The weather-vane home improvement sector continued to indicate rough times ahead for the consumer sector, as B&Q owner Kingfisher posted falling profits and slashed its dividend as it sought to conserve cash.
The weather-vane home improvement sector continued to indicate rough times ahead for the consumer sector, as B&Q owner Kingfisher posted falling profits and slashed its dividend as it sought to conserve cash.
The company saw its pre-tax profit fall 12.2% to £386m for the financial year to February 2, despite a strong performance from its international division which accounts for more than half of its sales.
Home improvement stores often experience a consumer slowdown before the rest of the market. Yesterday B&Q said its UK sales for the year were £3.9bn, up 2.7% on last year, including the impact of new floor space.
On a like-for-like basis, sales were up just 0.6%.
This echoes worse trading reported by Home Retail Group at its Homebase stores earlier this month, where it recorded a 5.3% drop in like-for-like sales in the early months of the year.
Kingfisher's response has been to focus on keeping costs down and generating cash in the coming year.
For a start, it is cutting its dividend by half. It is paying out 3.4p as a final dividend, making a total pay-out of 7.25p against 10.65p last year. The interim dividend is expected to be cut by about the same amount, saving the company around £120m a year.
Kingfisher announced cuts in capital expenditure to £400m from £528m last year, with an emphasis on those projects that will return money quickly. It has also set a target of keeping its net debt at around £1.6bn.
Chairman Peter Jackson acknowledged that the last year had been challenging, with global economic uncertainty hitting consumer confidence, particularly in the UK.
He said that rebasing the dividend ensured it was adequately covered by earnings.
Chief executive Ian Cheshire, the former B&Q head who replaced Gerry Murphy in January, said: "No business can fully shield itself from economic cycles and, given the current state of the financial markets, most commentators are expecting the short-term outlook to worsen before it improves."
Elsewhere in the UK, its Screwfix trade-focused business saw sales grow 28% as it opened an additional 55 outlets. Trade Depot also had "encouraging trading", it said.
While the company posted strong sales figures from its operations in France and Poland, it said it was restructuring its poorly-performing Chinese B&Q business, resulting in an exceptional charge of £22m in the year just ended and a further £11m this year.
