Preliminary Results Part 2

The proposed final dividend for the year ended 1 February 2014, subject to approval by shareholders at the Annual General Meeting, is 6.78p per share.

The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:

Sir Ian Cheshire Karen Witts

Group Chief Executive Group Finance Director

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 1 February 2014 ('the year' or '2013/14'). The comparative financial year is the 53 weeks ended 2 February 2013 ('the prior year' or '2012/13'). The 53 weeks in the prior year only impacted the UK & Ireland businesses with all of the other businesses reporting on a calendar basis as a result of local requirements.

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 1 February 2014.

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 1 February 2014, but are derived from those statements. Statutory financial statements for 2012/13 have been filed with the Registrar of Companies and those for 2013/14 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 2013/14 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 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 2 February 2013, as described in note 2 of those financial statements, except where set out below.

IAS 19 (revised), 'Employee benefits', amends the accounting for employment benefits and the Group has applied it retrospectively in accordance with the transition provisions of the standard. The impact on the Group has been in the following areas:

· The standard replaces the interest cost on the defined benefit obligation and the expected return on plan assets with a single net interest expense or income based on the net defined benefit asset or liability and the discount rate, measured at the beginning of the year. There is no change to determining the discount rate; this continues to reflect the yield on high-quality corporate bonds. For the current and comparative year, the Group's reported profit before taxation was not impacted as the expected rate of return on assets at the start of the current and prior year was the same as the discount rate for the UK scheme, the Group's principal defined benefit pension plan.

· The revised standard also requires administrative costs of running the UK scheme to be reclassified from net finance costs to operating costs. For the current year the Group's reported operating profit is £3m lower and net finance income £3m higher than they would have been prior to the adoption of IAS 19 (revised). For the year ended 2 February 2013 the Group's reported operating profit is £3m lower and net finance costs £3m lower than previously reported.

The amendments to IAS 1, 'Presentation of items of other comprehensive income', require items presented in 'other comprehensive income' to be grouped by those items that may be reclassified subsequently to profit or loss and those that will never be reclassified, together with their associated income tax. The amendments have been applied retrospectively and the presentation of items of comprehensive income has been adjusted accordingly.

IFRS 13, 'Fair value measurement', has impacted the measurement of fair value for certain financial assets and liabilities.

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 post-tax profit 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.

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

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

· profits and losses on the disposal of properties; and

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

The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). 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 current other investments.

3 Segmental analysis

Income statement

The current financial year is the 52 weeks ended 1 February 2014 with the comparative financial year being the 53 weeks ended 2 February 2013. This only impacts the UK & Ireland businesses with all of the other businesses reporting on a calendar basis as a result of local requirements. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional £72m sales and an immaterial benefit to retail profit.

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, Spain, Russia, Romania, the associate Hornbach 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

Acquisition and integration costs of £5m principally comprise costs of acquiring and integrating the Bricostore Romania business.

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

A net impairment loss of £14m has been recognised in the year on the Group's investment in Hornbach. This comprises a loss of £45m on remeasurement of the investment to fair value, following the Group's conclusion that it had lost the ability to exercise significant influence, offset by a £31m gain on the transfer from reserves of cumulative foreign exchange gains since transition to IFRS.

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

5 Net finance income/(costs)

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 26% (2012/13: 27%). Tax on exceptional items for the year is a credit of £114m, £118m of which relates to prior year items. In 2012/13 tax on exceptional items was a credit of £1m, with no amount 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 1 February 2014 of 6.78p 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 based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference in term between iBoxx and scheme liabilities. The principal financial assumptions for the UK scheme 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 Post balance sheet events

On 24 March 2014 Kingfisher agreed to sell all the shares it holds in Hornbach Holding AG and Hornbach-Baumarkt AG which together formed its 21.2% stake in Hornbach for approximately £195m.