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Thursday Preview - Kingfisher

With the hoo-hah over the Budget behind us, attention reverts to corporate matters, with retailers in focus on Thursday.

Do-it-yourself (DIY) retail giant Kingfisher is due to report full year results. Market expectations are for pre-tax profit of £801.9m on sales of £10.8bn. Earnings per share (EPS) are tipped to rise to 24.73p and a full year dividend of 8.44p has been pencilled in.

Credit Suisse expects the results to demonstrate the ongoing benefits of internal self-help - market code for cost cutting - and market share gains, despite a challenging trading environment.

As Credit Suisse notes, Kingfisher has already reported fourth quarter like-for-like (LFL) sales growth (year-on-year, or yoy) of +4.2% for France, -1.9% for UK & Ireland, and +0.1% for "Other International".

"For the full year we forecast French EBIT [earnings before interest and tax] growth of 22% to £425m with EBIT margins increasing by 120bp [1.2 percentage points] to 9.5% for the year underpinned by a strong LFL performance (+3.8%) and gross margin gains. For the UK & Ireland business we forecast EBIT of £260m (+7% yoy) with EBIT margins increasing by 40bp to 6.0% despite £3m of additional costs associated with the accelerated roll out of Screwfix," Credit Suisse said.

"For Other International, we forecast EBIT of £187m vs £171m in the prior year with improvements within profitability from Spain and Russia with break even position for China but Poland EBIT down 4% yoy (LFLs were +1.4% for the full year)," Credit Suise added.

"We expect management will also give further details on the next phase of its development ('Creating the Leader') focusing around self-help initiatives to drive sales, margin and cost productivity as management progresses towards its 2013/14E stretch EPS target of 31.2p," Credit Suisse predicted.

Stockbroker Jefferies reckons that "France may represent a source of near term concern (2011 French DIY spend +3% is a tough basis at a time when the tackling of the budget deficit is likely to become more vigorous post Presidential elections), but longer term investors will find comfort in the extent to which self-help can continue to drive the group."


21 March 2012
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