Hobson: Turning Around Kingfisher Was a Thankless Task

THE WEEK: Véronique Laury, one of only six female FTSE 100 bosses, has toiled away at the ramshackle DIY chain for many years without success

Rodney Hobson 22 March, 2019 | 9:56AM
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Veronique Laury, Kingfisher CEO

Sometimes it’s hard to be a woman, according to country singer Tammy Wynette. When it comes to running a large company, it’s always hard. Ask Kingfisher (KGF) chief executive Véronique Laury. Too often they get the lousy jobs that men don’t want and are set up to fail.

Laury is one of only six women at the head of an FTSE 100 company, having taken on the thankless task of turning the ramshackle do-it-yourself chain round in five years. No one can call her a quitter, though that may be partly because no man wanted to oust her and take on the heavy mantle. She’s spent 16 years at Kingfisher and has toiled away for three years now on her recovery plan with conspicuously little success.

Time has, however, caught up with her and a search for her successor is underway. At least she is spared the ignominy of being shown the door in haste but she will, like Moses, depart before reaching the promised land. The target of adding £500 million a year to profits by 2021 is long abandoned, though the £800 million cost of her One Kingfisher plan to unite the various outposts under one coherent roof has been all too real.

The fact is that this is a splintered group trading under different names and in different countries. There is always at least one part that is going badly wrong, usually the French side but Russia and Romania have run up losses to add to the burden.

What may yet save Kingfisher is the possibility that another woman who knows what it feels like to be set up to fail could replace her. Kate Swann took on the equally thankless task of leading WH Smith (SMWH) out of the wilderness, only to triumph against everyone’s wildest dreams. She was so successful that the newsagent, stationer and bookseller continues to thrive long after she handed over the reins.

Meanwhile, Kingfisher shares, like the profits, are down, from 318p last July to 227p after the latest results. There’s no reason why they will not continue their five-year slide from 440p and retest the recent floor at 210p. Even Kate Swann would have her work cut out to turn the tide. Perhaps she’ll leave it to a man to fail instead.

Wood Could Suit the Risk Takers

At least the past five years have seen some ups as well as downs at engineering company John Wood Group (WG.), its performance being inextricably bound up with the oil industry that it supports. So Ian Marchant is stepping down as chairman not because the business is struggling particularly but because he has served as long as corporate governance deems seemly.

Life has admittedly been tough at times, hence the swing in the share price between 500p and 900p, so the shares are more suitable for the nimble trader than a long term grit-your-teeth investor like myself.

However, this looks to be one of the upswings, with profits rising in the 2018 calendar year. While much of the boost came from the acquisition of rival Amec Foster Wheeler, there was organic growth as well.

On the downside, exceptional charges meant that Wood produced another pre-tax loss, albeit a much reduced one, and net debt, although down, has not been reduced as much as hoped. There is a tiny rise in the dividend but it is covered only 1.6 times, which I feel is not enough given the uncertain nature of the industry.

Wood reports higher activity levels across all its business units, the order book is strong and free cash flow is healthy. The shares dropped 9% on the results, which I felt was an overreaction. So did other investors who took the opportunity to step in the following day. Those who are not averse to risk should take a look. The next move is likely to be back above 600p.

Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice, nor are they the opinions of Morningstar.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
John Wood Group Plc185.50 GBX-1.01
Kingfisher PLC260.60 GBX-0.38Rating
WH Smith PLC1,181.00 GBX0.68

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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