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Kingfisher fixes itself with seven-point turnaround programme

Published: 5 June 2008
Ceo Kingfisher says the seven step plan will reduce its reliance on sales growth in what could be a challenging year.
Kingfisher ceo Ian Cheshire provided more detail of his seven-point turnaround programme to build the fortunes of the home improvement group in the UK and overseas.

Central to his plans is to drive up profitability of B&Q toward operating margins of 7% (currently 3.3%); to expand UK trade, the French and East European businesses; to improve the business of the Chinese operation – management is hoping to achieve a profit by 2009/10; and to increase gains from overseas sourcing and reduce working capital.

The news came on the back of an announcement explaining that 50 of Mr Cheshire's top managers stand to gain significant rewards if they can meet the demands of a recently introduced private equity bonus scheme under the four-year strategic plan.

Mr Cheshire, meanwhile, could pocket £16m in four years' time if the group hits various targets.

First quarter

The news should come as some comfort to shareholders as first quarter trading to May 3, 2008 across the group was hit by consumer's reluctance to spend.

B&Q's like-for-like sales growth dipped -8.1% caused by difficult weather and the early Easter; overall UK sales dropped by 7.9%. Despite the sales decline, Kingfisher saw an 8.9% rise in first-quarter profits partly due to the timing of supplier rebates and because of the strong euro.

The group said sales of outdoor products like barbecues, garden furniture and outdoor paint fell almost 40.0% although sales of indoor decorating products were up 1.7% on last year's figures.

Gross margins rose by 3% points in the UK due to lower mark down activity, increased mix of higher margin products and the timing of supplier rebates.

Screwfix's total sales grew 23.6% to £127 million, driven by the continued roll out of trade counters with a further 24 outlets opening taking the total to 117.

Trade counters now represent over half of total sales. A further 21 are planned for the rest of the year.

Trade Depot opened two stores, taking the total trading to eight.

Internationally, France (Castorama and Brico Depot) increased profits from £40m to £43m.

In Eastern Europe, businesses in Poland and Russia continued to grow strongly; B&Q China's management team has been strengthened and a turnaround plan instigated to return the business to profitability next year.

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