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LONDON (Alliance News) - Kingfisher PLC on Monday announced a five-year plan to deliver a GBP500 million annual profit uplift by the end of the fifth year and a capital return of GBP600 million over the next three years.
The DIY retailer said it will deliver the GBP500 million per annum in extra profit on top of the profit it will generate from normal business. It expects its performance pre-transformation to be broadly in line with the macroeconomic backdrop in its respective markets, Kingfisher said.
Kingfisher reported a pretax profit of GBP644 million in the financial year to January 31, 2015.
The costs of the transformation plan will reduce reported profit, before the benefits of the plan, by GBP50 million in the first year of the plan and by between GBP70 million and GBP100 million in the second year, Kingfisher warned. In total, the five-year plan is expected to cost GBP800 million in capital expenditure, operating costs and exceptional operating cost.
The five-year plan comes under Kingfisher's 'ONE' Kingfisher plan announced last year, which intends to leverage the scale of the business by becoming a single, unified company. Kingfisher currently operates under the B&Q and Screwfix brands in the UK, Castorama and Bricot Depot in Europe, and Koctas in Turkey.
Under the 'ONE' Kingfisher plan, the group intends to create a unified business which will share IT systems and buying infrastructure.
The new strategy focuses on its 'three key pillars' which aim to create a "unified, unique and leading" home improvement offer', drive digital capability, and optimise operational efficiency.
Under the first pillar, to create a unified and unique offer, Kingfisher expects to generate GBP350 million annual profit uplift, at a total cash cost of GBP480 million. The uplift equates to a 5% reduction in the cost of goods sold and assumes higher sales from price reinvestment.
Under the second pillar, to drive digital capability, Kingfisher expects to generate GBP50 million annual profit uplift, at a total cash cost of GBP210 million. The group will invest in its core e-commerce platforms and build capability.
Finally, under the third pillar, to optimise operational efficiency, Kingfisher expects to generate GBP100 million annual profit uplift, at a total cash cost of GBP110 million. The group aims to unify around 90% of GBP1.2 billion spend on goods not for resale, to create a combination of cost savings while working in a simpler, more effective way.
The GBP600 million capital return to shareholders will likely be via a share buyback and will be on top of the annual ordinary dividend, Kingfisher added.
"With a clear roadmap now in place alongside clear long-term targets, the size of the five-year opportunity is significant. We do acknowledge the challenges ahead. However having already made good progress since March last year, and with 80,000 committed colleagues, we feel confident about our plan and look forward to moving on to the first year of our transformation," Kingfisher Chief Executive Véronique Laury said in a statement.
Shares in Kingfisher were trading down 1.6% at 339.20 pence on Monday morning.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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