Kingfisher share price: 5 things to watch out for in its 2018 results

Last year was challenging for the Kingfisher group, with it hoping to satisfy disgruntled investors on Thursday when it publishes it full-year 2018 results.

The home improvement retailer that owns B&Q and Screwfix in the UK and Castorama and Brico in France is now three years into its five-year turnaround plan, with investors eager for an update on the group’s progress after its stock lost around 39% of its value over the course of last year.

Analysts guidance

With just a couple of days to go until Kingfisher releases its annual results on Thursday, the investment banking group Jefferies remained upbeat about the DIY retailer.

In fact, analysts at the bank reiterated the stock as a ‘buy’ late last week, despite cutting its price target for the group from 340p a share to 320p – its share price sits at 243p a share as of Monday 10:50am GMT.

The extreme margin rebasing suffered by Kingfisher’s French business has ‘entirely overshadowed’ resilience in the UK and Poland, Jefferies analyst James Grzinic said.

‘We look forward to a more proactive approach by the board in addressing this aberration,’ he added.

Five-year turnaround plan in focus

Kingfisher is now in the third year of its five-year restructuring plan called - One Kingfisher - which involves unifying the products that it sells across its four brands and simplifying its overall business model.

However, its management team has struggled to effectively implement the company’s turnaround plan, with the business forced to contend with a myriad of headwinds, namely challenging market conditions in the UK retail market and civil unrest in France.

‘This has been a tough year for the group, with UK macro unhelpful, the France GDP recovery fading and the impact of social unrest, plus the fact that One Kingfisher supply chain gains seem to be flowing more slowly than expected,’ UBS analysts wrote in a note to investors.

Investors will be hoping to receive an update on how the restructuring plan has progressed and the management team will hopefully be able to deliver some positive news as shareholders grow increasingly impatient.

Weaker confidence on management

Throughout the course of last year, Kingfisher’s management has done its best to reassure shareholders that its turnaround plan is firmly on track, but as sales at the group have begun to decline stakeholders have grown tired leading to several senior departures.

‘Looking ahead, key issues will be whether transformation plan guidance remains intact, whether the Castorama like-for-like sales decline is abating, and whether the eventual exhaustion of the guided transformation and exceptional costs will eventually see an increase in underlying operational expenditure and thus further pressure on margin,’ UBS added in its note to investors.

Shareholder pressure build for break-up plan

As shareholders grow disgruntled, activist investors have smelt blood and have begun gathering support for a break-up plan at Kingfisher.

If the group is unable to quell shareholders concerns in its full-year results, its management may be forced to sell off either its Screwfix brand or its ailing French business Castorama.

However, the biggest change likely to take effect in the near-term if Kingfisher’s full-year results disappoint is likely to be the departure of group CEO Veronique Laury.

Laury was appointed back in 2014 and is the brain-child behind the One Kingfisher turnaround plan, but unless she can show shareholders some significant progress soon she could be let go.

DIY specialist’s share price rises ahead of full-year results

Kingfisher’s share price has steadily risen more than 6% over the last four days of trading from 228p a share on Thursday last week to 243p levels as of Monday morning.

The DIY speiclaist has been marginally outperforming the wider UK stock market. However, the group’s share price has fall by 31% over the last 12 months.