Kingfisher Pretax Profit to Fall, New Buyback Scheme Looks Possible — Earnings Preview

SALES FORECAST: The home-improvement retailer is expected to see sales of 6.86 billion pounds ($8.49 billion) in the half-year ended July 31, based on a consensus provided by Visible Alpha, averaged from twelve analysts’ forecasts. This would be a slight decline from GBP6.81 billion in the first half of fiscal 2022. Based on a consensus compiled by the company, like-for-like sales are expected to fall 2.6% on year.
PRETAX PROFIT FORECAST: Based on the Visible Alpha-collected consensus, the FTSE 100-listed company’s pretax profit is expected to be GBP355.8 million, which would be a fall from GBP474 million in the year-ago period. On an adjusted basis, pretax profit is expected to be GBP359 million based on the company-compiled consensus, which compares to GBP472 million a year prior.
WHAT TO WATCH:
–FREE CASH FLOW: The market should be focusing on the company’s free cash flow in tomorrow’s interim statement, UBS analyst Saranja Sivachelvam wrote in a research note. The company looks set to book free cash flow of GBP453.1 million, which compares to GBP104 million a year prior, according to Visible Alpha’s consensus. “While we expect the FY23 free cash flow to be supported by inventory unwind, we see many alternate uses of this cash, e.g. store roll outs and upgrades, competing with the buyback story,” Sivachelvam said.
–SHAREHOLDER RETURNS: Kingfisher’s interim dividend payout will come under scrutiny by shareholders and analysts, AJ Bell investment director Russ Mould said in a market comment. The company is expected to declare an interim dividend of 3.8 pence, taken from Visible Alpha, which would match the prior-year’s payout. “Kingfisher has completed its five-tranche, GBP300 million share buyback but has dropped heavy hints that a new buyback scheme would be on the way,” Mould said.
Write to Christian Moess Laursen at christian.moess@wsj.com