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B&Q owner Kingfisher dragged down by French business once again in first half

This article could have been written last night: Solid growth in the UK more than offset by continued in France

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CEO Veronique Laury is halfway through her five-year turnaround plan with little to show for it so far

B&Q owner Kingfisher PLC (LON:KGF) has reported a near-20% plunge in half-year profits as ongoing problems in its French business continue to offset growth in the UK.

Shares were down 3% in mid-morning trade on Wednesday to 255.5p, making it the top blue-chip faller in London.T he FTSE 100 DIY retailer has had to deal with tough trading conditions in both of its core French and UK markets over the past couple years. But while Screwfix is more than propping up the business on this side of the pond, the performance of Kingfisher’s Castorama division “remains weak”.

READ: Kingfisher brings in new boss for struggling French division

UK profits rose 1.2% to £218mln (H1 17: £215mln) in the six months through to the end of July, while sales crept up by 1.3% to £2.64bn (H1 17: £2.60bn).

Screwfix continues to be the main growth driver as Kingfisher works towards opening 700 of the stores across England Scotland and Wales.

B&Q sales fell despite the warm weather, which normally bodes well for sales of its BBQ kits, lawnmowers and other summer essentials.

Revenues in France were broadly flat at £2.27bn, but profits tumbled by a third to £122mln (H1 17: £174mln) as margins took a hit from “logistics and stock inefficiencies”.

Kingfisher said measures had been put in place to reverse this trend, with margins picking up in the first few months of the second half.

For the group as a whole, sales edged up to £6.08bn (H1 17: £6.01bn), but adjusted pre-tax profits slipped 18% to £323mln (H1 17: £394mln), largely reflecting the troubles at Castorama.

Turnaround plan working? Apparently…

Kingfisher remains “convinced” that its five-year ONE Kingfisher turnaround plan, which it is halfway through, is tackling the problems, but today’s results are unlikely to relieve any pressure from chief executive Veronique Laury.

The 53-year-old said: “Our H1 results reflect a solid performance in the UK and Poland whilst France remains difficult.

“Looking to the full year we remain on track to deliver our strategic milestones for the third year in a row and have put actions in place to support our performance.

She added: “Transformation on this scale is tough, and there are challenges that we're working through.

“There is still much to do to improve our performance in France and to remove inefficiencies within the business as we continue to transform at pace. I am confident that we have the right plan and the opportunity for Kingfisher is significant.” 

Time to cut the French business loose?

“Would somebody change the record? It’s still the same old story at Kingfisher with little sign that the turnaround is really working,” said Markets.com’s chief analyst Neil Wilson.

“As the Q2 update indicated, Kingfisher enjoyed an OK performance in the UK and Poland but France, especially Castorama, continues to act as a massive weight.

“With talk of activist investors circling, the French op is one that could certainly be earmarked for hiving off, as previously argued on several occasions in the past.”

--Updates for share price and analyst comment--

Quick facts: Kingfisher PLC

Price: 295.9 GBX

LSE:KGF
Market: LSE
Market Cap: £6.24 billion
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