Kingfisher targeting £500m annual profit uplift

B&Q owner Kingfisher announced a five-year transformation programme on Monday, saying it plans to deliver a £500m sustainable annual profit uplift by the end of the process.

The company, which operates Castorama and Brico Depot in France, said it also plans a capital return of £600m over the next three years – most likely via a share buyback – in addition to the annual ordinary dividend.

In a statement ahead of the group’s capital markets day, chief executive officer Veronique Laury said: "With a clear roadmap now in place alongside clear long term targets, the size of the five year opportunity is significant.

“We do acknowledge the challenges ahead, however having already made good progress since March last year, and with 80,000 committed colleagues, we feel confident about our plan and look forward to moving on to the first year of our transformation."

Kingfisher said reported profit before the benefits of the plan will take a £50m hit in the first year and a hit of between £70m and £100m in the second year.

It expects to spend a total of £800m on the turnaround plan.

The group said the plan comprises three strategic pillars: creating a unified, unique and leading offer based on customer needs, driving its digital capability and optimising its operational efficiency.

Despite the drop in the share price – down 3.6% to 332.70p just before midday – analysts were fairly upbeat about the plans.

Credit Suisse upped its price target on the stock to 420p from 400p, saying the plan was “genuinely transformational” and broader in scope than it had expected, with a higher level of detail and greater potential upside in profitability.

Meanwhile, Goldman Sachs said: “While execution risks remain significant, given historic common sourcing difficulties, we believe the potential for Kingfisher to more than double earnings over the next 5 years (+18% compound annual growth rate) should underpin the shares, despite near-term EPS reductions."