Restructuring weighs on B&Q owner Kingfisher as first half sales fall

As Kingfisher updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

“Kingfisher’s half year results released to the market today showed revenues rising by 4.5% to just over £6bn, with a good portion of this rise attributed to currency movements. Stripping out those currency effects, investors should note that the numbers do not look as good, with sales falling by 1.3% and underlying pre-tax profits rising by just 0.9% to £440m.

“General performance in the UK was mainly good, driven mostly by the success of Screwfix. However, this was more than offset by the continuing weakness in France where sales fell by 4.6% on a like for like basis. Overall sales were also disrupted by continuing operational changes the management is taking. This includes integration of its various brand’s operations under one IT system and one supply purchase system. Whilst some of the financial benefits are already showing through, the restructuring was expected to hit sales and interested investors should acknowledge that management is working on minimising this effect over the longer term.

“This performance is not too much of a surprise to the market but interestingly, the shares were up by around 8% in early trading. Likely down to management reiterating that they expect to meet consensus underlying eps targets, despite still flagging caution for the second half of the year. They also announced a £60m share buyback which would have contributed to this morning’s share price rise.

“Despite today’s positive reaction, we still have a cautious attitude to the retail environment as consumers in the UK are increasingly felling the pressure in real incomes. Moreover, the generally more upbeat tone in Europe isn’t feeding through to the group’s French businesses. As a result, we continue to recommend Kingfisher as a ’hold’ for investors seeking a balanced return.”