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LONDON (Alliance News) - DIY retailer Kingfisher PLC Wednesday said the head of its Castorama business in France, Veronique Laury, will take over as group chief executive before the end of the current financial year, tasked with expanding the company's online sales, integrating recent acquisitions and expanding some of its brands into new markets.
In a statement, the company said current CEO Ian Cheshire will step down by the end of the financial year in January. Cheshire told journalists that after seven years as CEO, and 17 years in the Kingfisher business, he has decided that he didn't want to remain in place through the next five-year strategic plan the company has started.
"I've always looked at this job with a 5 to 10 years view... and there comes a time when you have to call the cycle," said Cheshire.
Laury has been with Kingfisher for 11 years, and her job will be to oversee the planned improvement of the company's IT systems, building its online capabilities, integrating recent French acquisition Mr Bricolage with the rest of the company's operations, and expanding the Screwfix and Brico Dépôt businesses into new markets, like Germany.
Laury is coming from a business that's struggling to grow in the face of continued economic weakness in France. Castorama's total and like-for-like sales rose just 0.1% in the first half of Kingfisher's financial year.
Still, the market reacted positively to the announcement, and Kingfisher shares were up 2.7% at 315.50 pence Wednesday morning, the biggest rise on the FTSE 100.
France, which also includes the Brico Depot operation, is currently the company's biggest profit contributor, followed by the UK and Poland. In a separate earnings statement, the company said its French and Polish operations continued to weigh on profit in the first half of the year, offsetting strong revenue growth in the UK and Ireland.
The home improvement retailer's pretax profit for the 26 weeks to August 2 fell by 6.5% to GBP375 million, down from GBP401 million last year when profit was buoyed by a tax repayment related to its previous demerger of the Kesa business. Excluding exceptional items, pretax profit was flat on the year at GBP364 million, as a 0.9% rise in revenue to GBP5.77 billion, from GBP5.72 billion, was offset by a slight drop in operating margin.
"This was a difficult first half with demand in our largest and most significant market, France, remaining particularly weak with a sharp market downturn experienced in our second quarter," CEO Cheshire said in a statement.
Kingfisher said that sales in August picked up in France, but it is too early to tell what that means for the rest of the year.
"We remain cautious about the consumer outlook for France, and we are working hard to keep numbers for margins rather than rely on sales growth. We are more confident about UK consumer confidence, and whilst we are not seeing stellar growth, it is better than France," Cheshire said.
"Internationally... it feels like it depends how everything will pan out in France, that is where we are really focused on," he added.
UK & Ireland sales were up 6.6% in the half, or 4.4% on a like-for-like basis, and retail profit was up 17.7%. The company cited initiatives to re-energise B&Q and better demand for trade products as housing construction and activity improved.
Kingfisher is in the midst of rejuvenating its home improvement business B&Q, which was hit hard by the UK economic downturn and suppressed UK housing market. The group said big promotions in the kitchen and bathroom divisions earlier in the year "burnt a bit too much margin", but it has managed to rectify it.
"Conditions in the UK were more favourable with better weather and encouraging signs in the smaller tradesman market. We were able to capitalise on the better conditions with Screwfix performing particularly well. B&Q UK & Ireland also delivered their best first-half sales growth in over a decade as the new team start to gain traction with its re-energising initiatives," Cheshire said.
Alongside maintaining margins and expanding into new markets, Kingfisher said that its keeping a look out for bolt on deals, similar to the one it made for Mr Bricolage.
"If there are other deals like Mr Bricolage, then absolutely... those type of bolt on deals make real sense," said Cheshire.
The DIY retailer raised its interim dividend by 1% to 3.15 pence, and said the remainder of its capital return programme will resume as a share buyback.
Earlier this year, Kingfisher announced multi-year capital returns programme to shareholders, starting with GBP200 million in the current financial year. So far GBP100 million has been returned as a special dividend, and GBP35 million via a share buyback.
"We promised to do GBP200 million, and we are now able to start share buyback... the GBP65 million will start immediately," said Cheshire.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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