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B&Q owner Kingfisher dips depite upbeat trading, after news of management changes

Company looking for new finance director after Kevin O’Byrne takes charge of B&Q

News of a 20% rise in full year profits should have pleased shareholders in DIY group Kingfisher, but a management reshuffle seems to have taken the shine off.

The company – which runs B&Q in the UK and Castorama in France – said fourth quarter sales were up 2.2%, with the UK 1.5% higher and France 4.6% better. It said annual profits would be up 20% in line with market expectations. Chief executive Ian Cheshire said:

We have ended another challenging year in robust shape. Looking ahead, the global economic outlook is uncertain and so we will remain focused on self-help measures to trade the business effectively, whatever the market conditions.

But its shares have fallen 4.1p to 274.8p as Cheshire also announced the next stage of its development – “Creating the Leader”. Among other things, this involves the abolition of the post of international chief executive, with the departure of Peter Hogsted. And Kingfisher will be looking for a new finance director, with current incumbent Kevin O’Byrne taking responsibility for the B&Q business.

Analyst David Jeary at Investec issued a hold note on the business, saying:

A solid fourth quarter performance with group like for like sales up 0.9% sees Kingfisher confirm a 2012 profit increase of around 20% to an implied £804m, therefore in line with consensus expectations of £799m.

Of greater interest arguably is a management reshuffle, the net effects of which see the group looking for a new chief financial officer and the departure of Peter Hogsted, chief executive of Kingfisher International.

This may cause a small degree of concern, given the success of the previous team and structure over the past three years. The exit of well-liked and respected Peter Hogsted may well cause some eyebrows to be raised, and the appointment of a new finance director will also be watched with interest, as it creates waves within the senior team.

But Philip Dorgan at Panmure Gordon was more positive about the changes, and kept his buy recommendation:

Management change is interesting and shows that the group isn’t standing still.

Kingfisher has a strong international growth opportunity, while we don’t think that the UK (or France) is yet ex growth. There is some concern that France – which is 44% of operating profits – is set to hit the buffers, but we believe that Castorama has enough self help to mitigate against this and these numbers show continued strong growth. The currency-related downgrade does not affect group returns, which is the prime concern of Kingfisher’s large US investor base. Therefore, we believe that the current valuation still looks too low .

The new management incentive scheme targets, for maximum vesting, require a compound annual growth rate of 15% between 2012 and 2015. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds