By James Davey
LONDON (Reuters) - Kingfisher (LON:KGF), Europe's largest home improvement retailer, beat forecasts for first-half profit thanks to strong demand in Britain and Poland and said its five-year plan to transform the business had got off to a good start.
The company, which runs the B&Q and Screwfix chains in Britain and Castorama and Brico Depot in France and other countries, also said that the UK's decision to leave the European Union had not hurt demand, though it remains cautious on the outlook for French operations.
Shares in Kingfisher, already up 14 percent so far this year, rose by as much as 2.7 percent after Tuesday's update. At 0905 GMT the shares stood at 380 pence, up nearly 1 percent.
Chief Executive Veronique Laury had outlined the transformation plan in January, looking to boost Kingfisher's profit by 500 million pounds a year from 2021.
The plan involves unifying the product offering across the group to improve ecommerce capabilities and efficiency, though implementation costs of 800 million pounds over the five years raised a few eyebrows among investors.
"We’ve made good progress so far and are on track", Laury told reporters, noting that the first unified ranges had been introduced in categories such as light bulbs, batteries and kitchen sinks. "Sales are encouraging so far."
The company also intends to return 600 million pounds to shareholders over the next three years through share buybacks. It has so far returned 160 million pounds.
Kingfisher made underlying pretax profit of 436 million pounds in the six months to July 31, up 13.5 percent and ahead of a consensus analysts' forecast of 430 million pounds.
Total sales rose 2.7 percent to 5.75 billion pounds on a constant currency basis.
"Performance has been driven by Poland and the UK, especially Screwfix, and a stable profit performance in France," Laury said.
Kingfisher also benefited from 17 million pounds of favourable currency movements on the translation of non-sterling profits.
"In the UK, the EU referendum has created uncertainty for the economic outlook, even though there has been no clear evidence of an impact on demand so far," Laury said.
"In France, we remain cautious on the short-term outlook," she added, citing weak market conditions in the country.
Second-quarter trading in France was held back by low consumer confidence, industrial action and wet weather.
"For quite some time we have referred to France as being quite subdued and we’re seeing that across the sector," Chief Financial Officer Karen Witts said.
Before Tuesday's update analysts' average forecast for full-year underlying pretax profit was 773 million pounds, up from 686 million pounds in 2015/16.
