Fitted kitchens, baths and door handles seller Kingfisher’s (KGF) results for the year to end-January reveal growth across key metrics, Screwfix the standout performer yet again and Kingfisher flagging brisk business in Poland.
Shares in the home improvement giant are marked down 5.3% to 327.4p however, forward-looking investors fretting over its faltering businesses in France, where the much-anticipated recovery has yet to be delivered, as well as the risk of a UK consumer downturn.
You can flick through the FTSE 100 retail titan’s annual numbers here. Key takeaways from the first year of CEO Veronique Laury’s (pictured below) five year transformation plan, designed to lift annual profits by £500m, include better-than-expected 14.7% growth in adjusted pre-tax profit to £787m with a boost from the weak pound. Cash-generative Kingfisher also hikes the dividend 3% to 10.4p.
FRANCE FALTERS
Disappointment centres on France, where like-for-like sales slipped 2.7% as both the Castorama and Brico Depot chains underperformed a weak French home improvement market and Kingfisher’s constant currency profits came in slightly lower.
In her outlook statement, Laury says: ‘Looking forward, the EU referendum has created uncertainty for the UK economic outlook and we remain cautious on the outlook for France, especially in light of the forthcoming presidential elections.’
Neil Wilson, Senior Market Analyst at ETX Capital, even comments: ‘Castorama and Brico Depot considerably underperformed - Kingfisher may consider offloading its French business in due course if it continues to degrade shareholder value and act as a drag on the UK business.’
SCREWFIX DOES THE BUSINESS
In the UK and Ireland, while like-for-like sales at DIY chain B&Q grew 3.5%, the bulk of the growth resulted from ‘sales transference’ following the closure of 65 stores, about 15% of B&Q’s selling space, over the past two years.
Trade-focused Screwix proved the star turn once again, like-for-like sales up 13.8% to almost £1.3bn ‘driven by strong growth from the specialist trade desks exclusive to plumbers and electricians, strong digital growth and the continued roll out of new outlets’.
CASH OR COMPETITION?
Having paid out £230m of ordinary dividends and repurchased £200m of its own stock, the increasingly shareholder-friendly Kingfisher is certainly a stock for income seekers to consider; it plans to lavish a further £600m on shareholders through buybacks in the current financial year.
Nevertheless, there are risks to consider. Haitong’s seasoned retail-watcher Tony Shiret remains a seller ‘on the basis of the challenges posed by the static nature of the UK and French markets, likely impacts of channel switch on market leaders as digital evolves and the sheer scale of the business risk here.’
Shares has previously highlighted a growing competitive threat facing Kingfisher too. Rival Homebase’s new owner is the deep-pocketed Wesfarmers, the brains behind admired Australian hardware retailer Bunnings.
Wesfarmer’s plan to spruce up Homebase stores will increase competition for B&Q in DIY hardwear, garden and seasonal ranges.
