Kingfisher resorts to “self help” in slowing market

Kingfisher, the do-it-yourself retailer, says it will create more than 1,200 new jobs across the UK this year despite the economic gloom, as it expands its chain of B&Q and Screwfix stores.

Announcing a first-half profit that beat analysts’ forecasts and saw shares jump 4 per cent, the London-based group said 1,000 new jobs would be created at Screwfix, the trade tools, plumbing and electrical equipment supplier launched nearly six years ago.

It aims to have 215 outlets by the end of January 2012 after management decided to take 40 smaller format trade counter stores to allow greater penetration with the M25.

Another 230 jobs will be created after Kingfisher’s £24m deal to acquire 29 former Focus DIY outlets, which it is reopening as B&Q stores. This brings its total investment in the UK to £130m this year, nearly four times the £34m spent in the previous year.

Describing Kingfisher’s performance as “strong results in difficult times,” chief executive Ian Cheshire, said that continued uncertainty in the UK and Europe would “translate into flat or difficult markets.”

The fear of unemployment was having “a much more pervasive effect” on the UK’s consumer economy, he said. “About 20 per cent of all civil servants have been put on consultation, yet only 5 per cent will lose their jobs,” he said, urging the government to accelerate the process.

The group plans to increase profits through “self help” measures including the common sourcing of product ranges across its international store brands, which include Castorama and Brico Dépôt.

The group will set out profit and efficiency savings targets at its full year results next March.

Kingfisher, which derives about two-thirds of its profits from operations outside the UK, was helped by a strong performance in France, where retail profits rose 24 per cent to £201m. In the UK and Ireland, retail profits rose 6 per cent to £182m.

The group is expanding its international business. Earlier this week it announced plans to invest £115m opening nine new Castorama stores in Russia over the next two years. However, Mr Cheshire said that poor summer weather in Europe had left the retailer with “£60m more working capital than we ideally wanted” due to unsold stock of air-conditioning units and outdoor products.

“Kingfisher is right to expect no assistance from the economies of its markets,” said Jonathan Pritchard, retail analyst at Oriel Securities. “Our concern is that these economies may actually prove to be a hindrance and that the current positive forecast momentum may be limited as a consequence.”

Overall, adjusted pre-tax profit rose 24 per cent to £439m for the six months to the end of July on revenues of £5.6bn, a rise of 3.8 per cent, marginally beating analysts’ consensus estimates.

Shares in Kingfisher rose 4.3 per cent to 249.5p on Thursday.