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The Government’s U-turn on returning to the office could drive DIY demand as people improve home working environments
Thursday 24 Sep 2020 Author: Ian Conway

The UK Government’s U-turn on encouraging people going back to the office to work provides DIY retailer Kingfisher (KGF) with an opportunity to sustain its recent positive sales momentum. It could see more people think about doing up their property, particularly if they are going to be staying at home to work.

Kingfisher owns the B&Q and Screwfix brands in the UK, Castorama in France, and Brico Depot in Spain. Having enjoyed a strong second quarter (ending 31 July), trading has remained upbeat so far in its third quarter.

Thanks to improved sourcing, which helps lower costs, a sizeable reduction in inventories and a lower level of working capital across the business as non-essential IT spending and range reviews were put on hold, free cash flow grew more than four-fold to over £1 billion in its first-half period.

This has put the firm on a strong financial footing, with access to more than £3.7 billion and a net debt to EBITDA ratio of just one compared with a normal range of between two and three times. However, the interim dividend was withheld due to ‘ongoing uncertainty’ over the spread of Covid.

The shares, newly promoted to the FTSE 100 index, climbed over 8% on the news (22 Sep). Chief executive Thierry Garnier said there was ‘more to do’ but management was ‘committed to returning Kingfisher to growth’.

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