FTSE shrugs off US rate concerns, with Kingfisher boosted by positive update

Discussion in 'Market News' started by Lily, May 24, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    DIY firm lifted by strong performance from Screwfix and Polish operations

    Leading shares have shrugged off the prospect of an imminent US rate rise which has been a dampening factor in recent days.

    After an early dip, the FTSE 100 is now up 29.24 points at 6165.67 although investors are still cautious as the Eurogroup meets to decide whether to release the latest tranche of bailout funds.

    We have made a solid start to the year, trading in line with expectations. In addition, I am pleased with the early progress we are making on our operational milestones for this year, the first year of our ambitious five year plan.

    The home improvement market is growing and buoyant sales at Screwfix reflect an increasing trend to call a man in rather than DIY. We are seeing the same in France with the consumer-facing business Castorama going backwards while trade-focused Brico Depot, put in a decent performance.

    Against the back drop of store closures, like for like sales at B&Q grew at a decent pace. Seasonal sales were down for the second year running, but this is just the ongoing return to “normal” levels of activity after a 30% surge in the first quarter of 2014/15.

    The significant change to the operational board over the last three years is, we believe, leading to a major shift in the company’s culture and strategy. There is also a growing acceptance that after a number of ‘false dawns’, the ranges and the assortments of the international businesses have to be more properly integrated and the diversity of its cross border formats reduced. We are raising our target price to 360p from 320p and would look to buy the stock on weakness. Our only concern in the short term is the current rating. Since the beginning of September 2014, the stock has steadily outperformed the FT All Share by over 20% over this time. It is rated at 16.0 times 2017 our revised earnings forecasts.

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