Kingfisher plc Wednesday 17 March 1999 Turnover Preliminary results for 52 weeks ended 30 January 1999 1999 Euro m 1999 1998 Change m m 7,457.8 6,409.4 16.4% 10,628.1 830.1 582.5 505.0 15.3% Profit before exceptional items and tax Exceptional items 66.7 46.8 15.0 Profit before tax 896.8 629.3 520.0 21.0% Net operating cash flow 995.1 698.3 605.0 15.4% Capital investment 1059.7 743.6 214.8 3.5x Net debt 988.2 693.4 203.5 3.4x 1=E1.425 Gearing 26.5% 11.5% Earnings per share before exceptional items 29.9p 27.6p 8.2% net of tax (p) Basic earnings per share (p) 32.3p 28.7p 12.5% Dividend (per share) (p) 13.0p 11.5p 13.0% ADDED EUROPEAN DIMENSION AFTER MILESTONE YEAR B&Q merged with Castorama Further expansion in electricals Around 40% of annualised sales now outside the UK After a milestone year of strategic development, Kingfisher plc, the European home and family retailer, today reports sales up by 16.4% to 7.5 billion (Euros 10.6 billion) and profit before tax and exceptional items up 15.3% to 582.5 million (Euros 830 million). The results reflect Kingfisher s strategy to build leading, pan-european DIY and electricals sectors alongside a growing UK-based general merchandise sector. The figures highlight the effect of continuing organic expansion and like-for-like growth of the existing businesses as well as significant investment in achieving strategic growth, 1
including the year-end merger of B&Q with Castorama Dubois Investissements SCA, of France. After exceptional items, principally the release of a VAT provision of 44.7 million, profit before tax rose by 21.0% to 629.3 million. Basic earnings per share grew less strongly by 12.5% to 32.3p, largely because of a much higher tax charge and minority interests. Earnings per share before exceptional items increased by 8.2% to 29.9p. The proposed final dividend is 9.25p, making 13.0p for the year, an increase of 13.0%. The results include the consolidation of Castorama for one month. The effect of this, together with the contribution of acquisitions, was to increase sales by 507.1 million and operating profits by 20.5 million. During the year, Kingfisher s like-for-like sales grew by 4.9%. Each of the retail sectors reported like-for-like progress with the DIY and general merchandise sectors leading the way. Net store numbers increased by 477 and net selling space increased to a total of 42.7 million sq. ft. (4.0 million sq. m). Space expansion was strongest in DIY and electricals, which included the impact of the Castorama merger and acquisitions. Capital expenditure on new stores, refurbishments and improving the operating infrastructure, notably systems and logistics, was 378.6 million. A further 365.0 million was invested in additional businesses to strengthen Kingfisher s electrical and DIY sectors. As a result of this heavy investment in growth and increased efficiency, net debt rose to 693.4 million and gearing to 26.5%. A major European player Kingfisher ended the financial year having made significant progress towards its key strategic goal of reshaping the business to become a major European player, positioned to capitalise on further retail consolidation in the European single market. In doing this, Kingfisher s objective is to use the benefits of scale to deliver improved value, choice and service to customers in existing markets and build a platform for further international growth. At the year-end, Kingfisher operated 2,742 stores in 13 countries and employed 115,383 people. Of this total, 645 stores and 37,565 employees, accounting for around 40% of total pro-forma sales in excess of 9.4 billion, are outside the UK, mainly in France and Germany. Europe s largest DIY group In DIY the merger on 18 December of B&Q, the UK market leader, with Castorama, the French market leader, created Europe s largest DIY group twice the size of its nearest European rival and number three in the world. Castorama remains listed on the Paris 2
Bourse and Kingfisher owns 57.9% of the issued share capital (54.6% on a fully diluted basis). With the acquisition of NOMI, the leading DIY operator in Poland, Kingfisher now operates 494 DIY stores in nine countries, soon to be 10 with the opening of a B&Q in China in June this year. Overall growth in DIY in the UK and France was stronger in the first half of the year than the second. B&Q increased its overall share of DIY spending in the UK from 19.0% to 19.5% and captured the lion s share of growth by DIY multiples. In France, Castorama is believed to have consolidated its leading DIY market share of around 15.0%. Further expansion in electricals Kingfisher Electrical, in which Darty is the market leader in France and Comet, the number two in the UK, saw additional expansion in France, Germany and the Far East. In France, Kingfisher increased its holding in BUT, the furniture and electrical chain, from 26% to 98%. In Germany, it acquired 60% of Wegert, which operates 64 electrical superstores trading under the Pro Markt and Macro Markt brands, and in Singapore, Electric City, which has seven stores, was acquired. With a total of 698 stores it is now one of Europe s top three electrical chains operating in seven European countries more than any other electrical retailer as well as in Singapore. The European market in electrical retailing was mixed, with growth on the continent offset by less buoyant trading in the UK. The football World Cup, new digital products and continuing strong sales of mobile telephones and multimedia products were key drivers of market growth in brown goods. However, price deflation remained a significant characteristic of the consumer electronics market across Europe. Both Darty and Comet grew market share. Outperformance in General Merchandise In the general merchandise sector on the UK high street, both Woolworths and Superdrug outperformed competitors on the basis of like-for-like sales growth. Growth was driven by marketing initiatives and product developments in both chains, as well as continuing investment in store refurbishments. Christmas trading saw comparatively strong like-for-like growth against difficult conditions. During the year Woolworths refurbished 98 stores and opened three. Meanwhile Superdrug continued its health and beauty repositioning programme and added 47 pharmacies to stores, giving a total of 177, making Superdrug one of the UK s largest dispensing pharmacy chains. 3
Kingfisher s strong position in entertainment was strengthened by 15 MVC store openings, now with a total of 61, and the acquisition of VCI, the music and video publisher. The Group s total entertainment turnover now exceeds 800 million. Investment and initiatives to drive growth Kingfisher expects customers to remain cautious and most retail markets to be very competitive in the current year. This is likely to increase the pressure for further consolidation in retailing in the European single market, a trend which is being driven by several factors including increased, cross-border price transparency. Kingfisher will pursue opportunities to increase its market-leading positions in the DIY and electrical sectors on a pan-european basis. It will also aim to maintain growth in its UK general merchandise sector by reinforcing value-for-money propositions and investing in store improvements and new developments. Good progress has been made in key areas of co-operation since the merger between B&Q and Castorama. This includes regular meetings of the joint board, implementation of financial reporting processes, budget reviews and the creation of a joint project team to work on buying synergies. Kingfisher plans to open a total of 103 new stores creating around 4,800 new jobs in the current year. Included in the opening programme are: - 33 DIY outlets - 31 electrical outlets - 39 general merchandise outlets At a strategic level Kingfisher is progressing a number of important initiatives to drive its ambition to deliver an unbeatable shopping experience based on outstanding value, choice and service. These include projects on global sourcing and pricing, supply chain efficiency, customer satisfaction, international management development and the development of complementary channels, such as home shopping and on-line retailing. Chief Executive s Commentary Commenting on Kingfisher s progress, Group Chief Executive Sir Geoffrey Mulcahy said: Today is the tenth anniversary of the Group s change of name to Kingfisher. The name change signalled our determination to build a broadly-based retail Group with international ambition. Since then the Group s market capitalisation has also increased almost tenfold to over 10 billion. 4
Last year we made some significant strategic moves as well as achieving solid organic progress in each of our three retail sectors. Kingfisher is now a truly European company. A high proportion of our sales today comes from continental Europe and two of our sectors have their headquarters in France. Succeeding in today s and tomorrow s very demanding retail environment will require world-class performance. I am confident that Kingfisher is better positioned than ever to face the future thanks to its increasing scale and absolute focus on delivering unbeatable customer value, service and choice. However, we have some major challenges to address. Customers continue to be more demanding and careful with their money and new technology will impact on shopping habits. In addition our ambitious expansion plans have to deal with tight planning regimes in both the UK and France and we expect the European retail environment to remain competitive. - ends For further information: Kingfisher plc: +44 (0) 171 724 7749 Michael Hingston, Director of Corporate Affairs Andrew Mills, Director of Investor Relations Web-site address: www.kingfisher.co.uk 5
SUMMARY RESULTS BY SECTOR SECTOR Retail sales ( m) Retail profit ( m) 1999 1998 % change 1999 1998 % change DIY 2,055.4 1,753.7 17.2 191.1 161.6 18.3 ELECTRICALS 2,458.1 1,937.9 26.8 173.4 146.8 18.1 GENERAL MERCHANDISE *KINGFISHER TOTAL 2,840.9 2,618.0 8.5 186.1 171.3 8.6 7,354.4 6,309.6 16.6 550.6 479.7 14.8 *Retail sectors only, excludes property, financial services and other operating costs. OTHER YEAR-END DATA SECTOR Store nos. Selling space Employees (FTE) (000s sq.ft.) (000s sq. m.) DIY 494 26,658 2,476.8 33,591 ELECTRICALS 698 7,393 686.8 21,192 GENERAL MERCHANDISE KINGFISHER TOTAL 1,550 8,696 807.9 23,350 2,742 42,747 3971.5 78,133 6
INDEX Operations review DIY - Castorama/B&Q...8 - Other...9 Electrical - Darty...10 - BUT...11 - Comet...11 - Other...11 General Merchandise - Woolworths...13 - Superdrug...14 - Other...14 Property - Chartwell Land...15 Kingfisher data by sector and company...16 Financial Section* Financial Review...17 Summary of Group results...20 Group balance sheet...21 Consolidated cash flow...22 Reconciliation of net cash flow to movement in net debt...23 Statement of total recognised gains and losses...23 Retail turnover...24 Exceptional items...24 Net interest payable...24 Taxation...24 Earnings per share...25 Reconciliation of movement in shareholders' funds...25 Net cash flow from operating activities...25 Dividend...26 Annual Report information...26 Page * The Financial Review and accompanying financial schedules are a summary extract from the full annual report. 7
DIY SECTOR m Sales % m Retail Profit % Company 98/99 97/98 change 98/99 97/98 change B&Q 1,908.4 1,753.7 8.8 188.1 161.6 16.4 *Other 147.0 - - 3.0 - - Total 2055.4 1,753.7 17.2 191.1 161.6 18.3 *Includes one month of Castorama and two months of NOMI. B&Q merged with Castorama to create the No 1 DIY retailer in Europe Strong performance by B&Q Warehouse and Supercentres One month of Castorama included A leading DIY retailer in Poland acquired The major event of the year was the merger in December of B&Q with Castorama, creating a business with a combined annualised turnover in excess of 3.9 billion and comfortably the number one DIY retailer in Europe. The sales and profit figures reported reflect a full year of B&Q, but only one month of Castorama. B&Q sales rose by 8.8% to 1,908 million in the year. The inclusion of 147 million contributed in January by Castorama and NOMI from the date of its acquisition, brings the sector total to 2.1 billion. B&Q s profits were up 16.4% to 188.1 million. Total DIY profits for the year were 191.1 million. Like-for-like sales growth of 5.5% in the year was the main driver of B&Q s growth and reflected the continuing strong performance of both its large format Warehouse outlets and good growth in Supercentres. New store openings, particularly Warehouses, accounted for the remaining growth. During the year, B&Q opened seven new Warehouse outlets in the UK, bringing the total to 35. Approaching half these outlets are achieving annualised sales in excess of 20 million, and Warehouse sales now account for over 29% of the B&Q total. Range and merchandise development at B&Q were key to higher sales. Highlights included the launch of the B&Q Colours own-label paint range, which drove core paint sales to record highs; a significantly expanded and much improved canopy display of lighting, and innovations in building products, including a new decking range. 8
In addition to increasing its share of the DIY market, B&Q also increased its share of the bigger Repair, Maintenance and Improvement (RMI) market, to a total of 9.2%. In the current year B&Q plans to open a further 11 Warehouses and two Supercentres. A major site acquisition programme is underway in order to meet the target of a total of 125 Warehouses in the UK. Castorama has announced separately its results for 1998. In the year to December 1998 Castorama reported sales of 2.1 billion and profits after tax and interest of 56.4 million. Like-for-like sales growth was 4.7% for the Castorama Group as a whole. Castorama (excluding B&Q) plans to open a total of 10 new stores in five countries during this year. Of these one will be in France and the others in Italy, Germany, Poland and Brazil. In Taiwan B&Q opened two new stores last year bringing the total to four. Three new openings are planned this year, one of which, in Taipei, will be a flagship 75,000 sq. ft. store. In addition, B&Q will open a similar sized store in China in Shanghai in June. Other The year saw the acquisition by Kingfisher of NOMI, a leading DIY operator in Poland. During 1998, NOMI opened eight new stores, bringing its total to 22 and plans to open five new stores during 1999. 9
ELECTRICAL SECTOR m Sales % m Retail Profit % Company 98/99 97/98 change 98/99 97/98 change Darty 1,123.8 1028.3 9.3 115.1 107.0 7.6 Comet 862.4 820.2 5.1 33.4 33.4 0.0 *Wegert 253.0 - - 7.5 - - **BUT 80.3 - - 15.0 4.2 - Other 138.6 89.4 55.0 2.4 2.2 9.1 Total 2,458.1 1,937.9 26.8 173.4 146.8 18.1 *Includes 6 months to 31 December 1998. **Includes 9 months associate retail profits at 26% share to 30 September 1998 and 3 months subsidiary turnover and retail profits to 31 December 1998. Europe s most widespread electrical chain French market recovery and further acquisitions drive growth World Cup and new products boost sales Both Darty and Comet increase market share Growth in Kingfisher s electrical sector was driven by a recovery in the French electrical market and the acquisition during the year of a 60% stake in Wegert in June and the majority of the outstanding shares of BUT in France later in the year. Overall sales in the sector of 2.5 billion were characterised by continuing price deflation in brown goods, particularly strong growing categories such as mobile phones and multimedia products. Electrical sector profits totalled 173.4 million, an increase of 18.1 % over the previous year. The football World Cup and the introduction of new digital products helped electrical sales across European markets. France In France, Darty increased profits in sterling terms by 7.6% to 115.1 million. The increase was broadly similar in local currency terms, at 7.2% to FF 1.1 billion. Last year saw a recovery in the French market for both brown and white electrical goods. Against this background, Darty once again increased its share of its core markets, and achieved strong growth in multimedia and mobile phones. Like-for-like sales growth of 6.7% for the year compared with estimated market growth of 4.6%. Darty s share of the market grew from 13.4% to 13.7%. Kingfisher Electrical Retailing is now one of Europe s top three specialist electrical chains and operates in more European countries than any other. Key developments during the year were the opening of seven new stores, including a 2,000 sq. m. format at Nation in Paris, the roll-out of an enhanced multimedia offer and the launch of new customer call centres and helplines. 10
The results for BUT, the furniture and electrical retailer, are included as a subsidiary for the three month period from 1 October to their 31 December year end. Sales during this period were 80.3 million with profits of 10.9 million. For the nine months to 30 September only a 26% share of BUT s profits are included, contributing 4.1 million. During the current year Darty plans to open eight new stores, relocate one and refurbish another eight. BUT has six new openings planned. UK In the UK, Comet increased sales by 5.1% to 862.4 million with profits remaining flat at 33.4 million, in a difficult year in which average selling prices were more than 5% down over the previous year. Despite a like-for-like sales decline of 0.6% in the year, Comet increased its market share from 11.7% to 12.3%. During the year Comet opened eight new stores, relocated 17 stores and carried out major refits to nine stores. It also opened a new purpose-built, brown goods distribution centre at Corby, and towards the end of the year, launched a much improved, nationwide home delivery and installation service. This year Comet plans to open eight new stores including a 26,000 sq. ft. trial store in Paisley near Glasgow. Germany The results include the contribution of Wegert for the period from 1 July until the year end. This amounted to sales of 253 million and profits of 7.5 million. There were a total of 64 stores trading under the Pro Markt and Makro Markt names at the year-end. During this year a total of eight new openings are planned. Since the year-end Kingfisher has made an initial investment of 4.53 million DM for a 55% interest in Tangens GmbH, which will shortly start operations as a mobile phone service provider in Germany with immediate access to the Wegert customer base. Other At New Vanden Borre in Belgium, like-for-like sales increased by 14% against market growth of 6%, with sales of brown goods and telephones particularly strong. NVB increased the number of its new concept stores by four. Eight out of its 20 stores have now been renovated. BCC in Holland increased sales by 12% against electrical market growth in the Netherlands of 6.5%. This sales increase was driven mainly by the opening of three new stores and the relocation of one, bringing the total number of stores to 20. 11
Electric City with seven stores in Singapore, which was acquired at the end of October last year, faced a depressed market. 12
GENERAL MERCHANDISE m Sales % m Retail Profit % Company 98/99 97/98 change 98/99 97/98 change Woolworths 1,763.2 1,662.8 6.0 114.4 105.1 8.8 Superdrug 798.6 749.5 6.6 41.1 41.0 0.2 Other 279.1 205.7 35.7 30.6 25.2 21.4 Total 2,840.9 2,618.0 8.5 186.1 171.3 8.6 High street outperformance in difficult trading Market growth in key categories Continued pharmacy additions Strong Christmas trading In the General Merchandise sector both Woolworths and Superdrug outperformed competitors on the basis of like-for-like sales growth during a year of difficult trading, particularly in the second half, and increased their market shares in most key categories. Woolworths increased its profits for the year by 8.8% to a record 114.4 million, continuing its record of profits growth. Like-for-like sales growth was 5.3% and reflected increased market share in the majority of Woolworths principal categories. Over the important Christmas period, when trading in most of the high street was difficult, like-for-like sales growth at Woolworths was 5.2%. The chain s Christmas advertising campaign, Woolworths Winter Wonderland, achieved the highest consumer recall for a Christmas campaign for the third year running. Entertainment was Woolworths strongest performing category with sales up 14% over the previous year. Woolworths maintained its market leading position in entertainment and sold over a million copies of Titanic between the October launch and Christmas Day. In a very competitive market Woolworths increased share in confectionery and toys. In kidswear Woolworths continued to establish its reputation as the preferred store for four to nine year olds clothing. It also maintained development of its Chad Valley, Ladybird and Classique own label brands as well as introducing new products for the home. 13
During the year Woolworths continued a programme to add a total of one million square feet of new selling space and opened three new stores. It also extended or refurbished another 98 stores. This year 14 new stores are planned, including a trial, edge-of-town format to be called Big W. This 70,000 sq. ft. store will open in Edinburgh in early June and will carry a comprehensive range of merchandise sourced from Woolworths and other Group businesses. Other development initiatives include continuing expansion of Woolworths home shopping offer. Following successful trials, Woolworths has signed a contract with Freemans to fulfil catalogue mail order sales. Superdrug At Superdrug profits for the year were 41.1 million compared with the previous year s 41.0 million. Total sales increased by 6.6% to 798.6 million, of which the likefor-like increase accounted for 5.4%. Continuing investment in store refurbishments and the addition of pharmacies contributed to the like-for-like growth, in a market where sales weakened throughout the year. Superdrug increased market share in key pharmacy medicines and beauty categories. During the year, Superdrug opened a 8,300 sq. ft. flagship store in Oxford Street, with an expanded health and beauty offer. A further 47 in-store pharmacies were opened bringing the total to 177. A quarter of Superdrug stores now have a pharmacy and as a result Superdrug is becoming one of the UK s largest dispensing pharmacy chains. Superdrug will continue its store refurbishment and pharmacy opening programme during the current year. Other Entertainment UK, the Group s music and video wholesaler, achieved a 21% sales uplift, against market growth in its core markets of music and video of 5% and 13% respectively. Towards the end of the year Kingfisher also acquired VCI plc, a leading UK publisher and distributor of pre-recorded video cassettes. MVC grew sales strongly during the year and its store base increased from 47 stores to 61. MVC plans to open 20 additional stores this year. 14
PROPERTY 56.7m revaluation surplus in lower growth market Chartwell Land, Kingfisher s specialist retail property company, increased operating profit by 13.1% to 69.1 million ( 61.1 million). However, total returns comprising operating profit, profit on investment property sales and a much reduced revaluation surplus were 129.1 million ( 179.6 million). Of the total gross rents of 78.3 million, 56.4 million or 72% came from Group tenants. Profit from development increased by 0.8 million to 6.3 million ( 5.5 million). The development business also completed construction of two new B&Q Warehouses, at Edinburgh and Paisley, retained in the investment portfolio. Profit on disposals from the investment portfolio was 3.3 million. The revaluation surplus was 56.7 million, significantly lower than the strong performance of 114.2 million last year, owing to a softening of the property market, mainly in the second half. The gross assets at the end of the year were valued at 1.29 billion compared to 1.03 billion in the previous year. 15
KINGFISHER DATA BY SECTOR AND COMPANY DIY SECTOR Company Store nos. Selling space Employees (FTE) (000s sq.ft.) (000s sq. m.) B&Q 290 14,478 1,345.1 14,563 Castorama 182 11,663 1,083.7 18,106 Other 22 517 48.0 922 TOTAL 494 26,658 2,476.8 33,591 ELECTRICAL SECTOR Company Store nos. Selling space Employees (FTE) (000s sq.ft.) (000s sq.m.) Darty 163 2,027 188.3 8,575 Comet 261 1,971 183.1 7,343 Wegert 168 1,290 119.8 2,474 BUT* 59 1,719 159.7 1,823 Other 47 386 35.9 977 TOTAL 698 7,393 686.8 21,192 GENERAL MERCHANDISE Company Store nos. Selling space Employees (FTE) (000s sq.ft.) (000s sq.m.) Woolworths 786 6,288 584.2 15,080 Superdrug 703 2,169 201.5 6,506 Other 61 239 22.2 1,764 TOTAL 1,550 8,696 807.9 23,350 KINGFISHER TOTAL 2,742 42,747 3,971.5 78,133 The figures for BUT include only those stores consolidated in the Group s figures. BUT also operates the following non-consolidated franchises. *BUT non consolidated franchises 177 4,478 416.0 4,177 16
FINANCIAL REVIEW Shareholder Return and Dividends Earnings per share before exceptional items increased by 8.2% to 29.9p (1998: 27.6p, as adjusted for the share split on 2 July 1998). After exceptional items, principally the release of a VAT accrual of 44.7 million, basic earnings per share increased by 12.5% from 28.7p to 32.3p. In addition, the revaluation surplus of 58.4 million on the Group s property portfolio was equivalent to a further increase in shareholder value of 4.3p per share. The Board has proposed a final dividend of 9.25p per share making a total dividend for the year of 13.0p per share. This represents an increase of 1.5p or 13.0% and is covered 2.3 times from pre-exceptional earnings. Cashflow and Investment in the Businesses Net debt grew from 203.5 million at the start of the year to 693.4 million by the year end with gearing increasing from 11.5% to 26.5%. In addition we issued a further 101.3 million of non-recourse notes within the Group s financial services company Time Retail Finance. Cash generation across the Group remained strong with 698.3 million being generated from operating activities before tax. Net capital expenditure for the year of 378.6 million was at a higher level than last year as the existing businesses expand and improve their store portfolios and supporting infrastructure. The Group also made acquisitions resulting in a cash outflow of 365.0 million. Interest Net interest payable decreased by 3.4 million from 13.3 million to 9.9 million, reflecting continued strong cash generation throughout the Group, offset in part by the investment in new companies towards the end of the financial year. Exceptional Items The exceptional other operating income of 44.7 million represents the release of an accrual for VAT of outstanding credit balances as at 28 February 1997 following the withdrawal of the Standard Method of Gross Takings by HM Customs and Excise. Following a Court of Appeal ruling, the accrual is no longer required. 17
Taxation The overall rate for the year increased from 25.6% to 29.2%. As we anticipated last year the level of release in prior year provisions was not repeated in the year to 30 January 1999. The rate on current year profits before prior year adjustments was 30.0%, down from 30.8%, mainly because the statutory rates in the UK and France have reduced slightly. Next year, the overall rate is expected to rise to around 30%. Mergers and Acquisitions DIY Sector On 18 December 1998, the Group completed the combination of B&Q and Castorama. The transaction has been treated as an acquisition and was effected by the transfer by the Group of its 100% interest in B&Q in exchange for a 57.9% interest (54.6% on a fully diluted basis) in the consequently enlarged Castorama group. The transaction was effected by an exchange of shares, being new shares in Castorama for the Group s shares in B&Q, and book value of the 42.1% of the net assets of B&Q at the date of acquisition of Castorama has been treated as the cost of that investment. The difference between the consideration and the fair value of the Castorama net assets received has been treated as a non-distributable reserve. On 4 November 1998 the Group completed the initial purchase of a controlling interest in NOMI, a Polish DIY retailer. Following a further shareholder offer, the Group s interest increased to 66.7%, taking the total consideration to 10.5 million. Electrical Sector On 29 June 1998 the Group acquired a 60% interest in Wegert, a German electrical retailer for a consideration of 52.0 million. Simultaneously Wegert purchased the entire share capital of the German electrical retailer Promarkt Holding GmbH using cash from its own resources for the equivalent of 14.5 million. On 24 September 1998 the Group increased its shareholdings in BUT S.A., a major French furniture and electrical retailer from 26% to 61.7%. After a subsequent public offer terminating on 13 October 1998 and purchases in the market, the Group further increased its holding to 98.2%. On 28 October 1998 the Group completed the purchase of Electric City, a Singaporean electrical retailer for a consideration of 4.6 million. 18
General Merchandise On 5 November 1998 the Group acquired VCI plc, the UK publishing and distribution group. Total consideration for 100% of the shares was 46.8 million. Accounting Policies and Standards During 1998 two accounting standards came into effect, FRS 9 and FRS 10. In addition the Accounting Standards Board issued four new standards, FRS 11 to FRS 14. The Group complies fully with the accounting principles and disclosure requirements of these standards. In the case of FRS 10 Goodwill and Intangible Assets the new requirements to recognise acquisition goodwill on the balance sheet, rather than immediate write off against reserves, has been adopted. Consequently the Group has 264.5 million of capitalised goodwill at the year end. With the exception of goodwill arising on the acquisition of BUT all acquisitions in 1998 are considered to have a useful economic life of 20 years. In the case of BUT the Group believes that its proven ability to maintain market leadership and barriers to entry into its market mean its goodwill is durable. Accordingly, no amortisation is required. Taking this into account the profit and loss account includes a charge of 2.3 million reflecting the amortisation of goodwill. For acquisitions prior to 31 January 1998 goodwill of 1,541.2 million remains written off against reserves. Year 2000 The Group has continued to charge the costs of rendering existing software year 2000 compliant to the profit and loss account as they are incurred. These costs amounted to 11.2 million (1998: 3.3 million). 19
KINGFISHER plc AND SUBSIDIARY COMPANIES Summary of Group Results For year ended 30 January 1999 millions Note 1999 1998 Turnover 1 7,457.8 6,409.4 Group Operating Profit DIY 191.1 161.6 Electrical 173.4 146.8 General Merchandise 186.1 171.3 Property 69.1 61.1 Exceptional item other operating income 2 44.7 - Other operating costs (27.3) (22.5) Group Operating Profit 637.1 518.3 Exceptional items 2 2.1 15.0 Profit before interest 639.2 533.3 Interest 3 (9.9) (13.3) Profit before tax 629.3 520.0 Taxation 4 (183.5) (133.1) Profit after tax 445.8 386.9 Minority interests (8.9) (0.5) Profit for the financial year 436.9 386.4 Dividends (175.3) (155.1) Retained profit for the year 261.6 231.3 Earnings per share - Basic 5 32.3p 28.7p Before exceptional items 5 29.9p 27.6p 20
Group Balance Sheet As at 30 January 1999 millions Note 1999 1998 Fixed assets Intangible assets 267.3 - Tangible assets 2,885.4 1,816.9 Investments in joint ventures Share of gross assets 105.1 41.9 Share of gross liabilities (94.9) 10.2 (35.0) 6.9 Investments in associates 11.2 26.1 Other investments 45.0 18.2 3,219.1 1,868.1 Current assets Development work in progress 69.0 49.1 Stocks 1,465.4 840.5 Debtors due within one year 608.8 447.0 Debtors due after more than one year 144.1 149.0 Securitised consumer receivables 321.0 189.9 Less: non-recourse secured notes (247.4) 73.6 (146.1) 43.8 Investments 311.7 254.7 Cash at bank and in hand 241.2 74.9 2,913.8 1,859.0 Creditors Amounts falling due within one year (2,726.0) (1,615.3) Net current assets 187.8 243.7 Total assets less current liabilities 3,406.9 2,111.8 Creditors Amounts falling due after more than one year (768.8) (327.6) Provisions for liabilities and charges (21.8) (14.1) 2,616.3 1,770.1 Capital and reserves Called up share capital 170.0 169.0 Share premium account 237.7 225.1 Revaluation reserve 395.4 342.0 Non-distributable reserve 146.3 - Profit and loss account 1,301.2 1,034.5 Equity shareholders' funds 6 2,250.6 1,770.6 Equity minority interests 365.7 (0.5) 2,616.3 1,770.1 21
Consolidated Cash Flow Statement For the financial year ended 30 January 1999 millions Note 1999 1998 Net cash flow from operating activities 698.3 605.0 Returns on investments and servicing of finance Interest received 35.2 18.5 Interest paid (46.1) (28.6) Interest element of finance lease rental payments (2.4) (1.1) Net cash outflow from returns on Investments and servicing of finance (13.3) (11.2) Taxation UK Corporation tax paid (125.2) (90.3) Overseas tax paid (44.0) (27.7) Tax paid (169.2) (118.0) Capital expenditure and financial investment Payments to acquire tangible fixed assets (416.0) (245.8) Receipts from the sale of tangible fixed assets 37.4 69.0 Payments for additions to investments (15.3) (0.5) Receipts from sale of investments 0.9 42.1 Net cash outflow from capital expenditure and financial investment (393.0) (135.2) Acquisitions and disposals Purchase of subsidiary undertakings (361.2) (32.6) Net overdrafts acquired with subsidiary undertakings (69.4) - Payments for additions to associated undertakings (3.8) (5.4) Net cash outflow from acquisitions and disposals (434.4) (38.0) Equity dividends paid (153.8) (135.3) Management of liquid resources Net movement in short term deposits 22.3 21.3 Net purchase of short term investments (43.1) (46.7) Net cash outflow from management of liquid resources (20.8) (25.4) Financing Issue of ordinary share capital 13.6 18.1 Capital element of finance lease rental payments (6.4) (2.1) Net receipt/(repayment) of loans 433.2 (213.1) Net cash inflow/(outflow) from financing 440.4 (197.1) Decrease in cash (45.8) (55.2) 22
Reconciliation of Net Cash Flow to Movement in Net Debt For the financial year ended 30 January 1999 millions 1999 1998 At start of year (203.5) (399.2) Decrease in cash (45.8) (55.2) Debt in subsidiaries acquired (41.0) - Net movement in short term deposits (22.3) (21.3) Net purchase of short term investments 43.1 46.7 Change in market value of investments (0.5) (0.2) Net (drawdown)/repayment of loans (433.2) 213.1 Foreign exchange effects 9.8 12.6 At end of year (693.4) (203.5) Consolidated Statement of Total Recognised Gains and Losses For the financial year ended 30 January 1999 millions 1999 1998 Profit for the financial year 436.9 386.4 Unrealised surplus on revaluation of properties 58.4 114.1 Non-distributable reserve arising on the combination 146.3 - of B&Q and Castorama Foreign exchange loss (10.0) (5.9) Total recognised gains and losses relating to the year 631.6 494.6 23
1. Turnover millions 1999 1998 DIY 2,055.4 1,753.7 Electrical 2,458.1 1,937.9 General Merchandise 2,840.9 2,618.0 Property 41.1 51.2 Financial Services 62.3 48.6 2. Exceptional items 7,457.8 6,409.4 millions 1999 1998 Operating exceptional - VAT accrual release 44.7 - Other exceptionals - Profit on disposal of fixed assets - continuing 2.1 5.7 operations - Profit on disposal of other investments - 9.3 Other exceptionals 2.1 15.0 3. Net interest payable millions 1999 1998 Interest payable 49.2 44.8 Interest receivable (35.2) (28.5) 14.0 16.3 Interest capitalised (4.1) (3.0) 9.9 13.3 4. Taxation millions 1999 1998 Tax charge on profit on the ordinary activities of the Group for the year: UK corporation tax at 31% (1998 : 31.33%) 148.6 123.9 Relief for double taxation (1.2) (1.2) Overseas taxation 40.2 35.7 Deferred tax (0.2) - Associated undertakings 1.5 1.6 188.9 160.0 Prior year adjustments (5.4) (26.9) 183.5 133.1 24
5. Earnings per share Pence 1999 1998 Basic earnings per share 32.3 28.7 Attributable to VAT accrual release (2.3) - Attributable to other exceptional items (0.1) (1.1) Earnings per share before exceptional items 29.9 27.6 6. Reconciliation of movement in shareholders' funds millions 1999 1998 Profit for the financial year attributable to the members of Kingfisher plc 436.9 386.4 Dividends (175.3) (155.1) 261.6 231.3 Foreign exchange loss (10.0) (5.9) Other recognised gains relating to the year 58.4 114.1 Shares issued under option schemes 13.4 18.0 Scrip dividend alternative 9.3 3.0 Write back of goodwill on disposal of Maxi-Papier - 10.4 Goodwill written off - (32.8) Non-distributable reserve arising on the combination 146.3 - of B&Q and Castorama Movement in Darty minority interests 1.0 - Net addition to shareholders' funds 480.0 338.1 Opening shareholders' funds 1,770.6 1,432.5 Closing shareholders' funds 2,250.6 1,770.6 7. Net cash flow from operating activities millions 1999 1998 Operating profit 637.1 518.3 Depreciation 141.0 126.8 Increase in development work in progress (15.8) (13.2) Increase in stock (94.3) (10.3) Decrease/(increase) in debtors 66.1 (110.5) (Decrease)/increase in creditors (46.0) 91.5 Share of associated undertakings' profits (4.6) (4.2) Loss on disposal of fixed assets 14.8 6.6 Net cash inflow from operating activities 698.3 605.0 25
DIVIDEND The final dividend for the year ended 30 January 1999 will be paid on 1 July 1999 to shareholders on the register at close of business on 12 April 1999 subject to the approval of shareholders at the Company s Annual General Meeting to be held at 11am on 26 May 1999 at The Dorchester Hotel, London. 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 an extract 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 1999. Further copies of this announcement are available from: The Company Secretary Kingfisher plc North West House 119, Marylebone Road London NW1 5PX 26