ii view: Kingfisher chasing efficiency gains

First-half results to 31 July

• Total revenues up 1% to £6.81 billion
• Profit up 10.2% to £368 million
• Interim dividend unchanged at 3.8p per share
• Group net debt including leases down 14% to £1.73 billion

Guidance:

• Now expects to achieve the upper range of its previous full-year estimate for adjusted pre-tax profit of between £480 million and £540 million versus £528 million in 2024
• Now plans to complete previously announced £300 million share buyback by March 2026

Chief executive Thierry Garnier said:

“Our teams continue to execute at a high level, delivering double-digit growth in our strategic initiatives, trade and e-commerce, which supported our market share gains. 

“We remain focused on executing our strategic priorities, maintaining cost discipline and driving shareholder returns."

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ii round-up:

Kingfisher (LSE:KGF) is an international home improvement retailer operating across seven European countries including the UK and Ireland, France, and Poland.

The retailer operates around 1,900 stores including a 50:50 joint venture in Turkey. Kingfisher brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş in Turkey.

Kingfisher brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş in Turkey.

For a round-up of these latest results announced on 23 September, please click here.

ii view:

Opening the first UK B&Q store in 1969, the FTSE 100 company today competes against rivals such as Wickes Group (LSE:WIX), Howden Joinery Group (LSE:HWDN), Topps Tiles (LSE:TPT) and Dunelm Group (LSE:DNLM). Geographically, the UK and Ireland generated most sales during its last financial year at 50%. That was followed by France at 30%, Poland 14%, and other countries the balance of 6%. 

The retailer categorises product sales into three. ‘Repair, Maintenance and Renovation’ accounted for most sales in 2024 at 67%, followed by ‘Seasonal’ sales at 18% and 'Big-Ticket' items the balance of 15%. Management strategic focuses include developing its trade business, speeding-up e-commerce related sales, rolling out compact store formats, and making Kingfisher more agile and lean.  

For investors, total French and Polish same store sales fell 1.2% and 0.5% respectively during this latest period. Political instability in France now offers uncertainty over the nation's finances, with  any debt reduction resulting in possible government job losses. Increased taxes in both the UK and France are estimated by management to have added £145 million to costs. Big Ticket and Seasonal sales such as new kitchens and garden furniture offers exposure to cyclical housing markets and unpredictable weather, while a forward price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap.

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To the upside, like-for-like sales for the UK and Ireland, by far Kingfisher’s biggest market, gained 2%. Efficiency initiatives included 96 store lease renewals and renegotiations during this latest period with an average net rent reduction of 11%. E-commerce provision now includes cloud data services with Amazon, Microsoft and Alphabet owned Google, while the French retail profit margin improved to 3.5% from 3.3%, with management targeting a level of 5-7%. 

In all, slow housing markets and increased political uncertainty, particularly in its major French market, provide caution. That said, ongoing management initiatives and a forecast dividend yield of around 4% are likely to see fans of this major European DIY play remaining loyal. 

Positives: 

• Diversity of geographical locations and brand names
• 2024 growth in market share for all key regions

Negatives:

• Uncertain economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Hold