Investors in home improvement products retailer Kingfisher (KGF) are cheering better than anticipated results thanks to a strong performance in Poland and at Screwfix.
In the six months to 31 July 2017, like-for-like sales in Poland rose 3.8% to £694m, which Kingfisher says reflected a ‘continued good performance in a supportive market.’
At Screwfix, like-for-like sales increased 11.7% to £727m, driven by strong growth from specialist trade desks, strong digital growth and the roll out of new outlets.
'RESILIENT' MARGINS
UBS analyst Andrew Hughes says underlying pre-tax profit of £440m beat his forecasts of £418m, and flagged that the UK beat expectations - but the flat margin implies this was due to lower costs.
Davy Research’s Michael Mitchell believes Kingfisher’s margin has been more resilient than expected, which is reassuring considering the company’s struggles over the first half of 2017.
The analyst says Kingfisher must continue to address its ‘disappointing top-line’ performance and disruption from the implementation of ONE Kingfisher to re-stimulate earnings growth.
The company is undergoing its ONE Kingfisher plan to deliver £500m of sustainable annual profit uplift by the end of 2020 to 2021.
Unfortunately, this has resulted in business disruption, causing an expected 2% like-for-like impact.
IMPROVED PERFORMANCE IN FRANCE
Mitchell also highlights an improved performance in France as retail profit declined 7% to £174m, compared to a forecast £169m.
Despite the results, Kingfisher is cautious on the ‘backdrop for the second half in the UK and France.’
B&Q is also struggling as total sales are down 6.3% to £1,875m due to the store closure programme.
Shares in Kingfisher are up 5.6% to 314.9p.
