Kingfisher plc (LON:KGF) (KGF.L) has released half year results today for the six months to 31 July 2018. The company recorded a 1.2% rise in sales, although they declined by 1.1% on a like-for-like (LFL) basis.
The company’s gross margin fell by 40 basis points to 36.4%, with underlying pre-tax profit moving 14.8% lower. On a per share basis, adjusted profit was 15.4% down on the same period from the previous year at 11p.
The company is now at the halfway point in its 5-year transformation plan. It has been able to unify 42% of its products, while the rollout of a new unified IT platform is now underway in all of its remaining operating companies. Digital sales now represent 6% of all revenue, which is up from 5% last year.
The company remains on track to deliver on its £30 million of operational efficiency benefits in the 2019 financial year. It delivered £14 million of benefits in the first half of the year.
Kingfisher recorded solid performances in the UK and Poland during the period. However, this was offset to some extent by weakness in France. This contributed to a lower gross margin, with logistics and stock inefficiencies in the region being the major factor.
The company is on track to deliver on its strategic milestones. It is putting in place actions to support its second-half performance in France, and expects to grow group gross margin after clearance in the 2019 financial year.
In my view, the prospects for the Kingfisher share price remain uncertain. It is experiencing a period of rapid change which could cause some uncertainty in the near term. And with consumer confidence in the UK being weak as well as it experiencing difficulties in France, its performance in the short run could be disappointing.
In the long run, the company could deliver a successful turnaround. Therefore, I feel it could offer some investment appeal in spite of the risks it faces.