ii view: Signs of hope at Kingfisher

2019 was a year to forget, but could Covid-19 and a push to online sales assist 2020?

Full-year results to 31 January 2020

• Revenue down 1.5% to £11.51 billion
• Pre-tax profit down 66% to £103 million
• Net debt down 0.6% to £2.53 billion
• No final dividend payment

Guidance:

• No guidance given for current year given Covid-19 uncertainty  

Chief executive Thierry Garnier said:

"When the various lockdowns began, we rapidly transformed our operations to meet a sharp increase in e-commerce, while adapting our retail space and processes to ensure a safe reopening of stores. 

"On joining the business in late September 2019 my priorities were to build the executive team, stabilise our operational performance and prepare a new plan. We have a strong new team in place. We ended FY 19/20 in better shape, after a disappointing first nine months, by returning the Group to positive like-for-like sales growth in Q4 as well as for the start of FY 20/21.

"While the coronavirus crisis has obviously shifted our immediate priorities, we have continued to plan for the longer term and implement our new strategic plan. It would be a mistake not to. Kingfisher is well positioned within a home improvement market that is resilient and has attractive long-term growth prospects. We have strong market positions and distinctly positioned retail banners that address diverse customer needs. Our clear intent is to become a more digital and service orientated company, using our strong store assets as a platform."  

ii round-up:

Kingfisher (LSE:KGF) is a multiformat retailer with over 1,350 stores. Approximately 40% of our total store estate by space is freehold.

It has nearly 1,000 stores in the UK & Ireland, over 200 in France, 80 in Poland and the rest spread across Romania, Iberia and Russia. It employs over 60,000 people. 

Its general DIY brands include B&Q, Castorama, and Brico Dépôt, while brands focused on trade include both Screwfix and TradePoint. 

For a round-up of these latest results, please click here. 

ii view:

The new chief executive, who joined in September 2019 and is a veteran of French retailer Carrefour (EURONEXT:CA), believes that the group had become overly complex and had lost its customer focus. Now, while prioritising the Covid-19 crisis, a new series of strategic goals have been established. These include growing e-commerce sales, moving to a balanced, simpler local-group operating model and building a mobile-first, service orientated customer experience. 

For investors, a previously muddled transformation has now been joined by measures to tackle the corona crisis. The scrapping of the 2019 final dividend to conserve £157 million in cash was unlikely to have been in the previous thinking for the new CEO – removing a key shareholder attraction. But Covid-19 may have assisted group strategy, forcing it to further implement and stress test online and click & collect sales. Some early signs of recovery are positive, although more cautious investors may demand more concrete evidence before adding to existing holdings.  

Positives: 

• Diversity of geographical locations and brand names
• A new strategic plan including growing online sales

Negatives:

• Profit during 2019 collapsed
• Final dividend payment cancelled

The average rating of stock market analysts:

Hold