Strong second quarter recovery sees Kingfisher profits rise
By Josh White
Date: Tuesday 22 Sep 2020
(Sharecast News) - Kingfisher reported a "resilient" first half performance on Tuesday, with its sales falling 1.1% at constant currencies to £5.9bn, reflecting the impact of Covid-19 in the first quarter, partially offset by a "strong" recovery in the second quarter.
The FTSE 100 home improvement retailer's adjusted pre-tax profit was ahead 23.1% year-on-year at £415m for the six months ended 31 July at £415m, while its retail profit rose 17.7% at constant currency to £533m.
Its retail profit margin was ahead 140 basis points at 9%, with adjusted basic earnings per share improving 28% to 15.1p.
On a statutory basis, Kingfisher's sales were down 1.3% at £5.92bn, and its gross profit was 1.6% weaker at £2.19bn.
Free cash flow came in at £1.04bn, which was up £838m, and reflected the company's higher operating profit, working capital inflow of £656m, and lower capital expenditure.
Its net debt-to-last 12 months' EBITDA ratio was 1.0x at period end, compared to 2.0x at the start of the year, and well below its medium-term target range of between 2.0x and 2.5x.
The board declared no interim dividend, given the ongoing uncertainty around the coronavirus pandemic.
"We delivered a resilient financial performance in the first half of the year, with the adverse impact of Covid-19 in the first quarter offset by a strong recovery in the second quarter," said chief executive officer Thierry Garnier.
"This recovery has continued into the third quarter to date, with growth across all banners and categories.
"The crisis has prompted more people to rediscover their homes and find pleasure in making them better."
Garnier said it was also creating new home improvement needs, as people were seeking new ways to use space or adjust to working from home.
"It's also clear that customers are becoming more comfortable with ordering online.
"Through our new strategic direction our retail banners have gained agility and have leveraged their distinct positioning.
"This has strengthened our market positions and delivered much improved like-for-like sales before and after the lockdowns."
He said the company's experience through the crisis had reinforced the benefits of its strategic direction, and made the firm "bolder" in its priorities.
"We have made progress against the strategic plan announced in June.
We are fundamentally reorganising our commercial operating model to serve our customers better.
"We have accelerated our plans around e-commerce, with a focus on fulfilment from stores."
Kingfisher was continuing to improve its operational performance in France, Garnier said, and introduced new trading approaches at each of its banners.
It was also testing a number of initiatives, including new concepts, services and partnerships.
"Looking forward, while the near term outlook is uncertain, the longer term opportunity for Kingfisher is significant.
"There is a lot more to do, but the new team and new plan is now established in the business and we are committed to returning Kingfisher to growth."
At 0810 BST, shares in Kingfisher were up 6.2% at 281.1p.
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