|£ millions (unless stated)||20221||20211||Change|
|UK depot revenue||2,256.1||2,043.3||+10.4%||+45.5%|
|Gross profit margin, %||60.9%||61.6%||-70bps||-140bps|
|Operating profit margin, %||17.9%||19.2%||-130bps||+150bps|
|Profit before tax||405.8||390.3||+4.0%||+55.7%|
|Basic earnings per share, p||65.8p||53.2p||+23.7%||+88.0%|
|Total ordinary dividend per share, p||20.6p||19.5p||+5.6%|
|Cash at end of period||308.0||515.3|
1 The information presented relates to the 52 weeks to 24 December 2022, the 52 weeks to 25 December 2021 and the 52 weeks to 28 December 2019, unless otherwise stated. The 2022 and 2021 results are presented under IFRS 16, 2019 results have not been restated.
2 Same depot basis for any year excludes depots opened in that year and the prior year. See Financial Review on page 4.
3 2019 results included due to the significant impact of COVID-19 on the 2020 results.
Andrew Livingston, Chief Executive said:
“Howdens delivered a strong performance in 2022, with good progress on executing our strategic priorities and further market share gains. During the year our teams have been adept at navigating the challenges of high inflation and supply chain disruption, while supporting our customers with a market leading product range, high stock availability and outstanding customer service.
“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. We see potential for around 1,000 depots in the UK and we are now selectively expanding our business model internationally in France and the Republic of Ireland.
“Our robust financial position underpins our strategy, funding investment in our growth initiatives, expanding our manufacturing and supply chain capabilities, and supporting ongoing cash returns for shareholders.”
Operational developments in the year
The following table shows sales in the first two periods of the new financial year to 18 February 2023 in absolute terms, on a same depot (LFL) basis1.
|Revenue growth (%)||Periods 1-2|
1 5 depots were opened in the Republic of Ireland and 5 French depots were closed in 2022.
We are on track with our plans for 2023 to capitalise on the significant ongoing opportunity to gain further market share. During 2023 we will face 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. This includes 61 new UK depots opened in the past two years, expanding our manufacturing and supply chain capabilities including XDC, ongoing digital development to support our customers and new depot openings in France and the Republic of Ireland. In 2023, capital expenditure will be around £130m, at similar levels to last year.
While it is still early in the new financial year, sales in the first few weeks have been encouraging in the UK. 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. We have a strong product line up and will place considerable emphasis on new product introductions with around 23 new kitchen ranges planned. We are increasing the number of ranges we offer at entry-level and mid-priced kitchen ranges and have refreshed our line-up of higher priced kitchens, a segment of the market where we are under-represented.
While mindful of ongoing macro economic uncertainty, we are investing in the business for the long term and the fundamentals of our business model remain robust and attractive. Howdens is in good shape and we are well prepared to address the opportunities and challenges ahead in 2023.3
3 As previously indicated FY 2023 has an additional 53rd week in December representing around £17m of additional operating costs with no
There will be an in person analyst and investor presentation at 0830 today at Freshfields, 100 Bishopsgate London EC2P 2SR, with light refreshments served from 0800. A live video webcast will be available on https://brrmedia.news/Howden_fy22results. For more information see: www.howdenjoinerygroupplc.com. The presentation can also be heard by dialling the phone numbers below:
United Kingdom, Local
United States, Local
+44 (0) 33 0551 0200
+1 786 697 3501
Confirmation code: Quote ‘Howdens Full Year Results’
|The webcast will be recorded and available on our website after the event has finished at:|
Note to editors:
1. About Howden Joinery Group Plc
Howdens is the UK’s number one specialist kitchen and joinery supplier. In the UK, the company sells kitchens and joinery products to trade customers, primarily local builders, through 808 depots. In 2022, the business generated revenues of around £2.3 billion and profit before tax of £405.8 million. Around one-third of Howdens’ cost of goods sold are products manufactured in house at its two principal factories in Runcorn, Cheshire, and Howden, East Yorkshire both of which have achieved carbon neutral status. At the end of 2022 Howdens operated from 60 depots in France and Belgium and 5 depots in the Republic of Ireland.
2. Timetable for the final dividend
The timetable for payment of the proposed final dividend of 15.9 pence per ordinary share is as follows:
|Ex-dividend date:||6 April 2023|
|Record date:||11 April 2023|
|Payment date:||19 May 2023|
3. Provisional financial calendar for 2023
|Trading update||27 April|
|Annual General Meeting||4 May|
|Half Year Report||20 July|
|Trading update||2 November|
|End of financial year||30 December|
Revenue £m (unless stated)
# of depots at period end
|Howden Joinery UK depots - same depot basis2||2,193.3||747||2,035.8|
|UK depots opened in previous two years||62.83||61||7.5|
|Howden Joinery UK depots||2,256.1||808||2,043.3|
|Howden Joinery International depots||62.9||65||50.4|
Local currency revenue €m (unless stated)
# of depots at period end
|France and Belgium – same depot basis2||59.5||30||51.8|
|- Depots opened in previous two years||12.3||35||0.4|
|- Revenue from closed depots||0.7||(5)||6.2|
|Republic of Ireland (from April 2022)||1.3||5||-|
1 The information presented relates to the 52 weeks to 24 December 2022 and the 52 weeks to 25 December 2021 unless otherwise stated.
2 Same depot basis for any year excludes depots opened in that year and the prior year.
3 2022 includes additional 3rd party sales generated by the Sheridans solid work surface business acquired in the period.
Group revenue of £2,319.0m was ahead by 10.8% (2021: £2,093.7m) and 46.4% higher than the same period in 2019, with the growth rate in the second half increasing versus 2019 at a higher rate than the first half. UK depot revenue grew 10.4% to £2,256.1m (2021: £2,043.3m) and increased by 7.7% on a same depot basis2 to £2,193.3m (2021: £2,035.8m); this excludes the additional revenue from depots opened in 2022 and 2021 of £62.8m (2021: £7.5m). Revenue in the international depots was £62.9m (2021: £50.4m). On a local currency basis, revenue at our depots in France and Belgium increased by 14.8% on a same depot basis2 (excluding the 35 depots opened in the last two years). In April, we entered the Republic of Ireland market for the first time. In all, we opened 5 new depots in the Dublin area by the end of 2022 with good engagement from local builders.
We continued to maintain sector leading margins by appropriately balancing pricing and volumes in a higher inflationary environment. Gross profit was £122.2m higher at £1,411.2m (2021: £1,289.0m). The lower gross margin percentage of 60.9% (2021: 61.6%) was predominantly due to the dilutive impact of the successful growth of solid work surfaces, following the acquisition of Sheridan last year. These products, which are often associated with sales of higher priced kitchens, make an attractive cash margin contribution but have a lower gross margin percentage than most Howdens kitchen products.
Operating profit was ahead of last year at £415.2m (2021: £401.7m) and 59.7% ahead of pre-COVID levels in 2019 of £260.0m.
Operating expenses increased by 12.3% to £996.0m (2021: £887.3m; 2019: £726.2m). As expected, costs increased due to continued investment in our growth initiatives across the business and input cost and energy price inflation. Compared to 2021 this included £42m on existing depots, £17m on new UK depots opened in 2021 and 2022 and £8m on international depots opened in the period and prior year. We also invested £31m in warehouse and transportation initiatives including in regional cross docking facilities (XDCs).
The net interest charge was £9.4m (2021: £11.4m) and, as a result, profit before tax of £405.8m was 4.0% ahead of the prior year (2021: £390.3m) and 55.7% ahead of 2019 (2019: £260.7m).
In recent years the UK Government has introduced the Patent Box Tax Relief Scheme which allows companies to benefit from investments made in intellectual property including new product innovations. In 2017, Howdens applied for and was granted a patent for the design of a new multi-part, adjustable cabinet leg that is used in many of our cabinet ranges which makes them faster and easier to adjust and fit. Discussions were opened with HMRC late in 2020, and in 2022 after seeking non-statutory clearance on some technical matters, HMRC agreed in principle to Howdens submitting a claim for the product.
The Group has prepared the financial statements for the year ended 24 December 2022 to include the impact of the claim. A prior year current tax credit of £36.1m has also been recognised for the prior financial periods 2017 to 2021. The success of the claim is subject to review and confirmation by HMRC. If successful, the Company expects, assuming prevailing marginal tax rates, a benefit to the underlying effective tax rate of around 3% in subsequent years. The cash benefit will be realised following approval by HMRC.
As a result, the tax charge on profit before tax was £31.6m (2021: £75.8m) and represented an effective tax rate of 7.8% (2021: 19.4%). Excluding the patent box claim the underlying effective tax rate was 16.7% (2021: 19.4%).
Consequently, profit after tax was £374.2m (2021: £314.5m) and, reflecting the above and the reduced share count, following the share buyback, basic earnings per share were ahead by 23.7% at 65.8p (2021: 53.2p).
The net cash inflow from operating activities was £546.5m (2021: £530.7m). Net working capital increased by £51.7m with stock £70m higher as a result of cost increases and additional safety stock to support our customers. Debtors at the end of the period were £24m higher than at the end of the previous period with ageing in good shape. Creditors were £42m higher. Capital expenditure was £130.4m excluding the Sheridans land acquired (2021: £85.9m) and the total cash outflow for the Sheridans acquisition was £25m which included £10m to acquire the site. Corporation tax payments were £101.5m (2021: £73.1m), and dividends amounted to £115.0m (2021: £133.6m). Share buy backs totalled £250.5m (2021: £50.0m) and the difference between the cash paid and the operating charge for the Group’s pension schemes was an inflow of £2.0m (2021: outflow of £18.5m). The interest and principal paid on lease liabilities totalled £79.2m (2021: £85.8m).
Reflecting the above, there was a net cash outflow of £207.3m (2021: cash inflow of £84.6m), leaving the Group with cash at the year end of £308.0m (25 December 2021: £515.3m).
In September, the Company signed a new £150 million, five-year, multi-currency revolving credit facility replacing the previous asset backed lending facility. The new facility remains undrawn.
We have a well-established policy for capital allocation. We focus on achieving sustainable profit growth by investing in and developing our 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’s objective is 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. Our policy remains that when year end cash is in excess of £250m we expect to return surplus cash to shareholders. This provides sufficient headroom to support organic growth, our seasonal working capital requirements and ongoing investments in our strategic initiatives, while maintaining a strong balance sheet.
On this basis, the Board has decided that the Group will undertake a further £50m share buyback programme. A £250m share buyback programme was announced and completed last year.
Taking into account the Group’s prospects and strong financial position, in July 2022 the Board declared an interim dividend of 4.7p per ordinary share (2021: 4.3p per ordinary share). The Board is recommending a final dividend for 2022 of 15.9p per ordinary share (2021: 15.2p per ordinary share), resulting in a total dividend of 20.6p per ordinary share (2021: 19.5p per ordinary share). The total dividend represents a year-over-year increase of 5.6% and the final dividend will be paid on 19 May 2023 to shareholders on the register on 11 April 2023.
In February 2022, Howdens acquired Sheridan Fabrications Ltd, for a total consideration of £25m including £10m for the purchase of the site. Sheridans is a leading industry specialist for the manufacture, fabrication, laser templating and installation of premium worksurfaces. The acquisition supports our ambition to develop our Howdens Work Surfaces (HWS) operations as the market leading supply and fit business. We are continuing to invest in expanding our capacity and we have now rolled out HWS to all regions and solid surface worktop orders have significantly increased on the prior period.
At 24 December 2022, the defined benefit pension scheme was in a deficit position of £42m on an IAS 19 basis compared to a surplus of £141m on 25 December 2021. This movement from a surplus to a deficit was primarily a result of an increase in the net discount rate resulting in a decrease in asset valuations of £754m partially offset by a reduction in the liabilities of £571m. The extreme market volatility in September 2022 led to changes in the Plan’s investments to meet collateral requirements. The defined benefit pension scheme is closed for future accrual.
The pension has returned to a small deficit on a technical provisions basis from November 2022 and, as a result, deficit contributions of £2.5m a month re-commenced in January 2023. It is possible that the scheme could return to a surplus position on a technical provisions basis. If this were the case, for more than two consecutive months then deficit contributions would cease. The next full triennial valuation of the scheme will be carried out as at 31 March 2023.
Peter Ventress joined the Board on 1 July 2022 as Chairman Designate and a Non-Executive Director prior to assuming the role of Chairman from 17 September 2022. The Company announced earlier in the year that Richard Pennycook had indicated his intention to retire. Peter is Chairman of Bunzl plc and was formerly Chairman of Galliford Try Plc and was previously CEO of Berendsen plc from 2010 to 2016 and prior to that he held several senior executive roles at Staples Inc. the office supplies retailer.
We are announcing today that Geoff Drabble will step down from the Howdens Board at the end of the Annual General Meeting on 4 May 2023. On behalf of the Board, we thank Geoff for his nearly eight years of service, in particular as Senior Independent Director and as the Non-Executive Director Responsible for Workforce Engagement. He has made a significant contribution to Howdens during a very successful period of growth in the Company’s history and we wish him well in the future. The Nominations Committee has a comprehensive succession planning process and a further announcement on the handover of Geoff’s responsibilities will be made in due course.
Howdens conducts its own research analysis into the size and structure of the UK kitchen and joinery markets. The work undertaken is based on existing 3rd party sources supplemented by management estimates. The findings show that the UK kitchen and joinery markets are large and fragmented with a significant opportunity for Howdens to continue to grow its market share. Management believes that based on its recent internal research the value of the kitchen market was around £7bn as at the end of 2022.
The UK joinery market is also large and very fragmented at around £4.5bn across the four segments that Howdens supplies; joinery, doors, flooring and hardware.
Consequently, we believe Howdens’ total addressable market in the UK is around £11.5bn compared with Howdens’ UK revenue of around £2.3bn last year. We are investing commensurately in our strategic initiatives as outlined below.
Howdens has made further progress on its strategic initiatives, and we expect to deliver profitable growth and market share gains over the medium term. The four strategic initiatives are:
Progress on each of these initiatives is reviewed below:
High service levels, including local depot proximity and immediate availability are very important to our customers and we have continued to extend our UK depot footprint in 2022. We are opening all new depots in our updated format which is designed to provide the best environment in which to do business. We are also improving space utilisation and making productivity gains in a cost-effective way, by using vertical racking in the warehouse section of the depot.
In 2022 we opened 30 new depots in the UK and we believe there is potential for around 1,000 depots, including c.25 in Northern Ireland. We plan to open around 30 new depots in 2023. We have also continued with our revamp programme for existing depots, and the programme is delivering additional sales and has received very positive feedback from depots and customers.
During the year, including relocations, we reformatted 82 depots, taking the total number of revamped depots to 185 at the year-end. The scale and scope of the revamps has been refined and, in 2023 we will shorten the reformatting timetable in some cases, reducing disruption to the refit and lowering, where appropriate, costs by modifying the scope and scale of some revamps to maintain incremental returns. Overall, we will continue to target a payback of up to 4 years for these projects. Including relocations, we plan to revamp around 80 more depots in 2023.
As product lifecycles shorten, managing the number of kitchen ranges efficiently is crucial for both our customers, who want best availability, and for profitability. We are managing range introductions and clearances so that our 2023 current range count is around 90, organised in 10 families. New products for 2022 featured 21 new kitchen ranges with total sales ahead of 2021 and 2019 with more emphasis on higher priced kitchens and on ensuring more of our most popular styles were accessible to all budgets.
Total sales of all product introduced in 2021 and 2022 represented around 22% of our UK product sales. During 2022, we focused on building out our ranges of higher priced kitchens, where we are under-represented. Sales in this category grew strongly in the period and contributed to the percentage increase in average kitchen invoice value. We also grew our market share significantly in the solid work surface category. These products are often associated with sales of higher priced kitchens, and the acquisition of the Sheridans business along with additional investments has expanded our range and manufacturing capacity to support this significant opportunity.
Value for money consistently drives consumer buying decisions and is likely to be more of a feature in 2023 given mounting pressures on household budgets. We also expect some consumers to reallocate how they spend their budget for example, between cabinetry, worktops and appliances. As a result, in 2023 we will increase the number of ranges aimed at entry and the mid-market segments, making more kitchen looks and styles accessible to all budgets. This is also important as kitchens from these segments are a major contributor to keeping our unit costs of manufacture low. New product introductions of around 23 new kitchen ranges are planned this year and include:
Manufacturing and supply chain
Our dedicated manufacturing and supply chain is critical to the success of our in-stock offer. We supply all product, whether manufactured or sourced, to all depots. Since the COVID-19 pandemic we have continued to hold enhanced safety stock as a contingency against unexpected demand patterns and interruptions to supply to support our customers.
We also keep under review what we believe it is best to make or buy, balancing cost and overall supply chain availability, resilience and flexibility. In 2022 we made about one-third of our products as a percentage of our cost of goods sold and we believe there is value in extending this further in the coming years.
In 2019, we invested in manufacturing technology to enable us to make the doors for our popular Hockley kitchen ranges. Since then, we have invested in new lines which will enable us to make doors for more of our kitchen ranges, at the same quality as we can source externally but at a lower cost and at a reduced lead time. The new lines, located at our Howden site, are now in-situ and we will be moving up to full scale production during the course of 2023. Our second architrave and skirting line is also now operational, enabling us to service in-house more of the substantial increase in demand we have seen for these products.
Last year we announced our plans to expand, over the next few years, our kitchen manufacturing capacity and capabilities and to reconfigure some of the supporting infrastructure at our Howden factory and we are continuing to progress the investments required to achieve this.
Regional cross docking centre (‘XDCs’)
The roll out of our XDC programme was completed early in the new financial year and the service is now available to nearly all UK mainland depots. This approach improves stock replenishment through regional hubs that supplement the depots’ core weekly replenishment with a next day service. XDCs also optimise the service levels our depots can deliver to customers by rebalancing inventory and freeing up more time and resources to focus on sales and service while reducing the need for inter-depot stock transfers. This year we will continue to optimise the service balancing cost and availability with providing the best service to support our trade customers’ daily needs. By rebalancing where we hold stock and changing the delivery pattern of some lines to depots, depots can allocate more warehouse space to faster selling lines and can reduce stocks of slower moving lines while providing a high level of service across the product range. XDC is now seen as a key point of differentiation by both customers and our depot teams versus the best competitor offerings.
Our digital strategy reinforces our model of strong local relationships between depots and their customers by raising brand awareness, supporting the business model with new services and ways to trade with us and delivering productivity benefits for depot employees and customers.
In 2022 we added to our capabilities for the builder, including new functions which improves our digital offerings. The Trade App, which puts more aspects of the local depot in the hands of our customers, was launched in February last year. This replicated core features of the online trade platform including customers’ account details and credit status making them readily accessible on the move. Customers can also view their open orders and new features include rapid check in at any depot, order status updates and an easy order collection function.
We continue to see high levels of engagement with our web platforms and growth in our social media presence which also stimulates interest in viewing our products and services on Howdens.com. New registrations totalled nearly 80,000 and around 45% of our customers had an online account by the end of 2022. “Impressions” were present in 15% more organic search results a month with site visits at 21 million. The time users spent looking at pages increased by 51% and the number of pages viewed per session also increased. Across our social media sites our follower base was c.455,000, up 14%, with 1.6 million users actively engaging monthly.
In 2023 we will be adding new services and capabilities which collectively improve lead quality, stock and account knowledge, promote frequency of trading and reduce time consuming manual tasks in depots including stock allocation.
Our international operations, predominantly based in France, continue to make good progress. The business model for France is similar to the UK with a market size in kitchens of around €4.3bn (excluding appliances). The French market has low penetration rates of integrated kitchens and most are purchased through DIY outlets and specialist small independent businesses.
Since 2019, we have been opening depots in small clusters within cities which benefit from word of mouth between customers and our ability to build a local and trusted brand. Clustering also helps to build the Howdens culture within our business teams. By the end of 2022 we increased the number of depots trading in France and Belgium to 60 with a significant proportion in the Paris metro area. We are continuing to selectively invest in expanding the business and expect to open around 30 depots in the next two years with around 10 new depots in 2023.
We believe appreciation of the advantages of our trade-only in-stock model, our service levels and competitive pricing is growing, and with around 90% of product common to our UK ranges this helps us realise scale benefits.
During 2022 we opened our first 5 depots clustered around Dublin in the Republic of Ireland. Our arrival in the Irish market has attracted much attention locally and we are encouraged by depot sales to date. In 2023, we plan to have at least 10 depots trading by the end of the year. This city-based approach fits with Irish population distribution and the depots can be supported by the UK.
We actively manage risks and identify opportunities across the business to minimise our impact on the environment. We want to create an inclusive workplace with a positive contribution to the communities we serve as well as all our stakeholders, including our customers, staff, communities, suppliers and shareholders.
In 2020 the Board conducted an ESG strategic review which resulted in a new approach to improve our performance and inject pace into our activities. Improvements were focused around four main commitments, which are outlined below. It also resulted in a number of additional targets and research projects in each of our material areas, which we now report on in the Annual Report. Building on our progress, in 2022 Howdens committed to the Science Based Targets Initiative (SBTi) to set near and long-term company-wide emission reductions. We are now working towards SBTi approval of our roadmap, which will get us to net zero by 2050.
Howdens’ four main ESG commitments are:
|Zero Waste to Landfill||Carbon Neutral Manufacturing||Behavioural Health and Safety Leader||Reporting and Disclosure|
|Maintain zero waste to landfill in manufacturing and distribution. Zero waste to landfill in depots over time, with target of less than 5% by end of 2022.||Carbon neutral manufacturing by the end of 2021 and maintain that status as the business grows.||Maintain international safety standard|
ISO45001 in our manufacturing and distribution operations. Achieve ISO45001 in our depot network.
|Progressive, phased implementation of high quality reporting.|
The review also confirmed five material focus areas which underpin our strategic commitments. These are:
Howden’s key asset is its workforce and we want to attract, train and retain great people from the widest possible pool of talent as well as keep them safe and healthy while at work. Howdens is committed to embedding safety as a core value in everything we do and we have worked hard to drive better performance. The Company’s reportable injuries per 100,000 employees under RIDDOR (Reporting of Injuries Diseases and Dangerous Occurrences Regulation), decreased in 2022 to 140 reportable injuries (2021: 196). This is significantly below the 2021/2022 HSE All-Industry rate in 2022. In addition, our injury severity rate also decreased in 2022 to 26.2 hours lost per 100,000 employees (2021: 33.4).
We also remained focused on creating an engaging place to work with fulfilling jobs and a strong culture that supports everyone to do their best. Listening to our employees is key and over 7,000 completed our Best Companies engagement survey in March 2022 and Howdens was proud to receive a ‘two-star’ accreditation as a company ‘with an outstanding commitment to workplace engagement’. The Company was ranked 10th in the top 100 UK’s Best Big Companies to Work For last year up from 14th in 2020.
Howdens recently agreed a partnership with the Football Association for their Game Changer programme supporting and enabling local communities to improve club kitchens. This new initiative involves Howdens donating £1m of kitchens each year for 3 years to grass roots football clubs. The programme will have nationwide reach and will benefit local clubs which are so often at the heart of their communities.
We have made further progress this year to reduce our Scope 1 and 2 emissions. In 2021 we were proud to achieve carbon neutral manufacturing in our two major UK factory sites and this year we have commenced the process to include our two recently acquired solid surface worktop factories. Our ongoing focus on waste reduction continues and we maintained our target of zero waste to landfill in our manufacturing and distribution facilities last year. We are now committed to reducing waste in our depot network and during 2022 we achieved 99.7% depot waste avoiding landfill across all 808 UK depots, which was achieved from a baseline performance of 60% in 2019. In addition, this year we have switched substantially all of our UK depots to a renewable energy tariff using wind, solar and hydro-electric sources. On an annualised basis this is expected to avoid around 10,000 tonnes of indirect carbon emissions.
We also achieved our objective to ensure that 100% of our kitchen door frontals are FSC or PEFC certified by the end of 2022. This independently certifies that the wood comes from responsibly managed forests. We have recently commenced a trial of Hydrotreated Vegetable Oil (HVO) in our vehicle fleet as an alternative to diesel which is a major contributor to our Scope 1 greenhouse gas emissions. If successful, replacing diesel with HVO has the potential to reduce our own fleet emissions significantly with no negative impact on fuel efficiency or maintenance costs.
Scope 3 emissions from our suppliers are a major area of focus for the business as they represent the majority of Howdens overall carbon emissions. We recently held our first sustainability conference to engage directly with our suppliers to work with them to improve our ESG performance and set joint targets to reduce our impact on the environment. Initially we are focusing on our major suppliers, with our top 27 suppliers comprising around 80% of all of our carbon emissions.
With respect to Howdens’ carbon emissions, overall Scope 1 and 2 absolute emissions decreased by 3.5% in 2022 and our carbon intensity ratio improved by 12.8% to 23.8 tCO2e per £m of revenue (2021: 27.3 tCO2e per £m of revenue).
Further details of the Group’s ESG strategy and performance can be found in the 2022 Annual Report and Accounts which will be available shortly on the Group’s website www.howdenjoinerygroupplc.com.
The Directors have adopted the going concern basis in preparing the financial statements and have concluded that there are no material uncertainties leading to significant doubt about the Group’s going concern status. The reasons for this are explained below.
Going concern review period
This going concern review period covers the period of 12 months after the date of approval of these financial statements. The Directors consider that this period continues to be suitable for the Group.
Assessment of principal risks
The Directors have reached their conclusion on going concern after assessing the Group’s principal risks, as set out in detail in the “Principal risks and uncertainties” section, starting on page 14.
While all the principal risks could have an impact on the Group’s performance, the specific risks which could most directly affect going concern are the risks relating to continuity of supply, changes in market conditions, and product relevance. The Group is currently holding additional amounts of faster-moving inventory as a specific mitigation against supply chain disruption, and the Directors consider that the effects of the other risks could result in lower sales and/or lower margins, both of which are built into the financial scenario modelling described below.
Review of trading results, future trading forecasts and financial scenario modelling
The Directors have reviewed trading results and financial performance in 2022, as well as early weeks’ trading in 2023. They have reviewed the Group balance sheet at 24 December 2022, noting that the Group is debt-free, has cash and cash equivalents of £308m, and appropriate levels of working capital.They have also considered three financial modelling scenarios prepared by management:
This scenario models a reduction in most of the variable cost base proportionate to the reduction in turnover. It includes capital expenditure at a lower level than in the base case, but which is still in line with our announced strategic priorities for growth, namely: new depot openings and refurbishments; investment in our manufacturing sites, investment in digital and expanding our international operations. It also includes dividends and share buybacks in line with the Group’s stated capital allocation model.
In this scenario the Board considered the current economic conditions that the company and its customers are facing, and noted that the downside scenario included allowances for reduced demand and increased costs to reflect such adverse conditions.
Capital expenditure in this scenario has been reduced to a “maintenance” level. Variable costs have been reduced in proportion to the reduction in turnover on the same basis as described in the severe but plausible downside scenario. It assumes no dividends or share buybacks.
Borrowing facility and covenants
The Group has a five-year, committed, multi-currency revolving credit facility of up to £150m which expires in September 2027 and which was not drawn at the period end.
As part of the scenario modelling described above, we have tested the borrowing facility covenants and the facility remains available under all of the scenarios. We have therefore included the credit available under the facility in our assessment of headroom.
Results of scenario modelling
In the base case and the severe but plausible downside scenarios, the Group has significant headroom throughout the going concern period after meeting its commitments.
In the reverse stress-test scenario, the results show that sales would have to fall by a significant amount over and above the fall modelled in the severe but plausible downside scenario before the Group would have to take further mitigating actions. The likelihood of this level of fall in sales is considered to be remote.
Conclusion on going concern
Taking all the factors above into account, the directors believe that the Group is well placed to manage its financing and other business risks satisfactorily and have a reasonable expectation that the Group will have adequate resources to remain in operational existence for the going concern review period set out above. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
Assessment of long-term prospects
The Directors have assessed the Group’s long-term prospects, solvency and liquidity, with particular reference to the factors below:
Strategy and business model
Robust assessment of principal risks
Time period and scenario modelling
The Directors’ review of the Group’s long-term viability used a three-year period to December 2025. This was considered to be the most suitable period as it aligns with the Group’s strategic planning process.
The financial modelling to support the assessment of viability was based on the three scenarios used for the going concern assessment and detailed above. We have tested the borrowing facility covenants and the facility remains available under all of the viability scenarios. We have therefore included the credit available under the facility in our assessment of headroom.
The Directors consider that the reasonably foreseeable financial effects of any reasonably likely combination of the Group’s principal risks are unlikely to be greater than those effects which were modelled in the severe but plausible downside and reverse stress-test scenarios.
Results of scenario modelling
The results of the base case and plausible downside scenario modelling showed that the Group would have sufficient headroom over the viability assessment period.
The reverse stress-test showed that the level of fall in sales required in the first year of the viability assessment period was significantly more than the fall modelled in the severe but plausible downturn scenario before the Group would have to take further mitigating actions. The likelihood of this level of fall in sales is considered to be remote.
Conclusion on long-term prospects and viability
Having considered the Group’s current position, strategy, business model and principal risks in their evaluation of the prospects of the business, and having reviewed the outputs of the scenario modelling, the Directors concluded that they have a reasonable expectation that the Group will continue to operate and to meet its liabilities in full and as they fall due during the three-year period to December 2025.
When we look at risks, we specifically think about internal and external drivers of operational, hazard, financial and strategic risk areas over short, medium, and long-term timescales.
The following describes our principal risks, the possible impact arising from them, what we do to mitigate them and our risk appetite.
Over 2022 the scoring of this risk has increased because of continuing economic uncertainty.
Risk and impact
Our products are mostly sold to small builders and installed in owner-occupied and private and public sector rented housing, mainly in the repair, maintenance and improvement markets. If activity falls in these markets, it can affect our sales.
Additional Actions in 2022
We have a low appetite for market conditions risks and maintain close relationship with the small builder to identify movements early to enable appropriate action to be taken.
Risk and impact
Any disruption to our relationship with key suppliers or interruption to manufacturing and distribution operations could affect our ability to deliver the in-stock business model and to service our customer’s needs. If this happened, we could lose customers and sales.
We build strong relationships with our suppliers, focused on integrity, fairness and respect, and which are worthwhile for all concerned.
Additional Actions in 2022
Howdens is an in-stock business. Our customers expect this and rely on it.
Because of this we have a very low appetite for Supply Chain risks and will put extra effort in identifying them early and putting in place appropriate mitigation to prevent stock issues at our depots.
Risk and impact
If we do not innovate, recognise and exploit our growth opportunities in line with our business model and risk appetite, or if we do not align structures and skills to meet the challenges of growth, we won’t get maximum benefit from our growth potential.
Additional Actions in 2022
We see a significant potential for growth which brings with it both opportunities and challenges.
We have a medium appetite for risk when it comes to growth, we are willing to accept some risk where we see a growth opportunity, carefully balancing the risk we are taking with the potential reward that the opportunity presents.
Risk and impact
Our operations could be adversely affected if we were unable to attract, retain and develop our colleagues; or, if we lost a key member of our team.
Additional Actions in 2022
The success of our business is fundamentally driven by our people and their unwavering customer focus. We have a low appetite for People risk and work hard in ensuring that they feel valued, rewarded appropriately, and have opportunities to develop and progress in their Howdens career.
Risk and impact
Howdens is about people and relationships. We have over 850 depots, 11,000 employees, hundreds of suppliers and hundreds of thousands of customers. If we do not ensure safe ways of working across the business, this could compromise the safety and wellbeing of individuals and the reputation and viability of the business.
Additional Actions in 2022
Care for the health and safety of employees, customers, suppliers and everyone who comes into contact with Howdens is integral to our values and to our behaviours. We put a great deal of effort into identifying and managing health & safety issues before they occur and have a very low appetite for Health & Safety risks.
Risk and impact
If we experienced a major security breach, this could result in a key system being unavailable causing operational difficulties, and/or sensitive data to be unavailable or compromised. This could also lead to breach of customer data.
Additional Actions in 2022
We depend on a core set of critical IT systems which are fundamental to the day-to-day running of the business. These systems are at risk from increasingly sophisticated security threats. We have a very low appetite for cyber security risk and manage IT security closely to secure the confidentiality, integrity and availability of these systems.
Over 2022 the likelihood of this risk has reduced because of on-going focus of the management teams on our unique model and culture.
Risk and impact
If we lose sight of our values, model, or culture we will not successfully service the needs of the local small builder and their customers, and our long-term profitability may suffer.
Additional Actions in 2022
Our future success depends on continuing to maintain our values, our unique business model and our locally enabled, entrepreneurial culture. To secure this we have a very low appetite for risks that can adversely impact on our business model and culture and put great emphasis on identifying issues and addressing them early.
Risk and impact
Kitchen technology and design do not stand still, and our products must reflect that. If we do not support the builder with new products that their customers want, we could lose their loyalty and sales could diminish.
Additional Actions in 2022
Ensuring that we have products that meet the design, price and quality needs of the small builder and their customer, is a key focus of the business model and is a critical element of our future success and growth aspirations. In meeting this, we accept that a measured amount of risk must be taken when selecting new products and we have a medium appetite for product risk.
Risk and impact
We have key business operations and locations in our infrastructure that are critical to business continuity. They include areas such as, our Credit Control Department, our Manufacturing & Logistics operations and key IT systems.
Additional actions in 2022
Our key operations are essential for ensuring our customers can get the product and services they want when they need them. To secure this we maintain a very low appetite for Business Continuity risk, ensuring that critical functions are resilient and appropriate business continuity plans are in place to protect them.
Any breakdown of the UK’s relationship with the European Union (EU) has the potential to bring with it some risk for all companies operating in these territories. The main areas of potential risk for Howdens include:
We continue to actively monitor the ongoing relationship between the EU and UK and reconsider our mitigation plans and potential impacts as part of our risk process.
Whilst the impact of COVID-19 was lower in 2022 than in previous years we remained vigilant and promptly dealt with any issues that arose during the year. Our learnings of what risks to expect and how to deal with them gained over 2020–21 helped us effectively manage these issues over 2022 and will continue to help us be prepared going forward.
Certain statements in this Full Year results announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
The 2022 Annual Report and Accounts which will be issued in March 2023, will contain a responsibility statement in compliance with DTR 4.1.12 of the Listing Rules which sets out that as at the date of approval of the Annual Report the directors confirm to the best of their knowledge:
By order of the Board
Andrew Livingston Paul Hayes
Chief Executive Officer Chief Financial Officer
22 February 2023
|Notes||52 weeks to |
|52 weeks to |
|Cost of sales||(907.8)||(804.7)|
|Selling & distribution costs||(870.7)||(756.5)|
|Profit before tax||405.8||390.3|
|Tax on profit||4||(31.6)||(75.8)|
|Profit for the period attributable to the equity holders of the parent||374.2||314.5|
|Earnings per share:|
|Basic earnings per 10p share||5||65.8p||53.2p|
|Diluted earnings per 10p share||5||65.6p||53.0p|
|Notes||52 weeks to |
24 December 2022
|52 weeks to |
24 December 2021
|Profit for the period||374.2||314.5|
|Items of other comprehensive income:|
|Items that will not be reclassified subsequently to profit or loss:|
|Actuarial (losses)/gains on defined benefit pension scheme||7||(183.0)||170.4|
|Deferred tax on actuarial gains and losses on defined benefit pension scheme||4||34.8||(33.5)|
|Change of tax rate on deferred tax||4||11.0||(8.5)|
|Items that may be reclassified subsequently to profit or loss:|
|Currency translation differences||2.1||(2.3)|
|Other comprehensive income for the period||(135.1)||126.1|
|Total comprehensive income for the period attributable |
to equity holders of the parent
|Notes||24 December 2022|
|25 December 2021|
|Property, plant and equipment||398.7||295.8|
|Lease right-of-use assets||614.3||555.8|
|Deferred tax asset||35.9||13.4|
|Prepaid credit facility fees||1.0||0.3|
|Trade and other receivables||233.3||205.8|
|Cash and cash equivalents||308.0||515.3|
|Trade and other payables||(433.9)||(384.7)|
|Current tax liability||–||(25.9)|
|Deferred tax liability||(3.8)||(37.7)|
|Capital redemption reserve||9.1||5.4|
|ESOP and share-based payments||11.7||5.9|
| ||Share capital|
|Capital redemption reserve|
|Share premium account|
|ESOP and share-based payments|
|At 26 December 2020||60.3||4.9||87.5||(3.5)||(28.2)||599.8||720.8|
|Accumulated profit for the period||–||–||–||–||–||314.5||314.5|
|Other comprehensive income for the period||–||–||–||–||–||126.1||126.1|
|Total comprehensive income for the period||–||–||–||–||–||440.6||440.6|
|Current tax on share schemes||–||–||–||–||–||(0.1)||(0.1)|
|Deferred tax on share schemes||–||–||–||–||–||1.3||1.3|
|Movement in ESOP||–||–||–||10.5||–||–||10.5|
|Reclaim of forfeited dividends||–||–||–||–||–||0.2||0.2|
|Proceeds from sale of forfeited shares||–||–||–||–||–||1.8||1.8|
|Buyback and cancellation of shares||(0.5)||0.5||–||–||–||(50.0)||(50.0)|
|Transfer of shares from treasury into share trust||–||–||–||(1.1)||1.1||–||–|
|At 25 December 2021||59.8||5.4||87.5||5.9||(27.1)||860.0||991.5|
|Accumulated profit for the period||–||–||–||–||374.2||374.2|
|Other comprehensive income for the period||–||–||–||–||–||(135.1)||(135.1)|
|Total comprehensive income for the period||–||–||–||–||–||239.1||239.1|
|Current tax on share schemes||–||–||–||–||–||0.4||0.4|
|Deferred tax on share schemes||–||–||–||–||–||(1.3)||(1.3)|
|Movement in ESOP||–||–||–||7.4||–||–||7.4|
|Buyback and cancellation of shares||(3.7)||3.7||–||–||–||(250.5)||(250.5)|
|Transfer of shares from treasury into share trust||–||–||–||(1.6)||1.6||–||–|
|At 24 December 2022|
The item "Movement in ESOP" consists of the share-based payment charge in the year, together with any receipts of cash from employees on exercise of share options.
At the current period end there were 5,237,907 ordinary shares held in treasury, each with a nominal value of 10p (2021: 5,567,555 shares of 10p each).
|Notes||52 weeks to |
24 December 2022
|52 weeks to |
25 December 2021
|Depreciation and amortisation of owned assets||44.0||40.6|
|Depreciation, impairment and loss on termination of leased assets||80.8||74.8|
|Share-based payments charge||7.3||10.1|
|(Increase)/ decrease in prepaid credit facility fees||(0.7)||0.3|
|(Profit)/loss on disposal of property, plant and equipment and intangible assets||(0.1)||3.2|
|Operating cash flows before movements in working capital||546.5||530.7|
|Movements in working capital|
|Increase in inventories||(69.8)||(46.6)|
|Increase in trade and other receivables||(23.7)||(39.2)|
|Increase in trade and other payables and provisions||41.8||84.1|
|Difference between pensions operating charge and cash paid||2.0||(18.5)|
|Cash generated from operations||496.8||510.5|
|Net cash flow from operating activities||395.3||437.4|
|Cash flows used in investing activities|
|Payments to acquire property, plant and equipment and intangible assets||(140.8)||(85.9)|
|Receipts from sale of property, plant and equipment and intangible assets||0.7||0.1|
|Acquisition of subsidiary - net of cash acquired||(14.6)||–|
|Net cash used in investing activities||(153.6)||(85.8)|
|Cash flows used in financing activities|
|Payments to acquire own shares||(250.5)||(50.0)|
|Receipts from release of shares from share trust||0.1||0.4|
|Inflow from receipt of forfeited dividends||–||0.2|
|Inflow from sale of forfeited shares||–||1.8|
|Dividends paid to Group shareholders||6||(115.0)||(133.6)|
|Interest paid - including on lease liabilities||(13.1)||(11.0)|
|Repayment of principal on lease liabilities||(66.1)||(74.8)|
|Net cash used in financing activities||(444.6)||(267.0)|
|Net (decrease)/increase in cash and cash equivalents||(202.9)||84.6|
|Cash and cash equivalents at beginning of period||515.3||430.7|
|Effect of movements in exchange rates on cash held||(4.4)||–|
|Cash and cash equivalents at end of period||308.0||515.3|
The notes are available in the printable pdf of the results. To download it, please click here