The last two newsletters described the strong market positions held by Kingfisher (LSE:KGF) in the UK and Ireland with its B&Q and Screwfix brands ("banners"). Today I turn to its other businesses ranging from Poland to Iberia.
Castorama Poland has grown gradually from sales of just over £1bn in 2011 to £1.5bn today. There are 90 stores, putting it in first place with about 30% market share.
The Polish team is currently expanding its urban park small-store concepts (800 – 2,000 sq m) under the Castorama Smart banner
Profits are a respectable £135m before deducting tax and central costs. Allowing for say £20m of central overhead allocation and about 20% for tax, we might estimate after-tax profits to be £92m.
If this was our estimated earnings power perpetuity then present value would £1.15bn at a discount rate of 8%.
As well as showing great strength in operations Poland has the virtue of owning 80% of its stores. This property was valued at about £700m recently.
France is where Kingfisher has made serious blunders, taking its eye off serving the customer, while focusing on its “transformation programme”. It also employed local managers who seemed to push up prices to the point where consumers decided to shop elsewhere.
If you look at the facts, it is not as bad as some would have us believe. Profits did fall but still profits were made, even in the bad years – over £160m. And now they have risen to over £220m.
Turnover is the same as it was eleven years ago, and higher than in 2016 so customers are starting to come back to the stores (93 Castorama's with an average store of 12,376 sq metres; 123 Brico Dépôt with an average store with 6,910 sq metres).
And the managers in France have already implemented the plan of “Every Day Low Prices” to compete more effectively. And cut staff numbers by 5%
Taking the numbers from the table: if we make the bold assumption that profit after-tax, after-central cost and after-exceptional deductions in future years is around £130m (based roughly on 2022 and 2021’s total retail profit minus one-third), then this division’s value might be £1.6m using an 8% discount rate.
Seventy-five percentage of the French sites are owned by Kingfisher, which were recently valued at £1.3bn.
The repair work is advancing
As well as increasing LFL sales by 14.8% over the last two years the company has ....
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