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Alan Green talks 2nd lockdown, Kingfisher #KGF, ECR Minerals #ECR & Mirriad #MIRI on the UK Investor Magazine podcast
Alan Green discusses the 2nd lockdown, Kingfisher #KGF, ECR Minerals #ECR & Mirriad #MIRI with Jonathan Roy on the UK Investor Magazine podcast
Atlantic View – Keep Buying Kingfisher #KGF, DIY Retailer Flying High Thanks To COVID Lockdown Sales Boom
by John Woolfitt, Atlantic Capital Markets
Fundamentals & Statement Summary
Kingfisher (KGF), the owner of B&Q in the UK and Castorama and Brico-Depot in France, today announced a resilient first-half sales performance after the impact of the COVID lockdown during Q1 was offset by strong sales recovery in Q2. The group said that the crisis had ‘reinforced’ its approach, ‘pushing’ the retailer to be ‘bolder.’ Sales fell 1.3% to £5.9bn, while adjusted pre-tax profit grew by 23.1% to £415m as a huge 164% increase in online sales and a strong recovery in reopened stores offset the temporary closure of all outlets in the UK and France early in the Covid-19 pandemic.
The results comfortably exceeded adjusted profit forecasts of £361m, and as a result Kingfisher said it would repay the £23m it received in furlough payments from the UK government. Free cash flow of £1.04bn, up £838m, reflected higher operating profit, working capital inflow of £656m and lower capex.
Kingfisher said it had benefited from a surge in spending on homes and gardens as people adapted their houses for working from home, using money they would have spent on holidays or entertainment.
Kingfisher CEO Thierry Garnier said the crisis “has prompted more people to rediscover their homes and find pleasure in making them better. It is creating new home improvement needs, as people seek new ways to use space or adjust to working from home. It’s also clear that customers are becoming more comfortable with ordering online. And delivering value to consumers is imperative against a challenging economic backdrop.”
Looking forward, Kingfisher said the momentum had continued into Q3, with UK sales up 18.9%. since the end of July and those in France climbing 16.7%. The group also intends to experiment with new store formats including a pilot with Asda to introduce B&Q mini-stores in supermarkets.
Garnier added that while the near term outlook was 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.”
Chart and Technicals
Source: FactSet and Hargreaves Lansdown
In the run up to the March COVID fall, Kingfisher shares traded steadily, before plunging to a 10 year low of 124p on March 18th. By the end of April however, the shares had not only recovered the 50-day MA, they blew through it, and recovered the benchmark 200-day moving average at 190p less than 1 month later. Since that time KGF has traded above both averages, leading to a bullish golden cross formation on July 10th as the 50-day MA passed through the 200-day MA. The stock drifted back to the 50-day MA in the run up to the results, and having successfully tested that level, opened higher on September 22nd. While above this level, our expectations are that the stock will retest July 2018 highs of 317p by early November 2020.
Summary and Atlantic View
Although the strong trading performance had by and large been flagged up by Kingfisher to the markets, the pace of online growth and resulting profit number caught out even the most bullish pundits. As CEO Thierry Garnier says, people have used the cash they would have spent on holidays and entertainment on home improvements. This factor, also evident in Travis Perkins results earlier this month, led to strong free cashflow and the return of furlough payments to HM Govt. Now, with lockdown and movement restrictions set to return at home and in France, Atlantic Capital Markets believes Kingfisher websites and outlets will be faced with a huge opportunity to cash in on another surge in home improvement spending during the latter part of the year. Backed by this sort of momentum, we expect the shares to push higher and retest the technical target of 317p in the next 4-6 weeks. Keep Buying.
To take advantage of this trading idea, speak to a member of our dealing team on 01872 229000 or visit the Atlantic Capital Markets website here
Redrow RDW as a result of its record order book, trading and performance in the second half of the current year continues to be robust and has enabled the company to increase its average selling prices more, or as they put it, “better” than expected. Profit before tax for the year to the end of June is now expected to increase by at least 22% to £306m.
Kingfisher KGF is increasing its total dividend for the year to 31st January by 3%, after sales and profit growth turned it into an important and productive year. Underlying profit before tax rose by 14.7%, adjusted sales were up by by 1.7%, leaving group results ahead on all key metrics.
Savills pls SVS delivered another record performance in 2016, including what it describes as a highly resilient performance in the UK .Getting down to the nitty gritty though group profit before tax rose by only 1% after a 52% rise in continental Europe. Underlying basic earnings per share were up by 15% and total dividends for the year are increased by 12% to 29p per share, compared to 26p in 2015.
XAAR plc XAR Revenue for the year to the end of December was up by some 3% and profit before tax rose from £13.6m to £17.9m. Ceramic tile sales were disappointing. Total dividends for the year have been increased from 9.45 p. per share to 10p.
Cello Group CLL Managed to turn earnings per share of 3.54p for 2015 into a loss of 3.23p per share for 2016. Revenue for the year to the end of December rose by 5.4% and like for like gross profit grew “robustly” by 5.9%. Dividends for the year grew even more robustly with a rise of 18.9% but headline profit before tax less so with a mere 0.8% rise. However a good start has been made to 2017.
French Connection FCCN Group revenue for the half year to 31st July declined to £69.2m from last years £75.8m as store closures continued but the loss before tax remained steady at £7.9m FCCN does its best in its half year report to point to the better statistics to justify its claim of a strong performance. Square footage fell by 15.8% but like for like sales were only down by 2.3% but the UK and Europes was strong with a like for like rise of 6.5% and the strong performance has continued during the first 6 weeks of the second half.
Kingfisher KGF claims it is starting to build solid foundations and has enjoyed a productive first half, driven by the UK and Poland. 52 of the 65 planned store closures have now been completed. On a statutory basis, pre tax profit grew by 10.6% for the six months to 31st July, on sales up by 4.7% whilst basic earnings per share rose by 3.7%.
Smart Metering SMS is raising its interim dividend by 25% to 1.37p per share for the 6 months to 30th June, after continued strong growth saw it pass the million mark for utility meter and data assets. The electricity meter portfolio rose by 28% but combined gas and electricity metering saw a more modest rise of 10%. revenue for the half year was up by 25%, with underlying profit before tax and earnings per share rising by 15% and 23% respectively.
Pure Circle PURE Despite challenging market conditions, the market for Sevia grew strongly in the year to the end of June, with sales rising by 9%, gross margins by 41% and operating profit by 90%. Net profit after tax soared by 257% and earnings per share following suit with a rise of 242%. The company claims that prospects for the next 4-5 years are also strong.
Fastjet FJET admits to a very difficult and challenging first half as its problems seemed to increase, with the six months to the 30th June producing a loss after tax of $15m as against last years profit of $6.4m. Revenue did rise slightly but the operating loss also surged with a rise from $12.8m to $31m. Action taken by the new CEO will see the fleet of five A319s reduced to three by the end of the year and the head office will be relocated from Gatwick to Johannesburg which is a fairly sensible move for an African airline with its main base in Africa.
TipTV Soapbox, with Nick ‘Moose’ Batsford, Zak Mir & Alan Green. Stocks discussed include Vodafone (VOD), Kingfisher (KGF), TalkTalk (TALK), Dixons Carphone (DC.) & Crest Nicholson (CRST).
Alan Green discusses Standard Chartered (STAN), Kingfisher (KGF), Barclays (BARC), Direct Line (DLG), Quindell (QPP) and other stocks on TipTV
Alan Green discusses Standard Chartered (STAN), Kingfisher (KGF) and other stocks with Nick ‘Moose’ Batsford and Zak Mir on TipTV.