Kingfisher PLC (LON:KGF), the owner of B&Q and Screwfix, reported a drop in full-year profits as sales were dragged lower by another weak performance in France and a slowdown in the UK.
Adjusted pre-tax profit fell 8.1% to £683mln in the year ended January 31 on sales of £11.6bn, up 3.8% on a reported basis but down 0.3% at constant currency.
READ: Kingfisher posts fall in third quarter sales as weak performance in France offsets strong growth at Screwfix
Like-for-like sales declined 0.7% as growth at its Screwfix and Poland businesses were offset by a decline in France and softer fourth quarter sales in the UK.
Shares fell 7.4% to 312p in morning trade.
UK division begins to show cracks
The slowdown in the UK at B&Q and Screwfix was due to less demand for big ticket items as the housing market cooled and as consumers hit by higher inflation and stagnant wage growth cut back on spending.
Chief executive Véronique Laury said the outlook for the company’s main markets is “mixed”.
“The UK is more uncertain, France is encouraging yet volatile, whilst the market in Poland remains supportive,” she said.
George Salmon, equity analyst at Hargreaves Lansdown, said the main headline of the results is the weakness in the UK.
"Fourth quarter like-for-like sales have slumped at B&Q, while the wheels are also turning that little bit slower at Screwfix, which has so often bailed out the UK business in recent years," he said.
"Kingfisher says the outlook for both businesses is uncertain, so the worry for investors is B&Q sales trends remain in the red."
Kingfisher says restructuring on track
Laury has been carrying out the group’s five-year restructuring, which has now entered its third year.
She said the retailer made good progress last year with its overhaul, having met all its key strategic milestones by reducing the number of global suppliers, rolling out an improved digital offering to customers and delivering £20mln in cost savings.
“Our performance this year has been mixed, however, with solid growth at Screwfix and Poland, offset by continued weaker sales in France and some business disruption, principally reflecting product availability and clearance,” Laury added.
“We are acting on the causes of this disruption, however next year will be another big year in our transformation plan.”
While Kingfisher said it is “aware of the challenges ahead”, it remains confident on delivering the benefits of its strategic plan by 2020/21.
For the 2018/19 financial year, it expects to achieve sales growth, a reduction in the cost of goods sold, a further £30mln in savings and to complete the roll-out of its new IT system.
Kingfisher improves shareholder returns
The company ended the year with net cash of £68mln, down from £641mln the previous year, reflecting outflows driven higher levels of stock.
However, Kingfisher raised its full year dividend by 4% to 10.8p and plans to return £600mln to shareholders by the end of the current fiscal year through a share buyback.
"On balance, the numbers are uninspiring and the early share price reaction reflects this disappointment," said Richard Hunter, head of markets at Interactive Investors.
"There is certainly progress being made, but in the interim the market consensus of the shares as a buy may be subject to some downward pressure.”