Kingfisher expects £175m profits boost from ‘temporary cost savings’

DIY chain Kingfisher has said it expects a £175m boost to profits this year from “temporary cost savings” that include government support during the pandemic.

The admission, in a third-quarter trading update that showed continued strong sales growth, adds to the growing controversy about whether businesses that have done well during the crisis should be receiving state aid.

In September, Kingfisher estimated that the costs for the group of responding to Covid-19 would be £40m across the full year. But business rate relief alone is expected to save the group £130m in the UK. 

It has also saved cash through other initiatives such as cutting back on advertising and marketing during the first UK lockdown.

Kingfisher has ample liquidity — it has access to about £3bn of cash and bank facilities including the Bank of England's coronavirus lending facility — and has had a strong recovery in trading as a result of households spending more on home improvements rather than going out.

Group sales in the third quarter were up 18 per cent, with sales at the UK's B&Q chain rising 24 per cent. In the six weeks to November 14, sales were up 12.6 per cent. Although lockdowns have been reimposed in its two most important markets — the UK and France — its stores remain open because they are classed as essential.

Like many other retailers, huge numbers of customers have moved to internet shopping: online sales more than doubled during the third quarter and click-and-collect sales more than tripled.

Its shares have risen almost a third in 2020.

The group, which has operations in the UK, France, Poland, Spain, Portugal and Romania, has repaid £23m of money drawn under the UK's furlough scheme, hired thousands more workers and has not declared any dividends so far this year. 

On Thursday, it said that new lockdowns made predicting results for the rest of the year difficult and it has not provided financial forecasts. However, analysts are forecasting a 4p payout for the full year, at a cost of £84m. Total dividends in 2019 were 11p a share.

Supermarkets, which have continued to pay dividends, have so far borne the brunt of political anger over “Covid winners” receiving state aid.

But the controversy may yet spread. Yesterday, Halfords said that the business rates relief and furlough schemes had added a net £15m to its half-year profit, while discounter B&M has been criticised for paying out special dividends. It did receive furlough money but has repaid it all and said it did not intend to use the scheme again.