1H results 15% above consensus Kingfisher reported a 23.1% increase in 1H21 PBT to £415m (cons £361m/INVe £375m), fortunate to be able to trade through lockdown and benefit from the switch in consumer spending towards Home categories, which has continued through the summer. This is on sales down 1.1% in constant currency showing the benefits of the focus on reduced costs, strong B&Q performance and improved operational performance in France, helped by furlough and the rates holiday (£100m – will repay £23m of furlough to UK Government) and discretionary ‘temporary’ savings of £92m. Adverse impact in 1Q from COVID, offset by strong growth in 2Q. No H1 DPS declared as expected. E-com sales up 164%, and account for 19% of Group sales. Net cash in the bank stood at £2.1bn (working capital inflow £656m in 1H expected to reverse in 2H) with liquidity at over £3.7bn. 3Q to date trading remained very healthy Group LFL sales to date up 16.6% versus Q2 +19.5%, with demand levels starting to soften in most businesses from Q2 except for UK. By business: B&Q 3Q to date LFL +23.9% (Q2 +19.6%), Screwfix +9.9% (Q2 +2.4%), Castorama +20.6% (Q2 +25.3%), Brico Depot +12.6% (Q2 +28.9%) and Poland +10.3% (Q2 +15%). Upward pressure on FY20 consensus but question remains on pull forward of demand from FY21 Given that the strong momentum from 1H has continued into 2H, there will be upward pressure on FY21 consensus towards the high of £680-690m. We place our forecasts and TP under review. We forecast FY21E PBT of £558m, EPS 19.5p (consensus £585m), based on flat H2 total sales in its 3 major markets (UK, France and Poland). As previously said, the unknown is the sustainability of demand for the rest of the year as the macro environment starts to deteriorate and reversal out of cost savings in 1H next year plus the end of the business rates holiday. We suspect demand will have been pulled forward from next year and believe consumer spending is likely to be impacted by rising unemployment which, together with a switch-back in spending to more leisure pursuits, may hit discretionary retail spending in 2021. Consequently, we believe Kingfisher could struggle to match FY21’s strong performance. Valuation (CY21 PE 15.8x) is too demanding for a business for which we struggle to see where sustainable long-term growth will come from given the structural pressures in its markets from the shift online, the rise of the discounters and the ‘do it for me’ trend.