Kingfisher PLC profits go through the roof as COVID lockdown leads to home improvement boom

eCommerce sales represented 19% of group sales in the half-year compared to 7% a year earlier

() saw its profits and cash flow go through the ceiling in the first half of the year as demand for home improvement took off during the coronavirus (COVID-19)  lockdown.  

But while the group’s directors plan to repay UK furlough payments back to the government, provided another prolonged national lockdown is not forthcoming, there is no plan of reinstating the dividend yet. 

The DIY stores chain saw group sales fall by 1.3% to £5.9bn in the six months ended July 31, 2020, as like-for-like sales (LFL) dropped 1.6%, with growth at B&Q in the UK, along with the Poland and Romania businesses offset by declines in the UK’s Screwfix, both French chains, Russia, Spain and Portugal.

The second quarter from May onwards saw LFL sales rise 19.5%, with growth in all the group’s areas and brands except in Russia and Iberia, the group added.

It noted that eCommerce sales were a particularly bright spot in the period, up 164% for the half-year to represent almost a fifth of total group sales, compared to around 7% a year earlier.

Statutory pre-tax profit increased 62.4% to £398mln and free cash flow swelled fivefold to £1.04bn as working capital inflow improved and capital expenditure was cut.

in the results statement, Kingfisher chief executive Thierry Garnier, who was appointed over a year ago and announced his new strategic plan in June, said it was “clear that customers are becoming more comfortable with ordering online” and for retailers to deliver value.

He pointed out that strategic progress included “fundamentally reorganising our commercial operating model”, accelerating plans around e-commerce with a focus on fulfilment from stores, along with testing various “concepts, services and partnerships”.

But, although the second half of the year has started with LFL sales climbing 16.6% through August and to September 19, with growth across all areas, the group acknowledged that the considerable uncertainty around COVID-19 means it has not declared an interim dividend, with some of the strong cashflow bring used to cut net debt to £1.4bn from £2.4bn a year ago.

The shares jumped 9% by noon on Tuesday to 287.9p, where they are 30% higher than at the start of the year.

Broker Peel Hunt said Kingfisher’s interims follow the theme seen across the ‘home’ space since March, with the encouraging news that the strong sales trends seen in the second quarter have been maintained into recent months.

“We have seen similar trends across soft and hard spending on homes. Kingfisher’s momentum over Q3 gives confidence that retailers ranging from Topps Tiles to DFSD and Dunelm will continue to benefit from the same trends,” said Peel Hunt analyst John Stevenson.

Susannah Streeter, analyst at Hargreaves Lansdown said: “The pandemic seems to have prompted the turnaround that was eluding management at the start of the year as it struggled with weak sales in France, particularly its Castorama business. But wielding a paintbrush seems to have become a national pastime during the pandemic, not just here in the UK but in the group’s other markets too, particularly Poland and Romania although sales slipped in Russia and Iberia.”

She added: “With fresh lockdowns imposed on towns and cities around Europe, where Covid-19 cases are spiking again, it will be interesting to see if Kingfisher can continue to capitalise on the confinement or whether people will become more fearful of spending given the uncertain economic outlook.”

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