Preliminary results for the 52 weeks ended 2 February 2008
27 March 2008
Operational Review – Asia
|Retail sales £m||2007/08||2006/07||% Change
|Retail profit £m||2007/08||2006/07||% Change
|Asia includes China, Taiwan and South Korea. Taiwan JV sales are not consolidated. All percentage movements below are in constant currencies.|
Asia sales increased 7.0% to £472 million (-0.1% LFL) with retail losses of £14 million (2006/07: £5 million profit).
B&Q China sales increased 7.9% to £465 million reflecting new store openings and the development of new ranges. Sales were flat on a LFL basis, impacted by a slowdown of new apartment sales in the major Chinese markets, and new regulations covering trading terms between retailers and suppliers.
Following the regulation change, finalisation of B&Q China’s 2007 supplier agreements was delayed until clarification with the authorities in August 2007. As a result of the required changes to some of its supplier arrangements, B&Q China’s result for the year was impacted by £11 million, contributing to a retail loss of £12 million (2006/07: £8 million profit).
The Chinese market remains fundamentally attractive with B&Q’s operations in the major cities continuing to show attractive returns. B&Q has expanded rapidly over the last three years, adding 42 stores, tripling its store base. However, after several years of dramatic growth the business now needs a period of consolidation. Following a Group-led review, B&Q China will be restructured giving rise to an operating exceptional cost of £22 million in 2007/08, relating to the accelerated write-down of assets. A further exceptional charge of around £11 million is expected to be recognised in 2008/09. Of the total £33 million exceptional charge, the cash cost is expected to be £9 million.
B&Q Taiwan delivered a small profit for the year prior to it being sold to its 50% joint venture partner on 4 January 2008. The exit from the two stores in South Korea was completed towards the end of the year. Following the disposal of Taiwan and Korea, the B&Q Asia head office in Hong Kong will close in the first half.