Investment View: Outlook overseas make Kingfisher worth a punt

Kingfisher. Our view: Buy. Price: 280.2p (-2p)

Chilly weather blew an ill wind through sales figures produced by Kingfisher, the multinational DIY retailer best known for B&Q here and Castorama across the Channel.

At stores open at least a year sales in the UK and Ireland fell by 5.8 per cent for the three months to the end of January. In France the decline was more muted, but a 2.4 per cent fall still doesn't make for happy reading.

The international operations in Poland, Spain, China and Russia were a mixed bag, but overall produced a 0.3 per cent increase, which is no better than OK.

However, the company should still hit earnings forecasts of about £715m for the year pre-tax. Lower bonuses for staff (I'd argue that executives should also take the hit) and a lower ad spend have helped to keep the numbers healthy, according to analysts. And Kingfisher's performance was by no means the worst in the sector. It's the market leader and has actually gained market share.

What's more, some parts of the business are doing rather well. One plus was the growth in the smaller Screwfix business, which is expanding rapidly both in terms of stores and online. It chiefly serves the needs of trade buyers (something Kingfisher seems to be good at).

The problem for me is this: analysts highlighted a survey showing that Britons don't really enjoy DIY and are more than happy to put off doing work when finances get tight. Finances are very tight at the moment.

It might help Kingfisher if its B&Q stores were more welcoming environments and staff showed an interest in helping customers with, say, DIY queries. My personal experience of them has been extremely negative. Note to executives: give your consumers a little love and they tend to pay you back with their business.

That said, the real attraction of Kingfisher is, in addition to ScrewFix, those businesses in China, Russia, and a joint venture in Turkey. These are places with emergent middle classes who have money to spend on their homes. This is something that Kingfisher appears well-positioned to capitalise on.

For the year ending 31 January 2014 the shares trade on 11.5 times forecast earnings, while offering a prospective yield of 3.7 per cent. By historic standards they are by no means expensive.

This column has been a supporter of the stock for a number of years and the shares have been reliable performers over that time, even if its editor is no longer a supporter of the shops.

While the outlook is cloudy for the UK, and there is arguably an over-supply of DIY outlets, the overseas outlook is somewhat better. I'd be willing to take a risk on Kingfisher and buy.

Another consumer company that's been making waves, and not always in a good way, is Premier Foods, whose enviable portfolio of brands includes Hovis and Mr Kipling.

Premier Foods' big problem has been its debt, and that's resulted in a number of disposals. The problem with selling businesses to pay down debt is you often have to do it on the cheap because buyers will be well aware of your distress.

Step forward Gavin Darby, the former Cable & Wireless Worldwide boss, who is promising better tidings and has put his money where his mouth is by snapping up 750,268 shares at 93.3p.

Commendable – although the City didn't think much of it, and after a day he was facing the thick end of £50,000 in losses. Ouch.

Sales of businesses have netted more than £400m, reducing the company's debt to just under £1bn.

Sales to consumers from what remains fell 12.2 per cent to £17.6bn, although the company was keen to point out that they rose 3 per cent at "underlying businesses" excluding milling, businesses in the process of being sold and other bits and pieces. It's basically a number that makes the company look good.

Still, I do wonder if brands like Hovis, and Mr Kipling, which are trusted and don't involve meat, might not be worthy of a little investment.

The shares are at a low ebb, and coming from Cables Mr Darby ought to know a thing or two about dealing with debt.

As he has committed his own funds, I'd be inclined to follow his lead, particularly now the shares are even lower than the level at which he bought in. Speculative buy.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project