Preliminary Results Part 2

The proposed final dividend for the year ended 31 January 2015, subject to approval by shareholders at the Annual General Meeting, is 6.85p per share.

The financial statements were approved by the Board of Directors on 30 March 2015 and signed on its behalf by:

Véronique Laury Karen Witts

Chief Executive Officer Chief Financial Officer

Notes

1 General information

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

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

The Company is listed on the London Stock Exchange.

2 Basis of preparation

The consolidated financial statements of the Company, its subsidiaries, joint ventures and associates are made up to the nearest Saturday to 31 January each year. The current financial year is the 52 weeks ended 31 January 2015 ('the year' or '2014/15'). The comparative financial year is the 52 weeks ended 1 February 2014 ('the prior year' or '2013/14').

The directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the year ended 31 January 2015.

The condensed financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and related notes do not constitute statutory financial statements for the 52 weeks ended 31 January 2015, but are derived from those statements. Statutory financial statements for 2013/14 have been filed with the Registrar of Companies and those for 2014/15 will be filed in due course. The Group's auditors have reported on both years' accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006. 

The condensed financial information has been abridged from the 2014/15 statutory financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS and therefore the consolidated financial statements comply with Article 4 of the EU IAS legislation. The consolidated income statement and related notes represent results for continuing operations, there being no discontinued operations in the periods presented. The condensed financial information has been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and post-employment benefits.

Accounting policies

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

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

Principal rates of exchange

Use of non-GAAP measures

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

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

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

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

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

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

The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). 2013/14 comparatives have been restated to exclude the share of Hornbach results. Financing fair value remeasurements represent changes in the fair value of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying amount of borrowings and other hedged items under fair value hedge relationships. Financing derivatives are those that relate to underlying items of a financing nature.

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

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

Prior year restatement

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

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

3 Segmental analysis

Income statement

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

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

Central costs principally comprise the costs of the Group's head office.

4 Exceptional items

Current year exceptional items include a £17m restructuring charge in the UK relating to the transformation of B&Q, driven by productivity initiatives aimed at delivering a simpler, more efficient business with a lower cost operating model.

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

Current year transaction costs of £15m have been incurred, including costs relating to Mr Bricolage and the agreement to sell a controlling stake in the B&Q China business (2013/14: £5m principally related to Bricostore Romania).

There is a net charge of £3m relating to the disposal of properties and impairment of non-operational assets (2013/14: £2m profit).

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

The current year exceptional tax credit of £106m includes the tax impact on exceptional items and the release of prior year provisions, which have either been agreed with the tax authorities, reassessed, or time expired.

In the prior year there was an exceptional tax credit of £114m, which included £118m taxation provision releases related to the successful resolution of the Kesa demerger French tax case. A £27m repayment supplement provision release was also recognised in relation to this case.

5 Net finance (costs)/income

6 Income tax expense

The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 27% (2013/14: 26%). Exceptional tax items for the year amount to a credit of £106m, £95m of which relates to prior year items. In 2013/14 exceptional tax items amounted to a credit of £114m, with £118m relating to prior year items.

7 Earnings per share

Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders of the Company by the weighted average number of shares in issue during the year, excluding those held in the Employee Share Ownership Plan Trust ('ESOP') which for the purpose of this calculation are treated as cancelled.

For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where both the exercise price is less than the average market price of the Company's shares during the year and any related performance conditions have been met.

8 Dividends

The proposed final dividend for the year ended 31 January 2015 of 6.85p per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability.

 9 Post-employment benefits

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.

A key assumption in valuing the pension obligations 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 to that of the scheme liabilities. The principal financial assumptions for the UK scheme are as follows:

For the UK scheme, the mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics and experience of the membership of the scheme from 2010 to 2013. The assumptions for life expectancy of UK scheme members are as follows:

The following sensitivity analysis for the UK scheme shows the estimated impact on the obligation resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.

10 Cash generated by operations

11 Net cash

12 Acquisitions and disposals

On 23 July 2014 Kingfisher entered into a binding agreement with the principal shareholders of Mr Bricolage to acquire their shareholdings subject to satisfactory French anti-trust clearance. This agreement made provision that it would lapse if the anti-trust clearance was not obtained by 31 March 2015 and an extension was not agreed by all parties. Subsequent to the balance sheet date, it has become clear that the anti-trust clearance will not be obtained by 31 March 2015 and therefore the July 2014 agreement will lapse on that date. Consequently the transaction will not proceed.

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

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

On 22 December 2014, Kingfisher announced a binding agreement to sell a controlling 70% stake in its B&Q China business to Wumei Holdings Inc for a total cash consideration of £140 million. The agreement followed Kingfisher's previous announcement of its plans to look for a strategic partner to help develop its B&Q business in China. The transaction is conditional on MOFCOM (Chinese Ministry of Commerce) approval and, if approved, is expected to close during the first half of Kingfisher's 2015/16 financial year. On completion, a £12m deposit received in the current year would be repaid. As part of the terms of the transaction, Kingfisher would have the option following the second anniversary of the completion of the transaction, or sooner where agreed by both parties, to sell the remaining 30% economic interest to Wumei Holdings Inc for a fixed price of the Sterling equivalent of RMB 582m (£62m at year end exchange rate).

Following the announcement the B&Q China business' assets and liabilities were classified as a disposal group held for sale.