The group, which is Europe's biggest home-improvements retailer, made an adjusted pre-tax profit of £386 million in the year to February 2 – down from £396.6m the previous year. It is the third successive year it has suffered a drop in annual profits.

Kingfisher, which also own's France's Castorama chain, had expected to see higher profits but said that the drop was the result of a recent multi-million-pound restructuring of the group's B&Q business in China.

And despite posting retail sales of £9.4 billion – up 7.9 per cent on the previous 12 months – they have slashed Kingfisher's dividend by half and warned investors that things could get worse before they get better.

Kingfisher chairman Peter Jackson said: "The last year has been challenging for international retailers with increased global economic uncertainty impacting consumer confidence, particularly here in the UK.

"Despite this there were many examples of good progress across the group. In our largest single business, B&Q, we made a major step forward in improving B&Q's offer to customers, introducing more new products and modernising more store space than ever before, whilst capitalising well on more buoyant conditions in many of our international markets."

Last month, Kingfisher said profits would be in line with market forecasts as it reported lower fourth-quarter sales at B&Q that were partly offset by a strong performance from Castorama in France and Poland. In the report, it added that profits at B&Q in Poland were up 42 per cent, and up 13 per cent at the group's stores in France.

The full-year dividend was cut to 7.25p from 10.65p last year, with the final payout slashed by 50 percent to 3.4p. It said a similar reduction was expected in the first half of the current year.

Recently-appointed chief executive Ian Cheshire said that the 50 per cent dividend cut was necessary in the tougher trading conditions as the group focused on tight cash control and reducing debts. "No business can fully shield itself from economic cycles and given the current state of the financial markets, most commentators are expecting the short-term outlook to worsen before it improves," he said.

"Against this background, our priorities remain on improving cash margin and controlling costs.

"I remain confident that Kingfisher has a bright future with a strong position in an attractive retail sector and with geographic diversification in developed and developing markets."

Shares in Kingfisher, which have underperformed the UK general retailers' index by around 18 percent in the past 12 months, closed at 135.1p yesterday, valuing the company at around £3.1 billion.