* H1 underlying pretax profit 365 mln stg, down 1.6 pct
* H1 sales up 4.3 pct, down 0.8 pct like-for-like
* Ends half with net cash of 259 mln stg
* To launch Screwfix in Germany
* Shares down over 2 pct
By James Davey
LONDON, Sept 11 (Reuters) - Kingfisher, Europe'sbiggest home improvements retailer, reported a slight dip inprofit on Wednesday and said it was too early to call aneconomic recovery in Britain, though it was encouraged by recentdata pointing to an upturn.
UK retailers are still taking a cautious view of the marketfor the year ahead even though official data and surveys haveshown an improving outlook for UK consumer spending, whichgenerates about two-thirds of gross domestic product.
British Finance Minister George Osborne said on Monday theUK economy had turned a corner and that its accelerating economyvindicated the government's austerity programme.
"While we're really welcoming the change in atmosphere andcertainly the UK lending environment has fundamentally changed,I'm not sure we're there yet in calling a sustained economicrecovery," Kingfisher's Chief Executive Ian Cheshire toldreporters on Wednesday.
"The critical indicator for us is not so much the forwardindicators (such as mortgage approval data) ... it's really whatgoes through the tills," he said, noting an expectation of a sixto nine month lag in any improvement to the housing marketfeeding through to do-it-yourself expenditure.
He was speaking after the firm, which runs the B&Q andScrewfix chains in Britain as well as Castorama and Brico Depotin France, met forecasts with a 1.6 percent fall in first-halfprofit as a better second quarter was not enough to fully offsetthe impact of record cold weather in the firstquarter.
Cheshire said the outlook for the French market,Kingfisher's biggest profit earner, was more uncertain than theUK, with its housing market and consumer confidencedeteriorating.
Shares in Kingfisher, which have risen 48 percent over thelast 12 months and hit a year high on Monday, closed down 2.7 percent at 408.5 pence.
That fall reflected the firm's cautious outlook and noreturn of cash to shareholders.
Having released an exceptional provision of 145 millionpounds relating to the resolution of a French tax case,Kingfisher ended the half with net cash of 259 million pounds.
"As it stands at the moment we're not calling any capitalsurplus," said Cheshire, explaining there was still uncertaintyover trading and a lack of clarity on future leases as the firmattempts to reduce B&Q's space.
Kingfisher, which trades from around 1,070 stores in ninecountries in Europe and Asia, is the world's third-biggest homeimprovements retailer behind U.S. groups Lowe's and HomeDepot. It has offset weak demand in many of its marketswith a drive to improve profitability by buying more goodscentrally, and directly, from places like China.
Cheshire said the firm would continue to focus on internalinitiatives to drive growth, profit margins and cost savings.
"Investments in stores, a focus on value and the continueddevelopment of ranges and services put it in a strong positionto take advantage of the upturn, when it eventuallymaterialises," said analysts at Conlumino.
Kingfisher also plans to launch the Screwfix chain inGermany, with a four-store trial starting in summer 2014. Thetrial puts it in direct competition with Hornbach Holding, of which it owns 25 percent plus two shares of thevoting capital.
Hornbach late on Wednesday said Kingfisher's representativeswould step down from the supervisory boards of Hornbach Holdingand its Hornbach Baumarkt unit with immediate effect.
The German DIY market is already well-penetrated and saw theinsolvency of the Praktiker DIY store chain thissummer, but Kingfisher said there was space for Screwfix,particularly as it serves trade customers.
Cheshire also said Kingfisher was interested in buying upsome of the stores that are being closed by Praktiker.
Kingfisher made an underlying pretax profit of 365 millionpounds in the six months to Aug. 3 - in line with the average ofanalysts' forecasts according to a company poll, but down from371 million pounds in the same period last year.
Total first-half sales rose 4.3 percent to 5.72 billionpounds, though like-for-like sales fell 0.8 percent.
The company raised the interim dividend by 1 percent to 3.12pence.
Kingfisher (KGF)