MORE woe was piled on Kingfisher shareholders yesterday as the B&Q owner slashed its final dividend by half and warned things would get worse before they got better.
The firm reported a 3 per cent drop in adjusted full-year profits to £386 million as it told investors that the 50 per cent dividend cut was necessary in the tougher trading conditions as the group focused on tight cash control and reducing debts.
Kingfisher said UK sales grew 5 per cent to £4.4 billion, despite the domestic home-improvement market being hit by lower consumer spending as shoppers faced higher bills and a weakening housing market. B&Q is Britain's biggest DIY chain.
Kingfisher, which also owns French DIY chain Castorama, said it was developing new three-year plans, which it expected to complete by the middle of the year. It added it was restructuring its poorly performing Chinese B&Q business, resulting in an exceptional charge of £22m in the current financial year and a further £11m expected next year.
Chief executive Ian Cheshire, who replaced Gerry Murphy at the end of 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."
The firm, which had been expected to post profits of about £388m, said last month that earnings would be in line with forecasts as lower fourth-quarter B&Q sales were partly offset by strong performances in France and Poland.
B&Q produced its first like-for-like sales growth after three years of decline, with comparative sales up 0.6 per cent.
Retail profits fell 20 per cent to £131m after spending on new stores, but Kingfisher added that early trading signals from its revamped sites were encouraging.
Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said Kingfisher was struggling in a tough consumer market.
He said: "In the UK, B&Q has continued to find the going tough in the face of consumer nervousness. The dividend cut, while expected, further dampens investor enthusiasm.
"The very diversification which could prove a plank for Kingfisher is not helping in the short term. Apart from the Chinese weakness, the European economic outlook seems to be faltering and this will hurt Kingfisher on a number of fronts."
Kingfisher slashed the final dividend to 3.4p, making a total payout of 7.25p, against 10.65p in its previous full year, with the interim dividend this year expected to be cut by about the same – saving the company about £120m in total.
Shares in Kingfisher have more than halved since March last year when they were worth 282.5p. The stock closed down 4.7p yesterday at 130.4p.
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The full article contains 479 words and appears in The Scotsman newspaper.
