Kingfisher, Europe's largest home-improvement retailer, took a big hit to its annual profits yesterday, as profits more than halved at its B&Q chain which is struggling with weak consumer demand.
Group pre-tax pre-exceptional profit slumped 33 per cent to £445.7 million in the year to January 28 from £661.4 million. Analysts had forecast profit of £420-462 million. The dividend was maintained at 10.65 pence a share.
"The UK home improvement market continues to weaken into 2006," Group Chief Executive Gerry Murphy said. "It is too early to forecast the full year, although a continuation of the recent stronger mortgage and housing trends could provide some support later in the year."
Kingfisher said 2005 was the weakest DIY market in Britain for more than 10 years. B&Q's retail profit sank 52 per cent to £208.5 million, impacted by lower sales, stock clearance, aggressive price discounting and higher costs.
Elsewhere, Kingfisher, which owns Castorama and Brico Depot in France, said it was outperforming in that market, which has seen its slowest growth for over 12 years. Retail profit in France grew 8.8 per cent to £230 million.
"Outside the UK, the business is in pretty good shape," Mr Murphy said.
Sales of high-priced projects such as kitchens, bathrooms and bedrooms have been the worst hit though Kingfisher reckons its market share grew to 14.8 from 14.7 per cent during the year.
Ahead of the crucial Easter period, when people traditionally embark on outdoor projects, Kingfisher is hoping for the sun to come out after a lengthy cold spell that has continued to sap demand.
Shares in the company, the worst performers in the FTSE 100 index in 2005, slipped one pence to 242 pence by 8.45 a.m., having fallen 19 per cent in the last 12 months to value the firm at £5.72 billion. The group's property was revalued at £3 billion.
"B&Q needs some market pick up," said Investec analyst Mark Charnock, with a hold rating on the stock. "It feels like this is still a few months away. Bid hopes will continue to protect against some of the share price downside." In recent weeks the shares have perked up on a flurry of private equity bid attempts in the sector.
"We ignore it," Mr Murphy said. "We're in a very febrile market driven by speculation. We don't look over our shoulders, that would be a waste of time."