Kingfisher Share Discussion Threads

[waldron] 23/11/2023 11:56

One must remember that KGF has BRICO DEPOT in France

[waldron] 23/11/2023 11:49

Current trading and outlook

Q4 has started largely in line with the trends of Q3, including continued resilience in the UK and market weakness in France (with Brico Dépôt closing the gap in performance to Castorama). For the three weeks to 18 November 2023(7) , Group LFL sales were -3.4%.

We continue to take decisive cost actions in France, more than offsetting the impact of inflation. However, given continued market weakness, this is not sufficient to offset the impact of lower sales in this region. Reflecting our expectation for this trend to continue in France for the balance of the year, we now expect FY 23/24 Group adjusted pre-tax profit (PBT) to be c.GBP560m (previous guidance c.GBP590m).

Our revised sales expectation flows through to cash, and so we now expect to deliver c.GBP 470 m of free cash flow for the year (previous guidance >GBP500m). This free cash flow is supported by ongoing sales and profit resilience in the UK as well as the unwind of working capital flows in the prior year. We continue to expect a positive contribution from inventory unwind, together with disciplined capital allocation, which underpin our expectation of free cash flow delivery. We also reaffirm our commitment to our recently commenced GBP300m share buyback programme.

Trading in France - Castorama in line with market, Brico Dépôt mix effect, cost actions being taken

As set out in our H1 23/24 results, Q3 in France started with a slight slowdown in the sales trend relative to Q2 (August LFL was -5.3% compared to the Q2 LFL of -3.5%). However, the French home improvement market deteriorated far more than expected in September with Banque de France sales data down 9.1%. Although the market and trading trends have improved in October (and in Q4/November to date) compared to September, we have assumed that the French market will remain at least as weak as October throughout Q4.

As a result of the subdued environment in France this year, we have been proactively managing our operating costs to align as far as possible to trading conditions. The business has strengthened actions on flexing staffing levels, lowered discretionary spend and has accelerated several structural cost reduction initiatives in H2. These actions will also support improved profitability in France over the medium-term.

[waldron] 23/11/2023 11:46

KINGFISHER : Deutsche Bank lowers its target price
November 23, 2023 at 06:08 am EST

Deutsche Bank cut its target price for Kingfisher shares from 255 to 225 pence on Thursday, following weaker-than-expected quarterly results and a downward revision of full-year forecasts.

The analyst - who still has a 'hold' recommendation on the stock - believes that this disappointment may well reflect a reversal in consumer spending after the rebound that followed the Covid epidemic.

He is particularly concerned about the impact of the slowdown in inflationary pressures on sales in value terms, but also about the low average ticket, the slowdown in the real estate market and the sluggish economic situation in France.

The intermediary - who also points to limited visibility on sales trends and inflationary pressures on costs - believes that Kingfisher's share price should remain locked in at a valuation of between 10 and 12 times its PER until the situation improves.

[m w] 24/10/2023 08:15

Why would you buy for a dividend of 5.7% when you can get 6% in a savings account with nearly no risk

[value hound] 13/10/2023 16:08

I bought back in here today at 206p - having last 'visited' during the maximum fear of March 2020 (but then sold too early!).

Anyway, I think KGF is fairly defensive and on a very undemanding rating and good yield etc., now, so was interested to read this today from Money Week fwiw:

--

Kingfisher (LSE: KGF) is an international home improvement company with about 1,980 stores, nearly 1,200 of which are in the UK and Ireland. It operates in eight countries across Europe under retail banners including B&Q, Castorama, Brico Dépôt, and Screwfix. Lockdowns hit the firm’s profits, while the stock price was also affected by a derating (a lower value placed on its earnings by the market).

And the pain hasn’t ended yet. In the six months to 31 July, like-for-like sales fell by 2.2%. Profit dropped 23% to £433m, reflecting higher operating costs in the UK, Ireland and Poland caused mainly by increased pay rates and energy costs. As a result, Kingfisher is cutting its 2023-2024 full-year adjusted pre-tax profit guidance to £590m (the previous guidance was for £634m).

However, “trading in the UK & Ireland continues to have positive momentum”, says the firm. “We remain very positive on the medium-to-long-term outlook for home improvement.” Many new homes will be needed in future. Kingfisher is “confidentR21; in its scope for growing market share. A new £300m share buyback programme reflects its bullishness.

Earnings estimates put the stock on a p/e of 9.4 for next year, dropping to 8.3 for the following 12 months. Though the price may drop further, that is a distinctly cheap valuation. Future profit growth would make the stock even better value. Meanwhile, the yield is 5.7%, with the dividend almost twice covered by prospective earnings. Buy.

[m_kerr] 19/9/2023 22:05

pretty harsh share price IMV. it's returning about £400-500m to shareholders pretty reliably, and has a growth story in screw fix. IMV the returns on screw fix are extremely high, and once a degree of stability returns to the housing market, could yield a massive valuation were it to be spun off.

gross margin also is remarkably stable, despite all that is going on. the stock has been under valued for a number of years now.

france is obviously a market the business knows very well, the CEO and CFO are french as well. i wouldnt bet the farm on screw fix succeeding there, but in this valuation you're not paying anything for it, so it's free upside.

[essentialinvestor] 19/9/2023 18:05

Hi Dean, tbf I don't have enough knowledge on the French DIY market to comment; what I can say is if you go back about 8-9 years, France was their most profitable country by some margin (on a pre tax profit basis).

The CEO talks a good talk, but that reduction in guidance, taking pre tax to below £600 million is pretty poor. KGF made more on pre tax in FY 2010 and that's without allowing for any inflation since.

[deanowls] 19/9/2023 17:13

Thanks EI. I was watching one of these c4 homes abroad type programs and there was one in France and he reckoned that the cost of diy materials was almost double so maybe an opportunity?

[essentialinvestor] 19/9/2023 14:39

Hi Dean, yes is the answer to your question - approx £2.4 BN of lease liabilities
on the balance sheet.

Following the COVID boom net cash was around £1 bn, a lot of which has been spent
on share count reduction.

They are ploughing ahead with the ScrewFix France physical store roll out,
better be calling that correctly or it may be expensive - SrewFix failed in Germany.

[deanowls] 19/9/2023 11:45

Is the majority of debt down to lease provisions?

[essentialinvestor] 19/9/2023 10:05

Revised FY guidance puts PBT at a lower level than 10 years ago, add in inflation since and that paints a vulgar picture.

Net debt is in the meantime ticking up as a result of regular buy backs. Gearing up the balance sheet while profitability is falling..

[gswredland] 25/5/2023 16:09

Thank you scooo

[scooo] 25/5/2023 15:46

gswredland

Yes, ex-dividend today 25th May 2023.

Final dividend of 8.6p to be paid on 3rd July 2023.

[scooo] 25/5/2023 15:23

KGF were caught sleeping by the advance of Amazon and other online competition some years back, and suffered badly for it. They now promote their own e-commerce proposition and of course have an extensive store network to give comprehensive appeal.

Amazon et al will achieve a significant & permanent presence in the market place but will level off at some point, which may not be too far off.

The direct in-store proposition has its advantages for DIY in terms of immediacy, inspection, advice and return convenience. I think the current share price undervalues KGF combined online & instore strengths, and overestimates the further potential of pure online players to take market share.

The disappointing historic share performance has reflected the earlier online attrition but the future outlook may be somewhat more robust.

[gswredland] 25/5/2023 15:23

Am I correct in thinking this goes ex divi today please?

[essentialinvestor] 25/5/2023 13:13

FY consensus pre tax number (if achieved) is similar to their level of profitability circa 2013.

Now given inflation in the interim profitability will be significantly lower in real terms; and this with huge growth in Screwfix over the last decade.

EPS is higher, helped via share count reduction.

[gswredland] 25/5/2023 08:40

Agreed
Bought my first lot this morning

[systemsthinker] 10/5/2023 09:35

I can't understand why KGF isn't more popular, at least as a long term investment:

P/B: 0.74
P/E: 10%
Yield: 4.75% and well covered.
Debt/Gearing: Just about right (around 35%)
Good profits, set to grow steadily.
Operating in 8 countries so some protection from Brexit etc
A good, but not radical, strategy to improve and accelerate their digital/data/ecommerce operations and roll out compact stores.
They seem to have a strong management team and motivated staff
There is a need for their services whether the economy worsens OR improves (within reason!)

Is it just that KGF is just not very glamorous??? Is it that it's not a '10 bagger' and unlikely to make an investor rich overnight? What am I missing?!?

[essentialinvestor] 21/3/2023 13:27

Consensus pre tax for the year ahead is approx £630 Million,
so another sharp fall from the post pandemic profit surge, subject to change as always.

They made more than that 10 years ago and a big wedge of inflation in the meantime.

[blackhorse23] 21/3/2023 08:10

Out from profit & going to buy GNC

[darrin1471] 07/12/2022 17:40

B&Q is set to roll out more B&Q Local convenience stores as it expands its presence on the UK high street.

hxxps://www.retailgazette.co.uk/blog/2022/12/bq-convenience/

I would of thought some of Wilko's estate would of been ideal to expand B&Q Local

Not holding KGF as I believe higher mortgage rates will hit housing market, tradesmen and DIY market for several years.

[dancing piranha] 24/11/2022 16:25

Weak results!

[dondee] 15/11/2022 11:47

I agree.
Wasn't it Warren Buffet who said "When others are fearful be greedy and when others are greedy be fearful" or some such thing.