The DIY group Kingfisher saw its adjusted pre-tax profits plummet 15.5% to £371m in the first half, with the B&Q-owner blaming record wet weather over the summer. The City highlighted other factors as well as weather.
Interims have come in below expectations, with adverse weather, the foreign exchange market, and some accelerated self-help taking their toll on profits in the half. Excluding these factors, profit before tax was only flat. The tougher economic backdrop in major European markets is also a major factor, which management expects to persist. The Creating the Leader strategy is being implemented successfully though and self-help is being accelerated. This should provide a partial offset to inevitable downgrades this morning.
- Matthew McEachran, Singer
This result reflected reported profit falls in all three major markets (UK, France and Poland), exacerbated by foreign exchange weaknesses. Poor weather was largely to blame, with Kingfisher quantifying this at £30m - primarily in the UK and France. We place our full-year forecasts and recommendation under review, as the market will be concerned with the deteriorating market conditions in France and Poland in particular.
- David Jeary, Investec
We think that it is best to take a cautious view going forward and this is why last week we downgraded our current year pre-tax forecast from £794m to £748m and the 2014 financial year from £870m to £800m. We would regard the adjustments as being largely one-offs and therefore shouldn’t affect the long term valuation. Long-term growth will be driven by self-help and its strong position in each of its markets and the joined up thinking that is Creating the Leader, which should substantially leverage group scale to new levels.
- Philip Dorgan, Panmure Gordon & Co
Results were also affected by the depreciation of the euro and sporting events over the period. Some of the problems are one off but one worries that some are also structural. The company has a number of self-help initiatives from growth in direct sourcing over the next three years, the development of common ranges to all stores and the further expansion of own label, which will all collectively help support earnings. However, the company’s two core markets, UK and France are mature, and in both these markets the company has too much space, which will require major restructuring, particularly in the UK, over the medium term.
- Freddie George, Seymour Pierce