Kingfisher must fix international business
IN WHAT was a quiet week on the stock market, half-year results at Kingfisher were the main event.
While the half-year dividend was held steady at 3.33p per share, it was a disappointing release from the Screwfix and B&Q owner.
Kingfisher was on the wrong end of a painful one-two from lower margins and weaker sales trends. As a result, underlying pre-tax profit fell 14.8 per cent to £375million.
With UK & Ireland profits actually rising 1.2 per cent to £218million, the damage was done by Kingfisher’s international businesses. Russia, Romania and Germany all delivered poor performances, but the worst was France. Weak sales plus higher marketing and logistics costs meant profits across the Channel collapsed like badly assembled shelves, down 29.8 per cent to £122million.
Unfortunately, the numbers were only half of Kingfisher’s problems. Investors will have also been disappointed to see the group’s “ONE Kingfisher” turnaround plan looks to be running into difficulty.
The plan itself is a worthy cause. Simplifying supply chains, streamlining the number of products across its various chains and improving its digital capability all make perfect sense. If all goes to plan, Kingfisher says the changes will uplift profits by £500million a year from 2021.
Progress has been OK so far, but the second half of the five-year transformation looks to have tougher challenges in store.
The unexpected departure of Chief Offer & Supply Chain Officer Arja Taaveniku has brought another sucker punch.
To be fair to Kingfisher, not all of its problems are of its own making. The housing market is in slack water, and home improvement isn’t much better.
There are some silver linings too. For example, problems at Homebase, where 42 stores are due to close, means the competitive landscape isn’t as bad as it might be.
Still, we can’t help but think these positives are more than outweighed by the negatives at the moment. For every job Kingfisher crosses off the to-do list, it seems at least one more appears.
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