B&Q owner should do decent thing and return its furlough payments | Kingfisher


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In retrospect, it was obvious: DIY stores, once they could reopen fully, would enjoy a boom. Office workers stuck at home are more inclined to do their place up, and many will have more time to do fiddly jobs.

Even so, sales at Kingfisher, owner of B&Q and Screwfix, aren’t simply strong, but are spectacularly so. Like-for-like sales in June were up 26% in the UK and Ireland and the pace has only slackened slightly in July. Over in France, where the group owns the Castorama and Brico Dépôt chains, the numbers are even higher.

It is why Kingfisher, even with stores limited to selling essential items for a few weeks, is confident that its half-year profits, for a period ending in July, will beat last year’s £337m. The shares rose 15% on Wednesday and, after initially slumping with the lockdown, are now in positive territory for 2020.

So what happens to the furlough money that supported the wages of 16,000 staff in the UK during the lockdown weeks? Can the Treasury have a few quid back?

That is where Kingfisher’s script became blurry. The group intends to decline the £1,000-per-employee return-to-work bonus next January, but the bigger sums relate the furlough scheme itself. On that score, the group muttered about keeping things under review “given uncertainty over a Covid-19 resurgence and the wider economic outlook”.

Sorry, but that’s a fudge. The right answer should be easy: if you are a FTSE 100 company enjoying a boost to profits, even a modest one, from the pandemic, you should do the decent thing and return your furlough payments.

Melrose still keeping the wheels turning

The aerospace and automotive industries are two to avoid during a pandemic. Melrose is stuck in the middle of both thanks to its £8bn purchase of GKN in 2018, a bitterly fought contest that seemed at the time to have delivered a bargain to the buyer. Nobody is talking about brilliant timing now. A share price that was 240p in February is now 103p. For the time being, Melrose’s manta of “buy, improve, sell” seems to have been replaced by something more like “cut, stabilise, keep going”.

But the approach seems to be working. The board crowed about how cash was still generated in the first half, allowing £90m of debt to be repaid. Yes, that’s impressive in the context of a 27% plunge in revenues, even if more heavy job losses look inevitable. One suspects an independent GKN would not have been so resilient.

The cash performance should allay worries about debt. A £3.2bn debt looks towering but Melrose also has its pre-GKN operations available for sale. The biggest operation is Nortek, an air-conditioning business enjoying a fillip from big tech’s need to cool its sweaty data centres. Nortek may be worth £2.5bn. A cash sale next year would transform the balance sheet, which helps to explain why Melrose’s bankers are behaving nicely.

None of which alters the fact that the original GKN turnaround plan will be severely delayed. The aerospace division, supplying Airbus, Boeing, Rolls-Royce and defence contractors, is likely to see sales fall by at least a quarter over the full year and the rate of recovery is anyone’s guess. The automotive division, big in powertrains, should pick up more quickly but, again, expectations will have to be reset.

Melrose expects a “small adjusted operating profit” this year, quite a comedown from the £1bn-plus the City had expected pre-Covid. In this climate, though, the job is to keep the wheels turning; Melrose is clearly managing to do that.

New FCA boss can make mark by circumventing City lip service on diversity

Nikhil Rathi, incoming chief executive of the Financial Conduct Authority, wants boards of City firms – banks, insurers, fund managers and so on – to be more diverse, meaning more women and minority ethnic candidates should be appointed to senior roles.

The surprise, though, is how Rathi thinks this excellent goal could be pursued. If progress doesn’t happen, he told MPs, “then at some point it becomes a supervisory matter”. In other words, the financial regulator could use its power to block appointments.

Rathi was probably issuing the mild threat in the expectation that it will not have to be executed. But, if he wants to make his mark, he should go for it. The City pays a lot of lip service to diversity, but actual action on appointments is notoriously slow.



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