Four Stocks Under Focus: KGF, BRBY, HL, and ABF

Kingfisher PLC

Kingfisher PLC (KGF) is involved in the supply of home-based improvement services and products with a chain of retail stores and other channels, situated primarily in the UK and continental Europe. The group’s segments are differentiated into three regions: UK & Ireland, France, and Other International. The company’s brands comprise Brico Depot, Castorama, Screwfix, and B&Q. The company’s business operations are spread across 10 countries, having a client base of approximately 6 million users. Total established stores are around 1,332, with a total headcount of about 78,708 employees.

Recent News

On 18th September 2019, the supplement to the group’s €2.5 billion EMTN (Euro Medium Term Note) Programme was approved by the Financial Conduct Authority.

Financial Highlights (for the 6 months ended 31 July 2019, £ million)

(Source: Interim Report, Company Website)

In the first half of 2020, the company’s reported sales decreased by 1.4 per cent to £5,997 million as compared with the corresponding period of the last year, while on a constant currency basis, sales were down by 0.9 per cent. LFL sales were down by 1.8 per cent with growth in Screwfix, Poland and Romania offset by B&Q and France. On a constant currency and reported basis, the gross margin surged by 60bps to 37 per cent against the 36.4 per cent in H1 FY19. The reported retail profit reduced by 4.8 per cent to £466 million in H1 FY20 against the same period in 2019. Adjusted pre-tax profit increased by 3.7 per cent to £337 million as compared to £325 million in H1 FY19, reflecting less transformational P&L costs. While statutory pre-tax profit was down by 12.5 per cent (after exceptional items) to £245 million in H1 FY20. The underlying and adjusted basic earnings per share stood at 12.3 pence and 11.8 pence in the first half of 2020. Statutory earnings per share were down by 15.6 per cent to 8.1 pence against the same period in 2019. The interim dividend remained the same as the previous year same period. On a post-IFRS 16, net debt declined by £158 million to £2,384 million and net debt to last twelve months’ EBITDA multiple of 1.8x in H1 FY20.

Outlook

The company focused on increasing implementation and providing priorities for the year, with the differentiated ranges (like B&Q kitchens in H2 FY20) and launch of new and optimising the execution of main transformation enablers. Although it was uncertainty around the United Kingdom customer demand. In the financial year 2020, the company expect gross margin after clearance to be flat, with incremental clearance costs in the range of £30-£35 million.

Share Price Performance

On 7th October 2019, KGF shares closed at GBX 191.30, down by 0.52 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 268.20/GBX 186.15. The company’s stock beta stood at 0.92, reflecting the lower volatility against the benchmark index. The outstanding market capitalisation was around £4.06 billion, with a dividend yield of 5.63 per cent.

Burberry Group PLC

United Kingdom-based Burberry Group PLC (BRBY) is a luxury goods company specialising in leather goods and ready-to-wear items. The company designs, sources, manufactures and distributes luxury men’s, women’s and children’s clothing and non-apparel accessories through directly owned stores, wholesale and licence channels.

Recent News

On 18th September 2019, the company announced that Debra L. Lee had been nominated to the group’s Board as a Non-Executive Director and member of the Audit and Nomination Committees.

First Quarter Trading Update (as on 16th July 2019)

Riccardo Tisci’s product gained modest customer response, with the growth of double-digit percentage as compared with the year-ago period, and the company was broadly in line with the management anticipations. During the current period, the retail revenue under consideration surged by 4 per cent to £498 million as compared to £479 million in the year-ago period. In the Asia Pacific region, the sales surged by high single-digit percentage, due to Mainland China up mid-teens. In the EMEIA region, the sales increased by a lower single-digit percentage, mainly supported by tourists spending, which primarily benefited the United Kingdom. The sales in the Americas were flat as sales in the USA increased by a lower single-digit percentage. However, sales in Canada delivered negative growth. In the period under review, Men’s and women’s apparel sales rose by a double-digit percentage, and the group maintained stable guidance for top-line and operating margin at CER (constant exchange rates).

Outlook

In the financial year 2020, the company maintain guidance of broadly balanced top line and operating margin at CER. The company expect a more effective weighting of operating profit in the second half of 2020 relative to first-half in the financial year 2020 than in the previous year.

Share Price Performance

On 7th October 2019, BRBY shares closed at GBX 2,047, up by 0.34 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 2,362/GBX 1,618.50. The company’s stock beta stood at 1.58, reflecting the higher volatility against the benchmark index. The outstanding market capitalisation was around £8.38 billion, with a dividend yield of 2.08 per cent.

Hargreaves Lansdown PLC

Hargreaves Lansdown Plc (HL) is a provider of investment management services and products to private investors in the United Kingdom. Its flagship service, Vantage, is a direct-to-private investor fund and wrap platform which enables clients to hold and manage their investments, including unit trusts, open-ended investment company, equities, bonds, investment trusts and cash irrespective of the tax vehicle.

Recent News

On 19th September 2019, the company finally ditched ‘exit fees’ for clients leaving its investment stage, matching steps by rivals Interactive and Fidelity Investors to snap the controversial charges. The company removed 9 of its charges in a ‘simplification of its fee structure’ with its transfer costs, which were twenty five pounds per holding or twenty five pounds for transferring cash.

As announced on 19th August 2019, Monday, an independent director non-executive Jayne Styles will be stepping down from company’s board on 10th October 2019.

Financial Highlights (for the year ended 30th June 2019, £ million)

(Source: Annual Report, Company Website)

Hargreaves Lansdown reported its financial results for the year ended June 30, 2019. In the FY19, the company’s net new business reduced by 4 per cent to £7.3 billion from £7.6 billion recorded in the FY2018. During the year 2019, the company’s revenue surged by 7 per cent to £480.5 million against the £447.5 million in FY2018. Pre-tax profit stood at £305.8 million in FY2019 versus £292.4 million in FY2018, an increase of 5 per cent. The company’s diluted earnings per share were up by 5 per cent to 52 pence in FY2019 versus 49.6 pence in FY2018. The company’s ordinary dividend was at 33.7 pence in FY2019 versus 32.2 pence in FY2018.

Outlook

The geopolitical and economic uncertainties in the United Kingdom as well as abroad has caused significant volatility in the market. The Brexit implication, stiff competition, and operational risks may affect the growth of the company. The need for individuals and families to save and invest in their financial futures remains as robust as ever, and this helps to increase the already significant addressable UK market opportunity.

Share Price Performance

On 7th October 2019, HL shares closed at GBX 1,790.50, down by 1.43 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 2,437.19/GBX 1,615.29. The company’s stock beta stood at 1.24, reflecting the higher volatility against the benchmark index. The outstanding market capitalisation was around £8.62 billion, with a dividend yield of 1.86 per cent.

Associated British Foods PLC

Associated British Foods PLC (ABF) is a London, the United Kingdom-based company, which is one of the leading ingredients, diversified food, and retail groups. The group’s major businesses comprise Sugar, Ingredients, Grocery, Agriculture and Retail. The company caters its products mainly to industries into Agriculture, Pharmaceutical, Retail and Food.

Recent News

On 1st October 2019, the company reported that a senior independent director of the group, Ruth Cairnie, will move out from the board of ContourGlobal PLC.

Pre-Closing Period Trading Update (as on 9th September 2019)

Although there is reduction expected in AB Sugar, this will be offset by robust profit generation by Grocery and Primark in the year 2019. The company’s full-year 2019 outlook remains unchanged, and the adjusted EPS is in accordance with the previous year. The company’s net cash is anticipated to be approximately £900 million by the end of FY19 as compared to £614 million in the last year. This update was announced before the announcement of the company’s full-year results for the financial year 2019 period ended 14th September 2019, and the results are anticipated to be announced on 5th November 2019. The company’s businesses have done all practical preparations should the United Kingdom no longer be a member of the European Union and contingency proposals are in place should some of the businesses experience disturbance at the time of exit.

Outlook

The company expect that the full-year 2019 profit will decline in sugar division, as it was reflected in the first half of the financial year 2019. In the retail segment, the company will improve its margin in FY2019. On an underlying basis, the company anticipate profit growth in Primark division in FY19. This profit will increase because of the additional development of the selling space expansion and client experience services. In the grocery segment, the company has made healthy progress, with an increase in adjusted operating profit. The main contributors to the favourable growth were from George Weston Foods (located at Australia), with the initial contribution from Yumi’s, contribution from Acetum and pricing at Allied Bakeries.

Share Price Performance

On 7th October 2019, ABF shares closed at GBX 2,165, down by 1.81 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 2,659/GBX 2,011. The company’s stock beta stood at 1.02, reflecting the lower volatility against the benchmark index. The outstanding market capitalisation was around £ 17.46 billion, with a dividend yield of 2.06 per cent.

Pperformance comparison of KGF, BRBY, HL, and ABF on the London Stock Exchange over the past one month along with that of FTSE 100 index.

(Source: Thomson Reuters)