Kingfisher to sell ailing Romanian company for £58 million

Kingfisher has agreed to transfer its loss-making operations in Romania to a local electronics retailer.

Screwfix’s parent company announced plans to sell the division, including its 31 points of sale, distribution operations and headquarters in Bucharest, to Altex Romania in a €70m (£58m) deal.

It expects to complete the sale sometime in the first six months of the next fiscal year, subject to regulatory approval.

Kingfisher first entered the Romanian market in 2013 after purchasing Bricostore Romania from French retail company Group Bresson.

The owner of B&Q and Castorama later expanded its store network in the country with the acquisition of home improvement company Praktiker Romania in 2017 for £19 million.

However, Kingfisher’s Romanian operations have struggled to reach profitability in recent years due to weak demand and Covid-related restrictions.

In the financial year covering the 12 months ending in January, the division recorded a retail loss of £18 million and a free cash outflow of £17 million.

Although it contributed £269 million in turnover, this represented just 2.1 per cent of Kingfisher’s total annual turnover.

Dan Ostahie, CEO of Altex Romania, said the acquisition “marks an important milestone for all parties involved, and this first step opens new horizons for growth and opportunities in the DIY market in Romania.

‘Our primary goal is to continue to grow while providing quality services that put the customer first.’

Kingfisher said the deal will not affect the Brico Dépôt banners in France, Spain and Portugal.

“Selling the loss-making Romanian operations will not make much difference,” said Russ Mould, investment director at AJ Bell.

‘However, it is one less thing for management to worry about and it makes sense to concentrate on the stronger parts of the group.’

The deal comes a few weeks after Kingfisher revised its full-year guidance amid consumer uncertainty and sluggish sales.

The company now expects to make an adjusted pre-tax profit of £510 million to £540 million this year, having previously expected this to be £550 million.

Kingfisher also warned of a potential £45 million impact on retail profits next year due to recent tax announcements in Britain and France.

The company expects to take a £31 million hit from Chancellor Rachel Reeves’ decision to increase the National Insurance rate that UK employers pay on staff salaries to 15 per cent and reduce the NI threshold from £9,100 to £5,000 in April .

It predicts a further £14 million impact if the French government’s intended changes to social taxes take place and delay the abolition of the turnover-based CVAE.

Kingfisher Shares were 0.9 percent higher at 255 cents on Wednesday morning, meaning they have grown just 7 percent this year.