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LONDON (Alliance News) - Kingfisher PLC Tuesday reported a drop in sales and profit for its last financial year which it blamed on a slower French market and the strength of sterling, but the DIY retailer said the new CEO plans to organise the company "very differently" to create a unified business that will share IT systems and buying infrastructure.
Chief Executive Véronique Laury, who took the helm from Ian Cheshire in December, said her initial plans include shutting about 60 B&Q stores, unprofitable stores elsewhere in the business, rolling out a new IT platform based on SAP software, as well as putting a new management team in place.
The DIY retailer, which owns brands including B&Q, Screwfix, Catorama and Brico Dépôt, reported a pretax profit of GBP644 million for the year to end-January, down 15% from GBP759 million a year earlier, as revenue dropped to GBP10.97 billion from GBP11.13 billion. Its closely-watched adjusted pretax profit, which strips out exceptional items and financing fair value re-measurements, dropped to GBP675 million, from GBP730 million.
It said the strength of the pound knocked GBP34 million off earnings abroad once they were translated back to sterling, while it also booked GBP22 million in charges for development activities in Romania, Portugal and Germany.
It said total sales would have been up 2.9% if exchange rates had remained constant over the year, with 5.5% growth in the UK and Ireland and 5.0% growth in its international markets offsetting a 1.0% fall in France.
It will pay a total dividend of 10 pence for the full year, up from 9.9p the year before, and also sweetened the news by saying it will pay out a further GBP200 million to shareholders via a capital return in the current financial year. It had returned GBP100 million through a special dividend and GBP100 million through a share buyback in the last financial year.
Laury is planning a swathe of changes at the company, which Monday pulled out of a deal to expand its French operations by buying Mr Bricolage after running into opposition from the board and a major shareholder of the French company.
"Home improvement is a great market with huge potential and Kingfisher has a strong position within it with further scope to grow in a sustainable way. However, it is clear to me that we need to organise ourselves very differently to unlock our potential. This will involve taking what is essentially a locally managed set of businesses and creating instead a single, unified company where customer needs come first," Laury said in a statement.
The first step in achieving this is to close around 15% of surplus B&Q space, which comprises around 60 stores and its "few" loss making stores in Europe, while developing a unified garden and bathroom business and the start of a Big Box revitalisation programme across Europe, she said.
Laury told journalists that there are "too many B&Q stores in the UK" when compared with the number of Castorama stores in France. Kingfisher currently operates 360 B&Q stores and 100 Castorama stores.
She also said that the company plans to open 60 new Screwfix stores in the coming year, and is "not worried" about the failed Mr Bricolage deal.
Kingfisher said that out of the 393,000 products sold across the company, only 7,000 products or 7% of sales are currently sold in at least two operating companies. A large proportion of the total also relate to delisted and ex-promotional ranges.
As well as introducing the new unified IT system to help manage this and the whole buying and supply chain process, the company said it will unify the process for managing GBP1.2 billion of goods that aren't for sale, like store maintenance, cleaning and merchandising equipment.
"To deliver ["one" Kingfisher] I'm putting a new leadership team in place. This new team will focus on people, digital, offer and quality of operations. This is why I have decided to organise the company by format, with new heads for Big Box, Medium Box and Omnichannel," Laury told journalists.
As part of this initiative, Arja Taaveniku will be joining the company in early May as chief offer and supply chain officer, while Kevin O'Byrne, the chief executive of its B&Q UK & Ireland business, will leave in the same month. The company said it will make an announcement about the handover of O'Byrne's responsibilities in "due course".
"We believe our plans will drive an increase in the value of our business for shareholders, with improved financial metrics through higher sales and lower costs, whilst at the same time optimising the generation and use of cash. Besides the growth in full year dividend, we are also pleased to be announcing today a further GBP200 million capital return during 2015/16 reflecting our confidence in our medium term prospects," Chief Financial Officer Karen Witts said.
"In the short term, whilst we remain encouraged by the improving economic backdrop in the UK, we remain cautious on the outlook for France, our biggest market," Witts added.
Shares in Kingfisher were trading up 4.4% at 380.70 pence Tuesday morning, the best-performing stock in the FTSE 100.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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