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Kingfisher (KGF) shares have dived underwater to the tune of 3.5%, but failed to resurface in the wake of a busy set of FY 2016 results.
Underlying pre-tax profits +14.7% on sales +8.7% suggests nice margin expansion, even if flattered by a Brexit-weakened GBP. A dividend +3.3% is also good news. And although the Chairman is retiring, his replacement has a wealth of experience (Unilever marketing, Cadbury Schweppes management, CEO of IHG and Fitness First), most recently in returns-focused private equity.
What is disappointing investors, however, is another poor show from key market France (38% group sales; -1.4% at constant FX). With outlook always key, a cautious view on the geography due to a looming presidential election is hurting. Add to this challenges associated with Brexit in the UK (44% group sales; +2.4% at constant FX) and sentiment is struggling in terms of outlook for the two main geographies.
Even strong performance from Screwfix (sales +23%), driven by impressive growth in online delivery/click & collect within a key but more mature UK & Ireland and a 10.1% surge in Polish sales (10% of group sales; 60% of other international) is being largely ignored.
Which rather takes the shine off a successful first year of a 5yr turnaround designed to boost profits by £500m. This has all served to scupper an attractive one month bounce that had threatened to deliver a breakout beyond 6-month falling highs resistance and the 200-day moving average to confirm a bullish change of trend.
With shares back close to where they were this time last month, bulls are hoping the uptrend isn’t screwed and can still be fixed, so they can click and collect. Again.
Mike van Dulken, Head of Research, 22 Mar 2017
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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