Kingfisher signals profits will exceed expectations

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The Independent Online

Shares in Kingfisher surged 4 per cent yesterday after the home improvements group said full-year profits would top expectations, buoyed by a strong final quarter.

The success of B&Q's new kitchen and bedroom ranges boosted sales at the DIY chain ahead of market expectations. Its like-for-like sales rose 2.9 per cent in the 13 weeks to 31 January, helped by the rollout of its new mini-warehouse format, which can stock up to one-third more products than existing units.

Gerry Murphy, the chief executive, said B&Q was taking market share "from everybody", although analysts pointed to MFI in particular. He said the launch of Marks & Spencer's Lifestore next week would help the home improvement market to expand. "Consumers are changing their houses more often, which is growing the market," he added.

Underlying sales from the group's continuing operations rose by 4.5 per cent during its fourth quarter and by 5.1 per cent during the year. Its shares rose 10.75p to 308p.

Its overseas arm, which contributes 40 per cent of group sales, had a good year, with like-for-like sales in France rising 4.7 per cent. Elsewhere, like-for-like sales in countries from China to Italy increased by 10.7 per cent over the past 12 months.

Mr Murphy said the strength of the group's sales and its focus on margins and managing its cashflow meant profits before exceptionals for its continuing businesses would be "towards the upper end of current market expectations".

He professed himself "relatively relaxed" about the outlook for consumer spending, despite the recent base rate rise to 4 per cent. "We don't expect a major shock to the system," he added, pointing to the group's strong performance in France as proof that consumers still spent money on home improvement, even when the high street was generally soft.

Analysts nudged their forecasts higher for 2003 and 2004 but noted that the group benefited from the euro's strength.

Kingfisher said an accounting change relating to how it recognises sales from B&Q had knocked 0.8 per cent off the fourth-quarter performance. Its reported retail profit for the 12-month period would be £10m lower because of additional non-cash accounting changes.