25th Mar 2024 10:15
(Alliance News) - There were few reasons to be cheerful after Kingfisher PLC's annual results, analysts on Monday said, as it tackles a weak housing market and cost-of-living headwinds.
Shares in Kingfisher fell 2.5% to 227.80 pence in London on Monday morning.
In the year to December 31, Kingfisher, which owns DIY retailers including B&Q, Castorama and Screwfix, reported statutory pre-tax profit of GBP475 million, down 22%, from GBP611 million. On an adjusted basis, pretax profit fell 25% to GBP568 million from GBP758 million.
In the current financial year, Kingfisher expects adjusted pretax profit to fall further to a range of GBP490 million to GBP550 million.
Richard Hunter, head of markets at interactive investor, said: "Some of the sting was taken out of these numbers after two previous profit downgrades, but the results are nonetheless light of many reasons to be cheerful."
Kingfisher said positive UK & Ireland sales, alongside consistent market share gains, were offset by a "more challenging" consumer backdrop in France and Poland which impacted trading.
Like-for-like sales fell 3.1% to GBP12.98 billion from GBP13.06 billion with retail profit down 20% to GBP749 million from GBP923 million. Retail profit margin dropped to 5.8% from 7.1%.
Hunter explained the drop in sales was worse than the 2.7% predicted, with sales even weaker in the final quarter of the financial year, down by 4.3%.
Hunter identified the main "culprit" for the disappointing out-turn as France, which accounts for some 33% of Kingfisher's overall sales.
"Low consumer confidence was held up as a major factor, resulting in like-for-like sales declining by 5.9% although the pressure on Castorama has been in evidence for some time," he pointed out.
"Poland suffered difficulties also, and with additionally strong comparatives which resulted in a like-for-like sales decline of 9.5% in the period, alongside a challenging trading environment.
"Measures are also afoot to revitalise fortunes in the region, but in the meantime and along with France, the group as a whole is facing headwinds which are in need of some repair."
If there is a "saving grace" from the update, Hunter said, it is from the performance of UK and Ireland, the largest region which accounts for 49% of group sales, and from the continuing strength of Screwfix in particular.
"Screwfix is the business which has long been the company's jewel in the crown and Kingfisher has recognised this by continuing to roll out the brand. A further 40 stores are planned in the UK this year, as well as another 15 in France," he noted.
Alongside the increase in Screwfix stores, Kingfisher plans a further 75 medium-box and compact store openings over next 5 years for Castorama Poland.
The increase in selling space is predicted to drive an uplift in sales of between 1.5% to 2.5% per annum over the medium term.
Hunter commented while there could be a boost resulting from an improvement in housing demand in the UK in the next few months, Kingfisher is mindful that this would also come with a time lag until any such benefits wash through to home improvements demand.
"For the moment, a positive direction of travel seems far from being established," he suggested.
Susannah Streeter, head of money and markets, Hargreaves Lansdown agreed, noting the B&Q owner was "very much in repair mode, with its performance damaged by cost-of-living headwinds and a struggling housing market."
"There had been hopes that with interest rates eyed on the horizon, and UK house prices stabilising, that demand for [do-it-yourself] products and services would bounce back, but the company says due to the lag between house sales and renovation projects being green lit, recovery is further on the horizon," she explained.
By Jeremy Cutler, Alliance News reporter
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