Kingfisher still looks ruffled

THINGS are looking uncomfortable at Kingfisher. Last year was awful for the group, with the fumbled splitting of the business into two, which brought attendant spats between some of the leading figures in the saga.

And while 2002 should have been the time when everything settled down, there is still an uneasy, restless spirit in the air. This does not feel like a stable situation.

As last week drew to a close, the story went round that Kingfisher's veteran chief executive, Sir Geoff Mulcahy, was about to achieve a long-sought full merger with Castorama of France, uniting the most powerful DIY operator on the Continent with Kingfisher's B&Q.

Kingfisher's share price dipped as investors bet that the company would pay for the deal by increasing debt, selling bonds - and issuing new shares.

Yes, the story makes sense. And Kingfisher is likely to make a deal with Castorama before year-end. But don't believe it is necessarily imminent.

And don't count on a deal with Castorama marking the end of the company ' s reshaping. On the DIY side of the business, Kingfisher has a toe-hold in Germany's Hornbach, Mulcahy having taken a 12.5% stake last November.

Look, too, at Kingfisher's electricals business. Unless the group establishes a real presence in the German electricals market, it is hard to see that having Comet in the UK and Darty in France under the same modest-sized umbrella adds a great deal. Why not sell Darty to Dixons and Comet to whoever would take it at a reasonable price?

Last year's demerger, cleaving Superdrug and Woolworths from Kingfisher, should have left a rump that was tidier, simpler, more logical and easier to understand. Somehow, that hasn't happened.

The old Kingfisher was something you wouldn't have invented if it had not already existed. Much the same can still be said of the new Kingfisher. A prediction: there will be more change, more upheaval.

ScotPower the brave
SALUTE the courage of Ian Russell, chief executive of Scottish Power. Here is a man struggling valiantly to sort out the legacy of the company's various mishaps - mishaps with which he was intimately associated.

Yes, he has been chief executive for only a year. But in his role as finance director before that, he was one of the main movers behind the company's strategic shifts that were to prove so costly.

A brief history. Scottish Power tried to reinvent itself as a so-called multi-utility. It bought the notion that householders who used a company's electricity would buy its water, gas, phone service and so on. The strategy failed.

At the end of last week, Russell announced his company had finally sold Southern Water - 'focusing Scottish Power as an international energy business'. To translate, Scottish Power, under its then chief executive Sir Ian Robinson, with Russell at his side, had tried to go down a particular route, realised its mistake and withdrawn.

Over the past half-decade, Scottish Power tried its hand at telecoms with Thus, now being demerged. And it tried - and failed - to build an electricals retailing business.

So what about the Scottish Power that remains? Is the group's remaining 'international energy business' fit? Well, Scottish Power's expansion into the US with its 1999 takeover of PacifiCorp has scarcely been a resounding success. Last year, the company had a power station blow up. And it found itself in the uncomfortable position of having committed to buy power for more money than it could sell it.

Russell has to show investors that the group is recovering. Few can be thrilled about their experience-over the past couple of years. From its peak, Scottish Power's share price has fallen 44%.

But Russell's real act of courage last week was to signal that Scottish Power is likely to cut its dividend - probably by about 30%.

Companies' historic reluctance to cut dividends is crumbling. In recent weeks, ICI, Reuters and Royal & SunAlliance have gone for a cut. Others, such as Schroders and Reckitt Benckiser, have frozen dividends. CGNU is warning of a cut in payouts of nearly 40%. And these companies won't be the last. By year-end, expect several others to have joined the list of cutters.

Yes, reducing shareholder payouts has become almost respectable. But the key word is almost. Institutional investors take a remarkably old-fashioned view of dividends: they are easily measured, they are tangible, they are comforting. A company that cuts its dividend appears to be on the defensive.

And that is why Russell's bravery is striking. Shareholders have suffered a great deal. Assuming he wants to keep his job, Russell must hope that they will forgive him this latest disappointment.