23rd Jul 2015 11:03
LONDON (Alliance News) - Kitchens and joinery products manufacturer Howden Joinery Group PLC on Thursday hiked its interim dividend on the back of a rise in pretax profit and revenue in the first half of 2015, but shares in the company fell after analysts said the profit missed expectations and little potential remains for upgrades.
FTSE 250-listed Howden said its pretax profit in the 24 weeks to June 14 was up to GBP59.2 million from GBP57.2 million, with growth held back somewhat by higher selling and distribution costs and administrative expenses, as the group continues to invest to expand its operations.
Gross profit, stripping out everything but its cost of sales, rose to GBP307.3 million from GBP275.2 million, as revenue rose to GBP482.6 million from GBP435.4 million, boosted by an 11% rise in UK depot revenue to GBP475.8 million in total, with an 8.6% rise on a like-for-like basis.
The rise in profit and strong underlying trading prompted the group to hike its interim dividend to 2.8 pence per share, up from 1.9 pence a year earlier.
Howden added the second half has started well, with UK depot revenue up 13% in the first four weeks of the second half, leaving it well placed to meet its expectations for the full year.
"Howdens has performed well, with sales increasing significantly in the first half. Cash generation remains strong, feedback from our depots is positive and we've seen a good start to the second half of the year," said Chief Executive Matthew Ingle.
But the robust results did not prevent Howden shares sinking in trade on Thursday, as broker N+1 Singer said that though Howden performed "extremely well" in the first half, its pretax profit slightly missed expectations and N+1 Singer cannot see much upside risk to the rating on the shares at present.
With significant cost rises, partly due to higher volumes and partly due to increases in capacity, the first-half results came in slightly below N+1's expectations, and any significant upgrades look unlikely to emerge. The broker had previously argued that earnings upgrades would be needed to boost Howden's rating, so given it does not see this happening, Howden's rating currently looks stretched at 19 times 2015 earnings.
Howden shares were down 4.6% to 494.20 pence Thursday late morning, one of the worst performers in the FTSE 250.
Howden said it has continued to open new depots and increased its number of customer accounts during the first half, while focusing on pricing discipline and margins. The company said its depot opening plans remain on track, with 14 opened in the first half in the UK of the 30 Howden has targeted for the full year.
European depot sales totalled GBP6.8 million in the half, down from GBP7.2 million a year earlier.
"We are increasing our investment in capacity in all areas of Howdens' business, including in property, people, product and continuity of supply. This investment will support our continuing ability to offer better service to the builder, while meeting growing demand in a rapidly sophisticating market," Ingle said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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