B&Q owner should do decent things and pay off vacation | Business


isIn retrospect, it was obvious: DIY stores, once they could fully reopen, would benefit from a boom. Office workers stuck at home are more likely to make their way, and many will have more time to do delicate tasks.Even so, sales at Kingfisher, owner of B&Q and Screwfix, are not just strong, but spectacularly so. Like-for-like sales in June rose 26% in the UK and Ireland and the pace slowed only slightly in July. In France, where the group owns the Castorama and Brico Dépôt chains, the figures are even higher.

That’s why Kingfisher, even with stores limited to selling essentials for a few weeks, is confident that its half-year profits, for a period ending in July, will exceed the £ 337million last year. Shares rose 15% on Wednesday and, after initially falling with the lockdown, are now in positive territory for 2020.

So what happens to the holiday money that supported the wages of 16,000 UK workers during the weeks of lockdown? Can the treasury recover a few pounds?

This is where the Kingfisher script got blurry. The group intends to decline the back-to-work bonus to £ 1,000 per employee next January, but the biggest amounts relate to the leave program itself. On this point, the group mumbled to keep things under review “given the uncertainty over a resurgence of Covid-19 and the broader economic outlook”.

Sorry, but it’s a fudge. The correct answer should be simple: if you’re an FTSE 100 company with even a modest increase in profits from the pandemic, you need to do what’s decent and pay back your vacation pay.

Melrose always turns the wheels

The aerospace and automotive industries are two to be avoided during a pandemic. Melrose is stuck between the two thanks to her £ 8 billion purchase of GKN in 2018, a hotly contested competition that at the time seemed to have delivered a good deal to the buyer. No one is talking about brilliant timing now. A share price that was 240p in February is now 103p. For now, Melrose’s manta of “buy, improve, sell” seems to have been replaced with something more like “cut, stabilize, continue”.

But the approach seems to be working. The council insisted on how liquidity was still being generated in the first half of the year, allowing the repayment of 90 million pounds of debt. Yes, this is impressive against the backdrop of a 27% drop in income, even though larger job losses seem inevitable. It is suspected that an independent GKN would not have been so resistant.

The performance of the treasury should allay concerns about the debt. A debt of £ 3.2bn looks huge, but Melrose has its pre-GKN operations available for sale as well. The biggest deal is Nortek, an air conditioning company getting a boost from the need for big tech to cool its sweaty data centers. Nortek can be worth £ 2.5 billion. A cash sale next year would transform the balance sheet, which is why Melrose’s bankers are doing well.

None of this changes the fact that GKN’s initial turnaround plan will be seriously delayed. The aerospace division, which supplies Airbus, Boeing, Rolls-Royce and defense contractors, is expected to see sales fall by at least a quarter over the year as a whole and the rate of recovery is uncertain. The automotive division, big in powertrains, is expected to recover faster but, again, expectations will need to be reset.

Melrose expects a ‘small adjusted operating profit’ this year, quite down from the £ 1bn and more that the city was expecting before Covid. In this climate, however, the job is to spin the wheels; Melrose clearly achieves this.

New FCA boss can make his mark by sidestepping City’s diversity talk

Nikhil Rathi, the new CEO of the Financial Conduct Authority, wants the boards of companies in the city – banks, insurers, fund managers, etc. – are more diverse, which means that more women and candidates from ethnic minorities should be appointed to positions of responsibility.

The surprise, however, is how Rathi thinks this excellent goal could be pursued. If progress does not happen, he told MPs, “at some point it becomes a matter of oversight.” In other words, the financial regulator could use its power to block appointments.

Rathi was probably issuing the slight threat in the hope that she wouldn’t have to be executed. But if he wants to make his mark, he should go. The City is paying lip service to diversity, but appointments decisions are notoriously slow.


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