First Half Brief disapoints!!!!!



Howden Joinery posts rise in first-half revenue but operating profit disappoints.

Shares in kitchen trade supplier Howden Joinery fell despite the company posting a rise in pre-tax profit and revenue and saying it was well-placed to achieve expectations for the full year, with analysts pointing to disappointment over the operating profit.

Pre-tax profit came in at £59.2m, up from £57.2m in the same period last year, on revenue of £482.6m, up from £435.4m.

However, analysts expressed disappointment over the 6% rise in operating profit, which came in at £60.9m.

The company reported a dividend of 2.8p per share compared with 1.9p in 2014, while net cash came in at £223.3m at 13 June 2015, compared with £217.7m in December 2014.

Gross profit margin, meanwhile, was 63.7% from 63.2% last year, reflecting the benefit of exchange rate movements, although some of this was impacted by higher costs, with selling and distribution costs, administrative expenses and other income up by £28.8m to £246.4m.
Chief executive, Matthew Ingle, said: "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.?

Atif Latif, director of trading at Guardian Stockbrokers, said the numbers were slightly below expectations and attributed some of the downside in the share price to selling after a strong performance into the results.

He said Thursday?s weakness in shares was a buying opportunity as the building materials sector could be on the cusp of a positive re-rating.

Numis Securities, which rates the stock at ?add?, said pre-tax profit was just a touch below its estimate of £60m but not a significant miss.

At 1024 BST, Howden shares were down 4% at 497.50p.


Do people understand how this business (or indeed any business) really works? I suspect not! GM continues to rise, giving massive operating leverage. Operating margin drops marginally as the business puts through a step increase in headcount/operating infrastructure to build the business. All companies do this at some point - eg when your warehouse is at max capacity, you can’t buy 15% of your next warehouse, but have to acquire the whole thing etc. This step change will be recouped in h2, especially as this is a seasonal upweight period. The LFLs show t/o producing a sharp turnaround/uplift end h1. This clearly accelerates strongly further start h2. With the UK housing market going into v v strong acceleration for q3, this uplift will continue to accelerate, at which point the gm will vomit cash (not that HJ has been lacklustre in this regard anyway). This remains one of the best things I can see right now. Come the end of the year many of the ‘teenage scribblers’ will be kicking themselves - or more realistically their clients will be wondering how on earth they justify their wages. We shall see.


Bang on malj1…a time to top up for sure!