like sales growth, expansion in Germany, Switzerland and Slovakia, andparticipation in Kingfisher's SSM programme. In Spain, Brico Depot continues toexpand and three new stores were opened, taking the total to four. Four newstores are planned for 2005. In Turkey, Koctas, a 50% joint venture, benefitedfrom introducing exclusive, competitively priced, direct-sourced products fromKingfisher's global supply base. Work continues on constructing a new store inAnkara. The first B&Q Home store in South Korea is expected to open in July2005. Castorama Russia has been established and is working towards its firststore opening in 2006. DATA BY COUNTRY as at 29 January 2005 Store numbers Selling space Employees (000s sq.m.) (FTE)B&Q 337 2,277 27,577Screwfix Direct - - 1,423Total UK & Ireland 337 2,277 29,000 Castorama 103 978 12,452Brico Depot 64 325 4,290Total France 167 1,303 16,742 Castorama Poland 25 227 4,887Castorama Italy 22 140 2,102B&Q China 21 243 5,222B&Q Taiwan 18 90 1,783Other International (1) 9 43 735Total Rest of World 95 743 14,729Total 599 4,323 60,471 FULL YEAR - 52 weeks to 29 January 2005 Retail Sales £m % Total % LFL Retail Profit £m % Total 2004/05 2003/04 Change Change 2004/05 2003/04 Change (Reported) (Reported)B&Q 4,087.7 3,896.8 4.9% 1.3% 400.5 371.8 7.7%Screwfix Direct 228.6 220.6 3.6% 3.6% 7.7 19.1 (59.7)%Total UK & Ireland 4,316.3 4,117.4 4.8% 1.5% 408.2 390.9 4.4% Castorama 1,571.1 1,541.8 1.9% 2.6% 134.2 125.8 6.7%Brico Depot 975.6 786.0 24.1% 17.7% 80.7 59.7 35.2%Total France 2,546.7 2,327.8 9.4% 7.7% 214.9 185.5 15.8% Castorama Poland 321.9 285.6 12.7% 2.9% 46.4 41.4 12.1%Castorama Italy 229.5 173.7 32.1% 6.1% 19.8 13.5 46.7%B&Q China 211.7 131.5 61.0% 15.5% 4.6 0.4 n/aB&Q Taiwan (2) - - - - 6.0 5.4 11.1%Other Int'l (1) (2) 23.5 2.2 n/a 4.5% 6.6 1.1 n/aRest of World 786.6 593.0 32.6% 6.5% 83.4 61.8 35.0%Total 7,649.6 7,038.2 8.7% 3.9% 706.5 638.2 10.7% (1) Other international includes Hornbach in Germany, Koctas in Turkey, B&QHome in Korea and Brico Depot in Spain. (2) Joint venture sales not consolidated FINANCIAL REVIEW Kingfisher's reported financial highlights for continuing operations for theyear ended 29 January 2005 are set out below. 2005 2004 Increase Turnover (including share of joint ventures) 7,755.5 7,177.4 8.1% Operating profit 712.8 608.7 17.1% Profit before tax 670.9 570.8 17.5% Adjusted earnings per share 20.8p 17.8p 16.9% Dividend per share 10.65p 9.65p 10.4% Underlying Return on Invested Capital (ROIC) 8.9% 8.7% 0.2pps Earnings per share and dividends Basic earnings per share for continuing operations were flat at 20.3p. Adjustedearnings per share, which removes the impact of exceptional items andacquisition goodwill amortisation, increased 16.9% from 17.8p to 20.8p pershare. 2005 2004Basic earnings per share 20.3p 20.3pExceptional items 0.6p (2.7)pGoodwill amortisation (0.1)p 0.2pAdjusted earnings per share 20.8p 17.8 p The full year dividend of 10.65p per share, up 10.4% year on year, is covered1.95 times by adjusted earnings before exceptional items and goodwillamortisation. Kingfisher will replace the scrip dividend alternative with the option to havethe payment of this dividend made via a dividend reinvestment plan (DRIP). Thisis available to all shareholders who would prefer to invest their dividends inthe shares of the Company. Further details of the dividend reinvestment planare being circulated separately to all shareholders with the Annual Report andNotice of Annual General Meeting. The final dividend for the year ended 29 January 2005 will be paid on 3 June2005 to shareholders on the register at close of business on 1 April 2005,subject to approval of shareholders at the Company's Annual General Meeting, tobe held on 27 May 2005. Return on invested capital Underlying Return on Invested Capital (ROIC) improved in the year from 8.7% to8.9%. Underlying ROIC assumes properties appreciate in value at a steady rateover the long-term. When calculating the underlying ROIC, short-term variationsin property values more or less than the long-term mean are excluded. ROIC is defined as net operating profit less adjusted taxes (operating profitexcluding goodwill amortisation, exceptionals, property lease and depreciationcosts less tax at the Group's effective tax rate, plus property revaluation inthe year) divided by average invested capital (average holding in the year offixed and net current assets invested in the business, plus property operatinglease costs capitalised at the market property yield). Cashflow and investment in the businesses Net debt decreased from £843.8 million at the start of the year to £794.3million at the year end. A total of £689.5 million of net cash was generated from operating activitiescompared to £777.4 million in the previous year which included the cashflows ofKesa Electricals for the first five months of the year. Working capitalincreased during the year driven by a higher level of stock held reflectinggrowth in the number of stores, an increase in the level of fulfilment capacityand increasing the level of stock in January in anticipation of the earlierEaster in 2005. Capital expenditure for the Group was £407.4 million, up from£389.1 million in the previous year. A total of £20.5 million (2004: £819.2million) was received during the year in respect of the sale of tangible fixedassets. The prior year receipts included the proceeds of the disposal of theChartwell Land property portfolio. Financing In November 2004, a committed bank facility for £180 million was cancelled as itwas no longer required by the Group. At 29 January 2005, the Group had a £540million committed bank facility, maturing in February 2007. Since the year end,the Group has refinanced this facility, replacing it with a new committed bankrevolving credit facility totalling £500 million, provided by a number of banks.This facility provides committed funding on improved terms, and in additionhas extended the maturity to August 2010. The facility is available to be drawnto support the general corporate purposes of the Group. Investments, acquisitions and disposals There were no material acquisitions or disposals during the year. Property Property income (primarily rent charged to B&Q on UK properties owned byKingfisher) grew 28.2% to £41.4 million (2003/04: £32.3 million) reflectingrental inflation and some additional properties. Kingfisher owns a significant property portfolio, substantially all of which isnow used for trading purposes and which, at the year end, had a value of £2.4billion. Kingfisher has continued its normal practice of externally valuing (onan existing use basis) one-third of the property portfolio on a rolling basis,with internal valuations being performed for the other two-thirds. In bothcases, these revalued amounts have been incorporated into the accounts, givingrise to a revaluation surplus in the year of £175.8 million. Other Operating Costs Other operating costs (principally Group central costs) fell 21.9% to £36.1million (2003/04: £46.2 million) following last year's reorganisation of thecorporate offices in London and Lille. Interest The net interest charge from continuing operations for the year was £25.3million, down £8.3 million from the prior year. The current year interest chargehas benefited primarily from a lower average net debt during the year. Exceptional items Exceptional items are detailed in note 4 to the accounts. A charge of £17.7million has been incurred in respect of the outstanding unsecured workingcapital loan made in connection with the disposal of ProMarkt. The loan was dueto be repaid in January 2005, however due to difficult trading conditionsexperienced by ProMarkt, they were unable to repay the loan in full by thatdate. The term of the loan has been extended, however given the uncertaintysurrounding its recoverability, the remaining balance of the loan was fullyprovided against in the current year. Taxation The effective overall tax rate on profit has decreased from 46.3% in the prioryear to 30.0%. The high rate in the prior year was due to exceptional itemscharged not qualifying for tax relief. The effective tax rate on profit forcontinuing operations before exceptional items and acquisition goodwillexcluding prior year tax adjustments is 31.6%, consistent with the prior year. Pensions Kingfisher continues to account for pension costs on the basis of therequirements of SSAP 24 and provides the disclosures regarding the FRS 17valuation of Kingfisher's UK defined benefit pension scheme ("the Scheme") netassets and liabilities. At the start of the year, the FRS 17 valuation for theScheme showed a deficit, net of deferred tax, of £189 million. The KesaElectricals section of the Scheme was transferred to a new Kesa Pension Schemeduring the year resulting in a reduction in the deficit, net of deferred tax, of£44 million. However, this reduction was more than offset by the impact oflower assumed corporate bond rates and changes in financial and demographicassumptions. The revised deficit, net of deferred tax was £209 million at 29January 2005. Kingfisher, in consultation with the Trustees, has decided to make additionalcontributions to the Scheme (over and above the normal annual contributions)totalling £250m over the next three years. The additional funds will beinvested by the Scheme in assets designed to match its expected liabilityprofile. The funding will reduce Kingfisher's exposure to future funding riskswhile increasing pension scheme solvency. The initial financial impact of theseadditional contributions will be to reduce Kingfisher's pension deficit andreplace it with debt. Accounting changes There have been no new accounting standards adopted during the year ended 29January 2005. International Financial Reporting Standards Kingfisher will adopt International Financial Reporting Standards (IFRS) for thefinancial year ending 28 January 2006 and, as a result, has restated under IFRSthe financial information for the year ended 29 January 2005 which will form thecomparatives for next year's consolidated financial statements. Kingfisher haselected to defer the application of the financial instrument standards (IAS 32and IAS 39) until the financial year ending 28 January 2006 and therefore thereis no impact from the standards on the restated 2004/05 IFRS financialstatements. For the year ended 29 January 2005 the impact on profits from the adoption ofIFRS would be to reduce retail profit by less than 1% and profit after tax by3%, with an underlying reduction in profit after tax of 5% excluding afunctional currency benefit under IAS 21. Net assets would be reduced by 7% at1 February 2004 and by 11% at 21 January 2005 after the reversal of the propertyrevaluation uplift recorded under UK GAAP. A separate announcement detailing the impacts of IFRS and providing restatedprimary statements will be made on 17 March 2005. Consolidated profit and loss account For the financial year ended 29 January 2005 2005£ millions Notes Total Continuing Discontinued Total operations operations Turnover including share of joint ventures 7,755.5 7,177.4 1,756.3 8,933.7Less: share of joint ventures (99.9) (126.9) (8.2) (135.1) Group turnover 2 7,655.6 7,050.5 1,748.1 8,798.6 Group operating profit 3 685.3 585.1 50.1 635.2Share of operating profit in:Joint ventures 7.3 7.5 2.3 9.8Associates 20.2 16.1 2.4 18.5 Total operating profit including share ofjoint ventures and associates 712.8 608.7 54.8 663.5 Analysed as:Home Improvement 706.5 638.2 21.6 659.8Electrical and Furniture - - 38.9 38.9Property 41.4 32.3 - 32.3Other operating costs (36.1) (46.2) - (46.2)Exceptional items - operating 4 - (11.6) (3.5) (15.1)Acquisition goodwill amortisation (net) 1.0 (4.0) (2.2) (6.2) Total operating profit including share ofjoint ventures and associates 712.8 608.7 54.8 663.5 Exceptional items - non-operatingDemerger costs 4 - - (43.2) (43.2)Loss on the sale or termination of 4 (17.7) - (58.3) (58.3)operationsProfit on the disposal of fixed assets 4 1.1 2.0 - 2.0Exceptional amounts written off fixed asset 4 - (6.3) - (6.3)investmentsProfit/(loss) on ordinary activities before 696.2 604.4 (46.7) 557.7interest Net interest payable (excluding exceptional (25.3) (33.6) (10.5) (44.1)financing charges)Exceptional financing charges - - (86.9) (86.9)Net interest payable 5 (25.3) (33.6) (97.4) (131.0) Profit/(loss) on ordinary activities before 670.9 570.8 (144.1) 426.7taxation Tax on profit/(loss) on ordinary activities (201.4) (182.5) 8.4 (174.1)(excluding exceptional tax)Exceptional tax - 75.2 (98.5) (23.3)Tax on profit / (loss) on ordinary 6 (201.4) (107.3) (90.1) (197.4)activities Profit/(loss) on ordinary activities after 469.5 463.5 (234.2) 229.3taxationEquity minority interests (0.5) (0.2) 0.5 0.3Profit/(loss) for the financial year 469.0 463.3 (233.7) 229.6attributable to shareholdersDividendsOrdinary dividends on equity shares (246.5) (221.1)Dividend in specie relating to the demerger - (1,592.9)of Kesa ElectricalsRetained profit/(loss) for the financial 222.5 (1,584.4)year Earnings per share (pence) 7Basic 20.3 20.3 10.1Diluted 20.2 20.2 10.0Basic - adjusted 20.8 17.8 19.2Diluted - adjusted 20.6 17.7 19.1 The profit and loss account for the year ended 29 January 2005 relates entirelyto continuing operations. Consolidated balance sheet As at 29 January 2005 £ millions Note 2005 2005 2004 2004 Fixed assetsIntangible assets - goodwill 2,463.1 2,455.3Tangible assets 3,270.7 2,781.2Investments in joint ventures Share of gross assets 54.3 50.6 Share of gross liabilities (27.8) 26.5 (30.0) 20.6Investments in associates 131.8 125.1Other investments - 0.2Total investments 158.3 145.9 5,892.1 5,382.4Current assetsStocks 1,333.0 1,071.7Debtors due within one year 460.4 493.0Debtors due after more than one year 26.6 25.8Investments 9.4 23.8Cash at bank and in hand 152.7 144.2 1,982.1 1,758.5CreditorsAmounts falling due within one year (2,114.0) (1,925.2)Net current liabilities (131.9) (166.7)Total assets less current liabilities 5,760.2 5,215.7 CreditorsAmounts falling due after more than one year (773.3) (744.9) Provisions for liabilities and charges (62.7) (64.2) 4,924.2 4,406.6 Capital and reservesCalled up share capital 369.0 366.3Share premium account 2,166.2 2,150.9Revaluation reserve 611.7 441.3Non-distributable reserves 159.0 159.0Profit and loss account 1,615.6 1,286.2Equity shareholders' funds 8 4,921.5 4,403.7 Equity minority interests 2.7 2.9 4,924.2 4,406.6 Consolidated cash flow statement For the financial year ended 29 January 2005£ millions Note 2005 2004 Net cash inflow from operating activities 9 689.5 777.4 Dividends received from joint ventures and associates 2.3 2.4 Returns on investment and servicing of financeInterest received 25.2 26.5Interest paid (37.5) (82.4)Exceptional financing receipt/(payment) 23.9 (111.2)Interest element of finance lease rental payments (1.5) (2.7)Dividends paid by subsidiaries to minorities (0.7) -Net cash inflow/(outflow) from returns on investment and servicing of 9.4 (169.8)finance TaxationUK Corporation tax paid (67.9) (134.5)Overseas tax paid (99.4) (53.7)Exceptional tax paid - (98.5)Tax paid (167.3) (286.7) Capital expenditure and financial investmentPayments to acquire tangible fixed assets (407.4) (389.1)Receipts from the sale of tangible fixed assets 20.5 819.2Receipts from the sale of investments 0.4 -Net cash (outflow)/inflow from capital expenditure and financial investment (386.5) 430.1 Acquisitions and disposalsPurchase of subsidiary and business undertakings (0.4) (63.7)Sale of subsidiary and business undertakings 10.4 203.0Loan to former subsidiary net of repayment - (18.1)Purchase of associates and joint ventures (3.4) (1.8)Disposal of associates and joint ventures 4.8 0.6Non-operating demerger costs - (40.7)Cash disposed on sale of subsidiary undertakings - (27.3)Net cash inflow from acquisitions and disposals 11.4 52.0 Equity dividends paid to shareholders (204.8) (119.2)Net cash (outflow)/inflow before use of liquid resources and financing (46.0) 686.2 Management of liquid resourcesIncrease in short-term deposits (11.1) (41.4)Decrease/(increase) in short-term investments 12.3 (41.7)Net cash inflow/(outflow) from management of liquid resources 1.2 (83.1) FinancingIssue of ordinary share capital 18.0 2.7Capital element of finance lease rental payments (10.4) (11.6)Receipts from sale of own shares 14.0 17.6Increase/(decrease) in loans 93.3 (584.6)Net cash inflow/(outflow) from financing 114.9 (575.9) Increase in cash 70.1 27.2 Reconciliation of net cash flow to movement in net debt For the financial year ended 29 January 2005 £ millions 2005 2004 Net debt at start of year (843.8) (1,926.4)Increase in cash 70.1 27.2Debt demerged with Kesa Electricals - 423.0Increase in short-term deposits 11.1 41.4(Increase)/decrease in debt and lease financing (29.8) 597.7Amortisation of underwriting and issue costs of new debt - (1.5)(Decrease)/increase in short-term investments (12.3) 41.7Foreign exchange effects 10.4 (46.9)Net debt at end of year (794.3) (843.8) Consolidated statement of total recognised gains and losses For the financial year ended 29 January 2005 £ millions Note 2005 2004 Profit for the financial year 469.0 229.6Unrealised surplus on revaluation of properties 8 175.8 295.7Net foreign exchange adjustments offset in reserves 8 65.2 (15.1)Tax effect of exchange adjustments offset in reserves 8 (2.5) 23.4Total recognised gains relating to the financial year 707.5 533.6 Notes to the accounts 1. Basis of preparation The consolidated profit and loss account, consolidated balance sheet,consolidated cash flow statement, consolidated statement of total recognisedgains and losses and extracts from the notes to the accounts for 29 January 2005and 31 January 2004 do not constitute the Group's Annual Report & Accounts. Theauditors have reported on the Group's statutory accounts for each of the years2005 and 2004 under section 235 of the Companies Act 1985, which do not containstatements under sections 237 (2) or (3) of the Companies Act and areunqualified. The statutory accounts for 2004 have been delivered to theRegistrar of Companies and the statutory accounts for 2005 will be filed withthe Registrar in due course. Copies of the Annual Report & Accounts will beposted to shareholders during the week beginning 18 April 2004. The accounts for the year ended 29 January 2005 have been prepared using thesame accounting policies as were used in the preparation of the accounts for theyear ended 31 January 2004. 2. Turnover 2005 2004 Total Continuing Discontinued Total operations£ millions operations Home Improvement 7,649.6 7,038.2 436.2 7,474.4Electrical and Furniture - - 1,311.9 1,311.9Retail Sales 7,649.6 7,038.2 1,748.1 8,786.3Property 6.0 12.3 - 12.3 7,655.6 7,050.5 1,748.1 8,798.6 Property turnover comprises: Third party rentalincome 6.0 10.1 - 10.1 Property development - 2.2 - 2.2sales 6.0 12.3 - 12.3 3. Operating Profit 2005 2004 Total Continuing Discontinued Total operations£ millions operations Group turnover 7,655.6 7,050.5 1,748.1 8,798.6Cost of sales (4,783.3) (4,377.9) (1,183.1) (5,561.0)Gross profit 2,872.3 2,672.6 565.0 3,237.6Selling expenses (1,834.4) (1,750.0) (419.6) (2,169.6)Administrative expenses (363.4) (338.4) (110.0) (448.4)Exceptional items -operating (administrativeexpenses) - (11.6) (3.5) (15.1)Administrative expenses - (363.4) (350.0) (113.5) (463.5)totalOther income 10.8 12.5 18.2 30.7Group operating profit 685.3 585.1 50.1 635.2 4. Exceptional Items 2005 2004 Total Continuing Discontinued Total operations£ millions operations Operating exceptionals Demerger costs - (1.8) (3.5) (5.3) Group restructuring - (9.8) - (9.8)Total operating exceptionals - (11.6) (3.5) (15.1) Non-operating exceptionals Demerger costs - - (43.2) (43.2)Loss on the sale or termination of (17.7) - (58.3) (58.3)operations Disposal of fixed asset investments 0.9 1.3 - 1.3Profit on the disposal of properties 0.2 0.7 - 0.7Profit on the disposal of fixed assets 1.1 2.0 - 2.0Exceptional amounts written off fixed asset - (6.3) - (6.3)investmentsTotal non-operating exceptionals (16.6) (4.3) (101.5) (105.8) Exceptional financing charges (see note 5) - - (86.9) (86.9) Total exceptional items (16.6) (15.9) (191.9) (207.8) During the current year, the Group provided £17.7 million against the remainingbalance of the unsecured working capital loan advanced to the purchasers of theProMarkt business in the prior year as part of the disposal. In the prior year,ProMarkt was classified as discontinued operations. 5. Net interest payable£ millions 2005 2004 Interest payable 44.3 72.2Interest receivable (15.2) (25.2) 29.1 47.0 Interest capitalised (3.8) (2.9)Net interest payable (before exceptional financing charges) 25.3 44.1 Exceptional financing charges - 86.9Net interest payable 25.3 131.0 The share of net interest payable by joint ventures included above is £0.3million (2004: £0.4 million). The share of net interest payable by associates included above is £5.8 million(2004: £5.7 million). Interest payable includes amortisation of underwriting and issue costs of newdebt of £nil (2004: £1.5 million). The exceptional financing charges in 2004 of £86.9 million were charged todiscontinued operations. These costs related to the impacts from the demergerof Kesa Electricals. 6. Taxation 2005 2004 £ millions Total Continuing Discontinued Total operations operations UK Corporation taxCurrent tax on profits for the period 278.5 113.5 (27.5) 86.0Adjustments in respect of prior periods (6.1) (0.4) - (0.4) 272.4 113.1 (27.5) 85.6Double taxation relief (156.1) (9.5) - (9.5) 116.3 103.6 (27.5) 76.1Foreign taxCurrent tax on profits for the period 76.2 72.9 18.1 91.0Adjustments in respect of prior periods (2.0) 4.2 - 4.2 74.2 77.1 18.1 95.2 Exceptional tax - UK - (75.2) - (75.2)Exceptional tax - overseas - - 98.5 98.5Deferred tax - current year 5.9 1.0 - 1.0Deferred tax - adjustments in respect of (1.8) (4.7) - (4.7)prior periodsAssociated undertakings 5.7 3.6 0.8 4.4Joint ventures 1.1 1.9 0.2 2.1 201.4 107.3 90.1 197.4 7. Earnings per share Earnings per share for continuing operations is presented in order to provide amore meaningful comparison. The calculation of basic earnings per share for continuing operations is basedon the profit on ordinary activities, after taxation and minority interests ofRelated Shares:
Kingfisher