Howden Joinery (HWDN) continues to extract growth from an unlikely source - selling kitchens to local builders on behalf of homeowners. The top-line growth rate of 7 per cent includes an extra week's trading due to changes in the company's year-end, but even without the extra week growth was 4.3 per cent.
That's partly because the company continues to add depots to its network. It opened eight in the first half, bringing the total to 537, and as many as 30 new depots could open this year. Howden's other source of growth is price increases. These exceeded cost inflation, pushing the gross profit margin up from 60.3 to 61.5 per cent. That's high because the company makes about a third of its goods in-house.
Thanks to operational gearing - spreading admin costs over a broader base of sales - margins also improved at the operating level, so that adjusted pre-tax profits jumped by two-thirds to £43.2m, well ahead of broker forecasts. But management warns that some of the margin gains may reverse in the second half, when it is due to open more depots and implement pension auto-enrolment. At least there was good news on the company's legacy pension plan deficit, which fell from £155m to £93.3m over the six-month period as long-term interest rates crept up.
Brokerage Peel Hunt expects adjusted pre-tax profits of £123m and EPS of 14.6p for the full year, up from £112m and 13.9p in 2012.
HOWDEN JOINERY (HWDN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 288p | MARKET VALUE: | £1.85bn | |
| TOUCH: | 287-289p | 12-MONTH HIGH: | 289p | 127p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 27p | NET CASH: | £101m | |
| 24 weeks to 15 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012* | 365 | 25.9 | 3.2 | 0.3 |
| 2013 | 391 | 38.7 | 4.4 | 1.0 |
| % change | +7 | +49 | +38 | +233 |
Ex-div: 23 Oct Payment: 22 Nov *Period to 9 June | ||||
