Mindful Money’s weekly shares watch: Kingfisher & Merlin Entertainment

14th September 2015


Kingfisher bolstered investor optimism back in July when it announced decent second quarter trading numbers and shareholders will be hoping to hear the momentum has continued when it delivers its half-year results on Tuesday.

The retailer’s July update saw it reporting some early success, with the pilot of its unified IT system commencing on time in Ireland and over the past 12-months the B&Q and Screwfix owner has witnessed its shares rise by 14%.

Keith Bowman, equity analyst, Hargreaves Lansdown Stockbrokers expects that progress made under its new ‘One Kingfisher’ strategic plan, detailed back in March will potentially head this week’s agenda.

He says: “News regarding store closures and supply chain efficiencies could be forthcoming. As for the results, and with first half sales largely announced, adjusted pre-tax profit is expected to increase by around 4% to £380m.”

Graham Spooner, investment research analyst at The Share Centre notes that shareholders are likely to be keenly watching for any signs of a slowdown in sales following weak retail figures for August recently.

He says: “The performance of the French operations will be uppermost in many minds given recent sign of improvement but there will also be interest in any news of the new CEO’s strategy to integrate the group’s various businesses more effectively.”

Spooner, currently lists Kingfisher as a ‘hold’ and ahead of the update the overall analyst consensus opinion continues to point towards a ‘weak hold’, chiefly as a result of the group’s exposure to the challenging French economy.

Thursday sees Merlin Entertainment reports its third quarter trading update. This will be the first market report for the group since the accident at its Alton Towers Resort.

Looking ahead to this week’s report, Bowman says: “Having already guided current 2015 full year profits lower – underlying profit before tax is now expected to be broadly flat year over year (2014: £249m) compared to a previously forecast improvement – any further management guidance will be closely watched for.”

Spooner highlights that the visitor attraction group recorded sales and profit increases in the first half but warned that the effects of the serious accident at Alton Towers in June might last for some time. Notably while its stock is 12% higher over the past year, it is off by 14% over the past three months.

Spooner, who has the firm on his ‘hold’ list, says: “Investors will be looking out for any comments on that but will also be interested in the performance of other parts of the group such as the Midway division, which includes Madame Tussauds, and the Legoland parks.

“The weather in August was not the kindest for tourist attractions in the UK but the market will be interested in any progress with the strategy to develop more hotels and restaurants at the resorts in order to cater to more of the needs of its customers.”

However ahead of the announcement Bowman notes that given its increasingly diverse portfolio of outlets, the broker consensus currently points to a ‘buy’.

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