Howdens Posts 'Encouraging' Half-Year Results

• Encouraging performance with further market share gains led by strategic initiatives. On track with 2024 outlook.

On Thursday 25th July, Howden Joinery plc published its half-year trading update.

Results summary

¹ The information presented relates to the 24 weeks to 15 June 2024, and the 24 weeks to 10 June 2023, unless otherwise stated.

² 2019 is shown for comparison being the last year of trading before the start of the COVID pandemic. 

Highlights

-      Revenue of £966.3m was 4.3% ahead of last year.

o  Good UK revenue growth in H1 in a challenging marketplace, gained market share in the period.

o  International business on track with an improvement in depot performance.

-      Maintained industry leading gross margins of 60.8%.

-      Profit before tax of £112.3m in line with last year, after £16m investment in our strategic initiatives in H1. Majority of cost increases due to higher inflation offset by productivity and efficiency improvements.

-      Strong balance sheet with £165.5m of cash at end of the period.

-      Interim dividend increased by 2.1% to 4.9p per share.

-      Continued progress on sustainability. Howdens' Net Zero plan approved by Science-Based Targets Initiative (SBTi) in January 2024.

-      Performance since the start of the second half in line with management's expectations. The Group is on track with its outlook for 2024.

Commenting on the results, Andrew Livingston, Chief Executive said:

"Howdens performance in the first half was encouraging and we gained market share in a challenging marketplace. We continued to invest in our strategic initiatives which is strengthening our differentiated business model and delivering positive results.

"We are focused on the significant growth opportunities in our core UK kitchen and joinery markets. To access these, we are progressing our new depot and reformat programme and making range and product innovations. We are also manufacturing more of what we sell and, alongside the provision of unequalled stock availability, we are adding further digital capabilities to support our trade customers and depot teams. We continue to see opportunities to develop our business model internationally and we're making good progress in establishing Howdens' presence, laying the foundations for future success." 

Operational developments in the first half

• Network expansion - we plan to open c.30 new UK locations and c.5 new international depots this year. To date we have opened 10 depots in the UK and one in the Republic of Ireland.
  
  
• Depot revamps and relocations - we completed 26 in the period and expect to complete c.85 this year.
  
  
• New product introductions - 11 new kitchen ranges for 2024 and we are refreshing our joinery, paint to order and solid worksurface offerings and extending our product line up with new bedroom ranges.
  
  
• Manufacturing expansion - we are expanding our capabilities and capacity. This year our new kitchen frontal and end-panel line at our Howden site will produce around 2m pieces up from 600,000 in 2023.
  
  
• Supply chain optimisation - stock availability remains a key differentiator for why our trade customers buy from us. We continue to invest in technology and infrastructure to maintain these high service levels. Through our cross docking (XDC) network and 'Daily traders' initiatives we are optimising stock across the network and rebalancing where we hold it in the most efficient way.
  
  
• Digital investment - we have launched an upgraded click and collect service enabling customers to see live depot stock which offers greater surety of availability which is particularly useful for everyday items.
  
  
• International development - outside of the UK we are building out our depot teams' capabilities with encouraging results. We have upgraded our offering of footfall promoting products with aligned promotional activity and more supplier support. 

Current trading and outlook for 2024

Despite the continued challenging market environment, our builder customers remain busy. We are maintaining our focus on competitive pricing to support them, while balancing ongoing inflationary pressures to optimise volumes. We are also maintaining a disciplined approach to managing our cost base to optimise operational performance, while implementing our strategic initiatives to support continued market outperformance and long-term growth. This will stand us in good stead for when market conditions improve.

While our results are second half weighted given the Autumn peak trading period, our performance since the start of the second half, has been in line with our expectations. Despite the challenging market conditions, the progress of our strategic initiatives and current trading momentum gives us confidence that the Group is on track with its outlook for 2024. We remain focused on delivering growth ahead of our markets, while generating strong cash flow, and attractive returns for shareholders over the medium-term.  

Technical guidance for 2024

Income statement

• As a result of the 53^rd week in 2023 there was an earlier start to trading in 2024 across the Group with our depots open in the first week of 2024, when they were closed in 2023. This reverses in H2 when there are fewer trading days than in 2023.
  
  
• As previously announced, there is a benefit in H2 2024 from the non-repeat of the additional 53^rd week in 2023 when £17m of additional costs were incurred.
  
  
• We expect a continuation of higher freight costs due to rising container costs. At current pricing around £5m of additional costs is expected in the second half as inventory procured and shipped in H1 is sold.
  
  
• Foreign exchange sensitivity in COGS of Euro: +/- €0.01 = £1.6m; US Dollar: +/- $0.01 = £0.7m. 

Cashflow

• Receivables are 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 is anticipated at around £125m including investments to support future growth.

Source : Howden Joinery plc

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