• Group revenue increased by 20.3% compared to the first half of 2019
  • The gross margin is stable compared to 2019 despite the increase in costs

Carpentry Howden (HWDN), the supplier of kitchen materials, has benefited from the boom in the UK property market and an increased appetite for home improvement. There were 822,000 residential property transactions in the first half of 2021, according to the Office for National Statistics – the highest in a six-month period since 2007. No wonder Howden reached an operating profit of $ 124 million. pounds sterling in the first half of the year, compared to a loss of £ 9.8 million in the same period last year.

Even the rise in prices does not seem to weigh on the company, as management is passing on to customers “significant cost inflation” linked to Brexit and Covid-19. Gross margin reached £ 481 million, up almost a fifth from the comparative period. Higher prices accounted for £ 22million of this increase in profits and more than offset the additional £ 6million of cost pressures. This in turn contributed to an operating profit margin of 15.8%, well ahead of 11.9% in 2019.

This strong performance enabled Howden to generate net cash inflows of £ 93.7million, up from £ 44.1million in the same period last year, although working capital increased by 27 , £ 5million to mitigate supply chain shocks.

Management is clearly confident, having opened seven new depots in the first half of the year, bringing the total to 754. The company now estimates there is a potential of 900 across the UK.

These plans are ambitious – but costly. The group today warned that it expects its capital spending to increase by more than a quarter in a full year to reach £ 90million. He has already spent £ 23.8million so far.

Nonetheless, management is confident that demand will remain despite persistent “economic uncertainties” and difficult upcoming comparators in the second half of the year.

Even if the market adjusts to pre-pandemic levels, Howden’s recent investments should help it capture a greater proportion of it. The company also strengthened its position in the solid surface countertop factory, a segment in which it was previously under-represented, and work on its website resulted in a 52% increase in traffic from a year over year.

The consensus estimates compiled by FactSet suggest a futures price to earnings of 23, which in our opinion doesn’t seem so demanding for a company that still has plenty of room for growth. Buy.

Last seen IC: buy, 540p, Jul 23, 2020

HOWDEN JOINERY (HWDN)
ORDER PRICE: 903p MARKET VALUE: £ 5.4 billion
TO TOUCH: 903-904.4p UP TO 12 MONTHS: 911p LOW: 489p
DIVIDEND RETURN: 1.5% P / E RATIO: 21
NET ASSET VALUE: 128p NET DEBT: 14%
Semester on June 12 Turnover (£ m) Profit before tax (£ m) Earnings per share (p) Dividend per share (p)
2020 465 -14.2 -1.8 nothing
2021 785 119 16.4 4.3
% cash +69
Ex-div: October 14
Payment: November 19

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