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Howdens Trades Ahead Of Expectations; Plans Republic of Ireland Openings

Howdens corner shutterstock_315639281 725 x 500

Howden Joinery Group has published interim results for the 2021/2022 financial year. 

Summary of Group Results (1)

£m (unless stated)   20212020     2019% change vs ‘20% change vs ‘19
Revenue
 - Group
 
784.9
 
465.0
 
652.6
 
68.8
 
20.3
 - Howden Joinery UK depots764.1453.4638.168.519.8
Gross profit481.0276.1404.274.219.0
Gross profit margin, %61.359.461.9190bps(60)bps
Operating profit/(loss)124.3(9.8)77.7 60.0
Operating profit/(loss) margin, %15.8(2.1)11.9 390bps
Profit/(loss) before tax119.2(14.2)78.1 52.6
Basic earnings/(loss) per share16.4p(1.8)p10.3p 59.2
Dividend per share4.3p0.0p3.9p 10.2
Cash at end of period476.2253.4217.187.9119.3

(1) The information presented relates to the 24 weeks to 12 June 2021, the 24 weeks to 13 June 2020 and the 24 weeks to 15 June 2019, unless otherwise stated. 2019 figures are presented on a pre-IFRS 16 basis.

(2) Same depot basis for any year excludes depots opened in that year and the prior year. See Financial Review on page 4.

Financial highlights (1):

  • Howden Group achieved a strong first half performance compared to both H1 2020 (which was significantly impacted by the COVID-19 pandemic) and H1 2019. Group revenue of £784.9m was up 68.8% on H1 2020 and 20.3% higher than H1 2019;

  • Howden Joinery UK depot revenue of £764.1m, was 68.5% up on H1 2020 and was 67.1% higher, on a same depot basis (2). Compared to H1 2019, Howden Joinery UK depot revenue increased by 19.8% and by 15.3% on a same depot basis (2);

  • Gross profit margin of 61.3% (2020: 59.4%; 2019: 61.9%), was encouraging considering the higher mix of everyday and promotional products, with price increases that more than recovered increasing commodity and freight costs;

  • Profit before tax of £119.2m (2020: loss before tax of £14.2m; 2019: profit before tax of £78.1m), reflected strong sales growth, together with a modest increase in operating costs;

  • 2021 interim dividend of 4.3p per share (2020: nil; 2019: 3.9p), and recommencement of share buyback programme of £50m;

  • Cash of £476.2m at 12 June 2021 (26 December 2020: £430.7m; 13 June 2020: £253.4m), with £108.3m of 2020 dividends paid after the end of the half

Chief Executive, Andrew Livingston, said:

“Howdens delivered a very strong performance in the first half of 2021, with sales and profit before tax at record levels for the period. Sales were 69% higher than the first half of 2020 (which was materially impacted by COVID-19) and 20% higher than the comparator period in 2019. Sales of “everyday” and promotional items were particularly strong and our profit, compared with 2019, increased at a faster rate than sales. 

“This robust performance demonstrates the strength of our trade only, in-stock, local business model and the benefit of pent-up demand as people choose to spend more on their homes. With that in mind, we now believe there is potential for at least 900 depots in the UK, including 20-25 in Northern Ireland, and plan to start testing the Howdens model in the Republic of Ireland in 2022.

“While we are aware that economic uncertainties persist and also of the strong comparatives we will trade against in the second half, we are encouraged by the progress made so far in 2021 and remain confident in our business model for the future.” 

Operational developments in the first half:

  • Seven new depots opened and one closed in the UK, bringing the total to 754 at period end;

  • 28 older UK depots revamped and eight depots re-racked without other modifications;

  • Howdens solid surface manufacturing facility now operational;

  • 14 of the 17 new 2021 kitchen ranges are now on sale, with sales of the new ranges higher than in the first half of 2019;

  • Good further progress made with developing the digital offering, with the Howdens.com web platform improving brand awareness and leading to increased web visits, online brochure requests and resulting depot contacts, and “anytime ordering” launched for trade customers; and

  • Capital expenditure of £23.8m (2020: £22.3m; 2019: £24.1m) included new and revamped depots, manufacturing capacity and digital investments. 

CURRENT TRADING AND OUTLOOK FOR 2021 

We have performed strongly through the first half, ahead of our original expectations as we continue to benefit from our in-stock model and product availability. Whilst we have also seen significant cost inflation resulting from Brexit and COVID-19 related disruption, we have been largely successful in mitigating these with price increases and supply chain management, respectively.  

In the first four-week period of H2 (Period 7, to 10 July 2021), total sales at Howdens Joinery UK depots rose by 31.0% on the same period in 2020, and by 29.5% on a same depot basis (2). On a local currency basis, European depot sales in Period 7 increased 52.3% compared to the same period last year, and by 48.3% on a same depot basis (2).

Compared to 2019, Period 7 sales at Howdens Joinery UK depots rose by 33.8% and by 28.9% on a same depot basis (2). On a local currency basis, European depot sales increased 122.6% and by 98.9% on a same depot basis (2).

Capital expenditure of around £90m is now expected in 2021, including new and refurbished depots, in-house manufacturing, further investment in digital and maintenance deferred from 2020. We plan to open around 45 new depots in the UK and France during the year, seven of which were opened in the first half. Including relocations, we also intend to revamp around 62 depots to the new format, 28 of which were completed in the first half, and introduce vertically racked product to a further 30 depots without further modifications, eight of which have been completed. 

We remain cautiously optimistic in our outlook for the second half and our all-important peak trading period. We are planning around several factors including:

  • The continuing mix of revenues we saw in the first half, with our ability to continue to recover increasing commodity and freight costs in our pricing;

  • The potential effect of the non-continuation of recent pent-up demand that we have seen from the second half of 2020;

  • Ongoing inflationary cost pressures and our investment in costs to more sustainable levels; and

  • The risk of any further pandemic restrictions on our business operations or levels of consumer demand.

Whilst we are aware of the economic uncertainties that we face and the tough comparators from the second half of 2020, we remain confident in our business model for the future.

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

Source : Howden Joinery Group PLC

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22 July 2021

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