Wednesday 14 March 2001 Preliminary results for 53 weeks ended 3 February 2001 As restated 2001 2000 Change m m Group Turnover 12,134.2 10,885.0 +11.5% Retail Profit 723.2 744.0-2.8% Profit Before Tax, exceptional items and goodwill amortisation * 605.8 720.6-15.9% Exceptional Items 103.3 2.7 Profit Before Tax* 691.2 712.8-3.0% Capital investment 942.7 816.8 +15.4% Net debt 1,873.8 1,020.8 +83.6% Gearing 52.7% 33.4% Earnings per share (p): Basic 30.3p 30.1p +0.7% Adjusted: - before exceptional items, goodwill amortisation, and estimated LibertySurf losses 27.4p 31.3p -12.5% Dividends (per share) (p) 15.5p 14.5p +6.9% * Profits before tax are stated after deducting 17.8 million of charges in respect of an accounting policy change for FRS 15 property depreciation (2000: no prior year adjustment) and 15.6 million of charges in respect of an accounting policy change for UITF 24 pre-opening costs (as restated 2000: 13.4 million).
A YEAR OF STRATEGIC TRANSITION Kingfisher, the European retailer, today announced record sales of 12.1 billion, an increase of 11%. A number of the Group s businesses achieved record profits. However profit before tax, exceptional items and goodwill amortisation fell 16% to 606 million. This reflected disappointing figures from Woolworths and ProMarkt, together 50 million lower than last year, and a number of non-trading factors which had a 70 million impact. Revenue investment was at a record level with an associated charge which was 42 million higher than last year. The 120 million exceptional LibertySurf gain resulted in the profit before tax being close to last year (-3%), and, with no tax payable on this exceptional gain, Basic EPS increased 0.7% to 30.3p. The full year dividend per share is 15.5p, a 7% increase on last year. Summing up the year, Sir Geoffrey Mulcahy, Kingfisher's Chief Executive said: "Despite the decline in profits, this was an encouraging year with most of our businesses performing well. Furthermore, we have backed our winning brands with new space, new formats, the further development of pan-european and global buying power and the rapid development of brand focused e-commerce." He continued: "The plans we announced in September for the separation of General Merchandise are progressing well and are on schedule for implementation in the second quarter. Kingfisher will then be a highly focused international retailer. We are targeting average annual earnings growth of at least 10% over the next five years. "Our General Merchandise businesses are also well positioned for future growth. Overall Superdrug, which recovered well in the second half, is now better placed to exploit the growing health and beauty market following investment and a change of image. "Similar management action is in hand to improve Woolworths' operating performance. Also the outstanding success of Big W and the General Store promise major new growth." In order to clarify the situation, Kingfisher also announces today that it has no current plans to buy out the minority shareholding in Castorama, after its option becomes exerciseable in July. Such a cash purchase is not considered to be in the best interests of Kingfisher's shareholders at the moment. In the short term, Kingfisher's priorities will be to strengthen Castorama's management and ensure that operational focus is placed on improving the performance of Castorama France. 2
DETAILED COMMENTARY Group turnover, at a record 12.1 billion, was ahead by 11% (14% in local currencies), with like-for-like sales ahead by 5%. Profit before tax, exceptional items and goodwill amortisation at 606 million was 16% below the restated figure of 721 million for the prior year. This reduction is accounted for by a number of trading and non-trading factors, as well as by the revenue investment that is being made in Kingfisher's winning brands. TRADING OVERVIEW The majority of the Group's businesses achieved strong growth, between them increasing profit by 86 million. This growth led to record profits at a number of businesses including B&Q, Brico Dépôt, BUT and Comet. However, two businesses reported a significant profit decline in the year totalling 50 million. At Woolworths, profit fell by 30.9 million and ProMarkt s losses worsened by 19.4 million. Recovery plans are now being set in place in each of these businesses. NON-TRADING FACTORS Non-trading factors accounted for 70 million of the decline: 17.1 million of the year on year decrease relates to the translation of Euro denominated profit into sterling 17.8 million relates to the accounting policy change for FRS 15 34.7 million relates to the year on year increase in estimated losses in respect of LibertySurf The investment in LibertySurf produced an exceptional profit of 120.8 million from the deemed disposal at the time of its flotation in March 2000. REVENUE INVESTMENT During the year, the Company further increased its revenue investment, building the future strength of its brands, both off- and on-line. This increase in investment totalled just over 42 million: e-commerce investment increased by 23.2 million new formats and pre-opening costs increased by 18.9 million The Company said that e-commerce investment peaked during the year and, with its infrastructure largely in place, the focus will now be on driving profits from its e- commerce operations. 3
In summary, trading factors ( 50 million), non-trading factors and revenue investments ( 112 million), offset by the strong performance of some businesses ( 86 million), account for 76 million of the decline in profit before tax, exceptional items and goodwill amortisation. The remainder of the shortfall relates to a 39 million increase in the interest charge. This increase was primarily due to the rise in the level of net debt over the year. The inclusion of the exceptional LibertySurf gain results in a profit before tax of 691 million, 3% below last year's restated 713 million. With no tax payable on this gain, Basic EPS is up 0.7% at 30.3p. The full year dividend per share is 15.5p, up 7% on last year s 14.5p, and is covered 2.0 times by basic earnings per share and 1.8 times by adjusted earnings before exceptional items, goodwill amortisation and estimated LibertySurf losses. FUNDING Year end net debt was 1.9 billion, up from 1.0 billion at the end of last year. The Company increased its capital investment to a record level of 943 million in order to fund development. This amount included the acquisition of 28 B&Q Warehouse development sites for 219 million. Cash outflows on working capital of 386 million reflect both higher levels of stock and 350 million of supplier payments paid during the 53 rd week of the period (which last year would have been paid after the year end). THE SECTORS Commenting on the performance, Sir Geoffrey, said: Home Improvement "We have made real strategic progress in the Home Improvement sector. Through the acquisition of 28 former Homebase sites, we will further accelerate the roll-out of B&Q Warehouse in the UK. In France, Brico Dépôt is growing rapidly and the trial Warehouse concept store opened by Castorama is achieving positive customer response. Real progress is being made internationally in Home Improvement, particularly in Poland, Taiwan and China, with overall store space increasing by almost 50%. Electricals "Our Electricals sector, the third largest in Europe, now has a powerful pan-european buying organisation to support the Every-Day-Low-Pricing (EDLP) proposition of all the national brands. We are also seeing the success of new store formats stemming from cross-fertilisation of experience and ideas between our international spread of 4
companies. In Belgium, New Vanden Borre became the market leader following the acquisition of the Hugo Van Praag chain. General Merchandise In General Merchandise, we have had a mixed year. Superdrug has addressed a number of issues that contributed to a weak performance in the first half of the year and achieved a strong profit turnaround in the second half. Woolworths is currently implementing a similar programme and is confident of getting back on track. Substantial progress was made in developing Big W and Woolworths General Store which we expect to drive strong future growth." e-commerce On e-commerce he added: e-kingfisher has continued to make solid progress with nearly all of our major retail brands now trading on-line. We are convinced of the value of having integrated clicks and mortar propositions for the customer, as evidenced by the strong performances of Screwfix and Comet in this area. Overall, our e-commerce activity, including the investment in LibertySurf, has already added significant value for shareholders." Corporate Development Turning to the business separation, Sir Geoffrey said that a number of key milestones have been achieved and the process was on schedule for completion during the second quarter of this year, in line with the timetable put forward in the announcement of the demerger in September. These included: preparation of the demerger listing particulars with these being filed with the UKLA at the end of next week; Inland Revenue clearance for the demerger via exempt distribution received; pension fund split agreed; e- commerce separation plans finalised; and inter Group supply arrangements being set up. Kingfisher continues to consider a number of approaches it has received for Superdrug and Woolworths, but, as previously stated, will only pursue these if they create better overall value for shareholders. Kingfisher recently announced the appointment of Gerald Corbett, formerly Chief Executive of Railtrack plc, as Executive Chairman of Woolworths and the entertainment businesses. His brief is to lead the businesess going forward and manage the process of separation of these businesses from the rest of the Kingfisher Group. Following the separation, the rationale for holding long leasehold and freehold High Street property within the Kingfisher Group will change. Consequently, arrangements to realise value from Chartwell's High Street property portfolio are being actively progressed. 5
For further information Media Enquiries John Eyre + 44 (0) 20 7725 5715 Jonathan Miller + 44 (0) 20 7725 5713 Gail Lavielle + 33 (0) 1 43 18 52 68 Broker and Institutional Enquiries Andrew Mills + 44 (0) 20 7725 5776 Ian Harding + 44 (0) 20 7725 5776 Graham Fairbank + 33 (0) 1 43 18 52 26 Kingfisher plc + 44 (0) 20 7724 7749 Kingfisher Website www.kingfisher.co.uk 6
SUMMARY RESULTS SECTOR Retail sales ( m) Retail profit ( m) (1) HOME IMPROVEMENT % % 2001 2000 change 2001 2000 change 5,093.5 4,528.3 +12.5% 398.5 365.8 +8.9% ELECTRICALS 3,564.9 3,188.0 +11.8% 184.0 194.3-5.3% GENERAL MERCHANDISE 3,358.4 3,065.5 +9.6% 140.7 183.9-23.5% TOTAL (2) 12,016.8 10,781.8 +11.5% 723.2 744.0-2.8% (1) Retail profits stated after charges for accounting policy changes of 13.3 million for FRS 15 (2000:nil) and 15.6 million for UITF 24 (2000: 13.4 million) (2) Retail sectors only, excludes e-commerce development, property, financial services, acquisition goodwill amortisation and other operating costs The impact of a weak Euro on the Group's retail profits was 17 million. At constant rates of exchange the changes in retail sales and retail profit would have been as follows: % change (at constant rates of exchange) Retail Sales Retail Profit HOME +15.0% +11.1% IMPROVEMENT ELECTRICALS +16.7% -0.5% GENERAL +9.6% -23.5% MERCHANDISE TOTAL +14.0% -0.5% SUMMARY OTHER DATA SECTOR No of stores Selling space Net change in Employees (000s sq. m.) store numbers (FTE) 2001 2000 2001 2000 2001 2000 2001 2000 HOME 554 506 3,382.2 3,020.8 48 12 43,874 38,863 IMPROVEMENT ELECTRICALS 803 733 940.4 825.5 70 35 26,155 23,760 GENERAL 1,603 1,584 925.7 852.7 19 34 27,426 25,933 MERCHANDISE KINGFISHER TOTAL 2,960 2,823 5,248.3 4,699.0 137 81 97,455 88,556 7
INDEX Pages Operations review Home Improvement... 9-11 Electricals... 12-14 General Merchandise... 15-17 Property... 17 Kingfisher data by sector and company... 19 Financial Section Financial review... 20-23 Profit and Loss account... 24 Group Balance sheet... 25 Consolidated Cash Flow statement... 26 Reconciliation of net cash flow to movement in net debt... 27 Consolidated Statement of total recognised gains and losses... 27 Notes... 28-31 8
HOME IMPROVEMENT m Sales % m Retail Profit (1) % 2001 2000 change 2001 2000 change UK (2) 2,766.9 2,312.3 +19.7% 263.0 221.3 +18.8% France 1,707.5 1,717.1-0.6% 116.6 126.2-7.6% Other 619.1 498.9 +24.1% 18.9 18.3 +3.3% Total 5,093.5 4,528.3 +12.5% 398.5 365.8 +8.9% (1) stated after charges for accounting policy changes of 9.4 million for FRS 15 (2000: nil) and 9.2 million for UITF 24 (2000 : 6.8 million) (2) includes Screwfix Kingfisher is the leading European Home Improvement retailer and globally number three. The sector operates in 11 countries with 34% of profits arising outside of the UK. The sector has three key strategic objectives: to grow B&Q and Castorama in the UK and France respectively; to leverage best practice and scale across the operating businesses; and to build a network beyond the UK and France. During the year solid progress was made against these strategic objectives. In the UK, B&Q achieved record sales and profit and strengthened its leadership position in the market. The acquisition of 28 development sites at the end of the year will accelerate the growth of the Warehouse format in the UK. In France, Brico Dépôt continued to grow rapidly and the first Warehouse store was opened in France, trading as Castorama L Entrepôt. B&Q and Castorama continue to work together with benefits arising from sourcing cost reductions being reported in the individual business's profits. UK The UK Repair, Maintenance and Improvement (RMI) market grew by 5.0% in the 12 months to the end of January 2001. B&Q, the UK s clear leader in Home Improvement, grew its share of the market from 10.1% to 11.2% over this period, further widening the gap with its competition. Total UK sales growth for the year was 19.7% with like-for-like growth of 7.1%. Categories showing particularly strong growth were Building, driven by new Outdoor Decking ranges, and Seasonal which saw strong performances from the Garden and Christmas ranges. As a result of B&Q's EDLP strategy, prices were lower than last year. B&Q is now up to 10% cheaper than its main competitors in the UK. The margin impacts of these lower 9
prices were broadly offset by product cost reduction programmes driven by increased scale. Strategically, B&Q made great progress in the year including opening 12 new Warehouses, bringing the total to 59, as well as acquiring the 28 new sites. Two thirds of Warehouses now have annualised sales of over 20 million. The business also opened two new Supercentre stores. B&Q again added over 100,000 square metres of space, ending the year with a total of 1.6 million square metres. In addition "The DIY Store, being trialled in Warrington, is a positive step towards a format which is expected to complement the successful Warehouse format. Screwfix, the specialist catalogue and internet business, continued to expand rapidly. FRANCE Total sales in France, where the market grew by 2.8%, grew by 6.1% in local currency (a decline of 0.6% on translation into sterling). Like-for-like sales in constant currency were ahead by 4.6%. Castorama France, which is by far the largest of the French Home Improvement businesses reported total sales down by 0.2% in local currency and by 6.5% on translation into sterling, reflecting in part the transfer of five stores to Brico Dépôt. Likefor-like growth was 1.0%. However, costs increased as a percentage of sales which led to a reduction in profit in local currency. The disappointing performance from Castorama France reflects the need for more focused management emphasis on the key drivers of performance: price, choice and service and, accordingly, a number of changes are being made. Brico Dépôt delivered excellent sales and profit growth, further underlining the strength of this proposition as well as its increasing popularity with trade customers. In October 2000 a new format Casto L Entrepôt was opened at Claye Souilly near Paris. This format was developed by a joint French, Canadian and UK team with the objectives of testing a new format, building on the classical Castorama format, Brico Dépôt and also reflecting best practice from the Warehouse formats in the UK, Poland and Canada. Initial results of this trial are encouraging, with customers giving positive reactions to the range of products and the prices. A second test store will open in June in Chambery which will contain new initiatives in the softer ranges of merchandise. INTERNATIONAL Further progress was made internationally in the year. Twenty new stores opened across all but one of the countries in which we operate. In addition, the acquisition of a 50% interest in five Koçtas stores provided entry into Turkey. In total, space grew by almost 50% internationally and now stands at over 660,000 square metres. Sales overall 10
increased to 619.1 million, an increase on last year of 24.1% including a 4.0% like-forlike increase. Profits were up 3.3% at 18.9 million. Particularly strong progress has continued to be made in Poland and the Far East. In Poland both the NOMI and Castorama chains performed well. In Taiwan the business is achieving strong profit growth and further progress has been made in China. The largest international Home Improvement business is Réno Dépôt in Canada and this contributed more than half of the international profit. Performance was affected by price deflation, especially in lumber products, and the impact of new store costs following the expansion into Ontario. These stores, trading as "The Building Box", are the first outside Quebec. 11
ELECTRICALS m Sales % m Retail Profit (1) % Company 2001 2000 change 2001 2000 change Darty 1,238.5 1,162.5 +6.5% 120.0 124.7-3.8% Comet 1,135.1 982.0 +15.6% 40.3 37.1 +8.6% ProMarkt 605.7 541.0 +12.0% (18.8) (1.0) - (2) BUT (3) 366.9 329.6 +11.3% 43.9 38.2 +14.9% Other (4) 218.7 172.9 +26.5% (1.4) (4.7) - Total 3,564.9 3,188.0 +11.8% 184.0 194.3-5.3% (1) stated after charges for accounting policy changes of 3.8 million for FRS 15 (2000: nil) and 3.9 million for UITF 24 (2000: 2.7 million) (2) includes 12 months to 31 December 2000 and 1999 (3) comparative figures are for 13 months (4) includes all electrical activities outside of the UK, France and Germany in addition to central sector costs Kingfisher s Electricals business, the third largest in Europe, achieved strong sales growth of 16.7% in local currencies with all the major brands achieving gains in market share. The sector now operates 803 stores across nine countries. The sector made significant progress this year against its goal of leveraging best practice in price, choice and service from the national businesses across Europe. Specific focus has been given to range management including the introduction of new ranges. Supply agreements are now in place with a number of European suppliers helping to support the sector strategy. Sales of ProLine, the pan-european own label brand, have also been strong. New format stores, based around a consistent model, have been implemented in Darty, Comet and ProMarkt. The sector s profit held steady in local currencies but declined by 5.3% on translation into sterling, heavily impacted by the worsening of ProMarkt s performance. Excluding ProMarkt, profit grew by 8.3% in local currencies. New management has recently been introduced at ProMarkt and is focused on returning the business to profit. There were strong performances at both Comet and BUT. UK The UK electricals market grew by 8.9% for the 11 month period to December 2000 with Comet, the UK s number two electricals retailer, growing its share of the market by 0.7% to 13.3%. Total sales growth for the year was 15.6% with like-for-like growth of 7.6%. EDLP was in place all year with Comet checking over 1.8 million competitor prices to ensure best value for its customers. Twenty new large format destination stores were opened offering an unrivalled interactive experience and a greater level of range and 12
services. Also the new national call centre handled over four million calls and processed over 40 million of sales. Profit moved ahead by 8.6%, despite higher one-off pre-opening costs arising from the new store programme. FRANCE The French electricals market grew by 5.9% in the period February to December 2000 with Darty, the market leading electrical retailer in France, continuing to grow market share. Darty's total sales growth for the year was 13.9% in local currency with like-for-like growth of 10.9%. Building on its strength as the leading specialist in the market, Darty was able to take advantage of the shift towards new technologies, through initiatives to improve both range and service in areas such as home installation and training for multi-media products. These initiatives, combined with an acceleration in the store opening and refurbishment programme, contributed to strong sales growth and market share gains. Darty's profit for the year grew by 2.6% in local currency (down 3.8% on translation into sterling), reflecting the impact of the shift into lower margin new technology products. BUT, the electricals and furniture retailer, grew sales by 18.7% in local currency, 7.5% on a like-for-like basis. Significant progress was made in rolling-out the new look stores with 30 converted by the year end. BUT also acquired 14 franchisee stores in the year. Growth came from all categories with significant growth in sales of new technology products, supported by improvements made in the supply chain. BUT's profit grew very strongly by 22.6% in local currency (14.9% on translation into sterling). This performance is even more encouraging when considering that the prior year results covered a 13 month period. GERMANY The German electricals market grew by 5.7% in the year to December 2000. ProMarkt, grew sales in local currency by 20.4% over the same period. This sales growth was driven by 14 new store openings but, on a like-for-like basis, sales declined by 4.3%. The worsening financial performance in Germany was disappointing, reflecting in part a competitive market but also the short-term costs of introducing the key operational changes needed for future growth. These included central buying, category management and central distribution. 13
A new management team is now focused on turning around the business. Particular emphasis is being given to improving operational execution, accelerating the benefits of centralisation and reducing costs. OTHER INTERNATIONAL New Vanden Borre is now the number one electrical retailer in Belgium following the acquisition and integration of the 30-store Hugo Van Praag chain during the year. BCC, the Dutch electricals retailer, performed strongly and is planning a significant expansion in 2001. Also, Kingfisher acquired a 60% majority share in Datart, the number one electrical retailer in the Czech and Slovak Republics which operates 16 outof-town superstores. The results also include a small loss at Electric City prior to its disposal. 14
GENERAL MERCHANDISE m Sales % m Retail Profit (1) % Company 2001 2000 change 2001 2000 change Woolworths 1,941.2 1,844.4 +5.2% 91.0 121.9-25.3% Superdrug 902.1 842.3 +7.1% 35.0 41.5-15.7% New 83.2 16.0 - (11.9) (4.7) - Formats (2) Other (3) 431.9 362.8 +19.0% 26.6 25.2 +5.6% Total 3,358.4 3,065.5 +9.6% 140.7 183.9-23.5% (1) stated after charging 2.5 million for accounting policy change under UITF24 (2000: 3.2 million) (2) Big W and Woolworths General Store (3) EUK, MVC and VCI The two major businesses, Woolworths and Superdrug, both saw profit declines due to a combination of factors. In the case of Superdrug, following a profit decline in the first half, a recovery plan was put in place which led to second half profits returning to last year's levels. A similar programme is now underway at Woolworths, which is expected to lead to an improved performance. Major progress has been made in the development of the two new Woolworths formats, Big W and Woolworths General Store, aimed at the destination and convenience ends of the market respectively. Superdrug Superdrug continued its repositioning as a health and beauty specialist. The health and beauty market in the UK continues to enjoy growth,fuelled by an increase in spending on personal well being. However, the toiletries market has continued to experience price deflation and increasing competition. The investment in the brand, including new formats and pharmacies, has placed Superdrug in a strong competitive position in health and beauty. With a sales increase of 7.1% (10.8% in the second half) equating to 2.8% like-for-like growth (5.0% in the second half), Superdrug increased its share of the health and toiletries market by 0.2% points to 9.0%. The business opened eight new stores in the year, relocated ten stores and extended seven. In addition, 24 new pharmacies, making 224 in total, were opened and 51 stores refurbished. During the first half, Superdrug experienced a 7.3 million profit decline caused by a number of factors, including poor price competitiveness and product availability. The second half saw a new management team committed to delivering great value to customers through competitive pricing, a more focused promotional programme and improved availability. Additionally, a focus on choice has seen merchandise ranging 15
improved. This has led to greater emphasis on satisfying local customer needs with, for example, fine fragrances being extended to more stores. As a result, a strong turnaround in profitability was achieved during the second half of the year, along with the restoration of Superdrug s reputation for excellent value on the High Street. Woolworths Overall sales at Woolworths grew by 5.2%, with like-for-like sales up 1.8% and the balance of growth coming from new space. During the year there were nine new stores along with three extensions and four relocations, accelerating the investment for future growth. Also, seven stores were converted into Woolworths General Stores. The most significant impact on Woolworths' profitability was the level of margin which reflected both the intense competitive environment and a different sales mix. Woolworths achieved relatively strong performance in lower margin categories, such as Entertainment, Mobile Communications and Toys, but had a relatively weak performance in higher margin categories, such as Clothing and Home. In particular, in Entertainment, which is Woolworths largest category and where the business is the market leader in pre-recorded videos, early action was taken to reduce prices to ensure that the business was fully competitive. This led to an increase in market share but reduced margins as the expected scale-based cost reductions from suppliers have yet to come through fully. Overall, the growth in cash margins was insufficient to cover the planned increase in the cost base. This led to the 25.3% fall in profit. Looking forward, an action plan is now underway aimed at restoring Woolworths to profitable growth as quickly as possible. Management focus is being applied to improving sales productivity, margin performance and cost efficiencies. New Formats Big W opened six stores taking the total to eight. Two stores became the first Kingfisher stores to take over 1 million in a week. The format continues to perform well with plans to open 54 Big W stores by 2005. New ranges in these stores (jewellery, car care and sporting goods) are expected to drive sales further. Woolworths General Store opened all seven of its stores, converted from Woolworths mainchain, during the year. The business continues to show real promise with the trial stores recording sales productivity significantly higher than the ones they replaced. A further 27 General Stores are planned for opening during 2001, six of which will be greenfield sites and the remainder conversions of existing Woolworths stores. 16
Other EUK, the UK s leading distributor of music and video, performed strongly, more than doubling DVD sales and delivering a 15% growth in CD albums. During the year it opened a new automated distribution centre at Greenford, believed to be the largest dedicated entertainment distribution centre in Europe. In addition, EUK, building on its leadership position in the entertainment market, successfully launched its e-commerce fulfilment business, EUK Direct, while also preparing itself for the digital business, including digital downloading and CD burning. MVC continued to grow sales strongly and opened five new stores taking the total to 88 at the year-end. VCI, the music and video publishing business grew its sales by 14%. PROPERTY Chartwell Land, Kingfisher s specialist retail property company, increased operating profit by 13% to 85.9 million (2000: 76.0 million). Total returns comprising operating profit, profit on investment property sales and the portfolio revaluation surplus, were 138.7 million (2000: 230.0 million). The reduction in total returns took place against the backdrop of a sharp fall in investor sentiment towards retail property, particularly in the High Street. Although down on last year, the capital growth of the retail warehouse element of the portfolio continued to perform ahead of the High Street. The total revaluation surplus was 56.3 million (2000: 140.1 million). Of the total gross rents of 107.2 million, 78.2 million (73%) came from group tenants. Development activity reported a profit of 3.0 million (2000: 0.9 million loss). During the year Chartwell Land s activities continued to provide new retail space for Group businesses. Two new B&Q Warehouses were completed, along with stores for Woolworths and Comet. Gross assets at the end of the year were valued at 1.7 billion compared to 1.6 billion at the previous year end. As a result of the intended separation, Chartwell Land s property portfolio will be split. The business will continue to be wholly owned by Kingfisher, sharpening its focus as a major specialist property owner in the retail warehouse market. Following the separation, the rationale for holding long leasehold and freehold High Street property within the Group will have changed. Consequently, arrangements to realise value from Chartwell's High Street property portfolio are being actively progressed. E-COMMERCE 17
e-kingfisher was created during the year to accelerate the development of alternative sales channels and to maximise the sharing of experience throughout the Group. During the year several sites were launched or revamped with expanded product ranges and by the year-end nearly all of the Group's major brands were successfully selling on-line. The combination of strong brands, backed up by established sourcing and fulfilment capabilities, has proved to be critical to the success of a "clicks and mortar" operation. This formula has worked particularly well at Screwfix, which grew sales by over 70%, and Comet, which has grown its pure internet sales strongly in the year, significantly ahead of its targets. During the year e-commerce costs, including estimated LibertySurf losses, increased from 24.0 million to 81.9 million. The realisation of the investment in LibertySurf led to an exceptional gain of 120.8 million. 18
KINGFISHER DATA BY SECTOR AND COMPANY HOME IMPROVEMENT SECTOR Company Store nos. Selling space Net new stores Employees (000s sq.m.) planned for (FTE) 2001/2002 B&Q 301 1,604.5 17 18,834 Castorama 148 1,114.6 7 13,818 Other 105 663.1 29 11,222 TOTAL 554 3,382.2 53 43,874 ELECTRICAL SECTOR Company Store nos. Selling space Net new stores Employees (000s sq.m.) planned for (FTE) 2001/2002 Darty 179 206.2 8 9,659 Comet 260 219.3 0 8,298 Promarkt 194 216.3 6 3,775 BUT (1) 78 227.8 4 2,722 Other 92 70.8 8 1,701 TOTAL 803 940.4 26 26,155 GENERAL MERCHANDISE SECTOR Company Store nos. Selling space Net new stores Employees (000s sq.m.) planned for (FTE) 2001/2002 Woolworths 797 616.0 (18) 17,384 Superdrug 703 209.5 3 6,738 Other (2) 88 31.2 1 2,002 New Formats 15 69.0 34 1,302 TOTAL 1,603 925.7 20 27,426 KINGFISHER TOTAL 2,960 5,248.3 99 97,455 (1) The figures for BUT include only those stores consolidated in the Group s figures. BUT also operates 149 non-consolidated franchises with 367,000 sq metres of selling space and 3,800 (FTE) employees. (2) MVC stores only 19
FINANCIAL REVIEW Shareholder Return and Dividends Basic earnings per share increased by 0.7% to 30.3p. Exceptional items and acquisition goodwill amortisation contributed 6.2p (2000: 0.6p) and estimated LibertySurf losses reduced the earnings per share by 3.1p (2000: 0.6p). As a result, adjusted earnings per share before exceptional items, acquisition goodwill amortisation and estimated LibertySurf losses fell by 12.5% to 27.4p (2000: 31.3p). The revaluation surplus of 53.9 million on the Group's property portfolio was equivalent to an increase in shareholder value of 3.9p per share. The Board has proposed a final dividend of 11.25p per share making the total dividend for the year of 15.5p per share. This represents an increase of 6.9% and is covered 1.8 times by adjusted earnings before exceptional items, acquisition goodwill amortisation and estimated LibertySurf losses. Cashflow and Investment in the Businesses Over the 53 week period, net debt increased from 1,020.8 million at the start of the period to 1,873.8 million by the year end. Cash generation across the Group remained healthy with 563.2 million being generated from operating activities before tax. The impact of payments to UK suppliers in the 53 rd week (which last year would have occurred after year end) is estimated to have increased year end net debt by 350 million. Net capital investment for the year of 942.7 million was 125.9 million up on last year. Net capital expenditure was 809.7 million, up 37%, as the enlarged Group continues to expand and improve its store portfolio and supporting infrastructure. Expenditure on acquisitions resulted in a further cash out flow of 133.0 million. Interest Net interest payable increased by 39.1 million to 76.6 million. This increase reflects the overall rise in net debt over the period resulting from the level of investment in our future growth strategy. Profit on the disposal of operations The profit on the disposal of operations includes the gain arising on the deemed disposal in respect of shares issued by Liberty Surf Group S.A. ( 120.8 million); the loss on the sale of certain trading assets of Electric City (Singapore) Pte Limited ( 13.3 million); and the loss on sale of the Andre Deutsch business ( 1.4 million). 20
Demerger costs Costs of 8.8 million have been incurred in implementing the planned demerger. These costs are principally fees incurred directly as a result of the demerger project and have been charged as a non-operating exceptional item. Taxation The effective overall tax rate on profit before tax has reduced to 24.7% (2000: 28.7%), principally as a result of the exceptional gain arising on the flotation of LibertySurf on which no tax is payable. The effective rate on profits before goodwill and exceptional items decreased from 28.4% to 28.1% and the rate on current year profits has reduced from 29.9% to 28.4%. The current year rate has come down because statutory rates have fallen in both the UK and France, because tax relief on capital expenditure has been running ahead of the corresponding accounting charge and because of intra-group financing arrangements. In this financial year the rate is expected to rise to just over 31% as the Group will adopt the requirements of FRS19 on deferred taxation. Acquisitions, Investments and Disposals During the year the Group made a number of acquisitions, investments and disposals. In the cases where goodwill arises this has been capitalised and is being amortised in accordance with Group policy. The Group made the following significant acquisitions during the year: - On 31 January, the Group acquired the assets and business of Hugo van Praag, a Belgian electrical retailer. Total consideration was 23.9 million giving rise to goodwill of 20.9 million. - On 19 June 2000, the Group acquired the remaining 40% of Promarkt Holding GmbH & Co KG, which it did not already own. Consideration was satisfied by the disposal of the Group's 55% stake in Tangens GmbH and the payment of 13.9 million giving rise to goodwill of 41.4 million. In addition to the above, the Group acquired the following subsidiaries and joint venture: - a 60% share of Datart International A.S. - an 85% share of Streets Online Limited 21
- a 50% share in Koçtas Yapi Marketleri Ticaret A.S. The total consideration for these and other investments amounted to 69.4 million giving rise to goodwill of 35.7 million In addition, on 10 January 2001, the Group disposed of certain trading assets of Electric City (Singapore) Pte Limited. Consideration received was 5.9 million and an exceptional loss on termination of the business of 13.3 million has been included in the Profit and Loss Account. LibertySurf The Group's investment in Liberty Surf Group S.A. (LibertySurf) was acquired in 1999 at a cost of 34.9 million. In March 2000, on the flotation of LibertySurf, the Group recognised an exceptional gain of 120.8 million arising on the deemed disposal of shares issued by LibertySurf. After adding the exceptional gain to and deducting the cumulative estimated losses of 49.3 million from the original cost, the carrying value of the investment now stands at 106.4 million. On 8 January 2001, the Group announced that it has entered into an agreement with Tiscali, the European Internet Service Provider, to sell its entire shareholding in LibertySurf. The agreement provides for consideration in the form of a combination of cash and shares in Tiscali and is expected to be completed in March 2001. Dividend The final dividend for the year ended 3 February 2001 will be paid on 15 June 2001 to shareholders on the register at close of business on 6 April 2001, subject to the approval of shareholders at the Company s Annual General Meeting, to be held at 11.00 a.m. on 23 May 2001 at The Dorchester Hotel, London. A scrip dividend alternative will be offered to shareholders. Accounting changes Financial Reporting Standard 15 Tangible Fixed Assets has been adopted and consequently a charge for depreciation on buildings is included for the first time. As required by the Standard, the provision for depreciation has been dealt with prospectively and there is no restatement of prior year figures. The additional depreciation provided in the year ended 3 February 2001 was 17.8 million. During the period the Urgent Issue Task Force Abstract 24 Accounting for start-up costs came into effect and required a review of the Group s policies in respect of preopening costs for new stores. As a result, certain costs previously depreciated over two years are now required to be expensed immediately. The cumulative effect on the 22
Group s reserves at 29 January 2000 was 19.1 million and this change has been accounted for as a prior period adjustment. Previously reported figures have been restated accordingly. The impact of adopting the new policy on the year ended 29 January 2000 has been to reduce the previously reported profit before and after tax by 13.4 million. Annual report and accounts The Summary of Group Results, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Total Recognised Gains and Losses and extracts from the notes to the accounts are extracted from the Group s Report and Accounts. The auditors have made a report on the Group s statutory accounts under section 235 of the Companies Act 1985 which does not contain a statement under sections 237 (2) or (3) of the Companies Act and is unqualified. The statutory accounts will be filed with the Registrar of Companies in due course. Copies of the annual report and accounts will be posted to shareholders no later than 23 April 2001. Further copies of this announcement can be downloaded from the website www.kingfisher.co.uk or by application to: The Company Secretary Kingfisher plc North West House 119, Marylebone Road London NW1 5PX 23
KINGFISHER plc AND SUBSIDIARY COMPANIES Summary of Group Results For year ended 3 February 2001 Restated millions Note 2001 2000 Group turnover 1 12,134.2 10,885.0 Group operating profit Home Improvement 398.5 365.8 Electrical 184.0 194.3 General merchandise 140.7 183.9 Property 85.9 76.0 e-commerce & other new channels (81.9) (24.0) Exceptional item operating 3 5.8 (3.5) Other operating costs (44.8) (37.9) Acquisition goodwill amortisation (17.9) (10.5) Group operating profit 2 670.3 744.1 Exceptional items - non-operating: Gain on deemed disposal of Liberty Surf Group S.A. 3 120.8 - Loss on the sale of operations and Group restructuring 3 (23.5) - Profit on disposal of properties 3 0.2 6.2 Profit before interest 767.8 750.3 Net interest payable 4 (76.6) (37.5) Profit before tax 691.2 712.8 Taxation 5 (170.8) (204.4) Profit after tax 520.4 508.4 Minority interests (104.9) (99.4) Profit for the financial year 415.5 409.0 Dividends (214.8) (198.2) Retained profit for the year 200.7 210.8 Earnings per share (pence) - 6 Basic 30.3 30.1 Diluted 29.6 28.9 Adjusted basic 27.4 31.3 Adjusted diluted 26.8 30.0 24
Group Balance Sheet As at 3 February 2001 Restated millions Note 2001 2000 Fixed assets Intangible assets 508.9 400.9 Tangible assets 4,139.6 3,432.5 Investments in joint ventures Share of gross assets 142.3 109.0 Share of gross liabilities (107.1) 35.2 (93.1) 15.9 Investments in associates 123.4 39.2 Other investments 135.9 40.3 4,943.0 3,928.8 Current assets Development work in progress 89.2 96.7 Stocks 2,095.5 1,669.4 Debtors due within one year 973.5 662.2 Debtors due after more than one year 22.2 146.8 Securitised consumer receivables 261.1 303.8 Less: non-recourse secured notes (211.8) 49.3 (234.5) 69.3 Investments 168.6 352.3 Cash at bank and in hand 120.1 156.6 3,518.4 3,153.3 Creditors Amounts falling due within one year (4,003.9) (3,377.1) Net current liabilities (485.5) (223.8) Total assets less current liabilities 4,457.5 3,705.0 Creditors Amounts falling due after more than one year (881.1) (626.0) Provisions for liabilities and charges (19.7) (18.6) 3,556.7 3,060.4 Capital and reserves Called up share capital 174.6 171.0 Share premium account 345.9 255.2 Revaluation reserve 574.1 534.4 Non-distributable reserves 148.2 148.2 Profit and loss account 1,740.3 1,500.7 Equity shareholders' funds 7 2,983.1 2,609.5 Equity minority interests 573.6 450.9 3,556.7 3,060.4 25
Consolidated Cash Flow Statement For the financial year ended 3 February 2001 millions Note 2001 2000 Net cash flow from operating activities 8 563.2 863.8 Returns on investment and servicing of finance Interest received 26.8 31.5 Interest paid (112.0) (68.2) Interest element of finance lease rental payments (1.2) (4.0) Dividends paid by subsidiaries to minorities (27.9) (20.2) Net cash outflow from returns on investment and servicing of finance (114.3) (60.9) Taxation UK Corporation tax paid (109.9) (127.8) Overseas tax paid (51.5) (73.0) Tax paid (161.4) (200.8) Capital expenditure and financial investment Payments to acquire intangible fixed assets (22.5) (5.6) Payments to acquire tangible fixed assets (857.2) (659.2) Receipts from the sale of tangible fixed assets 47.5 74.9 Payments for additions to investments (31.2) (14.2) Receipts from sale of investments - 3.4 Purchase of own shares (64.4) - Net cash outflow from capital expenditure and financial investment (927.8) (600.7) Acquisitions and disposals Purchase of subsidiary and business undertakings (117.3) (187.5) Net cash acquired with subsidiary undertakings - 4.8 Payments for additions to joint ventures/associated undertakings (15.7) (39.4) Net cash outflow in relation to planned divestment (3.2) - Disposal of subsidiary undertakings 5.9 - Issue of shares by group companies to minority 29.1 58.7 shareholders Net cash outflow from acquisitions and disposals (101.2) (163.4) Equity dividends paid to shareholders (146.6) (146.4) Management of liquid resources Net movement of short term deposits 4.2 120.2 Net sale/(purchase) of short term investments 183.7 (39.9) Net cash inflow from management of liquid resources 187.9 80.3 26
Financing Issue of ordinary share capital 53.2 10.8 Capital element of finance lease rental payments (2.4) (8.8) Net increase in loans 630.5 379.2 Net cash inflow from financing 681.3 381.2 (Decrease)/increase in cash (18.9) 153.1 Reconciliation of Net Cash Flow to Movement in Net Debt For the financial year ended 3 February 2001 millions 2001 2000 Net debt at start of year (1,020.8) (693.4) (Decrease)/increase in cash (18.9) 153.1 Debt in subsidiaries acquired (0.8) (44.5) Net movement in short term deposits (4.2) (120.2) Net (increase)/decrease of short term investments (183.7) 39.9 Change in market value of investments - 0.7 Net increase in debt and lease financing (630.5) (379.2) Foreign exchange effects (14.9) 22.8 Net debt at end of year (1,873.8) (1,020.8) Consolidated Statement of Total Recognised Gains and Losses For the financial year ended 3 February 2001 Restated millions 2001 2000 Profit for the financial year 415.5 409.0 Unrealised surplus on revaluation of properties 53.9 142.0 Non-distributable reserve arising on the combination of B&Q and Castorama - 1.9 Minority increase in Castorama (0.9) 21.2 Exchange adjustments offset in reserves 7.9 (46.4) Tax on exchange adjustments offset in reserves 2.9 (6.8) Total recognised gains and losses relating to the year 479.3 520.9 Prior period adjustment (19.1) - Total gains and losses recognised since last annual report 460.2 520.9 27
1. Turnover millions 2001 2000 Home Improvement 5,093.5 4,528.3 Electrical 3,564.9 3,188.0 General Merchandise 3,358.4 3,065.5 Property 59.2 32.5 Financial Services 58.2 70.7 Total turnover 12,134.2 10,885.0 2. Operating Profit Restated millions 2001 2000 Group Turnover 12,134.2 10,885.0 Cost of Sales (8,245.3) (7,248.5) Gross Profit 3,888.9 3,636.5 Other income and expenses (3,190.2) (2,886.9) Exceptional items - operating 5.8 (3.5) Share of joint ventures and associates (34.2) (2.0) Group Operating Profit 670.3 744.1 3. Exceptional items millions 2001 2000 Operating exceptionals - Non-recurring reduction in local French business tax on restructuring of Group companies 5.8 - - Costs of attempted merger - (3.5) 5.8 (3.5) Non operating exceptionals Gain on deemed disposal of Liberty Surf Group S.A. 120.8 - Loss on the sale of operations and Group restructuring: - Costs relating to planned divestment of General Merchandise (8.8) - - Disposal of Electric City (13.3) - - Disposal of Andre Deutsch (1.4) - (23.5) - Profit on the disposal of properties 0.2 6.2 28
4. Net interest payable millions 2001 2000 Interest payable 112.1 76.5 Interest receivable (26.8) (36.6) 85.3 39.9 Interest capitalised (8.7) (2.4) Net interest payable 76.6 37.5 5. Taxation millions 2001 2000 Tax charge on profit for the year: UK corporation tax at 30% (2000 : 30.16%) 103.2 123.9 Relief for double taxation (0.5) (3.2) Overseas taxation 67.0 93.6 Deferred tax 0.8 (0.3) Associated undertakings 0.8 0.8 Joint ventures 1.4 0.7 172.7 215.5 Prior year adjustments (1.9) (11.1) 170.8 204.4 6. Earnings per share The calculation of basic earnings per share is based on the profit on ordinary activities, after taxation and minority interests of 415.5 million (2000: 409.0 million) and the weighted average number of shares in issue during the period of 1,369.5 million (2000: 1,357.1 million). The diluted earnings per share is based on the diluted profit on ordinary activities, after taxation and minority interests of 409.5 million (2000: 401.8 million) and the diluted weighted average number of shares in issue during the period of 1,383.3 million (2000: 1,390.4 milion). Supplementary earnings per share figures are presented. These exclude the effects of exceptional items, acquisition goodwill amortisation and estimated LibertySurf losses in the year and are presented to allow comparison to prior year on a like-for-like basis. 29
Accordingly, the adjusted basis and diluted EPS exclude exceptional items and acquisition goodwill amortisation. Also excluded are the estimated LibertySurf losses as the directors do not believe it is meaningful to aggregate these with the profits from the continuing Group businesses. In the previously reported figures for 1999 the directors also excluded the costs of developing the e-commerce activities of our established businesses. These have no longer been excluded and the comparative adjusted basic and diluted EPS have been restated accordingly, the effect of which is to decrease these figures by 0.7p and 0.8p respectively. The comparative figure for diluted earnings per share has also been restated to adjust for the effect of interest, tax and minority interests on convertible bonds. The difference between the basic and diluted earnings per share is reconciled as follows: Restated pence 2001 2000 Basic earnings per share 30.3 30.1 Attributable to exceptional items (7.5) (0.2) Attributable to acquisition goodwill amortisation 1.3 0.8 Attributable to estimated LibertySurf losses 3.1 0.6 Taxation arising on exceptional items 0.1 - Minority share of exceptional items 0.1 - Basic - adjusted earnings per share 27.4 31.3 Diluted earnings per share 29.6 28.9 Attributable to exceptional items (7.4) (0.1) Attributable to acquisition goodwill amortisation 1.3 0.7 Attributable to estimated LibertySurf losses 3.1 0.5 Taxation arising on exceptional items 0.1 - Minority share of exceptional items 0.1 - Diluted - adjusted earnings per share 26.8 30.0 7. Reconciliation of movement in equity shareholders' funds Restated millions 2001 2000 Profit for the financial year attributable to the members of Kingfisher plc 415.5 409.0 Dividends (214.8) (198.2) 200.7 210.8 Foreign exchange adjustments (net of tax) 10.8 (53.2) Unrealised surplus on revaluation of properties 53.9 142.0 Shares issued under option schemes 51.3 10.3 Scrip issue 57.8 34.6 Non-distributable reserve arising on the combination of B&Q and Castorama - 1.9 Minority increase in Castorama (0.9) 21.2 Net addition to shareholders' funds 373.6 367.6 30