Mindful Money’s weekly share watch: Kingfisher, Barratt Developments, Morrison & Home Retail Group

8th September 2014


After unveiling some poor numbers earlier this year, shareholders will be eager to hear how B&Q owner Kingfisher is progressing when it delivers its half-year results this Wednesday.

The past 12 months have been a turbulent period for the FTSE 100 constituent, with its shares off by 25% over the period and in its update this week, any continuation of difficult conditions for both its French and Polish businesses heads the agenda.

The group’s late July second quarter update saw like-for-like sales for the first 10 weeks of the period fall 2.2% and 3.5% respectively – even though the countries generated a combined 64.5% of group retail profit in the last full financial year notes Hargreaves Lansdown Stockbrokers equity analyst Keith Bowman.

Nicla Di Palma, equity analyst Brewin Dolphin believes the weakness in the second quarter was surprising and adds that it remains unclear whether it is the start of a trend or a one-off. “We hope management will also announce further buybacks,” she adds.

On a more positive note, sales for its Screwfix business are likely to have remained healthy, whilst a further outlining of strategy for its UK B&Q business could feature notes Bowman. He adds: “For now, with France a key group market and recent economic indicators proving weak, analyst consensus opinion has fallen from a ‘buy’ as of its March full year results to a ‘hold’, albeit a strong one.”

House builder Barratt Developments publishes its fourth quarter results on Wednesday. Despite heading out of the FTSE 100 in its recent reshuffle, with its stock up 20% over 12 months investors will still be expecting to see continued momentum in its numbers as the UK housing and construction markets remain robust.

While the market consensus on the stock is pointing to a ‘buy’, for his part Sheridan Admans, investment research manager at The Share Centre is calling it a ‘hold’. He says: “As a measure of how well it’s doing, we will expect to see the number of completions, average selling prices, acquired plots and planning permissions increase. Good weather since the beginning of the year along with an improving economy should show through in the company’s sales and profitability numbers.”

Thursday sees embattled supermarket group Morrison deliver its own set of half-year numbers. The past six months alone has witnessed its stock fall a significant 27% and following a profit warning and a proposed 75% cut to the interim dividend payment at competitor Tesco, brokers are not overly optimistic. However Di Palma notes that following the price cuts implemented in the first half of the year, Morrisons has seen a slight increase in market share in the past four weeks.

She says: “We believe a cut in dividend is inevitable and we expect management to announce it next week. The World Cup is likely to have helped sales in the first quarter of the year, although England’s early exit of might have meant increased promotional activity. Overall, we expect double digit revenue growth.”

Half year pre-tax profit is forecast to fall by around 50% to £174m on a consensus basis asserts Bowman. He adds: “More positively, growth in the group’s newly launched online offering is likely to be underlined, whilst the ongoing roll-out of its convenience stores and its previously announced cost savings programme may also feature. In all and with it and rival Tesco yet to offer a clear strategy on how they will counter the rise of both Aldi and Lidi, analyst consensus opinion currently points towards a ‘sell’.”

Argos and Homebase parent Home Retail Group, up 20% over the past year, releases its second quarter update on Thursday and ahead of the update analyst consensus opinion currently points towards a ‘strong hold’.

While Argos is expected to report its ninth consecutive quarter of like-for-like sales growth, given a backdrop of pending potential interest rate rises, growth of approximately 3.5%, down from 4.9% in the first quarter, is forecast notes Bowman. He says: “A fall in the gross margin, due to buoyant sales of lower margin gaming and electrical goods, is expected. As for Homebase, and with tough year-over-year comparatives being battled, a fall in like-for-like sales in the region of 2% is forecast.”

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