Dividend controversy would overshadow Kingfisher's long-overdue revival

B&Q owner is enjoying a good lockdown thanks to a Covid-inspired boom in home DIY, but risks walking into a political storm

Ladders and men
This article is from The Telegraph’s City Intelligence newsletter. Sign up here for incisive analysis of the day's biggest corporate story from our chief City commentator Ben Marlow.

As if having one of the most pointless corporate names wasn’t enough, the folk at Kingfisher love nothing more than a silly slogan too. So out went “One Kingfisher”, along with its architect Véronique Laury, and in came “Powered by Kingfisher” under new boss Thierry Garnier.

Despite all those Kingfishers, there’s still no sign of any brightly coloured birds but at least there’s finally something to show for all the marketing spiel with the company emerging as a major, though surely predictable, winner of the pandemic.

It’s not as if there’s much else to splash out on when holidays have been rendered virtually impossible, unless you fancy a weekend break in Gibraltar, and let’s face it, why would you? Pubs, restaurants, cinemas, and theatres have closed their doors again; and even sporting events are crowd-free zones.

Nor are any of life’s little pleasures about to return. Reports suggest that the Government is considering a third lockdown in January to make up the relaxation of restrictions over Christmas. Talk about kicking off the new year with a bang.

And, when you’re spending more time at home, you want the house to look nice. People have been reaching for the paintbrush, updating the garden furniture, and buying new kitchens. In fact, demand is so strong for some products that Kingfisher’s logistics capabilities have buckled under the strain.

That probably explains the 4pc fall in the share price after the company posted a big surge in turnover between the beginning of August and the end of October. Sales are up 18pc to £3.5bn group-wide and B&Q reported a jump of a quarter.

It’s a similar story overseas with operations in France, Iberia, and Romania experiencing double-digit growth and Poland posting a still very respectable 8pc gain. Only the Russian arm let the side down, but that was offloaded anyway.

The question for shareholders is whether this is all the result of an entirely fortuitous, and potentially short-lived, Covid-inspired bump, or because Garnier’s new strategy is already paying off and the company has begun to turn a corner.

The answer is it’s probably a bit of both. It’s no secret that Kingfisher was going backwards under Laury’s confused attempts to centralise the systems of a sprawling empire that encompasses many different markets with their own national quirks.

Garnier’s shake-up has handed more autonomy to the various operating companies enabling local managers to respond more quickly to the sudden spike in demand.

Yet the boom may not come without controversy. Although the chain hasn’t declared a dividend this year, analysts have pencilled in a 4p-a-share payout. Having saved £130m through the Government’s ill-conceived business rate relief scheme, it would certainly be a bit rich if most of that went back out the door in the form of an £80m payout to shareholders. There’s nothing DIY about that.

Still, it hasn’t stopped the supermarkets, and indeed a growing number of other retailers, including B&M Retail, and Halfords, who have all used the spurious argument that the two issues are entirely separate.

It would be a shame if Garnier’s impressive start was overshadowed by an entirely avoidable row about the recycling of taxpayer support.

Nightmare in Adland

M&C Saatchi founders (L to R): David Kershaw, Bill Muirhead, Jeremy Sinclair and Lord Maurice Saatchi, pictured in their offices in London Credit: Richard Pohle/Times Newspapers

For an outfit whose motto is “brutal simplicity”, events at M&C Saatchi have been anything but. The departure of boss David Kershaw, executive chairman Jeremy Sinclair and director Bill Muirhead is a big moment in Adland – they were among the most influential individuals in the industry – but it comes almost a year too late.

The time to go was when the wheels came off after the discovery of an accounting black hole. Instead, they allowed their egos to get the better of them and chose to cling on, inflicting further damage.

Their decision to stay prompted an exodus of four distinguished independent directors including Maurice Saatchi, the “M” in the illustrious M&C name, leaving it fighting a governance crisis alongside a financial one.

And it continues to reverberate. The book-keeping fiasco hasn’t been resolved. After failing to file its accounts on time, the shares have been suspended, having crashed from a record high of 394p in March last year to just 57p at the end of September.

Meanwhile, investors are facing substantial dilution as the group prepares to hand staff up to £15m in share-based bonuses. And with the company now worth just £66m, it is a sitting duck for a cut-price takeover.

The irony is this was always the founders’ worst nightmare, yet such an outcome would be entirely self-inflicted.

Some things even the greatest admen can’t spin.

Will Ashley step in?

The administration of Peacocks and Jaeger is worrying news for 4,500 employees but the brands may yet be saved. Surely Mike Ashley fancies a crack?

The tracksuit and trainer tycoon appears hell-bent on creating a chaotic retail empire out of faded and forgotten brands and Britain’s most restless boss must be going out of his mind during lockdown.

The Telegraph's Fantasy Fund Manager is back for a second season, giving you the chance to win a £10,000 grand prize and £100 weekly prizes. Find out how to play here. Only available for Telegraph subscribers.