42 2GM Tuesday May 24 2022 | the times
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Bank of England official close (4pm)
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Period Open High Low Sett Vol Open Int
Long Gilt Jun 22 118.33 118.88 117.91 117.99 233047 641580
Sep 22 117.85 118.19 117.29 117.34 19265 4203
3-Mth Sterling Jun 22 99.025 99.045 99.015 99.026 10377 232459
Sep 22 98.885 98.890 98.860 98.866 3885 301735
Dec 22 98.820 98.825 98.790 98.806 7310 347378
Mar 23 98.785 98.795 98.755 98.771 8310 229855
Jun 23
3-Mth Euribor Jun 22 100.24 100.25 100.22 100.24 83681 456700
Sep 22 99.635 99.645 99.620 99.630 90676 510412
Dec 22 99.235 99.280 99.215 99.230 120701 592523
Mar 23 98.910 98.960 98.860 98.880 88343 478121
Jun 23 98.660 98.710 98.595 98.615 88768 401596
3-Mth Euroswiss Jun 22 100.71 100.72 100.70 100.71 925 29152
Sep 22 100.68 100.68 100.67 100.68 710 31355
Dec 22 100.61 100.62 100.59 100.62 488 22748
Mar 23
FTSE100 Jun 22 7427.5 7508.0 7403.5 7494.0 77723 606034
Sep 22 7380.0 7453.0 7380.0 7441.5 10 8108
FTSEurofirst 80 Jun 22 5103.0
Sep 22 5091.5© 2021 Tradeweb Markets LLC. All rights reserved.
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investment advice. Tradeweb is not responsible for any loss or damage that might result
from the use of this information.need to pay a high dividend mean
there’s a risk of becoming highly
concentrated in a few sectors, such
as financial services and energy.
About 95 per cent of the trust’s
holdings are in the UK, but recently
Gergel gained permission to allocate
up to 10 per cent of assets in
international companies.
Merchants might not be one for
those with environmental, social and
governance considerations high on
their agendas. British American
Tobacco and Imperial Brands, the
cigarette makers, are the second and
third largest holdings, with BAE
Systems, the defence contractor, at
No 6 on the list. Those risks are
thought about in terms of how wellUK equity income trust over the
past year.
Maintaining that record over the
past two years meant using reserves
accumulated during previous years
to pay the dividend, but last year
those profits funded only 6 per cent
of the payment and investors can
expect the dividend to be fully
covered by earnings this financial
year.
The aim of Simon Gergel, of
Allianz Global Investors, the trust’s
manager, is to deliver a high and
rising income, as well as a capital
return. The top ten holdings include
typical high-yielding names,
including GlaxoSmithKline, Shell
and Rio Tinto. The UK bias and theR
ising interest rates traditionally
take the shine off riskier assets
such as equities, but stocks
that pay out a high enough dividend
still hold an allure. Take Merchants
Trust, for example, a UK-focused
investment trust that has paid a
higher dividend each year for the
past 40, one that totalled 27.3p last
year for a yield of 4.8 per cent at the
present share price.
The result? A share price that
hovers around a record high and a
total return higher than any otherEmma Powell Tempus
Buy, sell or hold: today’s best share tipsHome truths about DIY after Covid
T
he reality check at
Kingfisher has not been as
brutal as that meted out to
some of the other so-called
pandemic winners — think
Netflix, Peloton or Asos — but
investors may not be done yet and
expectations that the retailer’s shares
will fall further have mounted.
The stock is now the fifth-most-
shorted in London, with investors
betting that booming sales enjoyed
over the past 18 months will decline
abruptly and that inflationary cost
pressures could take the shine off
margins. The shares have fallen by
about a quarter in value since the
start of this year and change hands
at just over eight times forecast
earnings, among the cheapest ratings
in the retailer’s recent history and
below an average multiple of almost
11 since Thierry Garnier was
appointed chief executive at the end
of 2019. That valuation represents an
adequate degree of scepticism.
Sales, unsurprisingly, have come
back down to earth, declining by
5.4 per cent on an underlying basis
during the three months to the end
of April compared with a year earlier.
Against pre-pandemic comparisons,
sales were 16.2 per cent higher, but
the question is how much that lead
gets eroded. Kingfisher is clutching
at some lockdown-era trends
persisting, including greater homeworking and an active housing
market, which it reckons will enable
it to hold on to higher sales. But
rising interest rates bring higher
mortgage costs and the rapidly rising
cost of living heightens housing
affordability barriers, both of which
could cool the housing market and
demand for DIY products.
Recovery in the French Castoramaand Brico Dépôt brands could fuel a
more enduring improvement in sales.
Garnier has scrapped a misjudged
strategy to unify ranges across
brands and countries, which turned
off French DIYers. The plan now is
to retain a harmonised approach
with large brands such as AkzoNobel
for Dulux paint, but to adopt a more
differentiated stance for product
lines such as garden furniture or
wallpaper, where tastes are more
likely to vary. French sales were
around a fifth higher during the first
quarter compared with the same
period in 2019.
Garnier wants to venture further
in his home country, opening the
first Screwfix in France this year.No quick fix
Total returnSource: RefinitivLike-for-like sales growth19.5%-40-30-20-1001020%Jul2021
Oct Jan2022
Apr00 00FTSE 100KingfisherQ1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022-24.8%17.4%15.5%64.2%-1.3%-2.4%-1.7%-5.4%Increasing online sales is another
string to Garnier’s growth strategy.
Ecommerce sales accounted for
18 per cent of the group total last
year, up from 8 per cent pre-
pandemic, but success has not been
evenly spread. Screwfix, the trade
retailer that started life as a
catalogue-based business, generated
67 per cent of its sales online last
year, but for B&Q the proportion
was 11 per cent and it was only 6 per
cent and 5 per cent, respectively, for
Castorama and Brico Dépôt.
Expanding the range of third-party
brands sold via the B&Q
Marketplace is one hope for growing
online sales. Garnier cites Amazon as
proof of the traffic-driving potential
of selling more product ranges, but
there is also the risk that higher-
margin own-brand sales are
cannibalised.
Those own-brand labels, which
account for around half of
Kingfisher’s sales, are a defence
against inflationary pressures
sapping demand, the company
argues, offering a cheaper
alternative. But with the rate of
inflation rising, the retailer still faces
a tough balancing act in remaining
price-competitive and dealing with
its own inflationary challenges.
What the shares have lacked in
capital growth, they have at least
delivered in income, with another
meaty dividend forecast this year
and a £300 million share buyback
unveiled alongside first-quarter
figures. But investors are right to
spot potential banana skins ahead.ADVICE Hold
WHY Inflationary pressures
and declining sales could
cause the profits to fall
further than expectedthey are priced into the stocks rather
than making moral judgments. Some
of the largest holdings are also more
highly dependent on the fortunes of
the broader economy and investor
confidence, including Shell and
IG Group, but that hasn’t dented
sentiment towards the trust yet,
which trades at a 1 per cent premium
to net asset value. Nevertheless,
relying on multiple stocks guarantees
better dividend security.ADVICE Buy
WHY High dividend yield and
a good track recordkingfisher
Market cap
£4.98bnDividend yield
5%merchants trust
Dividend yield
4.8%Premium / net
asset value 1%news in brief
Zuckerberg sued
Performance fee cut
Schroder Oriental Income Fund
said it had negotiated a cut in the
performance fee that investors
pay to its manager and that it was
willing to buy back more shares
to narrow the discount at which
its stock trades to its net asset
value. The investment trust said
the cut was a “meaningful saving
for shareholders”, adding it
believed in rewarding managers
“for delivering genuine added
value rather than just market-
based returns”. Its shares rose a
penny, or 0.4 per cent, to 265½p.Tesla puts its foot down
Tesla plans to restore production
today at its Shanghai plant to the
level at which it had operated
before the city’s Covid-19
lockdown, an internal memo says.
The electric vehicle maker has
been hit by the city’s strict
controls imposed from March on
the movement of people and
goods to curb the spread of
Covid-19. From today it will more
than double its daily output to
2,600 electric vehicles at the
plant, known as Gigafactory 3,
the memo said.Amigo plan approved
The High Court has approved a
plan by Amigo to cut the
compensation it pays to
customers who were mis-sold
loans in a move that takes the
troubled sub-prime lender a step
closer to avoiding liquidation.
Borrowers have been seeking
redress after claiming they were
issued with loans they could not
afford. The lender has warned
that without capping payouts it
would become insolvent. An
attempt last year to cut payouts
was blocked by the court.Mark Zuckerberg is being sued by
the District of Columbia for his
alleged role in data privacy
violations that led to the
Cambridge Analytica scandal.
The lawsuit claims that the
Facebook founder was personally
involved in allowing Cambridge
Analytica, the London consulting
firm, to use Facebook “to
influence and manipulate” the
outcome of the 2016 US
presidential election by using the
personal data of more than
70 million Americans. Meta, the
owner of Facebook, did not
respond to a request for comment.