Kingfisher PLC’s (LON:KGF) “ambitious” five-year turnaround plan seems to be on track as the B&Q owner reported growth in all key metrics last year, although there are still concerns over its French business.
The DIY retailer – which also owns the Screwfix brand – saw adjusted pre-tax profits for the 12 months to 31 January 2017 come in 8% higher at £743mln, on adjusted sales of £11.2bn (2016: £10.3bn).
The results were the first published since chief executive Véronique Laury introduced the One Kingfisher strategy last year and given that she’s had two years to turn the group around, the pressure was on.
She was helped out by the performance in UK and Ireland, which was responsible for nearly all of the growth and where like-for-likes rose 6% to £5bn, with Screwfix putting in another strong performance.
Sales at Screwfix rose 23% – 13.8% on a like-for-like basis – to £1.3bn, driven by its specialist trade desks which are exclusive plumbers and electricians.
Like-for-like sales at B&Q also added 3.5% on last year, although total sales at the DIY chain fell by a little over 3% to £3.7bn reflecting the planned closures of several underperforming stores.
The good performance of its UK business bodes well for the economy post-Brexit as it suggests Britain’s tradesmen are busy building.
There was also good progress made in Poland, where total sales increased more than 10% to £1.2bn.
“It has been a very productive and important year, a year which has again delivered sales and profit growth,” said chief executive Véronique Laury.
“I am really pleased that our performance has been achieved alongside delivering the key first year strategic milestones of our ambitious five year transformation plan, based on creating a unified company where customer needs come first.”
Not everything went to plan though, with its French business failing to keep pace and posting a 1.4% decline in total sales to £4.3bn on a constant currency basis.
Kingfisher said a downturn in the home improvement market across the channel was to blame, although both its Castorama and Brico Dépôt businesses delivered weaker sales compared to the market.
The outlook for France isn’t that good either according to Laury, who said the group remains “cautious” on the country’s economic future, “especially in light of the forthcoming presidential elections”.
Could Kingfisher sell its French businesses?
“Today’s final results largely followed the same pattern we’ve seen from trading statements throughout the year, with strong growth in the UK and Poland but weaker performance in France,” said ETX Capital analyst Neil Wilson.
“Indeed France clearly dragged on the group sales in the second half. Having been positive (+0.3%) for adjusted sales in constant currencies in the first half it turned negative (-1.4%) for the full year.
“Kingfisher may consider offloading its French business in due course if it continues to degrade shareholder value and act as a drag on the UK business.”
Price rises on the way?
In this morning’s conference call, Kingfisher said that it expects to raise some product prices over the coming year as the weak sterling increases the costs of some goods imported from aboard.
“We expect some moderate price increases on selected products in the UK,” said chief financial officer Karen Witts.
“I would emphasise…that within our overall plan we also have the flexibility to invest in prices where we need to do so.”
Chairman departs
In a separate announcement, Kingfisher announced that chairman Daniel Bernard will step down from his position after the AGM in June.
Andy Coslett – who has worked at the likes of Unilever and Cadbury Schweppes – will be appointed to the board on 1 April before formally taking over from Bernard after the AGM.
Shares were down 3% in early deals to 335p.
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