Interim Results - Part 2

Group income statement (unaudited)

Six months ended 31 October 2008

Six months

ended 31

October 2008 

(unaudited)

Six months

ended 31 

October 2007 

(unaudited)

15 months 

ended 30 April 2008 (audited)

Six months

ended 31

October 2008 (unaudited)

Note

£m

£m

£m

€m(1)

Revenue

2

2,180.8

1,962.2

5,356.6

2,753.0

Group operating (loss)/profit

2

(104.9)

42.6

134.1

(132.4)

Share of post tax profit in joint venture and associates

2

3.2

2.9

6.9

4.0

Total operating (loss)/profit

(101.7)

45.5

141.0

(128.4)

Analysed as:

Retail profit (2)

3

13.0

45.1

143.2

16.4

Share of joint venture and associates interest and taxation

3

(0.3)

(0.1)

(0.6)

(0.4)

Valuation gains/(losses)

3

-

0.5

(0.6)

-

Amortisation and impairment of acquisition related intangible assets

8

(114.4)

-

(1.0)

(144.4)

Total operating (loss)/profit

(101.7)

45.5

141.0

(128.4)

Finance costs

(5.2)

(8.6)

(23.5)

(6.5)

Finance income

3.1

3.6

10.4

3.9

(Loss)/profit before income tax

(103.8)

40.5

127.9

(131.0)

UK taxation

6.9

4.1

0.6

8.7

Overseas taxation

(6.3)

(16.2)

(45.6)

(7.9)

Total Taxation

0.6

(12.1)

(45.0)

0.8

(Loss)/profit for the financial period from continuing operations

(103.2)

28.4

82.9

(130.2)

Profit for the financial period from discontinued operations

2.7

11.2

36.7

3.3

(Loss)/profit for the financial period

(100.5)

39.6

119.6

(126.9)

(Loss)/profit attributable to:

- Equity shareholders

(99.9)

40.0

120.2

(126.1)

- Minority interests

(0.6)

(0.4)

 (0.6) 

(0.8)

(100.5)

39.6

119.6

(126.9)

(Loss)/earnings per share - basic and diluted (pence)

Continuing operations

(19.4)

5.5

15.8

(24.5)

Discontinued operations

0.5

2.1

6.9

0.6

Total (loss)/earnings per share 

6

(18.9)

7.6

22.7

(23.9)

Earnings per share - adjusted (pence)

Continuing operations

2.2

5.4

16.1

2.8

Discontinued operations

0.5

2.1

6.9

0.6

Total adjusted earnings per share

6

2.7

7.5

23.0

3.4

Notes

1) Income statement information in euros is provided for illustrative purposes only and is translated at the average exchange rate of €1.2624 for £1.

2) Retail profit represents total operating profit before the share of joint venture and associates' interest and taxation, valuation gains and losses on options to acquire minority interests and amortisation and impairment of acquisition related intangible assets. 

3) Adjusted earnings per share excludes the effects of valuation gains and losses on options to acquire minority interests and amortisation and impairment of acquisition related intangible assets (Note 6).

Group statement of recognised income and expense (unaudited)

Six months ended 31 October 2008

 Six months

ended 31 

October 2008 

(unaudited)

Six months

ended 31 

October 

2007 

(unaudited)

15 months

ended 30 April

2008 (audited)

Six months

ended 3 

October 2008 

(unaudited)

Note

£m

£m

£m

€m(1)

Exchange differences

14

(0.6)

7.3

49.0

(0.8)

Foreign exchange recycled to income statement on disposal of foreign operations

-

-

(59.4)

-

Actuarial gains on retirement benefit obligations

15.7

10.1

6.1

19.7

Tax on actuarial gains on retirement benefit obligations

(4.5)

(4.2)

(3.1)

(5.7)

Available for sale assets - fair value losses net of tax

14

(8.7)

(1.2)

(5.2)

(11.0)

Cash flow hedges - fair value gains/(losses) net of tax

14

2.2

(0.8)

-

2.8

- recycled and reported in net profit

-

-

0.2

-

Tax on employee share schemes

13

(0.1)

(0.1)

-

(0.1)

Net profit/(loss) recognised directly in equity

4.0

11.1

(12.4)

4.9

(Loss)/profit for the period

3

(100.5)

39.6

119.6

(126.9)

Total recognised (expense)/income for the period

(96.5)

50.7

107.2

(122.0)

Attributable to:

- Equity shareholders

(95.9)

51.1

107.8

(121.2)

- Minority interests

(0.6)

(0.4)

(0.6) 

(0.8)

Total recognised (expense)/income for the period

(96.5)

50.7

107.2

(122.0)

Note

1) Statement of recognised income and expense information in euros is provided for illustrative purposes only and is translated at the average exchange rate of €1.2624 for £1.

Group balance sheet (unaudited)

As at 31 October 2008 

31 October 2008 

(unaudited)

31 October 2007 

(unaudited)

30 April 

2008 

(audited)

31 October 2008 

(unaudited)

Note

£m

£m

£m

€m(1)

Assets

Non-current assets

Intangible assets

9

96.0

339.8

205.3

122.3

Property, plant and equipment

10

487.2

575.7

460.7

620.8

Available for sale financial assets

8.5

22.0

17.3

10.9

Investments in joint venture and associates

18.4

48.4

16.8

23.5

Other receivables

11.7

14.4

11.7

14.8

Derivative financial instruments

-

4.4

-

-

Deferred income tax assets

23.3

20.5

43.6

29.7

Total non-current assets

645.1

1,025.2

755.4

822.0

Current assets

Inventories

744.9

858.1

660.6

949.2

Trade and other receivables

313.8

328.7

270.1

399.9

Income tax

26.8

23.3

8.2

34.1

Other investments

41.7

62.8

45.1

53.1

Derivative financial instruments

3.4

0.7

0.1

4.3

Cash and cash equivalents

11

123.6

97.1

64.1

157.5

Total current assets

1,254.2

1,370.7

1,048.2

1,598.1

Total assets

1,899.3

2,395.9

1,803.6

2,420.1

Liabilities

Current liabilities

Borrowings

(2.7)

(25.7)

(4.5)

(3.4)

Income tax liabilities

(10.8)

(11.1)

(10.7)

(13.7)

Trade and other payables

(1,081.9)

(1,135.8)

(904.8)

(1,378.6)

Derivative financial instruments

-

(1.3)

(0.3)

-

Provisions

(1.7)

(1.0)

(1.7)

(2.2)

Total current liabilities

(1,097.1)

(1,174.9)

(922.0)

(1,397.9)

Non-current liabilities

Borrowings

(154.4)

(444.2)

(54.4)

(196.7)

Other payables

(312.1)

(276.0)

(308.5)

(397.7)

Deferred income tax liabilities

(49.1)

(45.9)

(41.7)

(62.6)

Retirement benefits

19

(58.7)

(69.6)

(75.9)

(74.8)

Provisions

(0.7)

(0.7)

(1.4)

(0.9)

Total non-current liabilities

(575.0)

(836.4)

(481.9)

(732.7)

Total liabilities

(1,672.1)

(2,011.3)

(1,403.9)

(2,130.6)

Net assets

227.2

384.6

399.7

289.5

31 October 2008 

(unaudited)

31 October 2007

 (unaudited)

30 April 

2008

 (audited)

31 October 2008 

(unaudited)

Note

£m

£m

£m

€m(1)

Equity

Share capital

12

132.4

132.4

132.4

168.7

Other reserves

14

717.3

750.6

724.4

914.0

Retained earnings

13

(621.2)

(500.3)

(456.6)

(791.5)

Total equity shareholders' funds

15

228.5

382.7

400.2

291.2

Minority interests

(1.3)

1.9

(0.5)

(1.7)

Total equity

227.2

384.6

399.7

289.5

Notes

1) Balance sheet information in euros is provided for illustrative purposes only and is translated at the closing exchange rate of €1.2742 for £1.

Approved by the Board of Directors on 16 December 2008 and signed on its behalf by:

Jean-Noel Labroue 

Simon Herrick

Director

Director

Group cash flow statement (unaudited)

Six months ended 31 October 2008

Six months ended 31

October 2008

 (unaudited)

Six months ended 31 October

2007 

(unaudited)

15 months 

ended 30 

April 

2008 

(audited)

Six months ended 31

October 2008 

(unaudited)

Note

£m

£m

£m

€m(1)

Cash flows from operating activities

Cash generated from operations

16

122.3

167.6

186.4

154.4

Interest paid

(6.7)

(10.6)

(31.6)

(8.5)

Tax paid

(8.4)

(19.1)

(55.7)

(10.6)

Net cash flows from operating activities

107.2

137.9

99.1

135.3

Cash flows from investing activities

Acquisition of subsidiaries, net of cash acquired

-

(94.4)

(114.2)

-

Proceeds from sale of subsidiary, net of cash disposed

-

-

385.7

-

Proceeds from sale of property, plant and equipment

2.1

3.4

13.7

2.7

Purchase of property, plant and equipment

(62.0)

(52.1)

(122.3)

(78.3)

Purchase of available for sale investments

-

(0.7)

(0.6)

-

Purchase of intangible assets

(15.0)

(18.3)

(34.1)

(18.9)

Cash inflow from other current investments

3.4

7.0

27.3

4.3

Interest received

0.7

3.4

11.1

0.9

Dividends received from joint venture

1.6

5.3

8.6

2.0

Net cash (used in)/from investing activities

(69.2)

(146.4)

175.2

(87.3)

Cash flows from financing activities

Net proceeds from/(net repayment of) borrowings

102.2

161.5

(166.5)

129.0

Dividends paid to shareholders

(76.3)

(53.2)

(71.7)

(96.3)

Dividends paid to minority interests

-

(0.5)

(0.5)

-

Net cash generated/(used) in financing activities

25.9

107.8

(238.7)

32.7

Net cash inflow from cash, cash equivalents and bank overdrafts

17

63.9

99.3

35.6

80.7

Effects of exchange rate changes

17

(2.6)

1.3

(35.8)

(3.3)

Net increase/(decrease) in cash, cash equivalents and bank overdrafts

61.3

100.6

(0.2)

77.4

Cash, cash equivalents and bank overdrafts at start of period

17

59.6

(25.0)

59.8

75.2

Cash, cash equivalents and bank overdrafts at end of period

17

120.9

75.6

59.6

152.6

Notes

Notes to the financial statements

Six months ended 31 October 2008

1 Accounting policies (unaudited)

Basis of preparation

The financial information set out on pages 10 to 28 comprises the condensed consolidated financial statements of Kesa Electricals plc for the six months ended 31 October 2008. They have been prepared in accordance with Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 Interim Financial Reporting as adopted by the European Union. They have been prepared in accordance with IFRSs as adopted by the European Union and, except as described below, the accounting policies set out in the 2007/8 Annual report approved on 24 June 2008 and should be read in conjunction with those consolidated financial statements. 

Exceptional items

The Group defines exceptional items as those non-recurring items which by their nature or size would distort the comparability of the Group's result from year to year.

The interim condensed consolidated financial statements comprise the Company and its subsidiary undertakings (together referred to as the "Group") and the Group's interests in associated undertakings and joint ventures.

In preparing the consolidated financial statements, the following restatements have been made to the comparative amounts:

In accordance with IFRS 5, prior period income statement comparatives have been restated so as to report BUT as a discontinued operation.

In accordance with the change to the new financial year ended 30 April 2008, the six month comparative figures have been changed from 31 July 2007 to 31 October 2007.

The interim report is unaudited, but has been reviewed by the auditors whose report is set out on page XX. It does not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985. The comparative figures for the 15 months ended 30 April 2008 are derived from the statutory accounts filed with the Registrar of Companies. The audit report on the Annual report 2007/08 was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985.

Use of adjusted measures

Kesa Electricals plc believes that Retail Profit and adjusted earnings per share provide additional useful information on underlying trends and business performance to shareholders. Retail Profit represents total operating profit before the share of joint venture and associates' interest and taxation, valuation gains and losses on options to acquire minority interests and amortisation and impairment of acquisition related intangible assets. These measures are used by the Group for internal performance analysis and incentive compensation arrangements for employees. The term Retail Profit is not defined by IFRSs and may therefore not be comparable with similarly titled profit measures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measurements of profit.

Notes to the financial statements

Six months ended 31 October 2008

1 Accounting policies (unaudited) continued

Principal rates of exchange

Euro

Czech Kr

Average rate - six months to 31 October 2008

1.2624

30.8168

Closing rate - 31 October 2008

1.2742

30.7050

Average rate - six months to 31 October 2007

1.4658

41.3408

Closing rate - 31 October 2007

1.4359

39.4626

Average rate - 15 months ended 30 April 2008

1.4165

39.1624

Closing rate - 30 April 2008

1.2721

32.1170

2 Group operating loss (unaudited)

Six months

ended 31 October 2008

Six months

ended 31 October

2007

15 months ended

30

 April 2008

£m

£m

£m

Revenue

2,180.8

1,962.2

5,356.6

Cost of sales

(1,570.0)

(1,408.7)

(3,857.0)

Gross profit

610.8

553.5

1,499.6

Distribution costs

(100.7)

(87.9)

(230.2)

Selling expenses 

(396.8)

(354.5)

(934.0)

Administrative expenses 

(108.8)

(73.8)

(213.3)

Other income

5.0

5.3

13.0

Amortisation and impairment of acquisition related intangible assets

(114.4)

-

(1.0)

Group operating (loss)/profit

(104.9)

42.6

134.1

Share of post tax profit in joint venture and associates

3.2

2.9

6.9

Total operating (loss)/profit

(101.7)

45.5

141.0

Group operating loss includes net premiums on exit from leased premises of £1.7m (31 October 2007: £1.9m, 30 April 2008: £5.6m) and property, plant and equipment disposal gains of £0.8m (31 October 2007: £2.0m, 30 April 2008: £4.1m).

Total revenue includes revenue from services of £144.6m (31 October 2007: £111.3m, 30 April 2008: £298.8m). Such revenues predominantly comprise those relating to customer support agreements, delivery and installation, product repairs and product support.

The amount of inventory written off and charged to the income statement for the period was £11.3m (31 October 2007 £14.8m, 30 April 2008 £33.8m).

Notes to the financial statements

Six months ended 31 October 2008

3 Segmental analysis 

(unaudited)

At 31 October 2008, 31 October 2007 and 30 April 2008, the Continuing Group was organised into three business segments, as follows: 

- Darty; 

- Comet; and 

- Other (includes BCC, Vanden Borre, Datart, Darty Italy, Darty Switzerland, Darty Turkey and Menaje del Hogar).

France

UK

Other

Central

Continuing

Discontinued

 Group

Darty

Comet

Costs

Group

operations

Six months ended 31 October 2008

£m

£m

£m

£m

£m

£m

£m

Revenue

1,010.5

723.3

447.0

-

2,180.8

-

2,180.8

Retail profit/(loss)

40.1

(8.1)

(12.0)

(7.0)

13.0

-

13.0

Share of joint venture and associates interest and taxation

(0.3)

-

-

-

(0.3)

-

(0.3)

39.8

(8.1)

(12.0)

(7.0)

12.7

-

12.7

Amortisation and impairment of acquisition related intangible assets

-

-

(114.4)

-

(114.4)

-

(114.4)

Operating profit/(loss)

39.8

(8.1)

(126.4)

(7.0)

(101.7)

-

(101.7)

Finance costs

(5.2)

-

(5.2)

Finance income

3.1

-

3.1

Finance costs - net

(2.1)

-

(2.1)

Loss before income tax

(103.8)

-

(103.8)

Income tax credit

0.6

-

0.6

Pre-tax profit on disposal

-

2.7

2.7

(Loss)/profit for the period

(103.2)

2.7

(100.5)

The share of operating profits of the joint venture and associates included within the retail profit for Darty is £3.5m. The share of post tax profits of the joint venture and associates included within the operating profit for Darty is £3.2m.

France

UK

Other

Central

Continuing

Discontinued

 Group

Darty

Comet

Costs

Group

operations

Six months ended 31 October 2007

£m

£m

£m

£m

£m

£m

£m

Revenue

876.2

785.4

300.6

-

1,962.2

307.5

2,269.7

Retail profit/(loss)

43.4

10.6

(2.9)

(6.0)

45.1

20.3

65.4

Share of joint venture and associates interest and taxation

(0.2)

-

0.1

-

(0.1)

(1.4)

(1.5)

Valuation gains/(losses)

-

-

-

0.5

0.5

(0.6)

(0.1)

43.2

10.6

(2.8)

(5.5)

45.5

18.3

63.8

Amortisation and impairment of acquisition related intangible assets

-

-

-

-

-

-

-

Operating profit/(loss)

43.2

10.6

(2.8)

(5.5)

45.5

18.3

63.8

Finance costs

(8.6)

(1.2)

(9.8)

Finance income

3.6

0.2

3.8

Finance costs - net

(5.0)

(1.0)

(6.0)

Profit before income tax

40.5

17.3

57.8

Income tax expense

(12.1)

(6.1)

(18.2)

Profit for the period

28.4

11.2

39.6

France

UK

Other

Central

Continuing

Discontinued

 Group

Darty

Comet

Costs

Group

operations

15 months ended 30 April 2008

£m

£m

£m

£m

£m

£m

£m

Revenue

2,371.0

2,086.7

898.9

-

5,356.6

782.8

6,139.4

Retail profit/(loss)

121.9

40.4

(4.3)

(14.8)

143.2

56.7

199.9

Share of joint venture and associates interest and taxation

(0.6)

-

-

-

(0.6)

(3.7)

(4.3)

Valuation gains/(losses)

-

-

-

(0.6)

(0.6)

-

(0.6)

121.3

40.4

(4.3)

(15.4)

142.0

53.0

195.0

Amortisation and impairment of acquisition related intangible assets

-

-

(0.9)

(0.1)

(1.0)

-

(1.0)

Operating profit/(loss)

121.3

40.4

(5.2)

(15.5)

141.0

53.0

194.0

Finance costs

(23.5)

(2.8)

(26.3)

Finance income

10.4

1.0

11.4

Finance costs - net

(13.1)

(1.8)

(14.9)

Profit before income tax

127.9

51.2

179.1

Income tax expense

(45.0)

(17.4)

(62.4)

Taxation credit arising on the sale of discontinued operations

-

1.8

1.8

Pre-tax profit on disposal

-

1.1

1.1

Profit for the period

82.9

36.7

119.6

The share of operating profits of the joint venture and associates included within the retail profit for Darty and discontinued operations are £7.5m and £10.6m respectively. The share of post tax profits of the joint venture and associates included within the operating profit for Darty and discontinued operations are £6.9m and £6.9m respectively.

4 Results for the period (unaudited)

The revenue from sales of electrical products plus associated services are subject to some seasonal fluctuations, with peak demand around the Christmas and New Year periods in the third quarter of the new financial year. The total revenue for the Group for the six months to 31 October 2008 represented 48 per cent (six months ended 31 October 2007 : 43 per cent) of the total annual revenue in the 12 months ended 30 April 2008.

5 Dividends (unaudited)

Six months ended 31 October

2008

Six months ended 31 October

2007

15 months

ended 30 April 2008

£m

£m

£m

Final paid 2008: 3.60 pence (2007: 10.05 pence) per share

19.1

53.2

53.2

Interim paid 

57.2

-

18.5

76.3

53.2

71.7

6 Earnings per share (unaudited)

Basic earnings per share is calculated by dividing the earnings attributable to shareholders by 529.1m shares (31 October 2007: 529.3m and 30 April 2008: 529.3m), being the weighted average number of ordinary shares in issue. 

There is no difference between diluted and basic earnings per share. Supplementary adjusted earnings per share

figures are presented. These exclude the effects of valuation gains and losses on options to acquire minority interests and amortisation and impairment of acquisition related intangible assets. 

Six months ended  31 October 2008

Six months ended  31 October 2007

15 months ended 30 April 2008

Per share

Per share

Per share

Earnings

amount

Earnings

amount

Earnings

amount

£m

pence

£m

pence

£m

pence

Basic (loss)/earnings per share

(Loss)/earnings attributable to ordinary shareholders

(99.9)

(18.9)

40.0

7.6

120.2

22.7

Adjustments

Valuation gains/(losses)

-

-

(0.5)

(0.1)

0.6

0.1

Amortisation and impairment of acquisition related intangible assets

114.4

21.6

-

-

1.0

0.2

Total adjusted earnings per share

14.5

2.7

39.5

7.5

121.8

23.0

Six months ended  31 October 2008

Six months ended  31 October 2007

15 months ended  30 April 2008

Per share

Per share

Per share

Earnings

amount

Earnings

Amount

Earnings

amount

£m

pence

£m

Pence

£m

pence

(Loss)/earnings per share

Continuing operations

(102.6)

(19.4)

29.1

5.5

83.6

15.8

Discontinued operations

2.7

0.5

10.9

2.1

36.6

6.9

Total for the period

(99.9)

(18.9)

40.0

7.6

120.2

22.7

7 Discontinued Operations (unaudited)

Six months

ended 31 October 2008

£m

Other income

2.7

Pre-tax profit on disposal

2.7

Taxation charge arising on the sale of discontinued operations

-

Total profit for the period from discontinued operations

2.7

On 31 March 2008 the sale of the Group's French furniture and electrical retailing business BUT was completed. In accordance with IFRS 5 the business was treated as a discontinued operation in the 30 April 2008 Annual Report and the results of BUT were excluded from the results of the Continuing Group.

Transaction costs and other expenses were accrued in the calculation of pre-tax profit on disposal presented in the 30 April 2008 Annual report. Some of the accrued amount has not been utilised and therefore has been written back to the pre-tax profit on disposal in this half year.

8 Exceptional Items (unaudited) 

Six months

ended 31 October 2008

£m

Impairment of goodwill and intangible assets

(114.4)

Exceptional loss for the period

(114.4)

Goodwill

Management has interpreted the recent retail downturn in Spain as an external indicator of impairment. Therefore under IAS 34, Interim Financial Reporting, an impairment review has been undertaken on the assets of Menaje del Hogar. This has been performed in accordance with IAS 36, Impairment of Assets.

Goodwill is allocated to cash generating units and tested for impairment based on value in use. Cash generating units are independent sources of income and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes, which is at a country level.

The key assumptions used for the value in use calculations are the discount rates, growth rates and expected changes to selling prices and costs. Management have estimated the discount rate with regard to the specific risks inherent within the Group's retail businesses. Changes in selling prices and direct costs are based on past experience and have been adjusted for expected changes in future conditions. The calculations are based on future operating cash flows derived using management's latest five-year forecasts. Cash flows are extrapolated using estimated long term growth rates.

The key assumptions used in the value in use calculations for Menaje del Hogar (EMH) are as follows:

Long term growth rate of 2.70%. This rate is consistent with Spain's forecast real GDP growth in 2013.

Pre-tax discount rate of 9.72%.

As a result of the impairment review an impairment of £114.4m has been recognised against the carrying value of Menaje del Hogar's intangible assets.

9 Intangible Assets (unaudited)

Goodwill

£m

Software

£m

Other intangibles

£m

Total

£m

Opening net book amount at 1 May 2008

120.7

43.4

41.2

205.3

Final adjustment to provisional goodwill on acquisition

0.8

-

-

0.8

Additions

-

9.4

5.7

15.1

Disposals

-

-

(0.1)

(0.1)

Impairment 

(102.6)

-

(11.8)

(114.4)

Amortisation and other movements

-

(6.8)

(3.9)

(10.7)

Closing net book amount at 31 October 2008

18.9

46.0

31.1

96.0

Goodwill

£m

Software

£m

Other intangibles

£m

Total

£m

Opening net book amount at 1 May 2007

188.7

20.5

14.2

223.4

Additions

111.6

7.4

13.6

132.6

Amortisation, impairment and other movements

(12.6)

(1.8)

(1.8)

(16.2)

Closing net book amount at 31 October 2007

287.7

26.1

26.0

339.8

In accordance with IFRS 3 'Business Combinations', goodwill on the acquisition of Menaje del Hogar, provisionally determined in the 30 April 2008 Annual report, has been adjusted. The adjustments were made to account for final amendments to the fair values of assets and liabilities acquired in September 2007.

Based on value in use calculations the carrying value of Menaje del Hogar's goodwill of £102.6m and other intangible assets of £11.8m is impaired and an exceptional pre-tax charge of £114.4m has been recognised, as set out with the value in use assumptions in note 8.

Notes to the financial statements

Six months ended 31 October 2008

10 Property, plant and equipment (unaudited) 

£m

Opening net book amount at 1 May 2008

460.7

Additions