23rd Mar 2016 12:31
LONDON (Alliance News) - Kingfisher PLC on Wednesday reported adjusted pretax profit which beat expectations in its recently-ended financial year, and said it is making good progress with its five-year turnaround plan.
Shares in the DIY retailer were trading up 3.9% at 364.20 pence on Wednesday, the best performer on the FTSE 100.
Kingfisher operates under the B&Q and Screwfix brands in the UK & Ireland, Castorama and Brico Depot in Europe, and Koctas in Turkey.
In the year ended January 31, Kingfisher's adjusted pretax profit rose to GBP686 million from GBP684 million the year before, beating the analyst consensus figure of GBP667 million. Adjusted pretax profit strips out the impact of exceptional items.
Statutory pretax profit, however, dropped to GBP512 million from GBP644 million due to exceptional costs of GBP166 million relating to the company's restructuring efforts.
Following the release of Kingfisher's financial 2015 results last year, Chief Executive Véronique Laury, who took up the role in late 2014, announced a huge restructuring project to try to turn the business around, including the rolling out of a new unified IT platform, a new management team, and store closures and openings.
Kingfisher intends to create a unified business from its multiple brands, or 'ONE' Kingfisher, which will share IT systems and buying infrastructure as it leverages the scale of the business.
Earlier this year, Laury announced a new five-year plan to deliver a GBP500 million annual profit uplift by the end of the fifth year, on top of the profit Kingfisher will generate from normal business, and a capital return of GBP600 million over the next three years, most likely through a share buyback. GBP50 million of this has already been returned since the year end.
However, the costs of the transformation plan will reduce reported profit, before the benefits of the strategy, by GBP50 million in the first year and by between GBP70 million and GBP100 million in the second year. In total, the five-year plan is expected to cost GBP800 million in capital expenditure, operating costs and exceptional operating costs.
On Monday, Kingfisher said it is making progress with the plan so far, and is on track to close around 15% of surplus B&Q space, equating to 65 stores, by the end of financial 2017. 30 of those stores were closed in financial 2016, along with two loss-making Castorama stores in France and one in Russia.
An exceptional charge of GBP350 million relating to store closures is expected to be made in financial 2017, compared to a GBP305 million charge in financial 2016 which was partly offset by a GBP143 million gain on the disposal of its 70% stake in B&Q China.
Revenue fell to GBP10.44 billion in the year from GBP11.0 billion, which Kingfisher blamed on unfavourable movements in foreign exchange rates, as well as B&Q store closures. At constant currencies, sales rose by 3.8%, it said, driven by good performances in the UK and Poland.
By division, France, which has taken most of the blame of late for lower group revenue, took an 8.4% hit, which Kingfisher said resulted from weak consumer confidence and subdued housing and construction activity. On a constant currency basis, sales grew by 1.2%.
In the UK & Ireland, sales were up by 5.5%, or 5.6% at constant currencies, which Kingfisher said benefited from a stronger UK economy and a more buoyant housing construction market. Screwfix delivered a particularly strong performance.
Kingfisher's other international operations saw its sales decline by 9.7%, although they rose by 4.8% at constant currencies, driven by like-for-like growth in Poland and Russia.
Kingfisher will pay a full-year dividend of 10.1 pence, up 1.0% on 10.0p the year before.
"In the short term, the fundamentals of the UK economic backdrop remain positive, although we remain cautious on the outlook for France. The outlook for the wider global economy remains uncertain, and the impact of the outcome of the UK EU referendum is unknown," Chief Financial Officer Karen Witts said in a statement.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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