2012 Half Yearly Report

19 July 2012


The full results
are available in PDF Format

The information presented in this document relates to the 24 weeks to 9 June 2012 and the 24 weeks to 11 June 2011, unless otherwise stated.


Chief Executive, Matthew Ingle, said:

"We are pleased with our performance, which is in line with our expectations for the year to date. In what remain difficult market conditions, we continue to pursue the growth opportunities that we see before us.

"At this stage, our expectations for the year as a whole remain unchanged. We are cautious about the outlook and will continue to respond to the prevailing conditions we encounter."

Financial results

  • Howden Joinery UK depot revenue increased by 6.8% to £357.7m (up 5.0% on a same depot basis). Group revenue was £364.6m (2011: £341.7m);
  • Gross profit margin was 60.1% (2011: 59.3%);
  • Operating profit rose to £29.1m (2011: £25.5m);
  • Profit before tax increased to £25.4m (2011: £23.5m);
  • Basic earnings per share increased to 3.2p (2011: 2.8p);
  • Net cash of £37.4m at 9 June 2012 (24 December 2011: £57.1m net cash, 11 June 2011: £5.1m net cash);
  • Interim dividend of 0.3p per share declared.

Business developments

  • Investment in the future growth of the business continues:

    • new products introduced across entire spectrum of offer;
    • eight new UK depots opened so far in 2012, bringing total to 517, and one new depot opened in France, where there are now 11;
    • capital expenditure totalled £6.5m;
  • Further mitigation of legacy property liability, with termination of leases on two more legacy properties since the Interim Management Statement, bringing the total so far this year to five and the total remaining to 16;
  • Agreement reached on funding of pension scheme deficit for the three-years ending April 2015 and existing banking facility extended to July 2016.

Current trading

  • Howden Joinery UK depot total revenue decreased by 0.9% in the first four weeks of the second half of the year compared with the same period last year, when sales rose sharply (+10.5%) as a price increase was initiated;
  • Management's expectations for the year remain unchanged.




Gary Rawlinson +44 (0)207 404 5959 (19 July 2012 a.m. only)
Head of Investor Relations +44 (0)207 535 1127

+44 (0)7989 397527


Brunswick +44 (0)207 404 5959

Kate Holgate

Zoe Bird


Note for editors:

Howden Joinery Group Plc is the parent company of Howden Joinery. In the UK, Howden Joinery is engaged in the sale of kitchens and joinery products to trade customers, primarily small local builders, through over 500 depots. Around one-third of the products it sells are manufactured in the company's own factories in Runcorn, Cheshire, and Howden, East Yorkshire. The business also has a small operation in France.



£m unless stated 2012 2011

364.6 341.7

- Howden Joinery UK depots
357.7 334.9

Gross profit 219.3 202.8

Gross profit margin, % 60.1 59.3

Operating profit 29.1 25.5

Profit before tax 25.4 23.5

Basic earnings per share 3.2p 2.8p

Dividend per share 0.3p -

Net cash at end of period 37.4 5.1




The financial results of the Group during the first half of 2012 benefited from the Group's competitive position and actions taken to improve performance.

Total Group revenue increased by £22.9m to £364.6m.

Revenue £m 2012 2011
Group 364.6 341.7

Howden Joinery UK depots
Howden Joinery French depots

Howden Joinery UK depots' revenue rose by 6.8%, increasing 5.0% on a same depot basis.

In demanding market conditions, this growth has been achieved through a number of factors and is a testament to the strength of our business model. The increase in the growth rate compared with that seen in 2011 reflects the initiation of a price rise in late February. This was earlier than the price rise in 2011, which occurred in the second half of June and which has also benefited the comparative sales performance so far this year. In addition, the number of customer accounts has continued to increase.

Sales by our French depots of £6.9m were up over 5% in constant currency terms.

Gross profit rose by £16.5m to £219.3m, with a gross profit margin of 60.1% (2011: 59.3%).

Selling and distribution costs and administrative and other expenses increased by £12.9m to £190.2m. This reflects the costs of new depots, additional staffing in existing depots and the impact of inflation, particularly on payroll costs.

Operating profit increased by £3.6m to £29.1m.

The net interest charge increased by £1.7m to £3.7m, reflecting the increased finance expense in respect of pensions. The net result was that profit before tax rose by £1.9m to £25.4m.

The tax charge on profit before tax was £5.6m, based on the estimated effective rate of tax on profit before tax for the 2012 financial year of 22.0%. This tax rate reflects the impact of the change in the corporation tax rate on the deferred tax asset relating to pensions.

Basic earnings per share were 3.2p (2011: 2.8p)

At 9 June 2012, the pension deficit shown on the balance sheet was £122.1m (24 December 2011: £136.9m). The decrease in the deficit in the period was largely driven by the Company's contribution (£20.1m), made as part of the 2009 agreement to clear the actuarial deficit.

There was a net cash outflow from operating activities of £15.5m. This included payments relating to legacy properties totalling £13.9m and a cash contribution to the Group's pension schemes, in excess of the operating charge, of £20.1m.

Excluding legacy property payments, underlying working capital increased by £10.4m. Within this, debtors at the end of the period were £24.6m higher than at the beginning of the year. Offsetting this, stock levels were £6.0m lower and creditors increased by £8.2m.

Also included within net cash flows from operating activities was tax paid totalling £9.0m.

Payments to acquire fixed and intangible assets totalled £6.5m (2011: £7.9m).

Reflecting the above, there was a £19.7m net cash outflow in the first half of the year, the Group having net cash at the end of the period of £37.4m (24 December 2011: £57.1m net cash, 11 June 2011: £5.1m net cash). Excluding payments in respect of legacy properties and the contribution to the pension deficit, there was a cash inflow of £14.3m.


In setting the level of dividend, the Board takes into account a number of factors, including its desire to signal its confidence in the longer term prospects of the business and to reward shareholders. It is the Board's aim to have a progressive dividend policy. Additionally, the Board will seek to ensure that the Group maintains an appropriate capital structure in the future, taking into account the working capital cycle.

In the nearer term, the Board expects to target a prudent level of cover, taking into account: the opportunities we see to invest in the growth of the business, through the opening of new depots and investment in our UK manufacturing operations and the funding of deals to terminate leases on legacy properties, all of which should deliver good returns; the need to contribute to the legacy pension deficit; and our desire to maintain a strong balance sheet given prevailing economic conditions, all of which the Board believes to be in the best interest of shareholders.

In respect of the relative scale of interim and final dividends, the Board currently expects that the interim dividend will be between one-fifth and one-third of the total dividend for the year.

Reflecting this, the Board has approved the payment of an interim dividend of 0.3p per share (2011: nil). It will be paid on 30 November 2012 to shareholders on the register at close of business on 2 November 2012.



The business model of Howden Joinery is “To supply from local stock nationwide the small builder's ever-changing routine kitchen and joinery requirements, assuring no call back quality and best local price”.

In July 2010, in our Half Yearly Report, we said that the opportunity to transform the scale of the business was apparent and that as the performance of the business was improving and legacy issues were diminishing, we were stepping up investment in the future growth of Howden.

Since then, this investment in growth has seen not only a step-up in capital expenditure but also increased expenditure in a number of other areas, and we have continued with this in the first half of 2012.

Depot network

Eight new depots have been opened in the UK so far this year, bringing the total to 517. A number of other depots are at various stages of the acquisition/shopfitting process.

In France, we have opened one new depot in Amiens, to bring the total to 11, and we are progressing one other in Le Havre.

Product and marketing

We continue to enhance our product offering, having introduced a number of  new products in the first half of the year across all of our product categories. Notable amongst these are: three new kitchen ranges - grey options in our integrated handle and Greenwich ranges, and a gloss grey option in our Burford range; seven new square-edged worktops; significant changes to our sinks category; and a range of black appliances.

To support our kitchen designers, we have begun trials of a 'virtual showroom' in a small number of depots. When working with our builder-customers' clients in our depots, this allows kitchen designs to be projected on to a wall in the depot in a large high definition format, as well as showing other material designed to support product sales.

In addition to updating our extensive product literature, we have introduced a wider format Joinery brochure and a new Hardware catalogue.

Manufacturing and logistics operations

The £20m two-year programme of investment in new production facilities at our two manufacturing sites is progressing to plan. At Runcorn, the first of the three lines that make up the new facility at the site is being commissioned.

We have also introduced 'in cab' technology throughout our delivery truck fleet. This allows us to better monitor all aspects of the fleet's operations, helping us improve operational efficiency and improving the service to our depots.



Legacy properties

The Group continues to reduce its legacy property portfolio.

Since the release of the Interim Management Statement, on 26 April 2012, the leases of a further two properties have been terminated, at a cost of £4.0m.  This means that the leases of five properties have been terminated so far this year, at a cost of £11.7m (all of which was incurred in the first half of the year), mitigating future liabilities that would have totalled over £27m.

As a result, the number of legacy properties now stands at 16, compared with 21 at the end of 2011. Included within this are eight properties that are fully or partly occupied by tenants.

The profile of properties remaining and the net annual rent and rates (current values) for the associated leases going forward, before any further mitigating action is taken, is shown below.

As at 31 Dec:

Current 2012 2014 2019 2024
Number of properties1 16 16 8 6 2
Net annual rent and rates, £m2 4.9 4.9 2.3 2.3 0.23

Estimated future costs associated with these properties were provided for in previous years.

  1. Vacant and tenanted.
  2. Gross rent & rates less payments by tenants.
  3. The remaining leases all expire during the course of 2025.

Pension scheme funding and banking arrangements

As recently announced, the Group has reached agreement with the Trustees of its defined benefit pension scheme in relation to the schedule of payment towards the funding of the scheme's deficit for the three years ending 5 April 2015.  Under the agreement, the Group's contributions to the pension deficit are expected be £35m per annum.

As also announced, the Group has reached agreement to extend its existing £160m committed bank facility, until July 2016.



Howden Joinery UK depot total sales fell by 0.9% in the first four weeks of the second half of 2011. This was against a strong comparator, sales in the same period in 2011 (which increased by 10.5%) having included the benefit of a price rise being initiated, with some associated pull-through effect on sales.

For the remainder of 2012, the key risk to performance is the challenging market conditions we face and the continuing uncertainty surrounding the general economic environment, in the light of which we remain cautious about the outlook. We also continue to see some pressure on product input costs.

At this stage, our expectations for the year remain unchanged.

We will continue to invest in the longer term growth and development of the business. However, as in recent years, we will continue to manage the business flexibly in light of economic conditions.



The Group meets its day to day working capital requirements through an asset backed lending facility of £160m. As announced on 18 June 2012, this facility has been extended until July 2016, having previously run to May 2014. The current economic conditions create uncertainty, particularly over (a) the level of demand for the Group's products and (b) the exchange rate between sterling and both the Euro and the US Dollar, which would affect the cost of the Group's operations.

The Group's forecasts and projections have been stress-tested for reasonably possible adverse variations in trading performance. The results of this testing show that the Group should be able to operate within the level of its current facility and covenants.

After making due enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements.


Related Party transactions are disclosed in Note 14 to the condensed set of financial statements. There have been no material changes to the related party transactions described in the last Annual Report.


The Board continually assesses and monitors the key risks of the business.  The principal risks and uncertainties that could have a material impact on the Group's performance over the remaining 29 weeks of the financial year have not changed from those which are set out in detail on pages 23 to 25 of the Group's 2011 Annual Report, and which are summarised below:

  • Market conditions - a severe downturn in market conditions could put pressure on our ability to meet sales and profit forecasts, which in turn could put pressure on cash availability and banking covenants;
  • Failure to implement the Group's business model and culture - could have a severe affect on the Group's future financial condition and profitability;
  • Failure to maximise exploiting the growth potential of the businesses - could adversely affect the Group's ability to obtain maximum benefit from its growth potential;
  • Continuity of supply - could adversely affect the Group's ability to implement the business model;
  • Loss of key personnel - could adversely affect the Group's operations;
  • Input price pressure - could adversely affect profitability;
  • Financial position - if it were to deteriorate significantly, this could limit the financial resources available to fund the growth and development of the business.

A copy of the Group's 2011 Annual Report is available on the Group's website, www.howdenjoinerygroupplc.com.


Certain statements in this Half Yearly Report 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.


We confirm that to the best of our knowledge:

  • the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
  • the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 24 weeks and description of principal risks and uncertainties for the remaining 29 weeks of the year); and
  • the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The directors are responsible for the maintenance and integrity of the corporate and financial information included in the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

By order of the Board

Matthew Ingle
Chief Executive Officer
Mark Robson
Chief Financial Officer
18 July 2012


Condensed consolidated income statement

Notes 24 weeks to
9 June 2012

24 weeks to
11 June

52 weeks to
24 December

Continuing operations:

Revenue - sale of goods
Cost of sales
Gross profit
Selling & distribution costs
Administrative expenses
Other operating income/(expenses)
Operating profit
Finance income 6 0.1
Finance expense 6 (0.4)
Other finance expense - pensions 6 (3.4)
Profit before tax
Tax charge for the period 7 (5.6)
Profit after tax

Discontinued operations:

Loss before tax - exceptional items 11 -
Tax on loss - exceptional item 11 -
Loss after tax - exceptional item

Profit for the period attributable to the equity holders of the parent

Earnings per share:

From continuing operations

Basic earnings per 10p share 8 3.2p
Diluted earnings per 10p share 8 3.2p

From continuing and discontinued operations

Basic earnings per 10p share 8 3.2p
Diluted earnings per 10p share 8 3.2p


Condensed consolidated statement of comprehensive income


Notes 24 weeks to
9 June 2012
24 weeks to
11 June 2011
52 weeks to
24 December 2011
Profit for the period
19.8 17.0 73.3

Items of other comprehensive income:

Actuarial (loss)/gain on defined benefit pension scheme 12 (1.9) 8.4 (31.4)
Deferred tax on actuarial loss/gain on defined benefit pension scheme
0.5 (2.2) 8.5
Deferred tax on share schemes
0.1 (0.3) 0.3
Effect of change in UK tax rate on deferred tax on cumulative actuarial loss
(3.3) (2.8) (6.5)
Currency translation differences
(0.1) (0.4) (0.3)
Other comprehensive income for the period
(4.7) 2.7 (29.4)

Total comprehensive income for the period attributable to equity holders of the parent
15.1 19.7 43.9


Condensed consolidated balance sheet

Notes 9 June 2012
11 June 2011

24 December 2011

Non-current assets

2.5 2.5
Other intangible assets
4.3 4.4
Property, plant and equipment 10 81.2 79.2
- 2.0
Deferred tax asset
38.8 43.0

126.8 131.1

Current assets

112.5 111.0
Trade and other receivables
119.9 112.3
Other assets
- 0.2
Cash at bank and in hand
39.5 18.9

271.9 242.4
Total assets
398.7 373.5

Current liabilities

Trade and other payables
(149.3) (148.2)
Current tax liability
(11.7) (12.0)
Current borrowings
(1.2) (1.3)

(162.2) (161.5)

Non-current liabilities

Non-current borrowings
(0.9) (12.7)
Pension liability 12 (122.1) (110.8)
Deferred tax liability
(4.7) (5.2)
Provisions 13 (22.8) (38.8)

(150.5) (167.5)
Total liabilities
(312.7) (329.0)

Net assets
86.0 44.5


Called up share capital
64.0 63.4
Share premium account
86.8 85.1
ESOP reserve
(21.3) (24.3)
Other reserves
28.1 28.1
Retained loss
(71.6) (107.8)
Total equity
86.0 44.5


Condensed consolidated statement of changes in equity

Called up




24 weeks to 9 June 2012

As at 24 December 2011 - audited 63.4 85.1 (22.8) 28.1 (83.6) 70.2
Accumulated profit for the period - - - - 19.8 19.8
Dividend declared - - - - (3.1) (3.1)
Net actuarial loss on defined benefit pension scheme - - - - (1.4) (1.4)
Currency translation differences - - - - (0.1) (0.1)
Net movement in ESOP - - 1.5 - - 1.5
Issue of new shares 0.6 1.7 - - - 2.3
Deferred tax on share schemes - - - - 0.1 0.1
Effect of change in UK tax rate on deferred tax on cumulative actuarial loss - - - - (3.3) (3.3)
As at 9 June 2012 - unaudited 64.0 86.8 (21.3) 28.1 (71.6) 86.0

During the current period, the Group issued 6,325,814 shares.

24 weeks to 11 June 2011

As at 25 December 2010 - audited 63.4 85.1 (26.0) 28.1 (127.5) 23.1
Accumulated profit for the period - - - - 17.0 17.0
Net actuarial gain on defined benefit scheme - - - - 6.2 6.2
Currency translation differences - - - - (0.4) (0.4)
Net movement in ESOP - - 1.7 - - 1.7
Deferred tax on share schemes - - - - (0.3) (0.3)
Effect of change in tax rate on deferred tax on actuarial loss - - - - (2.8) (2.8)
As at 11 June 2011 - unaudited 63.4 85.1 (24.3) 28.1 (107.8) 44.5

During the period above, the Group did not issue any shares.

52 weeks to 24 December 2011

As at 25 December 2010 63.4 85.1 (26.0) (28.1) (127.5) 23.1
Accumulated profit for the period - - - - 73.3 73.3
Net actuarial loss on defined benefit scheme - - - - (22.9) (22.9)
Currency translation differences - - - - (0.3) (0.3)
Net movement in ESOP - - 3.2 - - 3.2
Deferred tax on share schemes - - - - 0.3 0.3
Effect of change in UK tax rate on deferred tax on cumulative actuarial loss - - - - (6.5) (6.5)
As at 24 December 2011 - audited 63.4 85.1 (22.8) 28.1 (83.6) 70.2

During the period above, the Group did not issue any shares.


Condensed consolidated cash flow statement

Notes 24 weeks to
9 June 2012
24 weeks to
11 June 2011
52 weeks to
24 December 2011
Net cash flows (used in)/from operating activities 15 (15.5) (21.5) 40.2

Cash flows from investing activities

Interest received
0.1 - -
Payments to acquire property, plant and equipment, and intangible assets
(6.5) (7.9) (19.6)
Receipts from sale of property, plant and equipment, and intangible assets
0.4 - -
Repayment of investment
- - 2.0
Net cash used in investing activities
(6.0) (7.9) (17.6)

Cash flows from financing activities

Interest paid
(0.2) (0.5) (1.0)
Receipts from release of shares from share trust
- - 0.5
Issue of new shares
2.3 - -
(Decrease)/increase in loans
(0.5) 10.4 (1.1)
Repayment of capital element of obligations under finance leases
- (0.2) (0.4)
Decrease in other assets
- - 0.2
Net cash from/(used in) financing activities
1.6 9.7 (1.8)

Net (decrease)/increase in cash and cash equivalents
(19.9) (19.7) 20.8
Cash and cash equivalents at beginning of period 15 59.4 38.6 38.6
Cash and cash equivalents at end of period 15 39.5 18.9 59.4


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