Will People Get Bored of DIY?


Let’s seize on whatever positives we can in this time of crisis – and you don’t get much more positive at the moment than at do-it-yourself chain Kingfisher (KGF). Despite the closure of stores during lockdown, revenue was down a mere 1.3% in the six months to the end of July as B&Q and Screwfix deftly switched to online sales.

Pre-tax profits leapt by 62.4% as stay-at-home workers turned to improving their homes and gardens rather than twiddling their thumbs. Kingfisher can afford to pay back £23 million in furlough payments received from the Government.

What’s more, sales have been running 18.9% higher so far in the second half, with the improvement right across the board. Kingfisher reckons a lot of young people have got the DIY and gardening bug for the first time.

Even the French operations that have been such a drag on the group seem to be coming good and the rest of Europe is doing fine. Credit must go to chief executive Thierry Garnier, who has turned the operations round since he took over a year ago.

All this good news is admittedly already in the share price, which dropped from 221p to 124p in the general stock market slump but which has soared away to 296p, the highest level for more than two years.

The big fear now is that workers return to their offices and factories and lose interest in DIY, while the rising number of unemployed will be unable to afford more work. I believe that Kingfisher customers will appreciate the benefits of living in pleasanter homes and press on with more improvements.

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There is no reason for shareholders to take profits yet. There could well be another 50p to go if Garnier continues to work wonders after so many years of decline, especially if the dividend, which was suspended at the half-way stage, is restored along with final results to next January.

On The Road to Nowhere?

Two potential bidders have walked away from debt-laden roadside rescuer AA (AA.) and two more are exploring the possibility of a joint bid that would also divert cash away from shareholders and into clearing debt. The chances of a bidding war driving up the share price are rapidly diminishing.

Although the shares lost three-quarters of their value, from 60p to 15p, between January and April, hope seems to spring eternal that someone will be stupid enough to overpay for control. The shares recovered to a highly optimistic 40p before reality pushed them back below 30p, which in my view is as much as shareholders are likely to get – and remember, there is no guarantee that a bid will be forthcoming.

It’s not too late to get out. Next time private equity stacks a company up with debt and offloads it onto unsuspecting investors, make sure you stand well clear.

A Rose By Any Other Name

As a man have never understood why women need make-up. It’s a case of painting the lily. Lockdown has, it seems, allowed women to reach the same conclusion: PZ Cussons (PZC) reports reduced sales of cosmetics as those working from home don’t see the need to doll themselves up.

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A fall in sales of fake tan is also to be commended (unless you are a Cussons shareholder), less so a decline in shower gel sales. Not to worry, sales of hand sanitisers and anti-bacterial soap have soared, and Cussons neatly switched its Manchester factory to focus on the products in most demand.

Underlying pre-tax profits were down by nearly a third in the year to May 31 and the final dividend is reduced from 5.61p to 3.13p but at least it is not scrapped altogether.

The shares have been rising steadily for four months and have fully recovered the drop during the general stock market fall. If you’re in, stay in. The downside looks strictly limited.



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