Kingfisher, Europe's biggest home improvement chain, is planning to reduce its shop space in China by 40 per cent in the next two years as it overhauls its loss-making operation.

Ian Cheshire, the chief executive, who reported a 75 per cent plunge in pre-tax profit for the year after notching up ￡230m ($333m) of exceptional charges linked to the Chinese venture, said the business was salvageable but had to be pared back after over-expansion.

Mr Cheshire said that while the retailer had suffered at the hands of a collapsing Chinese housing market, it had also caused many of its woes by becoming too reliant on the booming apartment design and installation market without developing other services or product ranges, such as soft furnishings and home decoration.