Howdens Reports 'Year Of Progress' In Preliminary Results

Howdens has reported preliminary results for the year ended 28th December 2019, advising of a 'year of progress'.

Financial highlights

• Howden Joinery UK depot revenue increased by 4.9% to £1,550.3m (up 2.5% on a same depot basis. Group revenue was £1,583.6m (2018: £1,511.3m);

• Gross profit margin of 62.3% (2018: 61.7%), reflected a price increase in January 2019 and a more disciplined balance between volume and price achieved in depots;

• Profit before tax was £260.7m (2018: £238.5m); 

• Final dividend of 9.1p recommended, giving a full year dividend of 13.0p per share (2018: 11.6p); 

• A further £85m share repurchase programme to take place over the next two years.

Chief Executive Officer, Andrew Livingston, said:

“2019 was a year of progress for Howdens and I am pleased with how the business performed. We increased Group revenue by 4.8% to £1.6bn, with profit before tax, up 9.3%, increasing faster than sales, and gross margin also improving. We ended the year with £267m in cash, after investing £61m in the business and returning £126m to shareholders. We opened 44 new depots during the year, including our first five in Northern Ireland and five in France.

“We have initiatives underway to improve business performance further, focussed on depot format efficiencies, improving range management and the development of our digital platform. We have a new depot format which is designed to enable us to use depot space more efficiently and give us the option to open smaller depots in new locations.  Consequently, we see the opportunity for around 850 UK depots. Our investment in digital will both reinforce the strong local relationships we have with builders and improve awareness of the Howden offer with consumers.

“We are encouraged by the progress we made in 2019 and remain confident in our business model for the future.”

Operational developments

• 39 new depots opened in the UK during 2019, including our first five in Northern Ireland, bringing the total to 732 at year end, having closed one depot during the period;

• Five new depots opened in France, while the operations in the Netherlands and Germany were closed in January 2019;

• 12 new kitchen ranges introduced, with average sales per range above those of 2018; five of the new ranges have cabinet doors manufactured by Howdens;

• 19 kitchen ranges were cleared from the business, as part of our ongoing range management programme;

• New Howdens.com web platform is improving brand awareness and leading to increased website visits and depot contacts;

• Capital expenditure of £61.1m (2018: £44.3m) included new depots, digital upgrades and investment in the next phase of our Raunds distribution centre;

• Initiatives underway to improve business performance, focussed on a new depot format aimed at providing the best environment to do business and which utilises space more effectively, product range management and development of the digital platform, including on-line account management facilities.

CURRENT TRADING AND OUTLOOK FOR 2020

Howden Joinery UK depots sales in the first two periods of the new financial year (to 22 February), increased by 1.6% (-0.2% on a same depot basis), with one fewer trading day than in 2019. 

Excluding the first week of trading (which this year had 2.5 trading days), sales in the first two periods of 2020 were up 3.5% (1.6% on a same depot basis).

The Group believes that there is the potential for the number of depots in the UK to be increased from the 732 operating at the end of 2019, to around 850 depots. During the course of 2020, we plan to open around 30 new depots in the UK and five in France. We also intend to extend our depot test by refurbishing 30 older depots to the new format, during the year, and introduce vertically racked product to a further 50 depots, without further modifications. 

In 2020, we expect additional operating costs of £20m to be incurred in respect of: the one-year impact of running the old National Distribution Centre whilst also incurring the costs of the second phase of our new Raunds distribution facility; digital upgrades; increased pension charges; and additional depreciation. These are in addition to the impact of on-going growth in the business, inflationary pressures, new depots and any impact of foreign exchange rates. Compared to 2019, we will benefit from not bearing the £5.8m costs of closing our operations in the Netherlands and Germany. Capital expenditure of around £80m is expected, including the final phase of the Raunds distribution centre, together with further investment in digital and new depots. 

The Group will adopt IFRS 16 for the year to 26 December 2020. The first report under IFRS 16 will be the June 2020 half-year report, released on 23 July 2020. Further details can be found in the Notes to the Financial Statements, below.

With respect to coronavirus, we are monitoring our supply chain closely and have increased forward stock levels for product sourced from China, whilst reviewing alternative sources and means of supply.

Whilst we are aware of the economic uncertainties that we face, we remain confident in our business model for the future.

View the presentation of the preliminary results here.

Source : Howdens Joinery Group PLC 

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