Kingfisher plc’s (LON:KGF) ambitious turnaround plan will be closely scrutinised tomorrow when the owner of B&Q and Screfix reports its annual results.
The DIY retailer has completed the first year of its five-year restructuring under chief executive Véronique Laury’s One Kingfisher strategy.
Laury’s efforts to overhaul the business have included the closure of unprofitable shops, cuts to advertising spend, scrapping old product ranges and updating its technology.
She was head of the struggling French DIY arm before she replaced Ian Cheshire as chief executive in January 2015. Laury has had more than two years to make a difference so now the pressure is on.
Broker Jefferies believes the company’s recent underperformance is not over yet as the housing market looks set to soften in the UK, where the company trades under the B&Q and Screwfix brands.
“The [French] business continues to protect profits by de-emphasising promos (we assume +10bps FY 16/17 EBIT margin); however, a more front-foot approach is likely needed from here,” Jefferies said.
In the group’s last trading update in November it reported third quarter sales rose 1.8% to just under £3bn, marking a slowdown from the 3% increase the quarter before.
Kingfisher blamed weaker sales in France, where it owns Castorama and Brico Depot.
At the time, Laury said the pace of change is expected to pick up in 2017 in the second year of her turnaround: “We remain confident in our ability to deliver our ambitious plan, based on always putting customer needs first, supported by the expertise and energy of our colleagues.”
Savills finals
Savills plc (LON:SVS) joins Kingfisher in reporting its annual results tomorrow. The estate agent said in a January pre-close trading statement that it expects underlying results will be “meaningfully ahead of our previous expectations”.
The group cited the completion of significant volumes of commercial and residential transactions across its businesses and the benefits of a weaker pound following June’s Brexit vote.
Its UK arm increased market share in commercial transactions as foreign investors took advantage of the slump in sterling. Transactions in Asia and continental Europe performed ahead of expectations and offset flat performance in the US.
However, Savills lowered its expectations for the business transactions in 2017 against a “backdrop of heightened uncertainty over global economic prospects, geopolitical risks and rising bond yields”.
The update prompted Numis to upgrade its 2016 estimates by 10%, reflecting strong transaction volumes in the fourth quarter. Numis expects full year earnings per share of 71.2p compared to 63.2p the previous year.
“Whilst we did upgrade 2017 estimates by 5%, we currently forecast a small reduction in 2017 profits, reflecting the brought forward demand in Investment Management and also a cautious outlook for UK commercial/residential transactions,” Numis said.
“Estimates will be supported by c.£6m of currency gains and an expectation that the US business will see a better outlook from the change in president and strong levels of business/consumer confidence.”
Wednesday 22 March
Interims: Softcat Plc (LON:SCT), Haydale Graphene Industries (LON:HAYD)
Finals: Xaar PLC (LON:XAR), Kingfisher PLC (LON:KGF), Quixant (LON:QXT), Savills plc (LON:SVS), Ferrexpo (LON:FXPO)