So we’ve had Kingfisher’s (LSE: KGF) prelims announced today which I’ve held since 5 July 2014 at 361p and I’d stay that they’re mixed.
We’ve already recently been advised of the collapse of Kingfisher’s deal to purchase the French retailer Mr Bricolage just yesterday which was to be the main driver of growth for KGP going forward.
Here are the numbers from today’s announcement:
In regard to year end net cash of £329m is after £275m capital investment and £434m of cash returned to shareholders.
We have a lot to do and we are announcing today a set of first ‘sharp’ decisions which are already underway including the closure of around 15% surplus B&Q space (c.60 stores) and our few loss making stores in Europe, the development of unified garden and bathroom businesses and the start of a Big Box revitalisation programme across Europe. In addition, we will be developing our detailed plans for the wider reorganisation of the company as we progress on this exciting journey towards becoming ‘ONE’ Kingfisher.
Véronique Laury, Chief Executive Officer
Certainly the closure of non-performing stores will cut costs but more importantly the CEO looks as though she wants to seize on the opportunity that the failed takeover of Mr Bricolage has created and the strategic review has highlighted including ‘achieving significant benefits from developing a more common, unique and effective offer.’
Of note were the words of Karen Witts, Chief Financial Officer (emphasis mine):
We believe our plans will drive an increase in the value of our business for shareholders, with improved financial metrics through higher sales and lower costs, whilst at the same time optimising the generation and use of cash. Besides the growth in full year dividend, we are also pleased to be announcing today a further £200 million capital return during FY 2015/16 reflecting our confidence in our medium term prospects. In the short term, whilst we remain encouraged by the improving economic backdrop in the UK, we remain cautious on the outlook for France, our biggest market.
The honesty is reassuring and gives shareholders bold short term and medium term guidance: Kingfisher France sales declined by 1.0% (-2.3% LFL) to £4,132 million in an ongoing soft market impacted by weak consumer confidence and a declining housing and construction market.
With a PE of 15 from todays results (24.3p down from 30p a year earlier) management has sweetened todays results with an increase in the dividend. They’ve also managed to turn the pension deficit from a £100 million into a surplus of £112 million.
I will continue to hold Kingfisher with the expectation of improvements in it’s fortunes over the medium term and for that to translate into a higher share price as a result.