Howdens Delivers Strong Growth but Margin Pressures Increase

Howdens Joinery Group PLC issued it's half yearly update this morning and here's the summary:- 

Financial highlights:

• Howden Joinery UK depot revenue grew by 12.1% to £604.7m (2017: £539.5m), and up 10.7% on a same depot basis. Group revenue was £619.4m (2017: £553.0m);
• Gross profit margin of 61.3% (2017: 64.1%), reflecting sales initiatives and increases in costs of goods sold:
• Operating profit of £69.6m (2017: £66.6m), due to strong sales growth ahead of reduced gross margin;
• Profit before tax of £68.8m (2017: £65.6m);
• Basic earnings per share of 8.9p (2017: 8.4p);
• £38.3m returned to shareholders by 16 June 2018 through our share buyback programmes;
• Net cash of £213.3m at 16 June 2018 (30 December 2017: £241.1m net cash; 10 June 2017: £215.1m net cash)
• Interim dividend of 3.7p per share (2017: 3.6p).

Chief Executive, Andrew Livingston, said:

“Since joining Howdens in January, I have been impressed with the outstanding and differentiated service we give to our builder customers. We delivered a solid performance in the first half, as we press ahead in a competitive market.

“Our leading service proposition is supported by the unique combination of locally empowered depots and strong supply operations. In the first half, our supply chain enabled us to bring twelve new kitchen ranges to the market, as well as a new grey oak cabinet, thin laminate worktops and a new range of doors. Our investment programme in manufacturing, distribution, depot rollout and IT remains on track.

“Howdens is in good shape with opportunities ahead of us, as we develop our product offering, bring even more convenience to the building trade and generate further operational efficiencies across the business.”

Business developments:

• Seven new UK depots opened in H1 2018 bringing total to 668;
• 12 new kitchen ranges introduced in H1 2018.
• New distribution centre at Raunds ready for Period 11 trading.
• Capital expenditure of £17.1m (2017: £22.0m).

Current trading and outlook:

• Howden Joinery UK depot revenue increased by 5.3% in the first four week period (Period 7) of the second half of the year (to 14 July 2018).
• Our overall expectations for the full year are unchanged. 

Insight DIY Analysis & Commentary

Their Operating profit is in-line with expectations with continued, strong sales growth during the period offset by margin pressures. The decision to give their depot managers more pricing flexibility has adversely impacted their gross margins. UK sales growth in the first four weeks of the second half has declined to 5.3% from previously reported double-digit levels, and this could continue to decline through the rest of their trading period as year on year comparatives get tougher.

Source: Insight DIY Team & Howdens Results

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