Kingfisher PLC 27 April 2005 EMBARGOED UNTIL 0700 HOURS Wednesday 27th April 2005 Kingfisher plc announces acquisition in China and trading update Kingfisher plc today announces accelerated expansion of B&Q China with an agreement to buy OBI Asia Holding Ltd, the holding company for OBI's majority equity interest in its Chinese operations. The purchase price is undisclosed. B&Q China is already the market leader in the fast-growing Chinese home improvement market where it currently operates 22 stores and had 2004/05 sales of £212 million and retail profit of £5 million, after the costs of a rapid store opening programme. OBI is the second-largest western home improvement retailer in China with 13 stores and a further five due to open in 2005. Net assets with a fair value of around £85 million are included in the purchase, subject to final completion. The addition and conversion of OBI's stores will significantly accelerate B&Q China's growth to around 50 stores trading within the next 12 months, more than doubling current store numbers. The transaction is subject to local and national government approvals and is anticipated to complete later this year. Trading update Given the proximity of this announcement to the end of the first quarter on 30 April 2005, Kingfisher is providing a brief trading update ahead of its formal quarterly results announcement on 26 May 2005. Trading has continued to be weak since Kingfisher last updated the market at the time of its preliminary results announcement on 17 March. The trading environment continues to be very tough for UK retailers with consumer spending increasingly impacted by higher taxes, debt costs and inflation. Poor spring weather and an early Easter presented additional challenges for Kingfisher's UK and French consumer businesses. Official statistics confirm that household goods markets have been particularly slow in the UK and France. As a result, Kingfisher expects to announce broadly flat total sales for the quarter to 30 April 2005 compared with the previous year. Sales at B&Q UK and Castorama France are expected to decline, offset by continued growth at Brico Depot in France. Kingfisher's other businesses in Europe and Asia continued to grow, with the exception of Castorama Poland which continues to be affected by higher VAT imposed in May 2004 and strong sales comparisons with the prior year. On a like-for-like basis, Kingfisher's overall sales are expected to decline around 6% in the first quarter. Continuing focus on margin and costs is not expected to be enough to offset weaker sales, with the result that reported retail profit for the first quarter is expected to decline by around 15%. Commenting on the announcements today Gerry Murphy, Chief Executive, said: "The acquisition of OBI China will help double the size of B&Q's operations in China, in terms of sales and store numbers, within 12 months. OBI China also adds to B&Q China's existing 5,000 strong team a further 2,000 experienced staff and an excellent local management team. China is a tremendous opportunity for Kingfisher and this move underlines our commitment to, and belief in, the Chinese market and our own Chinese management team. "The weakening trends experienced by UK retailers in the last quarter of 2004 seem to have continued into 2005. Whilst it is too early to judge the full year, it is clear that demand is weak in the UK and any sales growth will be hard won in very competitive markets. "Kingfisher will continue to offer customers great products and prices whilst investing for long-term growth and driving improved returns for shareholders. Our scale and international diversity are key strengths in these tougher times, and we are pleased to announce a significant step forward in China." Enquiries: Ian Harding, Group Communications Director 0207 644 1029 Nigel Cope, Head of Communications 0207 644 1030 Notes to editors: Kingfisher is Europe's leading home improvement retailer and the third largest in the world, with over 600 stores in nine countries in Europe and Asia. Kingfisher operates the B&Q format in Asia, where it is the market leader in China (22 stores) and Taiwan (19 stores). The first B&Q store in South Korea is due to open later this year. OBI Asia Holding Ltd is part of OBI, the German DIY retailer, which has stores in European markets such as Germany, Austria and Poland. OBI is a division of Tengelmann, a privately owned German retailing group with interests in supermarkets, DIY stores and textiles. This information is provided by RNS The company news service from the London Stock Exchange