Tuesday preview: Kingfisher reports first half results amid turnaround

B&Q and Screwfix owner Kingfisher is expected to reveal that its turnaround plan is working when it reports its first half results on Tuesday.

The consensus forecast for pre-tax profit is £430m, compared to £384m the same period a year earlier, excluding around £30 of transformation costs.

In its second quarter trading update in August the home improvement retailer reported a 3% increase in like-for-like sales as strong performances in the UK and Poland offset weakness in France.

The UK was boosted by B&Q where like-for-like sales rose 6%.

However, Kingfisher said it expected gross margins in the UK to fall 100 basis points due to mix effects from strong growth in Screwfix, clearance related to the B&Q store closures and higher omnichannel sales.

The company said while the EU referendum had created uncertainty for the economic outlook, there has been no clear evidence of an impact on demand so far.

“The shares have outperformed the sector by 15% over the past 12m months, primarily because of the weakness in sterling (international profit is 58% of the total), and trade on 16x price-earnings ratio to calendar year 2017, a 30% premium to the peer group, or a 20% premium if transformation costs are excluded,” said Numis analyst Matthew Taylor.

“Meanwhile, the free cash flow yield is only 3-4%. We view this as challenging in the context of the lacklustre track record (underlying pre-tax profit in 2017 will likely still be below the 2012 peak), the fact that return on capital employed barely covers the cost of capital, and that emerging/ growth markets (mainly Poland) represent only 15% of group trading profit after many years of investment.”

Ahead of its results, news surfaced on Sunday that Kingfisher was seeking a new London headquarters. The group has reportedly appointed agents at Cushman & Wakefield to find a new 300,000 sq ft base. Kingfisher’s search is likely to take in the West End and the City, The Telegraph reported, adding that the move could result in some consolidation of staff from the existing office locations.

The deal will be seen as a boon to the commercial property market amid fears that businesses have put expansion plans on hold following the Brexit vote.

Tuesday 20 September

INTERIMS
Augean, Bango, Crossrider , e-Therapeutics, GVC Holdings, Horizon Discovery Group, Judges Scientific, Kingfisher, Lighthouse Group, Minds + Machines Group Limited (DI), Personal Group Holdings, Regional REIT Limited, Shield Therapeutics, Smart Metering Systems, Yu Group

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Building Permits (US) (13:30)
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Producer Price Index (GER) (07:00)

Q2
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BHP Billiton