Howden Joinery Group (HWDN) is a specialist joinery business that manufactures kitchens for the small builder trade (it does not sell to the public or housebuilders and does not install), manufacturing core cabinets or carcassing in the UK from its own factories. It also sells third-party white goods, brassware and accessories to complete the kitchen package. While clearly tied exclusively to the construction trade, it is listed (along with all other remaining builders’ merchants) in the support services sector, but is followed primarily by building sector analysts.
Sitting towards the upper end of the FTSE 250 index (its market cap is £3.5bn – it was very briefly in the FTSE 100 last year) Howdens generates around £2.3bn of revenues returning earnings before interest, tax, depreciation and amortisation (Ebitda) of around £485mn and pre-tax profits of around £350mn (all figures are consensus forecasts). Double-digit margins are high for a building materials distribution business reflecting its specialist nature, vertical integration and very strong market position.
Total returns have been pretty decent at 6.5 per cent per year over the past five years but, as the chart shows, this has been a bit of a rollercoaster, more than halving in 2022 and after a partial rebound is falling again through 2023. This is a home improvement and buy-to-let-driven stock, so concerns about the outlook are understandable and despite hopes that the interest rate cycle has peaked, there are still acute pressures in the housing market.