Howden Joinery (HWDN) had to contend with escalating cost pressures through 2017, so a 90 basis point decline in the gross margin represents a reasonable outcome. Ultimately, earnings were held in check by increased depreciation and pension charges, together with costs linked to a new distribution centre in Northamptonshire and the introduction of 26 new kitchen ranges. The group expects an additional £20m in operating costs this year due to the distribution switch and further digital upgrades.
Performance essentially mirrored wider trends in the construction and building markets, with first-half weakness in the London area offset by stronger contributions in the regions. Second-half sales did improve nationwide, although year-on-year contrasts aren’t particularly illuminating due to poor comparators in 2016.
Net operating cash flow pulled back to £177m (from £207m in 2016) following a £41.4m contribution to fund the pension deficit. Around £116m was returned to shareholders through the year, including £48m through the share repurchase programme, with another £60m earmarked for buybacks during the next two years. Meanwhile, Howden plans to open around 30 depots in the UK across 2018, having opened 19 in 2017.
The buy/sell recommendations are broadly split among the analysts covering Howden Joinery, with adjusted EPS for 2018 standing at 31.3p, rising to 34.1p in 2019.
HOWDEN JOINERY (HWDN) | ||||
ORD PRICE: | 485p | MARKET VALUE: | £3.01bn | |
TOUCH: | 485-487p | 12-MONTH HIGH: | 486p | 398p |
DIVIDEND YIELD: | 2.3% | PE RATIO: | 16 | |
NET ASSET VALUE: | 73p | NET CASH: | £186m † |
Year to 30 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2013 | 0.96 | 135 | 15.9 | 5.5 |
2014 | 1.09 | 189 | 23.2 | 8.4 |
2015 | 1.22 | 220 | 27.3 | 9.9 |
2016 | 1.31 | 237 | 29.5 | 10.7 |
2017* | 1.40 | 232 | 29.9 | 11.1 |
% change | +7 | -2 | +1 | +4 |
Ex-div: | 24 May | |||
Payment: | 22 Jun | |||
*53-week period. †Excludes £55m in investments |