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Howden Joinery Group PLC

Howden Joinery Group Plc Half-year Report

SUMMARY OF GROUP RESULTS1

£m (unless stated)20192018% change
Revenue – Group652.6 619.4 5.4
 – Howden Joinery UK depots638.1604.75.5
Gross profit404.2379.56.5
Gross profit margin, %61.961.360bp
Operating profit77.769.611.6
Profit before tax78.168.813.5
Basic earnings per share10.3p8.9p15.7
Dividend per share3.9p3.7p5.4
Net cash at end of period217.1213.31.8

The information presented relates to the 24 weeks to 15 June 2019 and the 24 weeks to 16 June 2018, unless otherwise stated.

2 Same depot basis for any year excludes depots opened in that year and the prior year.

Financial highlights1:

·       Howden Joinery UK depot revenue grew by 5.5% to £638.1m (2018: £604.7m), and by 3.4% on a same depot basis2. Group revenue was £652.6m (2018: £619.4m);

·       Gross profit margin of 61.9% (2018: 61.3%), reflected a price increase in January and a more disciplined balance between volumes and price achieved in depots;

·       Profit before tax of £78.1m (2018: £68.8m), due to good sales growth with improved gross margin, partly offset by continued investment in the business;

·       £46.3m returned to shareholders through our share buyback programmes;

·       Net cash of £217.1m at 15 June 2019 (29 December 2018: £231.3m net cash; 16 June 2018: £213.3m net cash).

Chief Executive, Andrew Livingston, said:

“Howdens delivered another positive performance in the first half of 2019, with sales increasing by 5.4%, against tough volume comparators in the prior year. Just as importantly, gross margin improved as we achieved a more disciplined balance between price and volume in our depots. Profit before tax was up strongly, at £78.1m and we ended the half year with £217m in cash, having invested £24m in the business and having returned £46m to shareholders.

“We have made good progress with our new initiatives, focussing on depot openings and our new format, range management and the development of our digital platform. We opened 15 new depots in the period, all in the new format, including five in Northern Ireland and one in France, and are reformatting a further eight of our older UK depots.

“We are encouraged by the start we have made to the year and, despite the economic uncertainties ahead, remain confident in our business model. With our peak trading period still ahead of us, we are on track with our plans for the year as a whole.”

Business developments:

·       15 new depots opened in H1 2019, including five in Northern Ireland and one in France, bringing the total to 731;

·       Eight new kitchen ranges introduced in H1 2019, with 15 ranges cleared from the business;

·       An update of our light oak cabinet and frontals, to a more natural tone;

·       Other new product introductions include 25 new Lamona appliances across cooking, laundry and dishwashing products, and 12 new laminate and solid surface worktops;

·       Rolling-out 250 of the fastest selling trial hardware lines, across all depots;

·       Further progress on developing the new digital offering with significant increases to web visits, online brochure requests and resulting depot contacts;

·       Capital expenditure of £24.1m (2018: £17.1m) included new depots, the next phase of Raunds distribution centres and digital.

CURRENT TRADING AND OUTLOOK FOR 2019

In the first four week period of H2 (Period 7, to 13 July 2019), total sales at Howdens Joinery UK depots rose by 7.5% on the same period in 2018, and by 4.8% on a same depot basis2.

During the course of 2019, we plan to open around 40 depots in the UK, including the five opened in Northern Ireland, and around five in France; 15 depots were opened during H1 2019.

Regarding the Group’s financial performance in 2019 compared with the prior year, we continue to expect additional operating costs of £15m in the full year in respect of closing the operations in the Netherlands and Germany, digital upgrades and additional depreciation. These are in addition to the impact of ongoing growth in the business, inflationary pressures, new depots and any impact of foreign exchange rates.

We expect capital expenditure of between £70m and £80m, including further investment in new depots, digital upgrades and the next phase of the Raunds distribution centres.

We remain cautious given economic uncertainties, particularly the impact that Brexit might have. In preparation for a ‘No-Deal’ Brexit, a number of measures have been taken. Our stocking policy for at-risk items has been adjusted to secure continuity of supply during the transition. As a result, around £12m additional inventory is being held and key suppliers are also making plans to ensure supply. In addition, we are looking closely at the options for our inbound supply routes and have in place appropriate logistics accreditation (Authorised Economic Operator status), to reduce potential customs delays.

Whilst we remain aware of the economic uncertainties that we face, we are encouraged by the start we have made to the year and remain confident in our business model for the future. With our busy Period 11 still ahead of us, we are on track with our plans for the year as a whole.

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