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Kingfisher hits £1bn in profits

While robust demand led to some impressive headline figures, the short-term outlook looks more uncertain
Kingfisher hits £1bn in profits
  • Post-period trading falls
  • Buyback programme will shortly complete

Kingfisher (KGF) soared to over £1bn in statutory pre-tax profits for the year as robust demand for home improvement items fed through to earnings, and progress was made on the ecommerce side of the equation. But the retailer, which owns B&Q and Screwfix, expects a fall in profits this year, and the confirmation of relatively poor post-period trading contributed to a fall in the share price on results day.

The UK and Ireland market was the top performer, with margins climbing by a third to 12.2 per cent. B&Q sales were up by 13 per cent to £4.2bn, as the TradePoint B2B brand was relaunched and grew by a fifth – outperforming the core business. Screwfix revenue jumped by 14 per cent to £2.3bn on the back of 68 new store openings, with the aim being 1,000 stores in the medium term. 

International revenues are dominated by France, where margins were up by 70 basis points and sales grew by over 4 per cent to £4.5bn.

Almost a fifth of all sales were made through online channels. This was in line with the prior year, but there are signs of greater promise. Online revenue grew by 5 per cent, and by 171 per cent against the two-year comparative. A new B&Q ecommerce marketplace was launched this month, with investment from the £25mn earmarked for new projects, and will offer an additional 100,000 products to the current online offering. 

Chief executive Thierry Garnier said that “we continue to leverage our store assets and group technology to drive forward our ecommerce proposition”.

Looking ahead, management confirmed that they expect adjusted pre-tax profits for this year to be in line with analyst forecasts of around £769mn. A significant drop from the £949mn in the 2021 results, in other words. In a time of rising prices and hits to the spending power of consumers, the outlook is difficult. Like-for-like sales for the first quarter of this year were down by 8 per cent, albeit up by 16 per cent on a two-year basis.

Numis analysts have the shares trading on around 10 times forward earnings, and said that “our concerns that this remains an inflated earnings base continue to weigh on our enthusiasm”. But we still think the-long term case remains sound. While there may be short-term volatility, investors can be soothed by the continuing share buyback programme – the final £75mn of a £300mn package will be completed by May. Buy.

Last IC View: Buy, 350p, 22 Sep 2021

KINGFISHER (KGF)   
ORD PRICE:276.4pMARKET VALUE:£5.67bn
TOUCH:276.3-276.5p12-MONTH HIGH:390pLOW: 247p
DIVIDEND YIELD:4.5%PE RATIO:7
NET ASSET VALUE:331p*NET DEBT:23%
Year to 31 JanTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
201811.70.6822.110.8
201911.70.309.107.49
202011.50.100.403.33
202112.30.7628.18.25
202213.21.0140.312.4
% change+7+33+43+50
Ex-div:19 May   
Payment:27 Jun   
*Includes intangible assets of £2.8bn, or 134p a share