Interactive Investor

Boom time at Howden Joinery

24th July 2014 12:27

Lee Wild from interactive investor

A booming property market and improving consumer confidence made it a first half to remember at kitchen supplier Howden Joinery. Already up 5% to 326p on these numbers, and after a series of earnings upgrades, the hot money's on Howden to build further gains.

Underlying pre-tax profit rocketed 30% to £57.2 million in the six months to 14 June, a tenth more than analysts at JP Morgan had pencilled in. That was driven by an 8.7% jump in like-for-like revenue and 170 basis-point improvement in gross margin to 63.2%.

Encouragingly, management say the good times have rolled into the first four weeks of the second-half, too, during which total sales are up 14%. That's a little slower than the market has been used to, but comparisons are getting tougher.

Much, of course, depend on the all-important October trading period. But while bosses admit the strong pound and rising costs - up 10% in the period just gone - could threaten margins, they're confident of doing the full-year numbers.

Having increased its own forecasts by a few percent, JP Morgan now expects adjusted pre-tax profit of £161.5 million this year, giving adjusted earnings per share of 19p, rising to 20.7p next year. Strip out forecast year-end net cash of £177 million, or 27p per share, the shares trade on a forward price/earnings ratio of less than 16, dropping to 14 in 2015. That looks modest.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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