Kingfisher to sell struggling Romanian business for £58m
- Kingfisher expects to complete the sale in the first half of the next fiscal year
- The B&Q owner’s Romanian operations have struggled to become profitable
Kingfisher has agreed to offload its loss-making business in Romania to a local electronics retailer.
Screwfix’s parent company revealed plans to sell the division, including its 31 outlets, distribution operations and head office in Bucharest, to Altex Romania in a €70million (£58million) deal.
It expects to complete the sale sometime in the first six months of the next financial year, dependent on regulatory approval.
Kingfisher first entered the Romanian market in 2013 after buying Bricostore Romania from French retail firm Group Bresson.
The B&Q and Castorama owner later expanded its store network in the country with the £19million acquisition of home improvement business Praktiker Romania in 2017.
However, Kingfisher’s Romanian operations have struggled to become profitable over recent years due to subdued demand and Covid-related restrictions.
Disposal: Screwfix owner Kingfisher has agreed to offload its loss-making business in Romania to a local electronics retailer
In the financial year covering the 12 months ending January, the division posted an £18million retail loss and £17million in free cash outflow.
While it did contribute £269million in turnover, this represented only 2.1 per cent of Kingfisher’s total annual revenues.
Dan Ostahie, chief executive of Altex Romania, said the takeover ‘marks a significant milestone for all parties involved, and this first step opens up new horizons for growth and opportunities in the DIY market in Romania.
‘Our primary goal is to continue growing while delivering quality services with the customer at the centre of our focus.’
Kingfisher said the deal does not impact its Brico Dépôt banners in France, Spain, and Portugal.
‘Selling its loss-making Romanian operations is not going to make much difference,’ said Russ Mould, investment director at AJ Bell.
‘However, it’s one less thing for management to worry about, and it makes sense to focus on the stronger parts of the group.’
The deal comes a few weeks after Kingfisher trimmed its full-year guidance amidst consumer uncertainty and sluggish sales.
It now expects to make adjusted pre-tax profits of £510million to £540million this year, having previously anticipated them being up to £550million.
Kingfisher also warned of a potential £45million impact on retail profits next year from recent tax announcements in the UK and France.
The firm expects to receive a £31million hit from Chancellor Rachel Reeves’ decision to hike the National Insurance rate British employers pay on staff salaries to 15 per cent and reduce the NI threshold from £9,100 to £5,000 next April.
It forecasts a further £14million effect if the French Government’s intended changes to social taxes occur and it delays axing the sales-based CVAE.
Kingfisher shares were 0.9 per cent higher at 255p on Wednesday morning, meaning they have grown by just 7 per cent this year.
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