Kingfisher shares soared following a strong first-half trading update, in which the DIY retailer raised its full-year profits forecasts.
At 299.5p per share, the Kingfisher share price was last 18.8% higher in Tuesday business.
The FTSE 100 company said total sales were £6.8 billion in the six months to July, up 0.8% year on year or 1.3% on a like-for-like basis.
Kingfisher said it enjoyed market share gains in the UK, France and Spain, though trading in Poland remained in line with the broader home improvement market.
Gross margins rose 100 basis points to 37.7%, nudging operating profit 2.1% higher to £383 million.
Pre-tax profit improved 4.1% year on year, to £338 million. On an adjusted basis profit was up 10.2% at £368 million.
A 13.5% rise in free cash flow to £478 million helped reduce net debt to £1.7 billion from £2 billion.
Kingfisher kept the interim dividend locked at 3.8p per share.
Mixed Regional Results
In its core UK and Ireland region, sales rose 4.5% in the first half to £3.5 billion. Like-for-like sales improved by 3.9%.
Revenues from its B&Q-bannered outlets rose 4.4% on a like-for-like basis, to £2.2 billion, while Screwfix-sources sales improved 3% on the same metric.
Kingfisher said that “improving mortgage affordability, real wage growth, and stable housing transactions” supported first-half trading, while favourable weather in quarter one also boosted demand for seasonal products.”
Trading was weaker in France, with first-half sales falling 2.4% and 2.1% on a reported and like-for-like basis respectively, to £2 billion.
Like-for-like turnover was down 1.4% at Castorama and 2.9% at Brico Dépôt. The retailer commented that “consumer sentiment remains subdued amidst an uncertain political environment,” even after falling interest rates and improvement in the housing market.
Reported sales in Poland rose 0.5% to £946 million, though this was down 2.1% on a like-for-like basis. Combined Spanish and Portuguese sales were £219 million, up 9.6% on a headline basis and 10.2%
Guidance Upgraded
Chief executive Thierry Garnier commented that “we delivered a strong first half… driven by increased volumes and transactions.”
He added that “we were encouraged by underlying quarter-on-quarter growth in our core categories, and a third consecutive quarter of growth in big ticket sales.”
Garnier said Kingfisher’s market outlook remains unchanged despite mixed consumer confidence and uncertain political backdrop.
This, combined with the company’s solid first half, encouraged it to raise its full-year profit estimates. Adjusted pre-tax profit is now tipped at the “upper end” of Kingfisher’s £480 million to £540 million estimate.
Free cash flow is also now expected at £480 million to £520 million. It was previously tipped at between £420 million and £480 million.
As a consequence, Kingfisher said it was accelerating its share buyback program. It now expects to complete its £300 million repurchase scheme by March.
Uncertainty Remains
Analyst Adam Vettese of eToro said that Kingfisher’s first-half results “showcase commendable operational execution in a tough retail environment… supported by solid progress at both B&Q and Screwfix, and double-digit growth in trade and e-commerce channels.”
He noted that “management’s decision to upgrade full-year profit guidance and accelerate the share buyback programme underlines confidence in their financial position and strategic momentum.”
However, Vettese added that “overall revenue growth remains muted” due to enduring weakness in France and Poland, and that “cost pressures, particularly around wage and regulatory headwinds, present an ongoing challenge even as offsetting savings are delivered.”