March 26, 2013 / 7:51 AM / 4 years ago

UPDATE 2-Kingfisher, Wolseley hit by dearth of home improvement

4 Min Read

* Kingfisher pretax profit down 11.4 pct to 715 mln stg

* Forex movements cost it 39 mln stg, weather 25 mln stg

* Wolseley H1 profit 199 mln stg, down 20 pct

* Bellway H1 profit 59.9 mln stg, up 47.5 pct

By James Davey

LONDON, March 26 (Reuters) - Britain's Kingfisher and Wolseley reported sharply lower profits as cash-strapped consumers cut back on home improvements in the economic downturn.

Kingfisher, Europe's largest DIY retailer, and Wolseley, the plumbing supplies group, are battling a prolonged squeeze in disposable incomes in Europe that is particularly affecting sellers of "big ticket" items such as kitchens and bathrooms.

British home improvement firms are also being hit by a continuing low level of housing transactions, since moving house is often associated with spending on home improvements.

Poor weather has also hit demand. In 2012 Britain had its wettest summer in 100 years, while 2013 has got off to a cold start with average March temperatures on course to be the lowest for 40 years, according to the Meteorological Office.

Kingfisher, which runs market leader B&Q in Britain and trades as Castorama and Brico Depot in France, on Tuesday reported an 11.4 percent fall in underlying pretax profit to 715 million pounds ($1.09 billion) in the year to Feb. 2.

That was in line with analysts' consensus forecast but down from 807 million pounds in 2011-12.

Group sales fell 2.4 percent to 10.57 billion pounds, with weak consumer confidence resulting in like-for-like sales declines in its three key markets of Britain, France and Poland.

Adverse foreign exchange movements when translating overseas profits in euro and Polish zloty into sterling knocked 39 million pounds off profit, while rain in Britain cost it 25 million pounds as fewer customers visited its stores.

Chief Executive Ian Cheshire told reporters improvement in UK employment data and measures to stimulate the housing market in finance minister George Osborne's budget speech last week were encouraging signs, though any recovery looked fragile.

"We're planning on markets not really giving us any help and us having to go out and work harder. Equally it would be bad luck if we got another 100 year summer," he said.

It was too early to say what impact a cold February and March would have on first-quarter sales, said Cheshire, noting April was the key month for horticultural trade.

Profitability Drive

Kingfisher, the world's No. 3 home improvements retailer behind U.S. groups Lowe's and Home Depot <HD.N, is partially offsetting weak demand with a drive to improve profitability by buying more goods centrally from cheaper manufacturing centres such as China.

Its shares, down 9 percent over the past year, were up 1.2 percent at 286.8 pence at 1312 GMT, supported by a net cash position of 38 million pounds and a 7 percent dividend rise.

At Wolseley, exceptionals mostly consisting of write-downs, disposals and staff redundancy costs amounted to 87 million pounds, which helped push pretax profit down 20 percent for the six months to end-January to 199 million pounds.

Of the charges, 63 million pounds was related to France where the firm is looking to dispose of and close up to 40 percent of its building materials business Reseau Pro. The group has cut 990 jobs in Europe since August as homeowners and businesses in the region put off repairs and maintenance to properties.

Group revenue fell 8.1 percent to 6.28 billion pounds.

Wolseley shares were down 3 percent at 3,115 pence.

In sharp contrast to Kingfisher and Wolseley, British housebuilder Bellway beat forecasts with a 47.5 percent rise in pre-tax profit in the six months to end-January to 59.9 million pounds.

UK housebuilders have defied the economic downturn by snapping up development land cheaply during the recession and focusing on the south where house prices have stayed strong.

Bellway's revenue rose 9.6 percent to 502.5 million pounds, helped by higher selling prices.

Its shares rose 2 percent to 1,217 pence.

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