Kingfisher cautious on France despite 'green shoots'

By James Davey

LONDON (Reuters) - Kingfisher, Europe's largest home improvement retailer, remains cautious about prospects for France, its most profitable market, even though recent industry data has indicated "green shoots" of recovery.

The firm, which trades as Castorama and Brico Depot in France and B&Q and Screwfix in Britain, said on Wednesday its French business saw sales fall 0.4 percent at established stores in the year to Jan. 31 in a broadly flat market, hit by weak consumer confidence and subdued housing and construction markets.

Chief Financial Officer Karen Witts told reporters that in the last quarter of the year French building permits and housing construction levels turned positive for the first time in four years.

"But I'm pretty cautious on that because when I updated on interim results in September those figures were still negative. So perhaps green shoots, let's just see," she said.

Witts was speaking after Kingfisher beat forecasts with a 0.3 percent rise in annual profit, sending its shares up to 5.8 percent higher and to top the FTSE 100 index leader board.

The firm made an underlying pretax profit of 686 million pounds, ahead of analysts' average forecast of 667 million pounds and the 684 million made in the 2014-15 year. Group sales rose 3.8 percent on a constant currency basis to 10.3 billion pounds.

Like-for-like sales in the UK and Ireland rose 4.4 percent in the year and Kingfisher said the short term economic outlook for the UK remained positive despite uncertainty over the outcome of a referendum in June on whether to stay in the EU.

In January, Chief Executive Véronique Laury announced a strategy to boost Kingfisher's annual profit by 500 million pounds from 2021 that will cost 800 million pounds over five years to deliver. The plan involves unifying the product offer across the business, improving its ecommerce capabilities and driving efficiencies.

She said the firm would return 600 million pounds to shareholders over the next three years through share buybacks.

Shares in Kingfisher have risen by 12 percent over the last three months but are flat year-on-year. They were up 18.7 pence at 369.3 pence at 1440 GMT, valuing the business at about 8.4 billion pounds.

"A challenging outlook in France and fiercer competition in the UK with the entrance of Wesfarmers should continue to weigh negatively on the investment thesis into 2016-17," said analysts at Barclays.

Last month Wesfarmers purchased B&Q rival Homebase from Home Retail. It intends to rebrand the chain as Bunnings and invest 500 million pounds refurbishing its 265 stores.

(Reporting by James Davey; Editing by Jason Neely and Mark Potter)