Howdens Makes Market Share Gains In 2023

• Performance in line with expectations, with further market share gains.
• Investing to drive future growth.

Results summary

¹ The information presented relates to the 53 weeks to 30 December 2023, the 52 weeks to 24 December 2022 and the 52 weeks to 28 December 2019, unless otherwise stated. The 2023 and 2022 results are presented under IFRS 16, 2019 results have not been restated.

² Comprises Howdens' depots in France, Belgium and the Republic of Ireland (ROI)

Highlights¹

- Group revenue of £2,310.9m in line with last year's record performance.

o UK revenue was 0.7% below last year or level after excluding £14.4m of third-party sales associated with the acquisition of Sheridans in 2022, not repeated in 2023.

o International revenue was 11.0% ahead of last year with continued expansion in France and the Republic of Ireland.

- Gross margins broadly maintained at 60.8% despite higher cost inflation and the dilutive impact of growing the sales of everyday joinery products and solid work surfaces which both performed strongly.  

- Operating costs well controlled at prior year levels, with cost inflation of around £50m more than offset through efficiencies. This protected our investment of another £53m in our strategic initiatives.

- Strategic initiatives included 43 new depots across the Group, 89 depot reformats in the UK, 23 new product ranges, further development of digital and upgrades to manufacturing and supply chain.

- Profit before tax was £327.6m and included £17m of additional costs relating to a 53^rd week. Before these costs profit before tax was down 15.0%.

- Strong cash generation supported by a robust balance sheet with period end cash at £282.8m.

o £50m share buy back completed in the first half.

o Proposed final dividend of 16.2p, bringing the total for the year to 21.0p, up 1.9%.

- The Science-Based Targets initiative recently approved our 2030 carbon emissions reduction target. We have also committed to set long-term targets consistent with our intention to reach net-zero by 2050.

- Encouraging revenue trends since the period end. The Group is on track with its outlook for 2024.

Commenting on the results Andrew Livingston, Chief Executive said:

"The combination of a strong product line-up, high stock availability and outstanding customer service, alongside investments to drive future growth, all contributed to further market share gains in 2023.

"Our established markets for kitchens and joinery in the UK are now estimated to be around £12 billion and we continue to seek further opportunities in adjacent markets. The focus remains on executing our strategic initiatives at pace to capitalise on this attractive, long-term growth opportunity, while selectively expanding Howdens' differentiated, trade-only business model internationally.

"Our robust balance sheet underpins our strategy as we invest in growth, including expanding our manufacturing and supply chain capabilities, and returning surplus capital to shareholders. While we are cautious about the macro-economic and geo-political environment, given the encouraging start to the year and the agility of our business model, the Board is confident in the outlook for 2024."

Operational developments in the year

- Opened 33 new depots, bringing the total in the UK to 840. Revamped 89 older depots during the year, including relocations, having now upgraded 274 of the 670 UK depots opened in the old format.

- Opened 10 international depots with 65 trading in France & Belgium and 10 in the Republic of Ireland.  

- Introduced 23 new kitchen ranges predominantly aimed at entry and mid-price ranges.

- Launched a new 'paint-to-order' service for our best timber kitchen ranges and successfully trialled a new fitted bedroom range during peak trading. Both initiatives achieving encouraging results.

- Expanded our joinery ranges, which represented a greater proportion of the sales mix in 2023.

- Invested in upgrading our manufacturing operations. Howdens now manufactures 35% of its cost of goods sold (COGS) in-house compared to 28% in 2021.

- Completed the roll-out of the cross-docking logistics network (XDC) in early 2023, enabling us to deliver even higher levels of service and availability and further differentiating our offer and scale advantages.

- Retained our #1 position in the digital search market with nearly 20m visits to Howdens.com and grew unprompted brand awareness by end-users to around 31%.

Outlook and summary of planned major strategic initiatives

While it is still early in the new financial year, revenue growth in the new financial year has been encouraging and compared to last year has increased in all the countries in which we operate. We anticipate that market conditions in 2024 will be broadly unchanged and we are well prepared for the challenges and opportunities that this may present. We aim to maintain a profitable balance between margin and volume and we have aligned our operating costs to expected market conditions. We will work with our suppliers to keep product and input costs well controlled.

We will continue to invest in our strategic initiatives to strengthen our differentiated business model and capitalise on the significant growth opportunities in our attractive markets. This is supported by our strong balance sheet and sustained cash generation. Howdens is well placed to continue to outperform its competitors and the Board is confident in its outlook for 2024.

Summary of major strategic initiatives for 2024 (see pages 6 to 10 for more details)

- We plan to open around 30 new depots, revamp 85 in the UK and open 10 new international depots.

- We are expanding our manufacturing capability and capacity including new kitchen furniture and range expansion in solid work surfaces, alongside more joinery products.

- We will launch nine new product ranges with more looks and styles accessible to all budgets with a continued focus on our premium kitchen ranges where we are under-represented.

- We will continue to develop our competitively priced paint-to-order service launched last year.

- Our new fitted bedroom ranges will feature in all our depots for the first time.

- We are refreshing our joinery offerings including doors, flooring and skirting, which generate more depot footfall. We are also extending these offerings in France where the category is under-represented.

- We are introducing a new 'click and collect' service with an in-depot stock management system alongside initiatives to optimise depot product availability. This time-saving feature will also enable customers to see live-stock information at their local depot through the trade app.

Technical guidance for 2024

Income statement

- Continued operating expense investment to support our strategic initiatives including new depots, manufacturing and supply chain and digital investments.

- Higher freight costs are expected to result in additional costs of around £5m in 2024, at current pricing.

- Foreign exchange sensitivity in COGS of Euro: +/- €0.01 = £1.8m; US Dollar: +/- $0.01 = £0.8m.

- Patent box impact on the Group's effective tax rate around 3% lower to c.23%.

Cashflow

- Receivables expected to increase by around £50m due to the later calendar end of our autumn peak trading period, with a higher proportion of customer payments not being due until after the year-end.

- Capital expenditure anticipated at around £125m including investments to support future growth.

- Following the triennial valuation in 2023, cash contribution to the Group pension scheme reduced to £1m per month, should the scheme be in deficit for more than two consecutive months.

Source : Howden Joinery Group Plc

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