Annual Report and Accounts 2007/08
The last financial year has been a challenging one for Kingfisher and for its shareholders who have seen a significant reduction in the company’s share price.
Much of this has been a result of stock market volatility, which was caused by uncertainty in the global financial markets. During the year, investor sentiment moved against UK-based retailers, particularly those selling ‘bigger ticket’ items such as home improvement, as concerns about consumer credit availability grew.
Whilst stock market sentiment will always ebb and flow, our job inside the company is to keep focused on moving the business forward aggressively but responsibly in order to optimise shareholders’ interests in the medium and long-term, as well as the short-term. Our model, which gives us exposure to opportunities in a range of markets, many in fast growing economies, should enable us to grow at rates which are notably higher than companies who are solely based in a single developed market. However, for the model to work most effectively, each of the units needs to perform and a close eye needs to be kept on the balance sheet.
Against this background it was good to see a range of excellent performances by a number of our companies during this last year. Examples include Castorama in Poland, which had a very successful year, as did its namesake in France. Koçtaş, our Turkish joint venture, delivered very strong results and our new business in Russia made an extremely encouraging start. There are, however, areas where we need to see improvement, including our business in China, where the performance is being addressed.
Overall, total Group sales rose 8% to £9.4 billion in the year, with adjusted pre-tax profit down 2.8% to £386 million, largely due to a difficult UK market.
In the UK, B&Q made major changes to its business, not only refreshing much of its ranges with new products, but revamping around 5.5 million square feet of its store space. This has been a demanding task which has been carried out well at a difficult stage in the business cycle. These changes are delivering good results, it was the right thing to do, and I am sure it will ensure B&Q is ready to take full advantage when the market improves.
Kingfisher has good brands, exceptional international and national store footprints, and excellent people. These now need to be pulled together to deliver the necessary returns on our investments and sustainable profit growth which will filter through into improved benefits for our shareholders.
At the end of the financial year, Ian Cheshire took over from Gerry Murphy as Kingfisher’s Chief Executive. Gerry played a major part in developing the business, particularly from an international perspective, but now Ian has the responsibility of really delivering the Group’s potential. I am very confident that he is the man for the job.
The spread of our Group means that there are many opportunities to invest. I am pleased to see that one of Ian’s first priorities following his appointment was to tighten up our controls over capital spend and to limit the overall amounts. However, if we are to move the business forward we do have to make finance available for considered investment, whilst taking steps to ensure that our balance sheet is prudently protected.
With this in mind and recognising the external economic environment, the Board has decided to reduce the final dividend by fifty percent and would expect to apply a similar cut to the forthcoming interim dividend. This would have the effect of rebasing the dividend to a level more prudently covered by current earnings from which it could grow consistent with the performance and capital needs of the Group. The Board is recommending a final dividend of 3.4p, making a total dividend for the year of 7.25p.
As I said at the beginning, this has been a difficult year for our investors but within the business there have been many major successes. This has been due to a combination of talent and hard work on the part of our 85,000 staff across the world. I would like to thank them for their enthusiasm and professionalism and wish them all the very best for the coming year.