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Kingfisher in search of new boss

The home improvement retailer is on the hunt for a new chief executive as it enters the fourth year of its transformation plan
March 20, 2019

The transformation plan at Kingfisher (KGF) is entering its fourth year, but its instigator will soon be out the door. The home improvement retailer announced that it is on the hunt for a new chief executive, but that current head Véronique Laury would stay on until a replacement is found. Chief financial officer Steve Willett is also set to leave. The ONE Kingfisher transformation plan’s aim was to unify its product range and procurement in hopes of improving sales and profits, but critics have said it’s had the opposite effect. Indeed, like-for-like sales during the year to January 2019 fell 1.6 per cent to £11.7bn, while reported profits halved.

IC TIP: Hold at 237p

Retail profit increases in the UK and Poland were not enough to offset tough trading at Castorama France and losses in Russia and Romania. Ms Laury called performance at Castorama France “disappointing”, with total sales down 7.3 per cent, blamed on weak footfall, price changes and national demonstrations. This offset a 1.4 per cent increase in Brico Dépôt sales, resulting in a 3.7 per cent fall to £4.27bn in total Kingfisher France like-for-like revenue.

Still, management was keen to highlight areas where the ONE Kingfisher programme has made progress, even if some disagree that it’s the right strategy. The group has now unified 44 per cent of its products and reported “continued growth” in sales and margins from unified and unique ranges. Management “remains convinced” that the transformation programme will deliver “significant” financial improvement. Although it did admit that any benefits generated so far have been offset by poor trading in the underlying business. It would also appear that the £500m uplift to the operating profit target has been abandoned.

Analysts at Stifel expect adjusted pre-tax profits of £718m during the year to January 2020, giving EPS of 24.4p, compared with £698m and 23.5p in FY2019. The analysts called guidance for FY2020 “underwhelming”, with flat gross margin expected despite the ongoing efforts to unify the product ranges.

KINGFISHER (KGF)   
ORD PRICE:237.3pMARKET VALUE:£5.01bn
TOUCH:237.2-237.4p12-MONTH HIGH:340pLOW: 203p
DIVIDEND YIELD:4.6%PE RATIO:23
NET ASSET VALUE:315p*NET CASH:£48m
Year to 31 JanTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201511.064424.310.0
201610.451217.810.1
201711.275927.110.4
201811.768222.110.8
201911.732210.310.8
% change--53-53-
Ex-div:6 Jun   
Payment:15 Jul   
*Includes intangible assets of £2.81bn, or 133p a share