26th Feb 2015 13:00
LONDON (Alliance News) - Kitchens and joinery products company Howden Joinery Group PLC's shares rose on Thursday after the company reported higher pretax profit for 2014 on the back of strong revenue growth, and hiked its dividend in addition to announcing a GBP70 million share buyback.
Shares in Howden were up 2.9% to 452.20 pence Thursday, one of the best performers in the FTSE 250 index.
Howden reported a pretax profit of GBP188.8 million for the 52 weeks to December 27, up from GBP135 million a year earlier, as revenue rose to GBP1.09 billion from GBP956.5 million. In January, Howden said it expected its 2014 pretax profit to beat the market as sales from its UK depots increased on the back of a recovery in the UK economy and housing market.
The group also said in January it had made progress on other key measures, including its gross margin, which was borne out on Thursday when it said its gross profit margin improved to 63.7% from 61.7% last year.
Revenue from Howden's UK depots increased to GBP1.08 billion from GBP940.7 million on the back of an expansion of its depot estate and higher customer numbers.
Howden expects that growth to continue in 2015 as it increased its capital expenditure plans, saying it expects to spend around GBP60 million per year over the net three years. Capital expenditure in 2014 totalled GBP32.8 million, with 30 new UK depots opened in the year, bringing the total to 589. The group also opened 2 depots in Belgium and plans to open 7 additional depots in northern France in 2015.
Sales in its French depots fell to GBP15.3 million from GBP15.8 million year-on-year, dragged lower by the depreciation of the euro against sterling. On a constant currency basis, French sales rose 2%.
The group hiked its dividend on the back of the stronger profit, with a final dividend of 6.5 pence recommended, giving it a total dividend of 8.4 pence per share, up from 5.5 pence in fiscal 2013. Howden also said it will return GBP70 million to its shareholders via a share buyback programme. The group net cash of GBP217.7 million at the year-end, up from GBP140.5 million a year earlier.
"Howdens has delivered another good set of results in 2014. Sales exceeded GBP1 billion for the first time in our twenty-year history. Profitability also increased, and we saw strong cash flow. As a result, we are recommending a substantial increase in our dividend and announcing a GBP70 million cash return to shareholders by way of a share buyback," said Howden Chief Executive Matthew Ingle.
Howden also said its UK depot revenue rose 9.9% in the first two months of 2015, in line with its expectations, and said its outlook for 2015 remains unchanged.
N+1 Singer reiterates its Hold rating on Howden Joinery Group, suggesting the possibility of any material upgrades is likely to be low and would probably only take place towards the end of the year, due to strong comparables.
The broker keeps its price target at 435p, saying its view on the likelihood of a re-rating towards the end of the year is unchanged, though it does expect the shares to edge higher Thursday.
N+1 believes 2014 was an excellent year for the company and notes Howden's GBP70 million share buyback plan confirms the existence of surplus cash in spite of a higher capital expenditure outlook.
By Sam Unsted; [email protected]; @SamUAtAlliance
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