5th Nov 2014 10:52
LONDON (Alliance News) - Shares in Howden Joinery Group PLC surged higher on Wednesday after the company said it expects pretax profit to beat market expectations in the full year amid a strong sales performance so far in its second half.
The FTSE 250-listed kitchens and joinery products supplier said sales performed well in the second half of the year, including during October, and it noted that about 10% of annual revenue is typically generated in the last two months.
On the back of the strong performance so far in the second half, it now expects pretax profit for the full year to be ahead of market expectations, which currently sit at GBP161 million to GBP172 million according to the company.
The forecast sent shares in the company up on Wednesday, rising 7.2% to 367.7 pence to be the best performer in the FTSE 250.
Total revenue for the company's UK depots in the second half to November 1 increased 16.2%. For the first 44 weeks of the year to November 1, total revenue rose 14.1%, up 10.6% on a same depot basis.
The gross margin performance of the business has been in line with expectations, it said.
Howden also gave a brief update on the schedule of payments towards its defined benefit pension scheme's deficit. In line with the agreement made in 2012, the company expects to make an additional one-off payment of GBP10 million in the current pension year, which it will pay in 2015.
Numis increased its full-year revenue estimate for the company on the back of the update by 12%, reiterating its Add recommendation and its price target on the stock of 385 pence.
"Howden's positive momentum in revenues which has led to the upgrade continues to reflect self-drivers in terms of market share gain, branch maturity and expansion but also a better underlying market in terms of volume growth," says Numis analyst Howard Seymour.
Seymour said Howden has the highest operational gearing in the merchanting sector, positioning it well for 2015 while its drivers remain in place. He also said he expects cash returns to start next year.
Numis believes the company would return around GBP100 million in surplus cash to shareholders next year, after it has made the payment on the pension deficit.
By Sam Unsted; [email protected]; @SamUAtAlliance
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