B&Q parent Kingfisher revealed better than expected pre-tax profit figures this week for the six months to August 1, driven by a strong performance in the UK.
The DIY giant was forced to reveal the figures early due to an “administrative error” that resulted in some draft figures being circulated externally. It expects to report adjusted pre-tax profit in the range of £285m to £290m.
Kingfisher expects between £345m and £350m of retail profit, made up of £148m in UK and Ireland, £146m in France and £53m in its other international territories, including China and Russia. It will provide more detail when it formally reveals its interim results on September 17, as well as prospects for the outlook in the second half, which it expects to be “challenging”.
Shore Capital analyst Kate Calvert said the figures came in “ahead of consensus expectations, mainly due to a strong UK performance”. Shore Capital expected pre-tax profits of £273m and has raised its full-year forecast £15m to £450m.
However, she added: “We maintain a sell recommendation, feeling there is better value elsewhere and more upgrade potential.”
Singer Capital Market analyst Matthew McEachran said Kingfisher’s pre-tax profits were 7% up on his forecasts. He noted that the retailer’s performance in its overseas territories, apart from France, was “marginally” below expectations but that overall it was a “strong performance ahead of expectations”.
He added: “We believe many of the factors behind today’s strong trading update are continuing in nature and not necessarily one-off or driven by the seasonal trading conditions, although the spring weather has clearly helped.”
UBS analyst Andy Hughes said the robust performance could lead to forecasts rising, “reflecting stronger than expected B&Q margin recovery”. He said: “Margins are key to the better figures. We believe this is based on stronger gross margins at B&Q. The increase may be about 100 basis points – at the top end of guidance – as a result of better clearance, positive mix effects and supply chain efficiencies. There may also be an element of positive price inflation, some reflecting higher commodity prices.
“Full-year forecasts could rise. Our £440m was based on a second-half like-for-like of 2% and flat gross margins. The latter may now look conservative.”
Kingfisher said the figures are yet to be approved by its audit committee and could be subject to change.