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The FTSE-100 finished yesterday’s session 0.61% lower at 7,387.87 whilst the FTSE AIM All-Share index was down 0.07% at 1,002.32. In continental Europe, the CAC-40 finished 0.57% lower at 5,146.85 whilst the DAX was down 0.49% at 12,203.46.
In New York last night, Dow Jones ended the day 1.24% lower at 21,750.73, the S&P 500 fell 1.54% to 2,430.01 and the Nasdaq tanked 1.94% at 6,221.91.
In Asian markets this morning, the Nikkei 225 was recently down 1.34% at 19,438.57 and the Hang Seng was 0.71% lower at 27,149.69.
In early trade today, WTI crude oil was slightly lower at $47.05 per barrel as was Brent at $50.98 per barrel.
Trump scraps infrastructure council plan
President Trump is dropping plans to create an advisory group on infrastructure, a day after two other business panels were dissolved. The president has faced a backlash from business leaders over his remarks this week on white supremacists. A White House official said the infrastructure council, which was still being formed, “will not move forward”. Mr Trump signed an executive order last month to create the group as he looks to spend $1 trillion on infrastructure. He has made updating US roads, bridges and airports a key part of his legislative agenda. However, on Wednesday he was forced to disband two other White House business panels amid an exodus of chief executives. Business leaders quit over Mr Trump’s response to a far-right rally in Virginia, which left a woman dead and dozens hurt. The rally, supported by neo-Nazis and white supremacists, was in protest of the removal of a statue of Robert E Lee, a general who had fought for the pro-slavery Confederacy during the US Civil War. On Thursday, Mr Trump re-opened the heated debate by denouncing the removal of “beautiful” Confederate statues.
Source: BBC News
Kingfisher (KGF.L, 294.80p) – Hold
Kingfisher, an operator of nearly 1,200 home improvement stores across 10 countries in Europe, including B&Q and Screwfix in the UK & Ireland, yesterday provided its trading update for the 3 months ended 31 July 2017 (‘Q2 FY2018’). During the period, sales advanced by +4.0% to £3,148m in reported basis, but fell by -1.7% on a constant currency basis, whilst on a like-for-like (‘LFL’) basis, sales fell by -1.9%, against the comparative period (Q2 FY2017). In the UK and Ireland, sales fell -2.0% to £1,332m in reported basis, with an LFL sales of -1.0% (B&Q: -4.7%, Screwfix: +10.8%). Sales in France rose +5.2% to £1,188m in reported basis, while LFL sales declined -3.8% (Castorama: -2.8%, Brinco Dépôt: -5.1%). Sales in Other International grew +16.6% to £628m on a reported basis, with flat LFL sales (Poland: +4.0%, Russia: -10.1%, Spain: -4.8%). On the operational front, Kingfisher has entered into binding acquisition agreement in August to significantly strengthen its position in Romania, subject to regulatory approval. The company has returned £168m (53 million shares) to date as a part of its previously announced c.£600m share buyback programme. Kingfisher’s CEO, Véronique Laury, commented “Having been very aware that this year would be challenging given the step up in transformation activity, we already have self-help plans in place to support our overall Year 2 performance, though we remain cautious on the H2 outlook for the UK and France as previously guided. We remain on track to deliver our Year 2 strategic milestones, and look forward to updating you on our wider progress in more detail at our H1 results”.
Our View: Kingfisher’s Q2 performance was disappointing. LFL sales declined by -1.9%, against the consensus estimate of -0.8%, having already fallen by -0.6% in the Q1. The Group blamed weaker LFL performance on strong weather-related comparatives for B&Q, continued weaker sales in France and ongoing disruption from its ONE Kingfisher plan, although the latter is said to be in “overall improving trend”. In the UK & Ireland, B&Q suffered from a -10.7% decline in seasonal product sales against +9.6% last year and +17% in Q1 FY2018 which were, again, primarily affected by the weather. This decline was partially offset by continuing strong growth in Screwfix which saw +10.8% LFL growth aided by improved digital capability, new/extended specialist ranges and new outlets. In France, although the LFL decline improved in Q2 against Q1 (-5.5%), it still underperformed the underlying French home improvement market which grew by +0.4%, according to the data from Banque de France. Elsewhere the Group’s international contribution was also supported by continued good performance in Poland. Looking ahead, management stated it is on track to deliver its Year 2 strategic milestones. Given strengthened self-help cost initiatives of c.£25m (previously: £20m), together with the favourable impact of weaker Sterling, the Group said it is “comfortable” with the expectation of it achieving consensus underlying EPS of 26.2p for FY2018. Beside this, the consensus is currently forecasting revenue of £11.6bn, underlying pre-tax profit of £778m, profit after tax of £466m and LFL sales growth of +1.2% for the FY2018E. The Shares have fallen by -18% year-to-date, leading to P/E multiple valuation for FY2018E and FY2019E of 13.6x and 11.3x respectively, along with dividend yields of 3.6% and 4.0%. On this basis, Beaufort reiterates its Hold rating on the Share while continue to monitor market environment and delivery of ONE Kingfisher plan.
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During the three months to end-July 2017, the number of stocks on which Beaufort Securities published recommendations was 205, and the recommendations were as follows: Buy – 75; Speculative Buy – 107; Hold – 19; Sell – 1.
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