25th Nov 2024 08:56
(Alliance News) - Kingfisher PLC on Monday trimmed the top end of its profit guidance range after soft trading in October, and flagged an expected hit of GBP45 million from tax changes in the UK and France.
The London-based owner of B&Q, Screwfix and Castorama
now expects adjusted pretax profit of GBP510 million to GBP540 million in the year to January 31 2025, the top end of the range lowered from GBP550 million. This would be a decline of up to 10% from GBP568 million posted last year.
The firm's free cash flow guidance of GBP410 million to GBP460 million is unchanged.
Kingfisher said sales fell 0.6% to GBP3.22 billion in the third quarer to October 31, with like-for-like sales 1.1% lower at constant currency.
This was below the GBP3.3 billion consensus, cited by RBC Capital Markets.
"As a result we see around 2% to 8% risk to consensus pretax profit forecasts for FY25-26," the broker said.
In response, shares in Kingfisher tumbled 13% to 257.50 pence in London on Monday morning. The wider FTSE 100 was up 0.3%.
Kingfisher reported "solid underlying trading in August and September" but tougher conditions in both the UK and France in October, "impacted by uncertainty related to government budgets in both countries".
UK & Ireland sales rose 1.2% on-year on a reported basis during the third-quarter at GBP1.62 billion, and were 0.4% on a like-for-like, constant currency basis.
Sales growth was driven by Screwfix, where like-or-like sales rose 1.8%, and TradePoint with LFL sales up 4.9%, reflecting strong market share gains. B&Q's e-commerce marketplace saw a 45% jump in gross merchandise value, the firm added.
France sales fell 6.4% on a reported basis to GBP967 million and 4.3% LFL. Sales were hit by "weak consumer sentiment and adverse weather."
Elsewhere in Europe, sales in Poland rose 6.6% to GBP468 million on a reported basis but fell 0.4% like-for-like.
Kingfisher highlighted a 4.0% drop in sales of 'big ticket' items, while core sales fell 0.4% driven by repair, maintenance and renovation activity on existing homes.
The firm expects full delivery of GBP120 million of structural cost reductions for the full year as guided.
Chief Executive Thierry Garnier said: "All our banners in the UK, France and Poland performed in line or ahead of their respective markets, with particularly strong market share gains at Screwfix."
"We continued to see improved volume trends in our core categories, supported by repairs, maintenance and existing home renovation. As expected, sales of our 'big-ticket' categories remained soft, although we are seeing early signs of improvement."
In the three weeks to November 23, the early weeks of its final-quarter, like-for-like sales are down 0.5% on-year, though this is an "improvement versus the exit rate" of the third-quarter.
Looking ahead, Garnier said recent political and macroeconomic developments have "layered incremental uncertainty onto the near-term outlook in our markets."
"And so we continue to focus our energy on what we can control - delivering further market share gains through our key strategic priorities, and managing our retail prices, costs and cash effectively."
Kingfisher said the UK & Ireland and Polish markets are currently tracking within the higher end of its scenarios, while the French market is continuing to track at the low end.
Reflecting on the recent Autumn Budget in the UK, Kingfisher said it expects to offset the impact of wage increases through structural cost reductions and productivity gains.
It estimates the impact of higher employers' National Insurance Contributions in the UK, in financial 2026 will be around GBP31 million, before any mitigations.
The impact of changes to social taxes in France are put at GBP14 million.
Results for the full-year to January 31, 2025, are expected to be published on March 25.
By Jeremy Cutler, Alliance News reporter
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