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Kingfisher to fly in with trading update on Wednesday

The third quarter update from the owner of B&Q will be the first outing of new CEO Thierry Garnier, who took over in September

Kingfisher plc - Kingfisher to fly in with trading update on Wednesday
Kingfisher is struggling to implement a turnaround strategy aimed at unifying its product offering

A third-quarter trading update on Wednesday from DIY retailer Kingfisher plc (LON:KGF) will feature the debut of new chief executive officer Thierry Garnier, the former Carrefour Asia boss who replaced Véronique Laury in September.

Laury, whose exit was announced in March, had struggled to turn around the sprawling owner of B&Q, Screwfix and Castorama, based around a five-year One Kingfisher plan including the creation of a more unified product offer.

In the first half of the year, group like-for-like sales (LFL) fell 1.8% on a constant currency basis, with the second quarter down 4.0% after a 0.8% increase in the first quarter.

The blame was placed at the doorstep of Castorama, as well as a poor showing from B&Q in the UK where LFL sales slipped 3.2% on the back of the implementation of new ranges of décor, while the UK’s Screwfix grew LFLs by 5.1%.

“Analysts will also look to Monsieur Garnier for any update on earnings guidance for the year,” said Russ Mould at AJ Bell.  “Kingfisher has given relatively few specific forecasts but has previously said that it expects gross margin to come in flat (excluding Russia and Iberia), including between £30mln and £35mln of additional stock clearance costs (up from prior estimates of £25-30mln)".

The consensus forecast is for Kingfisher to deliver full-year adjusted pre-tax profits of £607mln, up from £573mln last year.

Regulatory pressures could dent Direct Line

Direct Line Insurance Group PLC (LON:DLG) delayed its third-quarter update by a week and a bit, so that it will now come on Wednesday, a day ahead of its capital markets day.

The company’s shares have been amongst the worst performing in the sector so far this year, with a total return of –6%, under pressure from competitive pricing backdrop in UK motor insurance and regulatory pressure on home and motor insurance pricing.

Prospects for consumer-facing insurers have been overshadowed by fears that the UK industry is facing new regulations on renewal hikes.

This follows a report from the Financial Conduct Authority, issued last month, where the watchdog proposed a suite of remedies to remedy the problem including a ban on raising prices for consumers who renew year on year and restrictions on automatic renewal.

Insurers will also have to publish information about price differentials between customers.

For Direct Line, investors will be hoping the red phone can turn itself around in the second half after its interim results in July showed a 10.8% drop in profits to £261.3mln alongside a 2.2% fall in gross premiums to £1.57bn.

Shareholders may also be awaiting an update on the group’s transformation of its IT systems to make it more competitive in the crowded insurance market, as well as any updates from new finance boss, Tim Harris, who joined the company at the start of October.

United Utilities set to go with the flow

Utilities will be under the spotlight in the middle of the week, with half-year results due from United Utilities PLC (LON:UU.) on Wednesday.

Utilities stocks tend to be investor favourites because of their unusually high dividends, and share prices have been on the rise lately as fears of re-nationalisation under a Labour government have diminished.

Nevertheless, as the time nears for water regulator Ofwat’s latest final price determination on 16 December, with the plans to require stricter “financial resilience” at water firms, including restricting dividend payments, the companies will be under scrutiny to prove their worth.

In a recent note, analysts at Deutsche Bank said this, added to the upcoming general election, will “likely overshadow” the two firm's financial results.

It backed United Utilities to steal the show though, forecasting a 5% increase in operating profit to £387mln, compared to a “single-digit earnings drop” expected at Severn Trent, which will report results on Thursday.

Warship updates eyed from Babcock

Defence firm Babcock International Group PLC (LON:BAB) reiterated its full-year guidance in a trading update in September, so the firm’s interims on Wednesday are unlikely to contain any surprises in the figures.

However, investors will be watching for any updates on the group’s warship contract for the Ministry of Defence, where it was selected as the preferred bidder to deliver five frigates in a deal valued at around £1.25bn.

There may also be some news on whether the company is aiming to address the weakness in its civil nuclear business following the transfer of the Magnox decommissioning contract to the UK’s Nuclear Decommissioning Authority in August.

Sage investors brace for margin squeeze

Full-year results from software giant Sage Group PLC (LON:SGE) on Thursday are unlikely to be greeted with much of a fanfare after a warning in July that operating margins will be “at the lower end” of the 23%-25% range previously set out.

Investors will also be bracing for a sharp drop in revenues at Sage’s software and software-related services (SSRS) business, which is expected to see sales fall by over 15%.

The one saving grace is the group’s recurring revenues, which are forecast to “slightly exceed” its guidance range of between 8%-9%, which could provide some respite from negativity elsewhere.

Significant events for Wednesday 20 November:

Trading statements: Kingfisher plc (LON:KGF), Direct Line Insurance Group PLC (LON:DLG), Inmarsat Plc (LON:ISAT), Breedon Group PLC (LON:BREE)

Finals: The Sage Group plc (LON:SGE), Mitchells & Butlers PLC (LON:MAB), SSP Group plc (LON:SSPG)

Interims: Babcock International Group PLC (LON:BAB), United Utilities Group PLC (LON:UU.), Creightons PLC (LON:CRL), Intermediate Capital Group PLC (LON:ICP), Liontrust Asset Management PLC (LON:LIO), U and I Group PLC (LON:UAI), Alpha Financial Markets Consulting PLC (LON:AFM), Argentex Group PLC (LON:AGFX),

AGMs: Rainbow Rare Earths Ltd (LON:RBW)

Economic announcements: US oil inventories, US MBA mortgage applications

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