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Debt investors

 

Kingfisher finances its operations using a number of funding instruments, including medium term note debt, bank borrowings and leases.

As at 31 July 2018 Kingfisher had £99 million of net cash on the consolidated balance sheet. However, the Group is levered when capitalised lease debt (that, in accordance with accounting standards, does not appear on the balance sheet) is included. The ratio of the Group’s lease adjusted net debt (capitalising leases at 8 times annual rent) to adjusted EBITDAR is 2.5 times as at half-year. At this level Kingfisher has financial flexibility whilst retaining an efficient cost of capital.

A reconciliation of lease adjusted net debt to EBITDAR is set out below:

  2018/19
Moving
annual total
£m
2017/18
Full Year

£m
EBITDA 885 943
Property operating lease rentals 418 408
EBITDAR 1,303 1,351
Financial (net cash) (99) (68)
Property operating lease rentals (8x)(1) 3,344 3,264
Lease adjusted net debt 3,245 3,196
Lease adjusted net debt to EBITDAR 2.5x 2.4x

 (1) Kingfisher believes 8x is a reasonable industry standard for estimating the economic value of its leased assets

Kingfisher aims to retain its solid investment grade credit rating whilst re-investing in the business and the transformation plan, and paying a healthy annual dividend to shareholders. After satisfying these key aims and taking into account the economic and trading outlook, any surplus capital is returned to shareholders.

Taking all these factors into account, on 25 January 2016 Kingfisher announced its intention to return around a further £600 million of capital to shareholders between 2016/17 and 2018/19.

As at 31st July 2018, £550 million of the above programme was returned via a series of share buybacks.  The timing and mechanism for the balance of the capital return programme will be kept under review to ensure we maximise value creation for our shareholders. The next update will be given with our full year results in March 2019.

Kingfisher regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash flow forecast for the medium term, determining the level of debt facilities required to fund the business, planning for repayments of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows.

For any questions or queries please contact:

Gaylene Kendall
Group Tax and Treasury Director
Gaylene.Kendall@kingfisher.com

Christian Cowley
Head of Investor Relations
Christian.Cowley@kingfisher.com

Further information