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Kingfisher shares are top dog on the UK 100 this morning, over 5% to the good after its latest trading update. This despite headline first half like-for-like sales -1.3%, profits -6% and management reiterating a cautious outlook for the second half. Outlook usually trumps everything else (after all, you can’t buy past growth), in which case caution is not likely what investors will want to hear.
However, there is ample reason for cheer with underlying pre-tax profits up nearly 1%, which is 3% ahead of consensus. Another £60m share buyback, the latest tranche of a 3yr £600m return of capital plan is also considered supportive following similar announcements in May, June and July (£40-60m each) taking the 2017 total to a solid £260m. Continued strong growth for the UK Screwfix brand and in Poland, offsetting a more difficult French market, is also serving to revive confidence in the shares.
Add to this dividend growth of 2.5% (3.5% dividend yield) and management on-track to meet restructuring targets for the second of a five year turnaround programme, focused on delivering £500m in additional sustainable annual profits by end-2021, and the update is being overall digested as very positive.
Already off their 2017 286p lows this week (in anticipation?), today’s jump sees the shares above 300p for the first time since 17 Aug, for an upside test of their 316p early Jun breakdown. However, only after this is overcome can the bulls look back to May’s 2017 highs of 370p.
Mike van Dulken, Head of Research, 20 Sept 2017
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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