Kingfisher – a closer look at its businesses

PUBLISHED: Aug 20 2019 @ 10:29 | Comments (0) |

Today I’ll discuss the different parts of Kingfisher (LSE:KGF). (I would appreciate it if you can add your observations on its various businesses, as I’m not as familiar as I should be with the various divisions of Kingfisher).

It is frequently said of the Group that “a sum of the parts” valuation would total to much more than the current market capitalisation. What then usually follows is a statement to the effect that the company should be broken up.

I question that logic, especially given the much greater degree of integration painfully forged across its markets in the UK, Ireland, France and Poland in the last four years. It will be costly to split it now (redundancies, new IT, new senior teams, logistics networks, etc.), and many of the hard fought-for buying synergies will disappear.

Far better to do something much more mundane and long term: concentrate on doing the ordinary extraordinarily well. Don’t go dashing off looking for growth with dramatic sounding strategic moves, just get on with day to day improvements in every aspect of the business, from product selection to keeping a close eye on competitor pricing and tactics.

Group earnings history

	2019	2018	2017	2016	2015
EPS basic, p	10.3	22.1	27.1	17.8	24.3
EPS adjusted, p	19.8	21.8	24.4	22.0	20.9
EPS underlying, p	23.9	25.5	25.9	22.0	21.3
Revenue, £bn	11.7	11.7	11.2	10.4	11.0
Profit after tax, £m	218	485	610	412	573
Dividend per share, p	10.8	10.8	10.4	10.1	10.0
Dividend, £m	231	231	230	232	234
Share buyback, £m	140	260	200	200	200

	2014	2013	2012	2011	2010
EPS basic, p	30	24.1	27.5	21.0	16.5
EPS adjusted, p	22.8	22.3	25.1	20.5	16.4
EPS underlying, p	22.8	22.3	25.1	20.5	16.4
Revenue, £bn	11.1	10.6	10.8	10.5	10.5
Profit after tax, £m	710	564	639	491	385
Dividend per share, p	9.9	9.46	8.84	7.07	5.5
Dividend, £m	224	221	178	129	125
Share buyback, £m	0	0	0	0	0

This has been a no-growth company over the decade, with turnover not even keeping pace with inflation, and earnings per share much the same in recent years as in the early years of the decade.

The question is: if the past decade is representative of the future in terms of earnings power, would we be content to buy these shares at 190p (MCap £4bn)?

Average EPS is 22.1p, giving a cyclically adjusted price earnings ratio 8.7. That is an earnings yield of 11.5%.

We’ll have a look at owner earning numbers in a later newsletter, but my preliminary impression i

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