A big rise in the dividend, and an ability to vary its product and price mix, gave Howden Joinery's (HWDN) results an operational solidity to match one of the company's fitted kitchens. The ability to control costs not related to its depot expansion plans and to keep prices consistent, particularly as the effect of increases wore off in the second half, meant gross profit margins increased by 1.8 percentage points to 61.5 per cent. However, the strategic issue for management now is how to manage a yawning pension deficit, at the same time as keeping its expansion programme fully funded.
The performance of the UK business was particularly robust despite an uncertain housing market. Depot revenues rose 4 per cent to £872m, and by 1.9 per cent on a like-for-like basis, with 20 new depots opened and 16 extended in the UK to bring the total to 529. Turnover in the much smaller French business rose 5 per cent to £14.6m on an underlying basis. However, Howden's pension deficit looks problematic and increased 13 per cent to £155m even though the company made a contribution to the scheme of £41.7m. That explains why management feels the need to keep significant amounts of cash to hand, instead of using debt to finance the expansion plan that will take it up to 700 depots.
Broker Peel Hunt forecasts current year pre-tax profits of £116m and EPS of 13.1p (from £112m and 14p in 2012).
HOWDEN JOINERY (HWDN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 207p | MARKET VALUE: | £1.32bn | |
| TOUCH: | 206-207p | 12-MONTH HIGH: | 209p | LOW: 109p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 18p | NET CASH: | £96.4m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 806 | 79 | 9.2 | nil |
| 2009 | 770 | 68 | 8.3 | nil |
| 2010 | 808 | 101 | 11.1 | nil |
| 2011 | 854 | 111 | 13.5 | 0.50 |
| 2012 | 887 | 112 | 14.0 | 3.00 |
| % change | +4 | +1 | +4 | +500 |
Ex-div: 22 May Payment: 21 Jun | ||||
