B&Q owner Kingfisher set to post profit rise

B&Q owner Kingfisher should announce a 4% rise in annual profits on Tuesday amid signs that it is benefiting from the upturn in the UK housing market

B&Q
B&Q

Consumer appetite for ‘big-ticket’ purchases will be tested this week with figures from holidays firm Thomas Cook and B&Q owner Kingfisher.

B&Q owner Kingfisher should announce a 4% rise in annual profits on Tuesday amid signs that it is benefiting from the upturn in the UK housing market.

Analysts have pencilled in adjusted pre-tax profits of £742m for the year to January, up from £715m a year before.

The figures come two weeks after rival Homebase said its sales at the start of 2014 had risen by 9.3%, driven by further growth in big ticket sales such as kitchens and bathrooms. Kingfisher’s last trading update, for the third quarter to the start of November, showed B&Q’s like-for-like sales almost flat, nudging ahead by just 0.4%.

Sales of outdoor seasonal products dropped sharply as a knock-on effect of strong summer trading in the previous three-month period.

B&Q’s third quarter performance was outshone by Kingfisher’s Screwfix brand, which grew like-for-like revenues by 11.1%.

Elsewhere the group saw a mixed performance in France where Castorama sales grew but Brico Depot did worse.

Chief executive Ian Cheshire said at the time that trading conditions in all its markets remained challenging, and the numbers caused analysts to cut profit forecasts. But Cheshire said the group was ready to capitalise on any wider improvements.

Keith Bowman, equity analyst at Hargreaves Lansdown, said still cautious consumer confidence and the continued tough economic background in France were likely to be reflected in “flat to modest” profit growth for the full year.

Cost-cutting is likely to have helped while fourth quarter sales are again likely to have been led by the tradesmen-orientated Screwfix brand, he added.

Bowman said events in the Ukraine may result in management commenting on the effect on its business in Russia. But overall analyst opinion on shares in the group, buoyed by the recovering UK housing market, points towards a buy.

The Share Centre’s Sheridan Adams said investors would be keen to see whether the upturn in the property sector, boosted by the Government’s Help to Buy initiative, would be reflected in sales growth and margin performance at Kingfisher. He said there would also be a focus on operations in China amid a slowdown there, amid speculation the group might exit the region altogether.

Analysts at Credit Suisse said: “In the UK the year should have started better than we could have hoped with consumer expenditure strengthening in home related categories due to an accelerating housing market and very helpful weather.”

Travel operator Thomas Cook will update the City on Thursday on the latest stage of its turnaround plan under chief executive Harriet Green.

Summer bookings will be in focus at the group following a period of poor weather which will have prompted hopes of more customers deciding to make plans for a getaway.

The group said in an update last month that it was 39% sold for the season, in line with the year before.

First quarter figures for the period to December 31 saw underlying losses fall by £10m to £56m despite the impact of turmoil in Egypt on bookings. Revenues were £15m lower at £1.66m but Green said there had been “further rapid progress delivering our strategy for sustainable profit growth”.

The 173-year-old operator is battling to return to profit and under her leadership it more than halved losses to £207m in the year to September from £590m the year before. Green has hailed the first year of the turnaround plan as a “great success”.

Average selling prices are expected to increase as the company looks to sell a higher proportion of exclusive hotel offers to UK customers.

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