Europe's largest home improvement retailer, Kingfisher, has posted a 29 per cent fall in first-half pre-tax profit, with the group blaming difficult trading conditions across the UK's DIY market for its disappointing performance.
In a statement, the group announced that adjusted pre-tax profit for the six months to July 29th 2006 was £178.5 million. Although the fall in profits was less than had been anticipated by analysts, it was still significantly below the £252.5 million reported by Kingfisher a year ago.
Group sales increased by 6 per cent to £4.3 billion over the first-half, in line with expectations.
However, retail profit across the group fell 20 per cent in the first half to £231.5 million, compared to £288 million a year ago, although it remained flat during the second quarter of the year.
Kingfisher's drop in profits followed a slump in sales at its DIY chain B&Q, which saw a 4.4 per cent fall in sales to £2 million during the first six months of the year.
However, B&Q like-for-like sales did show an improving trend over the period, down by just 2.3 per cent during the second quarter, compared to a fall of 8.8 per cent in the first quarter.
As a result of declining sales, B&Q reported a 42.7 per cent fall in its retail profit to £82.6 million in the first half, while its gross margin percentage dropped by 150 basis points.
Kingfisher said the decline showed that B&Q had yet to annualise against price cuts introduced on several home improvement products and additional promotions launched during the second half of 2005.
But the group stressed that independent customer surveys had confirmed that progress had been made in conveying B&Q's "Every Day Low Pricing" strategy to shoppers.
"The continuing weakness of the UK home improvement market has again impacted B&Q's overall sales and margin performance. However, management's action programme is now showing encouraging signs of progress," said Kingfisher group chief executive Gerry Murphy.
"Although there are signs of stabilisation in the UK, we expect our major markets here and in France to remain challenging for the balance of the year," Mr Murphy added, although he stressed that Kingfisher expected to "make progress" in the second half, with B&Q expected to return to profit growth.
Mr Murphy said that outside the UK market, Kingfisher's sales were "strongly ahead".
The retailer, which has opened 19 new stores across seven countries in Europe and Asia, said that outside the UK sales were up by 16 per cent, while underlying retail profit was up nine per cent.