Kingfisher’s Q3 trading sales were slightly ahead of our estimates. The company continued to gain market share and has also made a promising start to Q4 (+0.4% lfl up to 13 November). However, the stock slipped post the results as the FY21/22 outlook upgrade was disappointing, considering the momentum of company’s ytd performance. We do not see any structural issue with the business model and maintain the stock recommendation.
Companies: Kingfisher Plc
Kingfisher reported better-than-expected figures at its H1 FY21/22 results, with lfl sales and adjusted PBT coming in ahead of market expectations and management’s guidance. Lfl sales outlook for H2 has been raised, the share buy-back programme re-introduced and the interim dividend increased. However, the share price was down c.5% today, as investors worried about inflationary cost pressures and supply chain constraints which are expected to continue into 2022. We will update our estimates and
Kingfisher’s Q2 FY21/22 trading update came in ahead of market expectations. Following an impressive c.64% lfl sales growth in Q1, the momentum finally receded with Q2 registering a sales decline of >1% so far, as DIY spend tailwinds unwind. On the back of the better-than-expected performance, management upgraded its sales and profitability outlook for H1 FY21/22. Although we will raise the estimates and target price, ‘Reduce’ recommendation is re-affirmed as DIY spend normalises and the limited
Q1 sales galloped c.64% yoy (in lfl terms) as consumers’ demand for DIY products sustained, besides favourable comparables. Given the strong sales trends in Q1 and early May, management revised upwards its sales and adjusted PBT guidance. We will raise our estimates, but are likely to maintain our cautious stance as the current DIY spend momentum seems unsustainable.
Kingfisher delivered better-than-expected FY20/21 results. The group’s lfl sales grew >15% yoy in Q4, bringing the FY sales growth to c.7%, driven by higher DIY consumer demand. Cost control measures along with robust top-line growth aided the retail profit to come in >27% higher. Looking ahead, management expects growth momentum to continue in the near term, with tough comparable and moderating consumer demand to weigh in on the top line in H2. Management has also resumed the dividend pay-out.
Kingfisher continued to register strong sales growth in Q4 FY20/21, buoyed by the higher DIY spend by consumers since the onset of the pandemic. Management continues to refrain from providing full-year revenue guidance, citing the pandemic-related uncertainties and the impact of lockdown restrictions. We maintain a positive outlook on the stock.
In Q3 FY20/21, Kingfisher continued to benefit from the DIY-boosting pandemic – its lfl revenue increased 17.4% yoy with a massive 153% yoy growth in the e-commerce channel. Even during the first two weeks of November 2020, the momentum remained strong. However, management refrained from guiding for the full-year revenue and margin, as the second round of lockdowns in its key markets (France and the UK) and the Brexit scenario unfold uncertainties.
Kingfisher was resilient during H1 20/21, as DIY demand recovered strongly during Q2 20/21 – the group’s operating cost management was also much better than our expectations. More importantly, the company’s robust trading backdrop has sustained during August and September so far (+16.6% yoy lfl sales). While the surge in DIY demand is an industry phenomenon (and still unclear how long will it last), we turn more positive on Kingfisher’s new trading strategy, which has shown initial green-shoots.
FY19/20 was another subdued year for Kingfisher, on both the revenue and profitability fronts. The road ahead also remains bumpy, as the Coronavirus- and Brexit-related uncertainties prevail. In such backdrops, the new CEO’s reasonable revival plan (which covers the retailer’s key pain-points) offers some relief. But, a faultless execution is a must, as investors would be less trusting now (considering the previous sour experience) even though management is new.
Kingfisher’s lfl sales tanked c.25% yoy in Q1 FY20/21, infected by Coronavirus in the second half of the period. Although the top-line improved on a weekly basis, in accordance with the relaxed lockdown/containment measures, we remain cautious about the retailer’s full-year performance, amidst the uncertain macro-economic environment induced by the COVID-19 pandemic and Brexit. However, we believe the group’s cost-cutting and cash-preserving actions are sufficient to sail through the crisis.
Kingfisher’s poor performance continued in Q3 FY19/20 – lfl sales declined 3.7% with most of the banners in the red. Operational inefficiencies, lower promotional activity and challenging market condition kept the top-line under pressure, especially in France (-6.1%). With no respite in sight, management anticipates the softness to persist in Q4 FY19/20.
3Q trade has been reported about 2.5% below consensus estimate at LFL level which arithmetically results in a £20-30m reduction to pre-existing consensus PBT estimates of £633m (source: Kingfisher). Given the trends evident however it is likely that this will follow through into the balance of the year. So we would expect further weakening of 2019/20 PBT estimates to sub £600m. For now a 5% reduction looks to take into account a good portion of the end out-turn.
Kingfisher once again disappointed investors with its dwindling top-line. Although H1 FY19/20 profitability was ahead of street estimates, it is likely to be offset with higher stock clearance costs in the second half. All eyes are now set on the new CEO, if he will make the difference. Impatient investors are, however, unlikely to give him much time to prove his worth. No material change in our estimates.
Kingfisher has reported 1H PBT (before transformation and exceptional costs of £109m) of £353m (1H 2018/19 £377m both years IFRS 16) and on the basis of weak 2Q sales at B&Q and Castorama and some phasing benefits in the gross margin to 1H we would expect 1/20E market consensus underlying PBT estimates to reduce by 3-5%.
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After a stellar period of trading through the various stages of Covid 19 restrictions, and easings, ScS
has reported a step-back in trading momentum in recent weeks. We await to see if the slower
trading is temporary, reflective of a change in Christmas shopping patterns, or of a more permanent
basis. We leave forecasts unchanged, looking for CPTP of £13.7m and EPS of 26.5p (both IFRS 16
compliant), as such the stock trades on an undemanding EV/EBITDA multiple of 4x for FY22 and 3.4x
Companies: ScS Group plc
easyJet’s FY21 results correspond to the market’s anticipations as the preliminary figures were communicated previously. Despite the worsening COVID-19 situation in Europe, the group seems upbeat on its capacity forecast for the next FY. Too early to judge whether it is too optimistic as all depends upon the development of the new Omicron variant.
Companies: easyJet plc
STU’s integrated online retail/credit model performed well in H1, even with well-documented headwinds in late Q2. EBITDA margin in the traditionally quieter half was >14%. As outlined in the June CMD, Studio has a clear growth strategy capable of driving EPS to c100p in 3-5 years. However, new customer recruitment has softened short term. On top of cost headwinds, PBT guidance has reduced by c£6m and we have downgraded estimates across all years.
Companies: Studio Retail Group plc
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Companies: Marks and Spencer Group plc
Motorpoint’s interim results for the 6 months to 30th September are record breaking and reflect very well
on the Group’s ability to traverse what remain unusual and volatile market conditions. Whilst said
conditions have undoubtedly supported sales in the nearly new market, availability has been a challenge
which has brought to the fore Motorpoint’s flexible, agile and brand agnostic model, in our view. With H1
22 sales and margin strongly ahead, we are upgrading our FY22 CPTP forecast by c22
Companies: Motorpoint Group Plc
One Media iP (OMiP) has released a robust FY21E trading update, with Adj EBITDA of £1.65m; slightly below our forecast of £1.8m, owing to it taking a little longer to deploy cash raised on acquisitions of new royalty assets, and adverse foreign exchange movements. The company ended the period with £0.7m of net cash (vs our forecast of £0.3m of net debt), leaving further financial resources available for acquisitions heading into FY22E. Applying a conservative 8x Net Publisher Share (NPS) multipl
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M&B’s has announced a strong closure to FY20/21. The adjusted EPS came in much ahead of both our and market consensus. The publican has also made a good start to FY21/22, with 2.7% lfl growth (vs same period in FY19). In the coming few quarters, we expect M&B to perform ahead of close competitors, in turn gaining market share. Positive stock recommendation is maintained on the UK-based publican.
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Pendragon has released a trading update today increasing its guidance for FY21 underlying PBT from £70m to approximately £80m. The Group attributes this lower than expected shortfall in the supply of new vehicles in the first two months of Q4 2021. Performance has also been supported by a strong GPPU because of a higher mix of premium vehicles sold. We have increased our FY21 forecasts of underlying PBT by 14.1% to £80.2m. We leave our FY22 and FY23 forecasts unchanged at this stage. Whilst we t
Companies: Pendragon PLC
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During the challenges of Covid, N Brown has taken the opportunity to accelerate its transformation programme. Strategic change was augmented by the FY2021 £100m equity raise, which alongside strong underlying cash generation sees the Group with a now comfortable balance sheet, with £80.8m of core net cash and all debt securitised against customer receivables. Management has again reiterated medium term targets for 7% annual Product sales growth and a 14% Group EBITDA margin, from which we take c
Companies: N Brown Group plc
Flutter reported consensus-beating H1 21 numbers as pro forma revenue grew 30%. Adjusted EBITDA declined 13%, attributable to larger US losses.
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Companies: Flutter Entertainment Plc
Exactly one year ago, the FTSE 100 closed at 5,862, having fallen 100 points on the day, the lowest point since mid-May 2020, due in part, to the strength of sterling vs US$ at $1.34. One year on, the FTSE 100 has risen to 7,119, a rise of 21%, it remains 7% below the peak in January 2020. From an international viewpoint, US and European markets continue to trade at record highs. The US Federal Reserve is close to withdrawing some of its economic support this year as inflation picks up and the e
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easyJet has turned down an unsolicited preliminary takeover approach and proposed a rights issue of £1.2bn, representing one third of its current market cap, to strengthen its financial positions and support potential long-term strategic investments. The renewed guidance for the short term is broadly in line with its last update.