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Kingfisher eyes Brazil and India after cost cutting boosts profits

Kingfisher is considering expansion into Brazil and India as the owner of the B&Q DIY stores plans a strategy for growth after cost cuts helped boost first-half profit.

Ian Cheshire, the chief executive, said there was "a long list of theoretical options" for international expansion, adding: "Situations like Brazil or India we have to think about."

Eastern European markets are another option but opening in the US is not on the cards.

"During the next six months we will work on what the growth story is going to be," Mr Cheshire said.

Kingfisher's pre-tax profit in the six months to the end of July increased 22pc to £351m despite flat sales across the group. Total revenue was held back by falling sales in the UK and Ireland despite strong demand for plastic grass and bird nesting houses.

The company's push to buy products straight from manufacturers instead of through wholesalers helped cut costs and boost margins, which widened by 140 basis points in the UK.

Mr Cheshire said margins were also lifted by scrapping discount weekends, which were bringing in fewer customers.

Mr Cheshire took over two years ago and set out to unify Kingfisher's fragmented businesses to improve efficiency and centralise buying. Among his directives was stopping Kingfisher's two French businesses, Castorama and Brico Depot, opening stores next to each other and indulging in cut-throat competition.

Having spent the first half of his three-year plan on efficiency measures, Mr Cheshire is now targeting top-line growth through product innovations and new in-store formats.

Kingfisher unveiled 10 own brands – whittled down from 150 – that will be used throughout its businesses. They include Cooke & Lewis for kitchens, bath and bedding and Blooma for outdoor leisure.

In the UK, the company has launched its own lighting range and is expanding in "eco" products such as sheep's wool loft insulation and carpet underlay made from recycled clothes.

In France, customers have taken to a toilet with a built-in washbasin, which now makes up 10pc of Castorama lavatory sales.

The French business performed better than the UK in the first half, increasing sales by 3pc. In China, losses halved to £12m from the same period last year but Mr Cheshire said it was still too early to say whether he definitely wanted to keep the business.

Kingfisher turned around its debt from £740m to a cash position of £19m. Kevin O'Byrne, finance director, said: "I don't think you can find on record a time when Kingfisher had net cash previously."

The interim dividend was held at 1.925p, payable on november 12, and the full-year payout will rise in line with earnings.

Source : Sean Farrell - Telegraph.co.uk

17 September 2010
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