Howden Joinery (HWDN), which sells kitchens to small local builders, is doing a roaring trade. The company is throwing off so much cash that City analysts reckon a special dividend could be in the offing.
Revenue from Howden's UK depots rose 12 per cent to £428m in the first half, driven by an improving repair, maintenance and improvement (RMI) market and new customer accounts. A price increase lifted the gross margin by 170 basis points, so operating profit rose by even more than revenue - jumping almost a third to £58m.
Howden's net cash pile grew by a further £21m in the first half, despite the continued roll-out of the depot network. That cash gave Howden the fire-power to almost double the first-half dividend. Analysts at Peel Hunt thinks Howden may go further, citing "scope for a significant cash return". The broker believes around £200m could be returned as a special dividend, which would equate to 31p a share or nearly 10 per cent of the company.
Broker Peel Hunt has upgraded its full-year pre-tax profit forecast by 5 per cent to £166m to reflect higher revenue and gross margin assumptions, giving earnings per share of 20p (from £138m and 16.3p in 2012-13), with 22.7p pencilled in for next year.
| HOWDEN JOINERY (HWDN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 326p | MARKET VALUE: | £2.1bn | |
| TOUCH: | 325p-326p | 12-MONTH HIGH: | 392p | LOW: 265p |
| DIVIDEND YIELD: | 2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 41p | NET CASH: | £161m | |
| Half-year to 14 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 391 | 37.1 | 4.2 | 1 |
| 2014 | 435 | 57.2 | 6.6 | 1.9 |
| % change | +11 | +38 | +38 | +90 |
