Profits at the B&Q owner are set to rise 20%, thanks to stronger sales across the Channel.
Kingfisher (LSE: KGF) provided its shareholders with some relief today, as the FTSE 100 firm predicted its full-year profit would rise by a fifth.
French connection
As well as owning B&Q and Screwfix in the UK, Kingfisher also owns French retailers Castorama and Brico Dépôt.
In fact, Kingfisher is no longer a UK-focused company, as it makes most of its sales overseas. Here is the breakdown of the company's sales for the 13 weeks to 28 January 2012:
| Country | Sales (£m) | Like-for-like growth (%) |
|---|
| UK & Ireland | 968 | -1.9 |
| France | 938 | 4.2 |
| International | 449 | 0.1 |
| Total | 2,355 | 0.9 |
As you can see, UK like-for-like sales -- which account for just over two-fifths (41%) of total sales -- fell by almost 2% in Kingfisher's latest quarter. However, like-for-like sales climbed more than 4% in France, while international sales were stagnant.
Sales at Castorama France hit £500 million (up 2.9%) thanks to "milder weather, new ranges and a store-modernisation programme". At Brico Dépôt, sales climbed 5.7% to £438 million, thanks to "range refreshment and a pick-up in new housing starts".
In the UK & Ireland, B&Q slipped back, with sales down 2.5% to £837 million against a "generally weak consumer backdrop". However, Screwfix pulled ahead, with sales rising 2.2% to £131 million, as new outlets and ranges attracted more tradesmen and handymen.
A pretty good year
Furthermore, for the full year ending 28 January 2012, sales in France outstripped UK sales. Across the channel, Kingfisher notched up annual sales of £4.47 billion, versus £4.34 billion over here. International sales climbed above £2 billion, to produce group sales of £10.8 billion.
In terms of like-for-like sales growth, France led the pack, with full-year growth of 3.7%, followed by international with 2.2%. Alas, the UK and Ireland recorded a 1.4% reduction in like-for-like sales, to produce 1.3% sales growth at the group level.
As a result, Europe's leading home-improvement retailer (with 950 stores in eight countries) expects adjusted, pre-tax profits to be in line with the consensus of analyst expectations of £799 million.
Executive 'musical chairs'
Looking ahead, Kingfisher will release its full-year results on 22 March.
At the same time, chief executive Ian Cheshire will set out the group's next development initiative, branded 'Creating the Leader'. This programme is aimed at driving up sales, margins and productivity by focusing on three themes: customer service, a core or common product range, and accelerated expansion.
To support this "organisational evolution", Kingfisher has reshuffled its executive team.
Peter Hogsted, CEO of Kingfisher International, is to leave the group later this year. Philippe Tible, CEO of Kingfisher France, will take on the French and Spanish businesses and assume responsibility for Castorama in Poland and Russia.
Euan Sutherland, CEO of Kingfisher UK & Ireland, becomes group chief operating officer, responsible for IT, property and human resources, as well as Screwfix. Lastly, Kevin O'Byrne, will move from group finance director to become divisional CEO for B&Q, so the retailer has begun searching for a new finance director.
Valuation: better value
As I write, Kingfisher shares are down a penny at 277.9p, valuing the group at almost £6.6 billion. At this price, they trade on a forward price-to-earnings ratio of 11.5 and offer a prospective dividend yield of 3.1%, covered 2.9 times.
Almost exactly a year ago, I gave Kingfisher shares the thumbs-down at 257.6p, since when they have risen by over 20p. However, Kingfisher's earnings per share and dividend have also climbed, taking the group deeper into value territory.
For investors looking for a reliable income from an increasingly dependable retailer, I suspect that Kingfisher offers a relatively low-risk play on a sustained recovery for building and DIY in the UK and France. Hence, I now switch my view to a weak thumbs-up for Kingfisher.
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