Kingfisher spreads Continental wings

NIGEL COPE

Kingfisher, the retail group whose French subsidiary has been one of its few recent successes, is expanding further into the French electricals market. It is paying pounds 59m for a 20 per cent stake in But, the country's fourth-largest electrical retailer.

The group is conducting the deal through Darty, the French electricals retailer it acquired in 1993. Darty accounted for almost half of Kingfisher's profits in the six months to July. It is widely considered to have been the group's salvation when many of its other chains such as Woolworths, Comet and B&Q have experienced problems.

The company said: "Darty was a good acquisition and we wanted to build on that." Retail analysts said the deal seemed a good, safe move. However, one described the deal as "totally bemusing". "It would have been better to seek new opportunities than simply reinforcing existing territory," he said. Kingfisher shares fell 16p to 528p.

But has 232 out-of-town stores and specialises in electrical goods and furniture sold to younger buyers who are looking for lower prices. All but 37 of the stores are franchises, although the company is looking to buy many of the franchises back.

But has 5.1 per cent of the French electrical market, which is thought to be less cut-throat than the UK market, which has seen a flurry of high- level casualties. As Darty is the market leader, with more than 12 per cent, Kingfisher will now control 18 per cent of the market. But is also France's second- largest furniture retailer, with a share of 7.7 per cent.

Last year But achieved profits of pounds 10m on sales of pounds 104m at its directly owned outlets. Profits from the franchises were pounds 24m on sales of pounds 199m.

But was founded in 1972 by Andre Venturini whose son Michael has been chief executive since 1980. The group has been quoted on the Paris stock exchange since 1990. Sales have been growing at an average of 5 per cent a year in the franchise stores but by 23 per cent in the directly owned branches. Kingfisher is keen for the group to accelerate the programme of buying in more of the franchises to help boost profitability.

The Venturini family is still the majority shareholder and Kingfisher has signed a standstill agreement, which means it cannot increase its stake for two years. The founding family has also undertaken to maintain a minimum 40 per cent interest in the company for the next six years.

Darty has consistently rescued Kingfisher's trading figures when a succession of problems have hit its UK businesses. In the six months to July profits fell at B&Q, losses deepened at Comet, while Superdrug profits were flat. Darty meanwhile reported a 10 per cent rise in profits to pounds 40m out of group profits of pounds 90m.