- UK’s leading trade kitchen supplier gains market share
- Announces further £50 million buyback
- But warns of strong comparatives during 2023
Trade kitchen supplier Howden Joinery (HWDN) defied the slowdown in the new-build home industry by posting higher profits for the year to December 2022 amid further market share gains and pointed to an encouraging start to the new year.
Howden Joinery also launched a further £50 million share buyback, but the shares softened 0.4% to 715p, halting their strong recent rally, after the company warned it faced demanding prior-year comparatives during 2023 and profitability would be crimped by the full-year impact of inflationary cost increases and ongoing strategic investments.
ANOTHER IMPRESSIVE YEAR
Despite margin pressure from cost inflation, Howden Joinery’s pre-tax profit for 2022 was 4% higher year-on-year and an impressive 55.7% above pre-pandemic 2019 levels at £405.8 million.
Group revenue rose 10.8% year-on-year to over £2.3 billion, so 46.4% above pre-Covid 2019, predominantly due to price increases.
The expansionist company, which is opening new depots in the UK, France and Republic of Ireland, attributed this resilient showing in the face of rising interest rates and housing market uncertainty to ‘the strengths of our local, trade only, in-stock business model’ as well as another record sales performance in its peak autumn period.
Cash-generative Howden Joinery not only raised the total dividend by 5.6% to 20.6p, it also pleased investors by announcing a further £50 million share buyback.
BUT DEMANDING COMPARATIVES TO COME
While it remains early in the new financial year, Howden Joinery’s sales in the first few weeks of 2023 have been ‘encouraging in the UK’, said the company.
‘We continue to seek to maintain a profitable balance between pricing and volume and have implemented a price increase from the start of the year to recover rising input costs.’
Howden Joinery also highlighted a strong product line up of new kitchen ranges, though it also cautioned that during 2023 it faces ‘strong prior year comparatives and, particularly in the first half, the full year impact of inflationary cost increases and our ongoing investments in our strategic initiatives.’
WHAT IS THE COMPANY SAYING?
Chief executive Andrew Livingston insisted Howden Joinery had been ‘adept’ at navigating high inflation and supply chain disruption while supporting customers with market-leading products as well as ‘high stock availability and outstanding customer service’.
He added: ‘Our markets are large and fragmented which gives us a long-term opportunity for growth. In response, we are continuing to expand our depot network, improve our product range, optimise our manufacturing and supply chain, and develop our digital capabilities.’
THE NUMIS VIEW
Numis Securities, which has an 850p price target for the stock, said Howden Joinery’s 2022 profits came in 3% ahead of its £395 million forecast and retained its 2023 and 2024 forecasts after the solid start to 2023, estimates pointing to a drop in pre-tax profits to £355 million this year ahead of £384 million next.
Based on estimated 2024 earnings per share of 53.7p, Howden Joinery trades on a prospective 2024 price to earnings ratio of 13.3 times.
‘Whilst cognisant of the uncertain macro backdrop,’ wrote the broker, ‘wwe view this as an attractive multiple for a high-quality company with a proven track record of outperformance and a clear runway of potential growth.’
