Sharp UK downturn hits Kingfisher

Kingfisher plans to expand into more new world markets

Profits at B&Q owner Kingfisher have more than halved amid a sharp downturn in UK spending.

Pre-tax profits after one-offs sank 64.2% to £231.8m ($406m) for the year to 28 January, from £647.7m last year.

The company said B&Q experienced its weakest UK market in years, prompting a 3.7% drop in reported sales to £3.9bn.

Despite the UK slowdown, like-for-like sales across Europe and Asia - which strip out new stores - grew 3.7%, helped by strong French sales.

"Strong performances in continental Europe and Asia were more than offset by a sharp downturn in home-related spending in the UK, presenting B&Q with its toughest trading environment for many years," said Kingfisher chief executive Gerry Murphy.

Spending worries

The group blamed high levels of household debt, rising taxes and higher energy bills for the "weakest" home improvement market in 10 years.

B&Q's new management has acted to support trading and accelerate development of stores, ranges and services for the future Gerry Murphy, Kingfisher Check Kingfisher's shares

Exceptional costs of £215.4m - mainly to pay for a restructuring drive at its B&Q outlets - also contributed to lower profits at the group.

In an effort to cut costs at its ailing UK business, Kingfisher has closed stores, swapped to smaller formats and cut jobs.

Meanwhile, promotions, price cuts and discounts have been introduced in an effort to encourage more consumers into their stores - as well as improved stock ranges and availability.

The group also set up a UK Trade division, including its Screwfix Direct business, in an effort to target the growing professional market. Profits at the unit climbed to £15.7m.

"B&Q's new management has acted to support trading and accelerate development of stores, ranges and services for the future," Mr Murphy said.

"I am convinced that these initiatives will make B&Q more attractive to its customers and more valuable for shareholders."

Global expansion

However it was a different story at the group's other stores around the world.

In France, its Brico Depot and Castorama outlets out-performed the wider DIY market - which grew at just 0.8%, its slowest rate in 12 years.

Retail profit in the country increased 8.8% to £230m.

Meanwhile, in the rest of Europe and Asia sales grew 28% after the group opened 47 new stores in eight countries - including its first outlets in Russia and South Korea.

Over the next five years, overall store numbers in Poland, Italy, Ireland, China and Taiwan are expected to double.

In the future, as well as strengthening its leadership position in the UK and France and expanding in its current markets Kingfisher hopes to expand into new markets where "future growth and economics look attractive", such as Turkey.