British-owned home improvement and DIY chain B&Q has reported a collapse in profits at its Irish unit in spite of strong revenue growth, which brought its sales above €90 million after less than four years in the market.
While the opening of new mini-warehouse outlets in Cork, Limerick, Naas and Athlone helped drive revenues 56 per cent higher to €90.43 million in the year to January, B&Q suffered a 48 per cent drop in pretax profits to €2.1 million in the same period.
This second successive decrease in profits was recorded against the backdrop of a housing boom, which had yet to feel the full impact of the steady rise in interest rates that began last December when the European Central Bank raised its base rate for the first time in five years.
However, the worsening performance did not deter the chain's parent, Kingfisher, from taking a €9.52 million dividend from the Irish unit last year.
In accounts newly-filed in the Companies Office, the directors of the business said its financial position was "satisfactory" given difficulties in its trading environment. "Trading performance for the year was disappointing, despite the opening of new stores. As a consequence of the downturn in consumer spending and the challenging trading environment experienced, the company suffered a reduction in profitability," the directors said.
Operating profits fell 48 per cent to €1.92 million, a year after a 25 per cent fall to €3.72 million. The latest deterioration meant B&Q was working to an operating profit margin last year of only 2.1 per cent. In the previous period, its margin was 6.5 per cent. The fall in profits came despite claims from B&Q last December that its Irish stores were trading "very well".
A spokesman in London declined yesterday to comment on trading in the current period.However, he cited an interim results presentation in September, which said the chain's Irish sales were still growing but which made no reference to profits. "In Ireland, sales from the seven B&Q stores grew 40.7 per cent, reflecting new store openings in the second half of last year. No further store openings are planned this year," the presentation said.
B&Q has previously blamed its falling profits on the cost of opening new stores in Ireland. The chain has been here since March 2002, when it opened a large warehouse store at the Liffey Valley centre, west Dublin. It opened a mini-warehouse store in Tallaght in October 2003.
B&Q has developed its position amid consolidation in the sector. While the growth in its sales suggests the housing boom has been good for the DIY market, interest rates rises have led to an erosion in spending power.
B&Q's Grafton-owned rival, Woodies, now includes Atlantic Homecare. Homebase is also active in the market.
