The refurbishment at home improvement specialist Kingfisher (KGF) has started apace with decent trading, which contradicts any narrative of a post-referendum slump in consumer spending. The decision to better focus its product range is a key plank of management's overhaul plan, which entails stocking fewer types of individual items, thus reducing supply costs and the amount spent on showcase items not for resale. This could provide cover should there be a wobble in consumer confidence once Brexit negotiations actually gain pace.
In the UK (Kingfisher's largest division by sales and profits), Screwfix is still the star performer with turnover up nearly a quarter to £612m. This was more than enough to counter the 1.9 per cent fall in sales at B&Q. That fall was partly due to the store closure plan, which is nearly complete, with 52 out of the planned 65 already closed. Gross margins across the UK and Ireland fell by 100 basis points, but finance director Karen Witts said this was the result of Screwfix representing a greater proportion of sales. She added that the group's fulfilment of click-and-collect orders would also soon become more efficient by holding more of these items in store; this should support margins in the future.
Overseas, the French business reported a 1.6 per cent drop in like-for-like sales to £2.18bn, while Poland led the way in its 'other international' division with like-for-like sales in the country up nearly 9 per cent to £587m. Overall, retail profits rose 8.7 per cent to £464m on a constant currency basis, a growth rate that would be 13.1 per cent if favourable foreign exchange movements - gained by the translation of overseas earnings into sterling - are factored in. Broker Davy was particularly impressed given the anaemic profit growth of recent years.
Analysts at Davy expect pre-tax profit of £613m for the year to January 2017, leading to EPS of 20.1p, compared with £512m and 17.8p in FY2016.
| KINGFISHER (KGF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 384p | MARKET VALUE: | £8.65bn | |
| TOUCH: | 384.3-384.4p | 12-MONTH HIGH: | 387p | LOW: 300p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 289p* | NET CASH: | £898m | |
| Half-year to 31 Jul | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 5.49 | 386 | 13.6 | 3.18 |
| 2016 | 5.75 | 427 | 14.1 | 3.25 |
| % change | +5 | +11 | +4 | +2 |
Ex-div: 6 Oct Payment: 11 Nov *Includes intangible assets of £2.69bn, or 119p a share | ||||
