Howden Joinery Group Plc (LON:HWDN), today announced 2018 Preliminary Results
Financial highlights:
· Howden Joinery UK depot revenue increased by 7.7% to £1,477.3m (up 6.3% on a same depot basis3). Group revenue was £1,511.3m (2017: £1,403.8m);
· Gross profit margin 61.7% (2017: 63.3%), due to depots having more flexibility on margin, a price increase that only took effect from April 2018 and increased costs;
· Profit before tax, after including the one-off £3.8m GMP Equalisation charge4, was £238.5m (2017: £232.2m); profit before tax, excluding the GMP Equalisation charge, would have been £242.3m (2017: £232.2m);
· A further £50m share repurchase programme to take place over the next two years;
· Final dividend of 7.9p recommended, giving a full year dividend of 11.6p per share (2017: 11.1p).
Chief Executive, Andrew Livingston, said:
“Howdens delivered another good performance in 2018. We increased sales by 7.7% to £1.5bn. Gross profit and profit before tax also increased, with gross margin improving in the second half. We ended the year with £231m in cash, after investing £44m in the business and returning £131m to shareholders. We opened 33 new depots in the year and the first phase of our new Raunds distribution facility became fully operational, delivering all product on time in full during our peak trading period.
“We have initiatives underway to improve business performance further, focussed on depot format efficiencies, improving range management and the development of our digital platform. We have put a new depot format into a limited number of depots, designed to enable us to use depot space more efficiently and give us the option to open smaller depots in new locations. Consequently we now see the opportunity for around 850 UK depots. Our investment in digital will both reinforce the strong local relationships we have with builders and improve awareness of the Howden offer with consumers.
“We are encouraged by the start we have made to the year and remain confident in our business model for the future.”
Operational developments:
· 33 new depots opened in the UK during 2018, bringing the total to 694 at year end;
· 18 new kitchen ranges introduced;
· First phase of the new distribution centre at Raunds successfully operated for Period 11 trading;
· Capital expenditure of £44.3m (2017: £48.5m) included new depots and digital investment;
· Decision to open four new depots in the Paris region, timing subject to Brexit, but cease operating in the Netherlands and Germany, from January 2019;
· Initiatives to improve business performance underway, focussed on a new depot format that utilises space more effectively, product range management and development of the digital platform.
CURRENT TRADING AND OUTLOOK FOR 2019
Howden Joinery UK depots sales in the first two periods of the new financial year (to 23 February), increased by 4.0%, with one fewer trading day than in 2018. Adjusting for the one fewer trading day, sales in 2019 would have been up 5.1%.
On a same depot basis3, UK revenue increased by 2.4%, or 3.5% adjusted for the one fewer trading day.
The Group believes that there is the potential for the number of depots in the UK to be increased from the 694 operating at the end of 2018, to around 850 depots. During the course of 2019, we plan to open around 40 depots in the UK and Northern Ireland (one already having been opened), and around four in the Paris region.
Regarding the Group’s financial performance, we expect further operating costs of £15m in respect of closing the operations in the Netherlands and Germany, digital upgrades and additional depreciation. These are in addition to the impact of on-going growth in the business, inflationary pressures, new depots and any impact of foreign exchange rates.
Capital expenditure of around £60m is expected, including further investment in new depots, digital upgrades and the next phase of the Raunds distribution centre.
We remain cautious given economic uncertainties, particularly the impact that Brexit might have. In preparation for a ‘No-Deal’ Brexit, our worst case scenario, a number of measures have been taken. Our stocking policy for at-risk items has been adjusted to secure continuity of supply during the transition. As a result, around £15m additional inventory has been purchased and key suppliers are also making plans to ensure supply. In addition, we are looking closely at the options for our inbound supply routes and pursuing appropriate logistics accreditation, including Authorised Economic Operator status, to reduce potential customs delays. Further details of Brexit planning can be found on page 9.
Whilst we remain aware of the economic uncertainties that we face, we are encouraged by the start we have made to the year and remain confident in our business model for the future.
