Howden Joinery : Full Year Results

About this update from Howden Joinery Group Plc

24 February 2022 Howdens delivers record results Results summary Change Change £ millions (unless stated) 2021 1 2020 vs 2020 vs 2019 3 Group revenue 2,093.7 1,547.5 +35.3% +32.2% UK depots revenue 2,043.3 1,509.6 +35.4% +31.8% Gross profit 1,289.0 930.0 +38.6% +30.7% Gross profit margin, % 61.6% 60.1% +150bps (70)bps Operating profit 401.7 195.7 +105.3% +54.5% Operating profit margin, % 19.2% 12.6% +660bps +280bps Profit before tax 390.3 185.3 +110.6% +49.7% Basic earnings per share, p 53.2p 24.9p +113.7% +52.0% Total ordinary dividend per share, p 19.5p 9.1p Special dividend, p - 9.1p Cash at end of period 515.3 430.7 The information presented relates to the 52 weeks to 25 December 2021, the 52 weeks to 26 December 2020 and the 52 weeks to 28 December 2019, unless otherwise stated. The 2021 and 2020 results are presented under IFRS 16, 2019 results have not been restated. Same depot basis for any year excludes depots opened in that year and the prior year. See Financial Review on page 4. 2019 included due to the significant impact of COVID-19 on the 2020 results. Highlights 1 Group revenue of £2,093.7m was 35.3% ahead of last year reflecting the strengths of our trade only, in-stock business model. UK depot revenue 35.4% ahead of last year and 33.7% ahead on a same depot basis 2 . Gross margin progression of 61.6% year-over-year with disciplined pricing recovering cost increases. Profit before tax of £390.3m, up 110.6% on 2020 and 49.7% on 2019, significantly outpacing revenue growth. Good cash generation and the balance sheet remains strong with cash at end of period of £515.3m. Final dividend of 15.2p per share bringing total dividend to 19.5p per share with £50m share buy-back completed. New £250m share buy-back announced today. Good progress on ESG, achieving carbon neutral status at our two principal UK manufacturing facilities this year. Andrew Livingston, Chief Executive said: "2021 was a very successful year for Howdens as we both delivered record financial results and progressed our strategic plans for the business. Our performance demonstrates the strength of our trade only, in-stock local business model and our ability to meet heightened demand for our products. I would like to express my thanks to our 11,000 employees for their dedication and commitment to delivering outstanding service to our customers against a continued backdrop of COVID-19 and supply chain challenges. "We believe there is now potential for at least 950 depots in the UK and we are expanding our presence in France and the Republic of Ireland. We continue to invest in our depot network, market leading products, manufacturing and supply chain, and digital capabilities, all of which improve service to our customers and help us take advantage of market opportunities. Our robust balance sheet gives us the flexibility to continue to invest in our growth plans for the business at the same time as delivering enhanced returns to shareholders through ordinary dividends and share buy-backs." Howden Joinery Group Plc - 2021 Full Year results announcement 01 24 February 2022 Operational Developments in the Year Opened 31 new depots in the UK, bringing the total to 778 at period end and revamped 62 older UK depots in the year. By the end of 2021 we had 210 UK depots trading in the updated format. Opened 10 new depots in France, bringing total to 40 at the period end. Introduced 17 new kitchen ranges and grew higher priced kitchen ranges strongly in the year. Continued to invest in upgrading our manufacturing capacity and capabilities to support future growth which included investment in capacity for kitchen frontals, solid work surfaces, architrave and skirting products. Invested in regional cross docking facilities (XDCs) with 6 operating at the end of the period supporting around 400 depots. XDCs enable improvements in customer service and product availability by optimising inventory and delivering patterns of product to depots across the full product range. Invested in our digital platform which amongst other things saves our trade customers time and money and supports them in optimising the procurement process for end users. Capital expenditure investment is expected to be around £100m in 2022 (2021: £90m) which includes investment in our strategic initiatives. There will also be an additional one-off investment of £10m this year on the acquisition of freehold land to support our investments in additional manufacturing capacity. Current Trading and Outlook for 2022 The following table shows sales in the first two periods of the new financial year to 19 February 2022 in absolute terms, on a same depot (LFL) basis 2 and adjusted for working days. Revenue growth (%) Periods 1-2 Periods 1-2 Adj * % LFL% % LFL % UK depots 17.1% 15.6% 19.5% 18.0% Continental European depots** 21.4% 18.9% compared with 2021 which had 38.5 trading days, 1 more than 2022 in the UK. The 38.5 trading days in Continental Europe depots are the same in both 2021 and 2022. excludes 5 French depots which will be closed in 2022. We have made an encouraging start to 2022 and are confident in our resilient business model across changing market conditions: We are continuing to execute and invest in our strategy and see many attractive medium-term opportunities for profitable growth and increased volumes. We are currently offsetting inflationary pressures through price management and cost control, underpinned by our service-led business model and the scale of our manufacturing and sourcing operations. We remain watchful of macro-economic uncertainties and vigilant for any potential headwinds in our markets. During the second half of 2022 we will be trading against record revenue comparatives which includes our all-important peak trading period. While it is still early in the new financial year, we have, at present, the momentum for another successful year in 2022 and the plans in place to deliver one. Howden Joinery Group Plc - 2021 Full Year results announcement 02 24 February 2022 For further information please contact Howdens Joinery Group Plc Media Enquiries Paul Hayes, CFO Nina Coad, David Litterick (Brunswick) Tel: +44 (0) 207 535 1110 Tel: +44 (0) 207 404 5959 Mark Fearon, Director of IR and Communications Mobile: +44 (0)7711 875050 Results presentation: There will be a live audio webcast for analysts and investors at 08:30 UK time today, 24 February 2022: https://brrmedia.news/HWDN_FY21 For more information see: www.howdenjoinerygroupplc.com . The presentation can also be heard by dialling the phone numbers below, where there will be the opportunity to ask questions: Location Phone Number United Kingdom, Local +44 (0)330 336 9601 United States, Local +1 323-701-0160 Confirmation code: 7136938 The webcast will be recorded and available on our website after the event has finished at: www.howdenjoinerygroupplc.com Note to editors: 1. About Howdens Joinery Group Plc Howden Joinery Group Plc is the parent company of Howden Joinery (Howdens). In the UK, Howdens sells kitchens and joinery products to trade customers, primarily small local builders, through 778 depots. In 2021, the business generated revenues of around £2.1 billion and profit before tax of £390.3 million. Around one-third of the products it sells are manufactured in house at its factories in Runcorn, Cheshire, and Howden, East Yorkshire both of which recently achieved carbon neutral status. The business also operates a total of 40 depots in France and Belgium. 2. Timetable for the final dividend The timetable for payment of the proposed final dividend of 15.2 pence per ordinary share is as follows: Ex-dividend date: 7 April 2022 Record date: 8 April 2022 Payment date: 20 May 2022 3. Provisional financial calendar 2022 Trading update 28 April 2022 Annual General Meeting 12 May 2022 Half Year Report 21 July 2022 Trading update 3 November 2022 End of financial year 24 December 2022 Howden Joinery Group Plc - 2021 Full Year results announcement 03 24 February 2022 Financial Review Financial Results for 2021 1 Revenue £m (unless stated) 2021 # of depots 2020 Group: 2,093.7 818 1,547.5 Howden Joinery UK depots - same depot basis 2,017.7 731 1,508.8 UK depots opened in previous two years 25.6 47 0.8 Howden Joinery UK depots - total sales 2,043.3 778 1,509.6 Howden Joinery Continental European depots 50.4 37.9 Local currency revenue (€m) France and Belgium - same depot basis 55.3 26 41.7 Depots opened in previous two years 3.1 14 0.9 France and Belgium - total sales 58.4 40 42.6 The information presented relates to the 52 weeks to 25 December 2021 and the 52 weeks to 26 December 2020 unless otherwise stated. Same depot basis for any year excludes depots opened in that year and the prior year. Total Group revenue of £2,093.7m was ahead by 35.3% (2020: 1,547.5m). UK depot revenue grew 35.4% to £2,043.4m (2020: £1,509.6m). UK revenue increased by 33.7% on a same depot basis 2 to £2,017.7m (2020: £1,508.8m); this excludes the additional revenue from depots opened in 2021 and 2020 of £25.6m (2020: £0.8m). Depot revenue in Continental Europe was £50.4m (2020: £37.9m). On a local currency basis, revenue at our depots in France and Belgium increased by 37.3% on a same depot basis 2 . Gross Profit Gross profit was £1,289.0m (2020: £930.0m; 2019: £986.2m). The £359m increase compared with 2020 reflected a positive volume and mix impact of £282m and higher pricing of £107m. There were also £30m of cost pressures reflecting the net impact of higher commodity, freight costs and foreign exchange. These factors contributed to an increase in gross margin of 150 basis points versus the prior year to 61.6% (2020: 60.1%; 2019 62.3%) as we appropriately balanced mix with higher overall volumes. The £303m increase compared with 2019 reflected growth in sales volumes and mix of £254m and changes in price of £91m partly offset by £42m of product cost pressures. This included the net impact of significant increases in input costs including commodities, freight and transportation partially offset by initiatives to reduce costs. Operating Profit Operating profit was strongly ahead of last year and 2019 at £401.7m (2020: £195.7m; 2019: £260.0m on a pre IFRS 16 basis) and the operating profit margin was 19.2% (2020: 12.6%; 2019 16.4%). Selling and distribution costs and administrative expenses (SD&A) increased by 20.8% to £887.3m (2020: £734.3m; 2019: £726.2m). As expected, costs increased due to continued investment in areas across the business. Compared to 2020 this included £11m on UK depots opened in 2020 and 2021 and £13m on French depots opened in the period. We also invested £28m in warehouse and transportation initiatives which included the investment in regional XDCs and £10m in marketing and digital costs. £70m of additional Howden Joinery Group Plc - 2021 Full Year results announcement 04 24 February 2022 costs were also incurred in the existing depot network as a result of the significant increase in volumes and there was also a £21m increase in other operating costs. SD&A costs increased in 2021 compared with 2019 by £161.1m. Investment in executing our strategy included £33m on new depots in the UK opened since 2019, and £22m on new depots in France. Other growth initiatives included logistics investments of £38m (including XDCs) and £13m of marketing and digital investment. This was partly offset by £17m of the non-repeat benefit from depot closure costs in Germany and the Netherlands, and lease amortization charges consequent upon adopting IFRS 16. Between 2019 and 2021 the increase in revenue in the older UK depots resulted in £50m of additional costs. Profit Before and After Tax The net interest charge was £11.4m (2020: £10.4m; 2019: £0.7m credit, on a pre IFRS 16 basis) principally reflecting the additional interest rate expense on our lease liabilities. Profit before tax of £390.3m was strongly ahead of the prior year (2020: £185.3m; 2019: £260.7m). The tax charge on profit before tax was £75.8m (2020: £37.7m; 2019: £51.7m) as a result of the higher operating profit and represented an effective tax rate of 19.4% (2020: 20.3%; 2019: 19.8%). As a result, profit after tax was £314.5m (2020: £147.6m; 2019: £209.0m). Reflecting the above and the reduced share count following share buy backs, basic earnings per share were 53.2p (2020: 24.9p; 2019 35.0p). During 2020 we were granted a patent on a new plastic leg design which we have incorporated into our sales of c.5m of kitchen cabinet units. We applied for the patent in 2017 and there is a potential to claim tax relief under HMRC patent box rules. We will review the potential scale of any claim with our advisers before deciding whether to make a claim under these rules. Cash The net cash inflow from operating activities was £437.4m (2020: £329.5m). Net working capital increased by £1.7m due to higher levels of business activity. Debtors at the end of the period were £39m higher than at the beginning of the period, creditors were £84m higher and stock was £47m higher due to our actions to increase levels of safety stock to support our customers. Capital expenditure was £85.9m (2020: £69.7m). Corporation tax payments were £73.1m (2020: £32.2m), and dividends amounted to £133.6m (2020: nil). Share buy backs totalled £50.0m (2020: £9.8m) and the cash contribution to the Group's pension schemes in excess of the operating charge was £18.5m (2020: £22.2m). The interest and principal paid on lease liabilities totalled £85.8m (2020: £87.6m). Reflecting the above, there was a net cash inflow of £84.6m (2020: £163.3m), leaving the Group with cash at the year end of £515.3m (26 December 2020: £430.7m). The Group has access to a £140m asset backed lending facility which remained undrawn at the balance sheet date. Capital Allocation and Returns to Shareholders Our approach to capital allocation has primarily focused on achieving sustainable profit growth by investing in and developing our vertically integrated business. We also want to maintain and grow our ordinary dividend in line with earnings to reward shareholders with an attractive ongoing income stream. After allowing for these uses of cash, Howdens remains committed to returning any surplus capital to shareholders. Within its definition of surplus capital, the Board believes it is appropriate for the Group to be able to operate through the annual working capital cycle without incurring bank debt, noting that there is seasonality in working capital balances through the year, particularly in advance of our peak trading period in the second half. We also take into account that the Group has a significant property lease exposure for the depot network, and a large defined benefit pension scheme that has only recently moved into a surplus. Howdens has a prudent risk appetite towards balance sheet management, an approach which has been borne out over the past two years with the balance sheet being a source of great strength through the Howden Joinery Group Plc - 2021 Full Year results announcement 05 This is an excerpt of the original content. To continue reading it, access the original document here .

View stock analysis, news, and events for Howden Joinery Group Plc