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Kingfisher gets a makeover

DIY specialist Kingfisher is in line for a much-needed refurbishment project.
March 31, 2015

Full-year results from Kingfisher (KGF) were overshadowed by news that the DIY retailer is to get a massive makeover. Newly appointed chief executive Veronique Laury, previously boss of the group's Castorama France business, is overhauling the entire management system into one centralised structure to create an "international leadership team with more focused cross-company roles".

IC TIP: Buy at 381p

A victim of the changes is Kevin O'Byrne, chief executive of B&Q UK and Ireland, who is to leave the company after his job was replaced with a non board-level position. Ms Laury also took her guillotine to the bloated B&Q estate, announcing the closure of roughly 60 stores - 15 per cent of the total - as well as a handful of loss-making outlets in Europe. That will give rise to £350m of exceptional costs over the next two years. The store formats in Continental Europe are to be refreshed and the successful Screwfix trial in Germany extended.

Kingfisher's everyday operations are also getting a radical overhaul. The plan is to start standardising operating models, processes and infrastructure across the group to drive cost savings. Ms Laury said customer needs were largely the same across Europe, so Kingfisher would start to unify product lines in the bathroom and garden segments. That will give the group huge buying power, which has hitherto remained "untapped".

Finally, the bid to acquire Mr Bricolage in France fell through after a major shareholder pulled out. Asked what she planned to do with the funds earmarked for the acquisition, Ms Laury said she wouldn't be "hanging on to" any excess capital on the balance sheet. That could pave the way for shareholder returns in addition to the £200m capital return already ring-fenced for this year.

As for last year's trading, pre-tax earnings were held back by a £34m foreign exchange loss, business development costs and exceptional restructuring charges. Strip out the exceptionals, totalling £35m, and pre-tax profit still fell 8 per cent to £675m. France underperformed, while UK profits climbed 16 per cent following the best performance at B&Q for five years.

Cantor Fitzgerald expects adjusted pre-tax profit of £720m the year to January 2016, giving EPS of 34p, up from £675m and 21p.

KINGFISHER (KGF)
ORD PRICE:381pMARKET VALUE:£8.9bn
TOUCH:381-382p12-MONTH HIGH:441pLOW: 283p
DIVIDEND YIELD:2.6%PE RATIO:16
NET ASSET VALUE:266p*NET CASH:£329m

Year to 31 JanTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201110.567121.07.07
201210.879727.58.84
201310.669124.19.46
201411.175930.09.9
2015**11.064424.310
% change-1-15-19+1

Ex-div:14 May

Payment:15 Jun

*Includes intangible assets of £2.67bn or 114p a share

**Not inclusive of special dividend of 4.2p a share paid on 25 Jul 2014