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Full Year 2007 Kesa Electricals plc Earnings Release (15 months accounts) - Presentation - Final.

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Original Source: FD (FAIR DISCLOSURE) WIRE

DAVID NEWLANDS, CHAIRMAN, KESA ELECTRICALS PLC: Good morning, ladies and gentlemen. Welcome to Kesa's results presentation.

As you are aware, we have changed our year-end from January 31 to April 30, to improve the internal budgetary process. You may remember we reported the 12 months to January 2008 on March 22, so these are the first accounts prepared to the new reporting date. They are, accordingly, for the 15 months to April 30, 2008, with pro forma information for the 12 months to April 30, 2008.

Simon will provide the financial review and Jean-Noel the business review and outlook, based on the new financial year-end. And for completeness, I will briefly cover the 15-month period.

Group revenue was GBP5.4b, operating profit GBP141m and earnings per share GBP0.158. I'm pleased to highlight that the sale of BUT was completed on March 31. These proceeds, plus continued strong cash generation from the rest of the Group, resulted in a net cash position of GBP46.5m at the end of April.

As announced in March, the Board is recommending a final dividend of GBP0.036, payable in October for the three-month period ending April 30, 2008, giving total dividends of GBP0.179 for the 15-month period. When the Board considers dividends for the current financial year, it will have regard to the GBP0.144, being the second interim dividend of GBP0.108 and the final dividend of GBP0.036, as the base.

As stated to shareholders in the EGM circular for the disposal of BUT, the Board will remain flexible as to the timing and amount of share repurchases. And we will keep this under review and believe that there are benefits to the Group maintaining a strong balance sheet in current market conditions and enabling us to take advantage of potentially attractive future investment opportunities.

As we say in the statement, the decline in consumer confidence is continuing and we expect trading to be difficult in this financial year, particularly in the U.K.

I do take quite a lot of comfort from the fact that last year 57.5% of the Group's revenue and 83.4% of the Group's retail profit were denominated in euros. By far our largest business is in France and the savings culture is strong in France. They behave cautiously and put gold under their mattresses and this will help in any downturn.

As usual, I know our managers will concentrate on product margin, costs and cash generation and deliver the best results they can.

Thank you. I'll now hand over to Simon for the financial review.

SIMON HERRICK, FINANCE DIRECTOR, KESA ELECTRICALS PLC: Thank you, David. Good morning, ladies and gentlemen.

As David has just mentioned, following the change in year-end, this part of the presentation will focus on the pro forma Group results from continuing operations for the 12 months to April 30, 2008, compared to the same period to April 30, 2007.

BUT has been classified as a discontinued operation, in line with its disposal at the end of March. At completion, the removal of cumulative FX gains in sterling carrying value of BUT's net assets, previously held in consolidated reserves, has actually resulted in a GBP1.1m overall accounting profit on the sale of BUT, compared to the GBP39.8m impairment we took through the accounts in the 12 months to January 2008.

At the end, I'll briefly comment on what is the only new historic information in these numbers, the three months of February to April 2008, or the Q5 as we've called it internally. A summary of the various reporting periods presented on page four of this morning's announcement are also repeated as an appendix to this presentation.

Before I commence with the results of the Group's continuing operations, it is worth highlighting that the marked appreciation of the euro against sterling, particularly in the back half of this 12-month period, has had a significant impact on the Group's sterling results as presented.

Overall, the Group produced a strong 12 months, with revenue of GBP4.5b and a retail profit of GBP141.3m, increasing by 14% and 3.1% respectively, compared to the same period last year. This period included GBP36.6m of total losses, including start-up losses in Darty Box, our organic expansions in Italy, Switzerland and Turkey, and a small loss in Menaje del Hogar.

The P&L interest charge saw a small increase to GBP10.3m, due to the financing of the Menaje del Hogar acquisition in September and interest paid on our debt facility being denominated in euros, partly offset by a gain on closing interest rate hedges no longer needed following a reduction in Group debt after the disposal of BUT.

Profit before tax was GBP128.8m, up 1.8% on last year. The Group's overall effective tax rate, which includes the share of JV and associates tax within operating profit under IFRS, increased from 32.2% to 36.3%. This was a higher rate than initially envisaged, due to greater unrelieved losses in overseas businesses, the impact of a strengthening euro on the sterling amount of overseas taxes and a greater proportion of the Group's tax paid at a higher rate in France. We'd expect the rate to reduce by around 200 basis points for this financial year. Profit after tax for our continuing operations reduced to GBP82.4m, representing basic and diluted earnings per share of GBP0.156.

Revenue growth was again driven by demand for new technology products, particularly flat screen TVs and laptops, with large white good sales weakening in the second half of the year, particularly at Comet. Pleasingly, all our other businesses, both established and new, delivered solid like-for-like revenue growth. Web-generated revenue continued to grow very strongly, up over 40% at Darty and 30% at Comet.

The overall negative product mix effect on margin eased compared to the prior year, to between 30 and 40 basis points.

Darty France, excluding the Box, delivered a 1.8% improvement in retail profit after the P&L cost of a number of investment initiatives that Jean-Noel will expand on shortly. The Box losses are a similar level to those previously reported for the 12 months to January 2008, at EUR22m.

Despite lower revenue growth, Comet was able to hold retail profit, reflecting careful cost control and operational efficiencies and the continuation of its property strategy, as previously explained.

The established businesses, BCC, Vanden Borre and Datart, continue to deliver growth, with a 39% improvement in retail profit. Overall losses for our new businesses, including Menaje del Hogar, were EUR28.9m (sic - see presentation) and, again, Jean-Noel will provide more detail in a minute.

We generated GBP291.9m of cash from operations, significantly ahead of last year, despite the investment in Menaje del Hogar's working capital. One-off phasing of supplier payment runs and more prompt collection of supplier rebates significantly reduced period-end working capital compared to last year, and without any...