Kingfisher: When a new CEO talks about ‘sharp’
decisions, then you know the axe is out. Out goes Kevin O’Byrne, who didn’t
quite get the top job, with another internal candidate, Veronique Laury, having
got the nod last year. The main thrust of the new strategy is that national
fiefdoms and format silos are out. In comes the concept of ONE Kingfisher, with
the top team organised along functional lines (Finance, Supply, IT and HR). The
Mr Bricolage deal having floundered, it is a case of press on with other plans.
ONE encompasses a rationalised group product offering, fewer formats and a
permanent low cost offer. They proffer the morsel that of a boggling 393,000
group products only 7,000 are sold in more than one group retail format. In the
UK, 15% of B&Q’s space is going with some 60 stores closing and six being
shrunk, with an associated £350m exceptional charge. The future focus of
expansion will be the fragmented European DIY space. SAP is being trialled
across the Ireland operation, with a view to a group roll out. This could be
worth watching as many companies seem to struggle with SAP in its early phases.
All this is being attempted at a time when the stop-start UK DIY market seems to
have lost its mojo over recent years and France is in an economic porridge. So
the scale of the task is not to be under-estimated.
The big
picture stuff rather overshadows these well-guided results for the year to 31st
January 2015, showing sales down 1.4% (which would have been +2.9% constant
currency) and adjusted pre-tax profits down 7.5% at £675m, but again currency
affected by a similar factor. Eps down 8.3% at 20.9p, are supporting a just
twice-covered dividend of 10p, up 1% on last year. The net cash pile has grown
to £329m from £238m. So, there is a firm platform from which to launch this
programme of re-invigoration, but you need to break some eggs to make an
omelette and this is a big omelette in the making. Allowing for a modest rise
in eps to 22p for the year to 31st January 2016, which is subject to
currency swings, we have a PE of 17.4x at today’s perky 382p. A 10.5p dividend
would be a yield of 2.7%. The new CEO is mapping out an aggressive programme of
change, which if it delivers improved growth and profitability will make these
valuations look a good entry point. The challenge is whether change is
delivered successfully. After today’s 5% odd price rise, I would wait for some
of the dust and wood chippings to be cleared away before getting too excited. (Neil Cumming, 30th March 2015)
These comments are not a personal
recommendation to deal. Any investments can fall as well as rise in value, so
you could get back less than you invest. I may have a financial interest in
some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk Twitter: @DividendPower
No comments:
Post a Comment