H1 underlying PBT 3% ahead of consensus Reported underlying H1 PBT post IFRS 16 down 6.4% to £353m vs company complied consensus of £342m. The beat was driven by a stronger than expected gross margin (up 60 basis points). The Transformation programme continues, with unified product (COGS) now 59% of the range. Sales trends by division are directionally similar to recent quarters, with sales growth in Screwfix, Poland and Romania offset by decline in B&Q and France. However, what stands out is the significant deterioration in Q2 sales performance in the core businesses, with B&Q sales down 8.2% (Q1LFL +2.8%) and France down 5.1% (Q1 -3.7%). FY underlying PBT forecast under pressure Management has maintained its flat gross margin guidance for the full year despite delivering 60 basis point improvement in H1, highlighting higher H2 clearance costs given weak sales. We expect FY20 consensus expected to fall by c.3% to £635m-645m u/l PBT pre Transformation costs and post IFRS16, including Russia and Spain which management has failed to dispose of (we had u/l PBT of £668m post IFRS 16 and ex c.£5m of losses from Spain and Russia). Note the forecasts below are on a pre IFRS16 basis (which is expected to have a minimal impact at the PBT level) and after Transformation costs. Our view: Core businesses remain structurally challenged Strategically, Kingfisher is in limbo until the new CEO, Thierry Garnier, starts next week and has time to assess the business. He inherits a business where it is hard to identify the longer term growth story and sales/market share are in decline. Both France and the UK (collectively c.80% of EBIT) face structural issues in our view. A radical change of direction seems unlikely given a break-up of the business was effectively ruled out by Chairman, Andy Cosslett, at the Capital Markets Day in May. In addition, he said that the Board supports the evolution of the ‘ONE Kingfisher’ strategy into ‘GoodHome’ as set out by departing CEO, Ms Laury. We place our forecasts and TP put under review.