Results round-up

Kingfisher posted better profits than were expected for the first half of the year but the do-it-yourself retailer remained cautious on the second half backdrop in the UK and France.

The FTSE 100 group, which had already released half-year sales figures that showed total sales up 4.5% and like-for-like sales down 1.3% due to weaker sales in France and disruption to its UK business from product availability, reported retail profit in the six months to 31 July up 0.5% to £467m, underlying pre-tax profit up 1% to £440m and adjusted pre-tax profit down 6% to £394m.

The consensus from City analysts, as compiled by the company, was for total retail profits of £455m, underlying PBT of £426m and adjusted PBT of £351m. Underlying figures exclude non-exceptional transformation costs, while adjusted numbers exclude exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items.

Underlying basic earnings per share increased 2.1% to 14.5p, supported by £200m of share buybacks so far, while adjusted basic EPS fell 4.4% to 13.0p.

Net cash shrank 27% to £650m from £898m but the half-year dividend was hiked 2.5% to 3.33p.

"Looking across our markets, we have seen solid growth at Screwfix and Poland, offset by continued weaker sales in France and some business disruption, principally reflecting product availability and clearance. We are aware of and are acting on the causes of this disruption, which we are confident will ease," said chief executive Véronique Laury, who is not yet halfway through her five-year 'One Kingfisher' transformation plan.

"For the full year, we have self-help plans in place to support our overall performance and remain comfortable with full year profit expectations, though we remain cautious on the second half backdrop in the UK and France."

Business disruption was estimated to have a 2% LFL impact due to the "significant increase in transformation activity this year", Laury said, which saw clearing of old ranges and remerchandising of new ranges across 25% of company-wide store space this year, the roll-out of a unified IT platform and transitioning to the new supply chain organisation and with newly unified company-wide functions.

Laury stressed that, "We always recognised that this year would be challenging and we already have self-help plans in place to support our overall FY 17/18 performance", which include the appointment of a chief transformation officer.

The Frenchwoman has decided to bring forward the launch of an upgraded digital offer into the second half but has also decided to smooth the rollout of more unified common sourcing over the next two years whilst maintaining the longer-term 90% target for the 2021 financial year.

She added that Kingfisher was on track to meet full year strategic milestones for the second year, with cost cutting target benefits raised to circa £25m from £20m previously, and that targets for the 2020/21 financial year also remained unchanged.

"We are buying as one and are starting to see the customer and financial benefits coming through. This is all underpinned by our IT rollout which remains on track, and efficiency benefits which continue to deliver."

REACTION AND ANALYSIS

Kingfisher shares flew more than 6% higher to 314.45p in early trading on Wednesday.

Independent retail analyst Nick Bubb said the bottom-line performance was disappointing, with underlying PBT owing a lot to currency translation benefits.

But it does look like the company is making solid progress on the transformation strategy, said analyst Neil Wilson at ETX Capital. with the earlier rollout of the unified IT platform potentially able to produce cost savings sooner than planned.

"As previously noted, Kingfisher could be well advised to spin-off its French division, while there remains talk of whether Screwfix is better off on its own. Common sourcing savings which are targeted at £500m a year by 2021 may be the reason not to go down this route."

Diageo issued an update on its trading on Wednesday morning, claiming its business continued to strengthen through improved marketing, innovation and commercial execution, as investors prepared for the company’s annual general meeting.

The FTSE 100 distilling giant said it remained “well set up” to deliver in line with its own expectations.

"We expect the H1 organic net sales growth rate will be impacted by the later timing of Chinese New Year and by the expected impact of the highway ban in India," chief executive Ivan Menezes noted.

"Our productivity work continues to move at pace."

As it had previously announced, Menezes said Diageo was “up-weighting” its investment behind US spirits and scotch whisky, and as a result the board expected its organic operating margin expansion would be weighted towards the second half.

"Our expectations on overall performance for the year remain unchanged."

Menezes said underlying momentum and progress in implementing productivity gave management “continued confidence” in its ability to deliver sustainable growth.

"We re-affirm our expectation of mid-single digit top line growth and 175 bps of organic operating margin improvement over the three years ending 30 June 2019."