ii view: management fixing DIY retailer Kingfisher

Full-year results to 31 January

• Revenues down 1.5% to £12.78 billion
• Pre-tax profit down 35.4% to £307 million
• Adjusted pre-tax profit down 7% to £528 million
• Final dividend of 8.60p per share
• Total 2024 dividend unchanged at 12.4p per share
• Net debt down 5% to £2.02 billion

Guidance:

• Expects full-year adjusted pre-tax profit for 2025 of between £480 million and £540 million compared with £528 million in 2024

Chief executive Thierry Garnier said:

"For the first time in over six years, we grew our market share in all key regions. We delivered profit and free cash flow in line with or ahead of our initial guidance, with strong delivery against our strategic objectives. 

"Looking to the year ahead, the recent government budgets in the UK and France have raised costs for retailers and impacted consumer sentiment in the near term. With this in mind, we remain focused on what is in our control.

“Kingfisher is in its best operational shape for years, and we remain confident about the growth opportunities in our business."

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ii round-up:

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

Just over 1,260 stores are in the UK & Ireland, with around 220 in France and a further 107 in Poland. The company’s 262 Turkish stores are operated as a 50:50 joint venture. 

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

For a round-up of these latest results announced on 25 March, please click here.

ii view:

Tracing its history back to 1982, the FTSE 100 company today employs around 57,000 people. Competing against rivals like Wickes Group (LSE:WIX), Howden Joinery Group (LSE:HWDN), Dunelm Group (LSE:DNLM) and Topps Tiles (LSE:TPT), Kingfisher sells products and services to both consumers and trade professionals. The retailer breaks its sales into the categories of Repair, Maintenance and Renovation activity on existing homes, accounting for 67% of 2024 revenues. ‘Seasonal’ sales accounted for a further 18% of 2024 revenues, with 'Big-Ticket' items the balance of 15%. 

Group focuses include developing its trade business, growing e-commerce related sales, building a data-led customer experience and rolling out compact store formats. 

For investors, around a third of sales come from Big Ticket and Seasonal items including products like new kitchens and garden furniture, which mean exposure to both cyclical housing markets and unpredictable weather. Increased taxes in both the UK and France have added to already high costs. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are still not cheap, while recently increased political uncertainty in France now offers an additional uncertainty for consumers there.  

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To the upside, market share gains across all key regions have been achieved. A high management focus on costs persists. Total online sales rose 8.3% year-over-year to £2.5 billion, while group ambition includes more than 600 Screwfix stores in France compared with just 30 currently.

In all, a likely conservative estimate of profit for the year ahead is grounds for caution. That said, group initiatives are ongoing, while a forecast dividend yield of close to 5% pays investors while they wait for a targeted profit recovery.

Positives: 

• Diversity of geographical locations and brand names
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• The weather can impact performance

The average rating of stock market analysts:

Hold