ii view: what to make of Screwfix owner Kingfisher?

Opening new stores in France and Poland and offering a forecast dividend yield of close to 5%. Buy, sell, or hold?

Full-year results to 31 January

• Currency adjusted revenue down 2% to £13.1 billion 
• Adjusted pre-tax profit down 20% to £758 million
• Final dividend unchanged at 8.6p per share
• Total dividend for the year unchanged at 12.4p per share
• Net debt up to £2.2 billion from £1.6 billion

Guidance:

• Comfortable with the consensus analyst forecast of £633 million adjusted pre-tax profit for the full year ahead

Chief executive Thierry Garnier said:

“We have maintained a sharp focus on pricing to deliver value to our customers during this challenging period for household finances, while at the same time managing our cost inflation pressures effectively. Strong supply chain management has ensured good product availability and a firm grip on our inventories.

"We remain confident in both the growth of our industry, and in our strategic priorities supporting growth ahead of our markets.”

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ii round-up:

Kingfisher (LSE:KGF) is a multi-format DIY retailer with over 1,500 outlets. 

It trades from eight European countries including the UK and Ireland, France and Poland and employs over 60,000 people. 

Group brands include B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş. 

For a round-up of these latest results announced on 21 March, please click here.

ii view:

Founded in 1982, this FTSE 100 company today has rivals including Wickes Group (LSE:WIX), Howden Joinery Group (LSE:HWDN) and Topps Tiles (LSE:TPT). The UK and Ireland account for its biggest slug of sales at just under half. That’s followed by France at just over a third, Poland at a tenth and other European countries the balance. 

Group strategic priorities include growing e-commerce sales, downsizing bigger stores and opening new compact ones, increasing its trade focused sales via growth in its Screwfix and Tradepoint outlets, and extending its range of generally higher profit margin Own Exclusive Brands (OEB). 

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For investors, a backdrop of rising interest rates and concerns for the health of property markets cannot be forgotten. Elevated trading during the pandemic has made for difficult comparatives, costs generally for businesses have risen, while investment in new stores for both Screwfix in France and Castorama in Poland offer their own initial headwinds.

On the upside, Kingfisher enjoys diversity of both brand names and geographical regions, a broad improvement programme is reflected in a 15.6% gain in like-for-like sales over the last three years and prior to the pandemic, while ecommerce sales now account for 16% of overall group sales compared to around 8% prior to the Covid crisis. It's also expanding by opening new stores.

Despite progress, investors have taken advantage of a strong rally in 2023 to bag profits during recent market turmoil. It will be interesting to see how many are confident enough to buy back in at these lower levels and lock in a dividend yield of near 5%.  

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:

Weak hold