Business Overview
Kingfisher PLC (LON: KGF) is a London, United Kingdom-headquartered international home improvement company, which operate under retail brands including Castorama, Screwfix, B&Q, Koçta?, and Brico Dépôt. The company is endorsed by a team of more than 77,000 colleagues and have more than 1,300 stores in nine countries across Russia, Turkey, and Europe.

Recent News
On 27^th November 2019, the company announced that its, Remuneration Committee Chairperson, Clare Chapman, has stepped down from the Board on 21^st January 2020. Claudia Arney had been appointed as Remuneration Committee Chair from 21 January 2020.

Trading Update - Q3 Financial Year 2020 (As on 31^st October 2019)

(Source: Interim Report, Company’s Website)

The company announced Q3 trading update to 31 October 2019. The company’s total sales were down by 3.2 per cent based on CER (constant exchange rate) for the period. On a like-for-like basis, the sales were down by 3.7 per cent due to softer market conditions in company’s key markets, ongoing operational challenges in French business, lower promotional activity and disruption from new range implementations. The company is focusing on its supply chain efficiency and IT effectiveness, to improve performance from its Castorama France business. The company expects its gross margin for the full year to remain flat for the period.
The company will announce its final results of FY2020 on 24^th March 2020.

Share Price Performance

Daily Chart as on 30^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 30^th, 2020 Kingfisher Plc shares were trading at GBX 204.20 at the time of writing before the market close (at 8:02 AM GMT), down by 1.75 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 268.20/GBX 185.90. The stock price has givennegative 10.93 per cent returns during the previous year. In the last one month, it has givennegative 5.91 per cent returns.

Valuation Methodology


Conclusion
In the financial year 2020, the company’s sales in the UK were expected to remain bleak with a softer market backdrop. France sales are anticipated to remain soft due to the reduction in the promotional activity at Brico Dépôt and Castorama, and Poland sales will be impacted from the trading restrictions and softer overall market outlook. For the full year 2020, the gross margin is expected to be flat. In FY20, the company’s transformation P&L costs are expected to be in the range of £40-£45 million. This range is lower than the previous range (£50-£60 million). The decline in the earnings momentum was impacted by the challenging trading conditions in France and the UK. This combined with higher-than-expected disruption and costs attached to the transformation plan itself has resulted in a continued decline in the LFL sales in the core Castorama and B&Q banners. The P&L and cash impacts of the settlement stood at £80 million and would be paid, and recorded as an exceptional charge, in the financial year 2020. The company witnessed wide fluctuations in the Home Improvement Retailers price in the UK and global market and expect the same in the coming future, which might have an adverse effect on the company’s financial performance.

Based on the above rationale, we recommend investors to “AVOID” taking fresh positions in the stock at the closing price of GBX 207.80 (as on 29th January 2020).
 
 
*All forecasted figures and information have been taken from Thomson Reuters.

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