Kingfisher's plumage looking soggy

Miserable weather in the UK and northern Europe had a serious impact on footfall at Kingfisher in the first half of the do-it-yourself (DIY) retailer's financial year.

The B&Q owner put the impact on profits of the soggy weather at more than £30m, as it reported a 15.5% decline in adjusted pre-tax profit to £371m in the 26 weeks to July 28th from £439m the year before. That was some way below the £395m broker Charles Stanley had been expecting and a bit shy of the £280m Credit Suisse had forecast. Reported profit before tax was down 16.9% to £364m from £438m.

Exchange rate movements did not help matters either, with the group taking a £25m hit from translating the euro and Polish zloty back into sterling for reporting purposes.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Sales were down 3.3% on an actual basis but up 1.0% on a constant currency basis to £5,478m from £5,662m a year earlier. That was slightly better than the £5,475m predicted by Charles Stanley and in line with the group's pre-close update back in July. On a like-for-like (LFL) basis, sales were down 2.8%.

First reverse in five years"This has been a tough first half with unprecedented wet weather throughout the key spring and summer seasons in Northern Europe. This affected footfall and demand for outdoor maintenance, gardening and leisure products, which normally account for a significant proportion of our first half sales," said Ian Cheshire, as he reported the first reversal in growth in five years.

Sales in France, where the group's brands are Castorama and Brico Dpt, were down 5.6% to £2,206m from £2,341m the previous year, but were up 1.1% on a constant currency basis. LFL sales were off 0.6% year-on-year.

Retail profit in France dipped 4.9% to £191m from £201m at the halfway point last year, but was up 2.0% using constant exchange rates.

April was a real wash-out, especially in the north of the country, with nationwide sales in the DIY market down 9% year-on-year in that month.

Over the six months under review, LFL sales in the north of France were down 1.2% but were flat in the sunnier southern part of the country.

UK & Ireland misses its barby cueThe weather was not any better in the UK & Ireland and the performance was worse. Sales were down 1.8%, or 5.5% on a LFL basis, to £2,264m from interim sales of £2,306m in 2011. On a constant currency basis sales were 1.7% lower year-on-year. Average footfall was down 20% in the severely weather-affected weeks.

Retail profit slumped 20.2% to £145m from £182m the year before, principally reflecting weak seasonal sales, additional markdowns to clear seasonal stocks and an acceleration in the change of the range of products being offered.

Gross margins were down by four-tenths of a percentage point, despite the group's initiative to source more products directly from the manufacturers, as the group slashed prices to get shot of seasonal stocks, which in the summer Britain just had should have included galoshes.

Russia a lone bright spotIn the Other International division, sales were down 0.8% (-1.0% LFL) to £1,008m from £1,015m the previous year but were up 7.4% on a constant currency basis. Retail profit slumped 25.3% (-15.1% on a constant currency basis) to £67m from £90m last year. Russia was the only real bright spot, with sales up 19.3% on a LFL basis.

Adjusted basis earnings per share tumbled 14.8% to 11.5p from 13.5p at the interim stage last year. The interim dividend has been hiked by 25.1% to 3.09p from 2.47p last year, in line with the group's policy of paying out 35% of the previous year's total dividend.

The group ended the period net cash positive, with £29m in the coffers, compared to net debt of £186m a year earlier.

Forecast remains overcastThere was no update on current trading, but Cheshire did acknowledge that the "uncertain economic backgrop" is unlikely to improve for a while.

"In the short term we will continue to focus on trading effectively, whatever the market conditions, whilst accelerating our self-help initiatives where practical and remaining agile in order to capitalise on opportunities as they arise," Cheshire said.

JH