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Howdens: 2020 Trading Robust, Despite Coronavirus Impact

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Howdens has reported on trading for the year ended 26th December 2020.

Financial Highlights
• Whilst the COVID-19 pandemic had a significant impact on Howdens, the Group adapted and traded robustly overall with revenue of £1,547.5m (2019: £1,583.6m). Howden Joinery UK depot revenue reduced by 2.6% to £1,509.6m (2019: £1,550.3m), and by 4.5% on a same depot basis.

• Gross profit margin of 60.1% (2019: 62.3%), reflected mix changes, pricing and the impact of carrying fixed costs during reduced levels of production due to COVID-19;

• Profit before tax was £185.3m (2019: £260.7m), reflecting the lower gross profit, together with a modest increase in operating costs;

• 2020 final dividend of 9.1p per share recommended and special dividend of 9.1p per share to be paid (in lieu of the cancelled final dividend for 2019), totalling £108m;

• Net cash of £430.7m (2019: £267.4m), enhanced by the timing of c.£60m of supplier payments due after year end. The Group repaid Government support received earlier in the year ahead of the year end.

Current Trading & Outlook For 2021

The following table shows sales in the first two periods of the new financial year (to 20 February 2021) in absolute terms, on a same depot (LFL) basis2 and adjusted for working days.

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* Excluding the first week of the year when depots were closed in 2021, compared with 2020 which had 2.5 trading days. We have made a solid start to the year although we have seen some greater caution from end consumers on allowing trades people into their homes under the current lockdown. We therefore remain cautious about the ongoing impact that COVID-19 may have.

So far in 2021 we have implemented price increases across a range of products as we manage the drivers around margin and aim to get the right balance between price and volume. We are experiencing pressure from commodity prices, increasing freight costs and product mix, with a higher than usual proportion of sales coming from lower margin products. We believe that Howdens is in a strong position in an uncertain market and we continue to invest in new depots, digital investments and enhanced depot stock replenishment while incurring some inflationary cost increases. These investments are partially offset by the ending of the double-running costs of our legacy national distribution centre and the new Raunds development, incurred in 2020.

Capital expenditure of around £80m is expected in 2021, including around 45 new depots and 40 depot refurbishments, in-house manufacturing further investment in digital and maintenance deferred from 2020.

With respect to Brexit and COVID-19, we continue to monitor our supply chain closely and have increased stock levels. Our Brexit planning has meant that, to date, there has not been a material impact on our business and we are effectively managing through the short-term challenges.

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

Chief Executive Officer, Andrew Livingston, said:
“Howdens performed well during 2020. We adapted to COVID trading conditions and progressed our strategic plans for the business. Our performance demonstrates the strength of our trade only business model and our ability to evolve the business while prioritising the health and wellbeing of our staff and customers.

“Following a sharp drop in sales in quarter two when the UK entered its first national lockdown, our performance improved significantly in the second half, with sales up 16% compared to the equivalent period in 2019, as we benefitted from pent-up demand and the consumer’s desire to invest in their homes. The year ended strongly with profit and cash flow ahead of expectations and we were able to repay the Government furlough and other support taken earlier in the year. We are also pleased to be resuming dividend payments.

“Given the COVID-related and other economic uncertainties, we remain cautious about underlying market conditions; however, we are encouraged by the progress made in 2020 and remain confident in our business model for the future.”

Operational developments:

• On 24 March 2020, in response to the COVID-19 pandemic, Howdens announced the temporary closure of all its UK depots, along with most of its manufacturing and distribution operations. From late April, in line with Government guidance and with additional safe working processes in place, Howdens began a phased reopening of its depots, manufacturing and distribution facilities. By period 6, all sites were open and operating safely, and the strong second half benefitted from our ability to meet pent-up demand and the consumer’s desire to invest in their homes;

• 16 new depots opened in the UK during 2020, bringing the total to 748 at year end;

• Four new depots opened in France, bringing the total in France and Belgium to 30 at year end;

• Ended the year with 63 kitchen ranges having introduced 18 new ones, with the new Hockley ranges having cabinet doors manufactured by Howdens;

• Good progress was made developing the digital offering, with the web platform improving brand awareness and leading to increased web visits, brochure requests and depot contacts. The online trade customer area is seeing a significant increase in adoption and usage;

• Capital expenditure of £69.7m (2019: £61.1m) included the final phase of our Raunds distribution centre, new depots, depot refurbishments and digital investments.

Review the results presentation here.

Source : Howden Joinery PLC

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25 February 2021

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