Howden Joinery Group H2 2024 Earnings Report

Howden Joinery Group EPS Results

• Actual EPS: GBX 45.60
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Howden Joinery Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Howden Joinery Group Announcement Details

• Quarter: H2 2024
• Date: 2/27/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 27, 2025
• Conference Call Time: 3:30AM ET

Howden Joinery Group (LON:HWDN) is the parent company of Howdens. Howdens sells kitchens and joinery products to trade customers, primarily small local builders, through a network of over 850 UK depots. The business also operates over 70 depots across France, the Republic of Ireland, and Belgium. Howdens only sells to the trade - they have the expertise to ensure that our products are fitted to the highest possible standards. Local Howdens depots build trusted partnerships with trade professionals, helping them to exceed their customers’ expectations and allowing their businesses and ours to profit from doing so. Underpinning this model is a combination of locally empowered depot managers and a dedicated supply chain that ensures product is available in stock in depots in a cost-effective way. Around one-third of the products Howdens sells are manufactured in Howdens’ own factories in Runcorn, Cheshire, and Howden, East Yorkshire. Find out more about us on our website: www.howdenjoinerygroupplc.com

Howden Joinery Group H2 2024 Earnings Call Transcript

Presentation

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Good morning and welcome to Heidman's twenty twenty four results presentation. I will start by introducing our performance for the year. Paul Hayes will then review our financial results for the period. I will then share my perspective on our performance and outline our plans for this year and then we look forward to taking your questions. The business performed well in, as we anticipated, a challenging marketplace.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

The results met our expectations as we continued with our investment program, which is focused on our key capabilities, which gives us end to end a stronger business. Group sales were ahead of those in 2023 and were 47% up on 2019 being the year prior to the onset of the COVID. In The UK, we believe we gained market share, which helped us mitigate a significant single digit decline in the overall size of the kitchen market. Entry level kitchens represented a higher proportion of the kitchens we sold with sales of product in our kitchen categories collectively outperforming those of other established categories. We maintained an industry leading gross margin with gross profit ahead of last year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We balanced recovery of cost rises with our commitment to providing competitive pricing across the board for our customers. Reported profit was in line with the previous year and we progressed with our strategic initiatives and plans for The UK business, which ended the year with eight sixty nine depots trading. Total sales of our international operations increased with a total of 78 depots trading at the year end. The business delivered strong operating cash flow and we maintained a robust balance sheet. This gives us the flexibility to continue to invest in our growth plans for the business and provide shareholders with increased dividends for the year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Today, we have also announced a new million share buyback program. The results demonstrate the strength of our local trade only in stock model. A strong product lineup, high stock availability, industry leading service levels and a very engaged team have all contributed to our performance, which benefits from the ongoing movement in our strategic initiatives. We had a record number of customer accounts as of the year end with more accounts trading than last year. As well as managing an industry leading gross margin, which benefits from purchasing and manufacturing efficiencies, the business continued to deliver KPI volumes well ahead of pre COVID times.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Given the prevailing macroeconomic environment, we expect market conditions to remain challenging. We are well prepared for this and our customers, mainly self employed builders, are adept at managing their businesses in such times. Delivered by our highly entrepreneurial, well incentivized teams across the business, I believe our differentiated model is the right one to deliver sustainable market share gains. Our model is hard to replicate, it's difficult to compete with and we have initiatives in place to make it even more so. The addressable UK markets in which we have an established presence total some billion and there are significant long term growth opportunities for us.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We continue to prioritize investments in the business on this basis. So I will update you on our strategic initiatives, which are key to the long term development of the business, after Paul has taken you through our financial results for the year. Paul, thank you.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Thank you, Andrew, and good morning, everyone. I'm pleased to present Howden's financial results for the year ended twenty eight December twenty twenty four. Howden's performed well in challenging markets. Group sales were in line with the prior year at billion as we supported our trade customers with our differentiated in stock trade only model and made further market share gains in the year. Gross profit was ahead of last year at billion with a gross margin percentage of 61.6%.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

This is sector leading and shows a year on year improvement. Operating costs were £28,000,000 higher at billion, predominantly due to ongoing investments in our strategic initiatives. We protected the P and L with further productivity and efficiency actions to mostly offset the impact of inflation. And I'll cover this in more detail shortly. As a result, we generated an operating profit of million, which was broadly in line with last year.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

After net interest charges, profit before tax was million. So let's look at revenue in a bit more detail. First turning to The UK business. We continue to face challenging macroeconomic conditions in the year. However, despite a declining kitchen market, we held revenue in line with last year.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

We again maintained a disciplined approach to balancing price and volume to support our trade customers. Revenue on a same depot basis was down 1.2%. We are confident that the major driver of our consistent above market revenue growth has been the ongoing investments in our strategic initiatives, and these reinforce our differentiated business model. We again prioritized opening new depots and we revamped 76 older depots into the new format, which drives incremental revenue. At the end of the period, we had eight sixty nine depots in The UK and around 60% of those are in the new format.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

In the international depots, where we operate from 78 sites, we generated revenue of million, which was 9.7% ahead. In France, we are pleased to have significantly outperformed the market with a strong improvement in the same depot sales in the year. Our Irish depots also traded well in the year, and we will continue to expand our depot footprint there. Now moving on to profit before tax. This slide bridges the movement in PBT from 2023 to 2024.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Starting with 2023 PBT of £328,000,000 on the left of the slide. Gross profit was £27,000,000 ahead of last year. We were effective in implementing price increases early in the year that benefited the business by million. This more than offset the negative impact of volumes and mix of million. Looking at costs.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Within gross profit, we benefited from sourcing and manufacturing efficiencies as we maintained a tight control on input costs. These productivity improvements more than offset the increases in freight, commodities and wage inflation. We're continuing to increase the proportion of what we manufacture versus buy in as returns are attractive and we retain greater control of the supply chain. We now manufacture 36% of our cost of goods sold versus twenty eight percent three years ago. In the coming year, we have announced our intention to expand our rigid cabinet manufacturing facilities based at our factory in Runcorn.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

This is to ensure that as we grow the business, we have sufficient capacity to meet demand. Operating costs increased by million, which I'll cover in more detail in a moment. The focus on optimizing margin and tightly managing our costs has enabled us to hold PBT at million. This slide shows how we continued to manage our cost base, while funding our growth initiatives. Again, bridging from left to right, the incremental costs of the new UK depots totaled million.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

The other strategic initiatives spend of million included our investments in the depot revamps in The UK, which drives revenue growth in the mature depots. We're also continuing to accelerate our digital strategy to support our trade customers to save them time when they're on the move. For example, this year, we launched a depot based click and collect service, which is now live in all of our UK depots. This means that our customers can now see live depot inventory and make purchases through the trade app. We also continue to invest in our international business with a focus on the city based strategy.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

The £4,000,000 increase in our costs includes the incremental costs of the 10 depots we opened in 2023 and the three depots opened this year. The existing depot cost increase of million related to higher inflationary costs, principally in property and labor. Other costs were tightly controlled with the majority of inflationary cost increases being offset by productivity and efficiencies. We continue to face high levels of property costs and depreciation. Finally, we benefited from the non repeat of the additional costs relating to the fifty third week in 2023.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

So let's review our cash flow performance. From an opening cash position of $328,000,000, we ended the period with £344,000,000 of cash, a net inflow of GBP 61,000,000. You can see from the slide that this was after paying dividends of GBP 116,000,000. Overall working capital increased by GBP 65,000,000, stock increased by GBP 8,000,000 due to depot openings and new product introductions and we are carefully managing stock levels given ongoing disruptions to global supply chains and shipping routes. Trade debtors increased by million as a result of the later calendar end of our peak trading period in 2024.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

This cash since Alpine collected and overall aging remains in great shape. Creditors were million higher, which also reflects timings. Capital expenditure totaled million as we continue to focus on the execution of our strategic initiatives. Just under half of the investment was in depot expansion and revamps. Other initiatives included investments in our supply chain and manufacturing sites as well as expanding our digital capabilities.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Tax paid was lower than the P and L expense and reflected the collection of the previously announced backdated tax credit relating to the patent box claim. Now turning to uses of cash. Now strong cash generation remains a hallmark of Howden's business model and this was the case again this year. The group has an established capital allocation policy, which has been in place for many years. This slide shows how over many years, Howlands has both reinvested cash into the business to fund future growth, while rewarding shareholders with progressive dividends and returning surplus cash through share buybacks.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

In line with this, I'm pleased to announce that the Board has declared a final dividend of 16.3p. Added to the interim dividend declared at the half year, this gives a total dividend of 21.2p, which is an increase of 1%. In fact, our progressive dividend policy has meant that over the past twelve years, Houzzens has increased its ordinary dividend every year. The Board considered the group's balance sheet position in line with its capital allocation policy at the start of this financial year. As a result, we are also announcing today a million share buyback, which we'd expect to complete over the next twelve months.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Now I'm going to provide some technical guidance for the year ahead. First P and L guidance. As we indicated at the trading update last November, the annualized impact of higher contributions to employers, national insurance and the increase in the national minimum wage is around 18,000,000. With respect to foreign exchange sensitivity within gross profit, we have set out the impact on a full year of a $0.01 move in both the euro and the U. S.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Dollar, and they're shown on the slide. Our effective tax rate is expected to be around 24%. And in 2025, the amount of cash tax will be more in line with the P and L rate. As in 2024, we received that credit relating to the Patent Box claim. In the first half of twenty twenty four, we benefited from an additional two trading days.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

This won't be repeated in the first half of this financial year and is worth around million worth of sales. In terms of cash flow items, we'd expect capital expenditure to be broadly in line with last year at million as we continue to invest for growth. As we mentioned in the statement, we may also purchase the freehold of our Runcorn site, which results in an additional outflow of cash, and we'll keep you posted on progress. Overall, working capital is in great shape and the balance sheet remains strong to fund both investment but also to continue to return surplus capital to shareholders. So in summary, we have performed well in a challenging marketplace and taken market share.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

We have been proactive in delivering productivity and efficiency savings to protect profitability. Our balance sheet and cash flow remain very strong and support our continued investment in the business, And we remain confident of delivering growth ahead of our markets while generating strong cash flow and attractive returns for shareholders. Thank you. Now I'd like to hand you back to Andrew.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Thanks, Paul.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Well

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

done. Thank you, Paul. In reviewing last year's performance and our plans for this year, I'm going to use our strategic initiatives for the business as the framework. And they're fully aligned with our trade customer only focus, our entrepreneurial culture and they're based around the core building blocks of service and convenience, trade value, product leadership. So these four things are to deliver and evolve our depot model, to improve our range and supply management, to develop our digital capabilities and services and finally to expand our international operations.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So first, depot evolution. High service levels, including local proximity and immediate availability, are very important to our customers. And we continue to see profitable opportunities to open depots. We're using our updated format for all depot openings. This format enables us to provide the best depot environment in which to work and serve our trade customers and to make space utilizations and productivity gains in a very cost effective way.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So we opened 29 UK depots during the year with with a total of eight sixty nine trading at the year end. This year, we expect to open around 20 more depots as we continue to take a highly disciplined approach to new depot locations. And overall, we have a line of sight to around 1,000 depots in The UK. We've progressed our revamp program for existing depots and this continues to receive very positive feedback from depot staff and customers alike. And providing such a trading environment and working environment is important to our competitive position.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

During the year, we completed a further 76 revamps, including relocations, and that takes the total number of revamps up to three fifty. This year, including relocations, we plan to revamp around another 60 depots, which means by the end of this year, we will have revamped around 60% of the six seventy depots which opened in the old format and have around 70% of all UK depots trading in the updated format. Next, range and supply management. Sales of new product make a significant contribution to our performance and we've upgraded our product development program in recent years. Total sales of new product introduced in the last two years represent around 20% of total UK product sales, with new product introduced over the last three years representing 30% of UK product sales.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Sales of new product introduced in the prior year alone increased some 178% in 2024, in part reflecting majority major product innovations in that year, such as bedrooms and our new mid priced kitchen families. As in prior years, our higher priced ranges continue to contribute more to our kitchen mix by volume than previously. Managing our kitchen portfolio efficiently is crucial for both best availability, which is highly valued by our customers, and for profitability. More efficient new product testing means we can now bring more proven use kitchen styles to market more quickly and our new paint to order service is also informing our ranging decisions. Platform sharing within and across our kitchen families helps us introduce new kitchen options cost effectively And stock management and replenishment enhancements, which also includes our XDC network, enables us to provide the best availability on a larger offering and at an economic cost.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

All this gives us the flexibility to keep on offer kitchens whose sales may have peaked but still remain popular for an extended period. Excluding paint to order, we have 23 new kitchens confirmed for 2025, that compares with 11 last year and in 2023 in the prior year, with our entire offering of such kitchens organized into 11 families. We're committed to providing market leading and competitively priced product for our customers and value for money is a consistent feature of purchasers' buying decisions. Given the pressures on household budgets, price features vary prominently in twenty twenty four and is expected to do so again this year. With an emphasis on value for money, choice at all price points, our offering is well positioned to take advantage of this.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Our kitchen new product introductions for 2025 make more colors, styles and finishes available to more budgets, including entry and mid price points. We are innovating in other long established product categories and are adding significantly to our fitted bedroom offering, which we sold from all depots for the first time last year. Across our product categories, we've also introduced cleaner and more delineated pricing to demonstrate the value we offer at all price points. In 2024, we brought to market 10 new entry level and mid level kitchens. And this year, we have 13 more kitchens for our current entry and mid level families.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

These include Greenwich in porcelain, gloss porcelain, Allendale in pebble, Clerkenwell in gloss sand grey and Hellsworth in reed green. We also continue to develop our higher priced kitchen portfolio, which is a large segment of the market and one most associated with High Street Independence. For our contemporary style premium kitchen family, which we call Hockley, we have launched five new colors, including Reed Green and Textured Dark Oak. The paint to order service for customers buying our shaker style timber kitchens performed very well in its first full year and the service continues to be favorably received by both customers and depots. Customers buying our Chillcum and Elmbridge Kitchens can opt for a paint to order option in either all or just part of their kitchen furniture.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

In addition to the nine colors available from stock, this year we are offering 15 paint to order color choices. Solid work surfaces, which are often but not exclusively associated with the sale of a higher priced kitchen, continues to represent significant opportunity for the group. Our solid surface manufacturing capability is now amongst the largest in The UK. Following a significant increase in 2023, sales increased yet again in 2024 as we continue to improve our offer and our service levels. Last year, we increased significantly the number of decors we offer for this service and this year, we are adding some more.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We will have a total offering of 63 decors to suit all budgets in place well ahead of peak autumn trading, during which kitchen sales represent an above average mix in the portion of the total sales. We have continued to reinvigorate our offering in other categories and are invading yet again this year. Indoors, we are adding more colors and bolder styles at all price points. In appliances, we have further additions to our Lemona brand, which is the largest, which is the leading integrated appliance brand in The UK, alongside extensions to our range of third party branded product. And in sinks and taps, we have more styles, we have more colors and we have more finishes.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Our own label flooring, which we call Oak and Grey, launched in 2023 and now represents a substantial portion of the category sales. A new flooring product for this year includes innovative water resistant laminates and refreshed entry level decors. For Iron Mongree, we've also launched our own label, which we are calling Fuller and Forge. It features door furniture in a variety of designs, finishes and styles and significantly improves our offering in a category where we are underrepresented. Our new kitchen our new fitted bedroom range contributed a full year's trading for the first year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Sales for the first year matched our expectations and this year we are upscaling the offer. Installing fitted bedroom suits the skills of customers who fit kitchens and they have a high cabinetry content, which matches our manufacturing capabilities. We developed our bedroom ranges in house, utilizing existing design, manufacturing and supply infrastructures. Ahead of peak autumn trading last year, our offering comprised of 19 bedrooms, ranged into four leading family designs drawn from our kitchen portfolio, matched with internal accessories including pull down rails, mirrors and internal storage solutions. For these families, we are adding six more colors this year and we're also introducing Clark and Well as our fifth bedroom family, which will be available in four colors.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

The new product materially increases our bedroom total offering to 29 bedrooms. We are committed to providing competitively priced product for our customers and we have reinforced our focus on price and promotions, which demonstrates the value we offer and promotes footfall across the year. Howden's is an in stock business and the trade tell us that high levels of stock availability is one of the key reasons that they buy from us. Our XDC network, which enables us to offer next day delivery service and other initiatives, which include daily traders, facilitated a service level from primary to depots of 99.98%. Now that is a world class performance by any standard.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Our in house manufacturing capability is a source of competitive advantage for us and we keep under review what we believe is best to make or buy by balancing costs and overall supply chain availability, resilience and flexibility. In 2024, the new manufacturing lines in and around our Haydn site were fully operational for the first time. Production of the new furniture lines, which are among the most advanced of their type in Europe, totaled around 1,700,000 pieces in 2024. This gives us the flexibility to make a variety of kitchen furniture, principally doors and panels for more of our ranges at the same quality as we can source externally, but at a lower cost and at reduced lead times to delivery. Our second new Architrave and Skirting line made some 3,300,000 pieces and the performance levels of the new lines are now ahead of those of the original one.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

The line increases our total capacity by some 10,000,000 pieces and broadens the range of such products we can manufacture, enabling us to service in house sustainably all of the potential demand we see for these products over the longer term. Our new paint to order lines, which facilitate our premium price kitchen initiative, ran smoothly last year, supplying product all year round for the first time. We achieved the order turnaround time we set out for ourselves with demand more than doubling during our peak autumn trading period. Located in a purpose built facility near our Hydens site, the line gives us an industry leading production capability in this area. Cabinet and panel manufacturing underpins our entire kitchen offering, which constitutes the principal source of group sales and a higher portion of gross profit.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Our Runcorn factory, which with its high volume, low cost panel making capability, has always been an integral part of our manufacturing and logistics strategy. And in line with our longer term ambitions for the business, we're in discussions with all interested parties about our development plans for the site to give us more capacity and broader capabilities. Now, such development works, which are included in our CapEx plans, will take several years to complete and we will provide an update later in the year on how our plans for Runcorn are shaping up. Turning to our digital platform. We use digital to reinforce our model of strong local relationships between our depots and their customers by raising brand awareness, to support the business model with new services and ways to trade with us and to deliver productivity benefits and more leads for our depot teams and our customers.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Usage of our online account facilities, which provide efficiencies and benefits for our customers and depots, continue to increase. New registrations totaled some 111,000 and around 50% of customers had an online account at the year end. Total users viewing our trade platform increased by 50% with approaching 80% of users regularly looking at their individual and confidential prices. Customers with an online account have an average continue to trade with us more frequently and spend more than non users. We saw high levels of engagement in our web platform with growth in our social media presence, which also stimulates interest in viewing our products and services on hygens.com.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Site visits totaled 23,900,000 for the year. Amongst kitchen specialists, we continue to have the highest number of fitted kitchen site visits in The UK and the time spent viewing the number of pages viewed per visit were also consistently high levels. Across the leading social media channels, our follower base at 610,000 was up 15% with around 5,800,000 engagements a month. In 2024, our new digitized in depo stock management system or live stock as we call it, commenced operating in all UK depots. The system helps depots to record and pick deliveries and check allocations and to check and confirm depot stock levels.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Amongst other benefits, the system frees up time for staff to use more productively. It also enables us to have complete visibility of the location of stock holdings by SKU across our factories, primary and depots. Our livestock and other initiatives have enabled us to launch an upgraded click and click service to our trade customers, which is available for everyday products. Online account customers can check real time availability of stock on a depot by depot basis. They can review individual and confidential prices at their selected depot.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

They can place orders at any time of their choosing. And this year, amongst other initiatives, we will be supporting depots with the management of their customer relationships by making our depot account management tools more efficient and more productive. Our new account management tool captures information from multiple sources and makes it visible via a single dashboard. Individual functionality enables automation of time consuming manual tasks in depots. It provides comprehensive data for each customer and real time overview of accounts and leads and contacts.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We expect the system to be fully operational in all UK depots, well ahead of autumn trade this year. And finally, international sales. Sales of our operations based in France increased in 2024 with second half sales improving significantly year on year. By the end of 2024, we had 65 depots trading in France and Belgium. In 2024, we focused on team development with a program to give our teams the skills and confidence to sell Heidens differentiated model to best advantage.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

In the latter part of the year, the performance of the business improved. We invested in the business including through enhancing offerings of footfall driving product and introduced a regular schedule of trade days at all depots aligned with promotional activity and more supplier support. For this year, we remain focused on team development, particularly account management, as we look to build on the progress made last year. Last year, sales in The Republic Of Ireland continued to be very encouraging and we intend to open more depots there in 2025. We We identified The Republic Of Ireland as a market which suits our differentiated model.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We opened for business there in 2022 using a similar depot location strategy to that in France with the local team supported by our UK infrastructure and our digital platform. And by the end of twenty twenty three, we had 10 depots trading with eight of these clustered around Dublin and two serving the Cork area. And in 2024, we opened three new depots, taking the total trading to 13 at the year end. Our growing presence in the Irish market continues to attract much attention locally. And this year, we expect to open around five more depots, which take the total trading to 18 by the year end.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, for 2025, we are well planned, including on our strategic initiatives. These are aimed at increasing our market share profitably, as well as delivering value to customers across all price points. We have all of our new kitchen ranges in stock, well ahead of peak autumn trading, with an emphasis on entry and mid price ranges together with our very competitively priced premium kitchen offering. We have a structured program of rooster promotions in place to keep Huygens at the front of the trades mind together with other price initiatives. We will continue to make improvements to service and availability, for example, by utilizing XDCs efficiently and through our daily traders, livestock and click and collect initiatives.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And we are increasing the functionality we offer online to the benefit of our trade teams, our customers and theirs. During 2025, we plan to open around 20 depots in The UK and refurbish around another 60 existing depots to the updated format. By the end of twenty twenty five, we expect to have around 65 depots trading in France and Belgium and 18 or so trading in The Republic Of Ireland. And lastly, outlook. Given the prevailing macroeconomic environment, we expect market conditions to remain challenging and anticipate the total market may well contract this year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

However, we are well prepared for all challenges and opportunities ahead. We aim to retain a profitable balance between price and volume as we continue to maintain competitive pricing whilst aligning our operating costs and working with suppliers to keep product and input costs controlled. We are confident that the business model is the right one to address the opportunities in our markets. And in summary, we are well placed to outperform our competitors in 2025 as we both continue to invest in our strategic initiatives and return a further million to shareholders through the new share buyback program announced today. And finally, I would like to take this opportunity to thank everyone who works at Heidens, whether they are in the depots, in our manufacturing operations or our supply operations, in our commercial teams or in their support functions for the extraordinary commitment to providing exceptional service for our trade customers.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And it's this that sets us completely apart from so many others. Thank you. So we'll now take your questions.

[Priyal Woolf, Equity Analyst at Jefferies]

Brea Wolf from Jefferies. I'll just start off with two questions. The first is just a follow-up on the outlook. So you've obviously talked about the likelihood of the Kitchen market potentially being down this year. This year, obviously, your same depot sales were down slightly.

[Priyal Woolf, Equity Analyst at Jefferies]

It seems to comprise the market being down mid to high single digits, but you've obviously outperformed that significantly. How do you expect those two contributors to move into 2025? I appreciate it's early in the year, but I'm just trying to work out the potential that your same depot sales could still be up this year despite your outlook for the markets being down. And then secondly is just on the international division. I think you've previously talked about the possibility of hitting breakeven there in 2026.

[Priyal Woolf, Equity Analyst at Jefferies]

I just wondered what the latest was on that.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Sure. Yes, you're right. And it is pretty early to call how the year is going to play out. I would point to the surveys that the depots are seeing, the surveys that we're doing with customers are progressing very nicely and are up well. That may be the fallout whatever is happening in retail in their January sales, but we are making good progress due to the start of this year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I would say also that we are extremely well placed for whatever eventuality comes out of the market this year. I'm particularly pleased of how we've managed profitable growth in the business in a contracting market and we've managed our gross margins particularly well. And that's the focus for the Depo teams right across the country that we continue to take all of the opportunities that we see and we take them profitably. I think I'll stress the point that I said in our presentation, our builder customers who we talk to regularly through our builder forums that we meet regularly, particularly the established ones are still busy as you like. You can look right out into the year and they still feel very busy.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, our total focus in the business is keeping really strong relationships with our builder customers who are spending more frequently with us. So, I do not feel, I'm far from gloomy on the market this year. I would say our teams across the business are in probably the best form I've seen them in for a long time and often positive morale in the business, which we absolutely have, often translates into great performance. I think we've got one of the best trading plans that we've ever had laid out in front of us for the year. It's fully understood by the depots and we've got a lovely rhythm going through the year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, I don't think we feel we're going to get much help from the market. I think that's probably well understood. But, we love a fight. And I think our job is just to continue doing what we are doing so well, taking profitable volume growth, managing our cost base appropriately and I can see potential for something a good year. Your second question is about France and I pointed pretty straightforwardly to we went fast a couple of years back when we opened a number of depots and that was learning for us.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We acted quickly on it and we strengthened up the team. So we've brought in one of our great UK Traders, a guy called Zarinzalek. He's out in France. He's been there a year and he is bringing all of the goodness of Haydn's to the French market. In addition, we've appointed a new CEO of France, a guy called Sebastian Krajcek.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And the rest of the team very strong in France. So I'm completely confident in what we've got from a team point of view. We've just gone steady on depot openings because we just want to consolidate where we're at and we are making very good progress. We think the French market would have been down around about seven last year. That seems to be what's reported publicly and we made a proper swing in the back half of the year and sales progress has progressed further forward since the back half of the year into the start of this year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, I think we're in a good place. Where you get to on breakeven depends on how many new depots we pop down in France, but our job is to get sales per depot up to increase the account base, get the account base active. But I'm confident in our plans, whether it's '26 or '27 for breakeven, we'll be making good progress to reducing losses there. Next question, Christian. Just stand at the front here.

[Christen Hjorth, Equity Research Director at Deutsche Numis]

Thank you. Christian York from Deutsche and Numis. Three from me please. First of all, just I know it's difficult to read into much from current trading at the start of the year, but are there any sort of trends that you'd pull out? And was there anything current trading which drives the view around the market for 2025?

[Christen Hjorth, Equity Research Director at Deutsche Numis]

Secondly, could you please just touch on the independents as a grouping and how you feel they've performed since 2019? For example, have we been seeing businesses go out of business, etcetera there? And then thirdly, just any sort of views on price in the market given obviously OpEx and National Insurance contributions, etcetera, continue to go up. I assume a lot of competitors don't really have much margin to play around with. So just a bit of sense in terms of which those that cost inflation can be possible.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Thanks, Christian. Thank you. Look, I mentioned earlier about current trading. It is early in the year. And I think we would say we are seeing customers shopping around.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

That would be a feature of some of what we're seeing and that may be indicating why we're seeing more and an increased number of surveys that we're doing for customers. The team, I spent a lot of time in front of the depot teams right up and down the country. They would say the customers might just be taking a wee bit more time, particularly if we're at the top end of the kitchen. Somebody has saved, they're probably going to do it anyway and they're waiting for planning permission on extensions, that's normally fairly safe. But there is a feature of customers wanting value.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I would say we've been very strong in opening price point, which is a heartland territory for us. Remember, all the kitchens we sell, whether it's opening mid or top end, all come off the common carcass platform made in Heiden and in Rungkorn. From a margin perspective, we're comfortable whether it's opening mid or top end because we drive incredible margins at all three levels, it's not that much different. So, we would be facilitating customers if they want to get the full look of their kitchen, there's some element of trade down, which sort of works for us. So, you'll see customers wanting a blue look and they'll do it in an open price kitchen on our carts and they may even invest in a solid work surface to get the combination together.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, we're able to place whether it's in the own brand appliances versus big branded appliances, we're able to get customers to the right place for it. So, I think those are some of the dynamics going on. I think our builders are becoming even more reliant on us because I think some of the competitor sets are I think struggling on availability. And I don't know what that points towards, but we hear pretty poor service levels in the market. And I mentioned our 99.98 service level, which is just an incredible feat from what the supply chain team and the factories do for our depots.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, I feel pretty good. I would I'm pleased with the progress that we've made on the better end of the kitchen range. I think I've always felt this business has got a big opportunity in the better end of the market. And that continues to remain a very big part of the market. We've seen independents drop out.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And if you face a sort of an independent product offering versus a Heydens product offering, somebody in an independent doing a 40,000 pound kitchen, you can get it much, much cheaper with Howdens working through the trade. So people find these routes to market, I think in tougher times. So yes, I think we'll continue to put pressure on the independents. And I think Howdens of old, seven, eight years ago, I would have described it as a product follower. And one of the reasons I've not shown all the product we've got coming to market this year is because we are absolutely a product leader and we are being increasingly sensitive about what we're bringing to market because others trying to copy us.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So, I would point to the good independents will continue to do well and it's a made to order type products. You can sort of survive, but rents and salary pressures I think are enormous for them. And we've seen with our progress into things like Haydn's work surfaces, we've seen a number of the independent operators who are make sort of mom and pop type local places, finding it very difficult to compete with our offering as we get more and more volume. In terms of price, we would take the view it is it's kind of it's a weight to national insurance and we've been clear about the costs that have been put into the business from that. We don't feel customers should take all of that pressure.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So we've gone in with a sensible price increase and I know it's slightly lower than some others. So that gives us an even greater differential. So we've gone in with about a 3.5% and I'd be looking to maintain and retain a lot of that. And I'm not getting any pushback from the teams when we do our regional board meetings. The teams feel very confident about where we're at in pricing.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We've been smart through the commercial team about how we've applied pricing. So, there are everyday footfall drivers in our business that we would be absolutely blistering keen on to make sure that we are repeat seeing customers coming into the business. And we've got a big mantra in the business, the more joinery and doors volume that we drive, the more time we get to see builder customers. And the more time we spend with builder customers, the more time we get to understand where the leads are and where the opportunities are for us. And that's where we're so difficult to compete with, because we're not competing with a national price file.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Our depots are incentivized to run their pricing on a local level. So they will take kitchens at lower margins or higher margins, but it is very difficult to compete with our depot teams who are very aligned to making bonusable profit for them. So I'm pleased with how the price increase is going, I suppose is the shorter answer to your question, Christian. Thank you. It's down in the front there.

[Geoff Lowery, MD, Retail & Sporting Goods Analyst at Redburn Atlantic]

Jeff Lowry

[Geoff Lowery, MD, Retail & Sporting Goods Analyst at Redburn Atlantic]

at Redburn. Two questions. I'll go one at a time, if I can. Your EBIT margin this year is probably going to be at its lowest level for getting on for fifteen years. In a normalized volume environment, is there any reason why historic margins can't be recaptured?

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I'll

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

go and then you go in afterwards. Yes, absolutely none, Geoff. I think we're feeling some weight from losses in France. We're feeling some weight from not having volume going through the factory. I think like a 1% volume would account for roughly 0.4%.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So you're right, a 14.6% getting it back up to seventeen percent and post COVID we were as high as nineteen percent. I can tell you, Geoff, we are absolutely focused on getting that metric back. And it helps, it gets helped by volume put through Hayden's work surfaces, which has got a lower mix and the team are doing a fantastic job on driving volumes and efficiencies through that, getting it right first time for customers. Getting France losses reduced, driving the mix on things like bedroom furniture, which we're very pleased with, which has an accretive margin, so to non kitchen product. So yes, I feel we will absolutely get back there in the coming years.

[Geoff Lowery, MD, Retail & Sporting Goods Analyst at Redburn Atlantic]

Lovely. And second question around vertical integration, You've given us some helpful numbers about where you've journeyed from and to. Is 50 odd percent still a realistic target?

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I think it is by volume, but not by value. Yes, I think sort of a 40 early 40s by value feels about right for us. We're very strong on manufacturing cabinetry, skirting, worktops, nice solid work surfaces, end panels and Julian sitting at the frontier has been very curious about what else we can take back that stable long run production volume and bringing it back to The UK. And what we've done on some of the panel lines that are referred to in my presentation has just been outstanding. And you go to the factory and you see just world class manufacturing going down our production lines and we can do more.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And I think we can get curious about some other areas and joinery for example, which we're doing some early work on. We've acquired some space at the back of the factory in Heiden. We've got development plans for Runcorn. It's a critical part of our operating model and I've been very keen to make it even more productive. So that's where our head is around about sort of 40% of our mix.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And never we will always buy drawer runners hinges from Austria or The Far East or a combination. Appliances is not a business we would ever enter into, but we add value to it by creating our own brand and being really specific about trade quality and where we source it from. But yes, I think we're in our strongest single place on manufacturing than we ever have been from a leadership point of view and investment plan point of view.

[Geoff Lowery, MD, Retail & Sporting Goods Analyst at Redburn Atlantic]

I'll just ask a

[Geoff Lowery, MD, Retail & Sporting Goods Analyst at Redburn Atlantic]

point, Part B, if I may, on just that. You did an amazing job last year offsetting input cost pressures. I guess there was some positive FX in that bucket. Can Julian work his magic again and defray input costs?

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I think one of the things that we are outstanding at in this business is a program management effort of taking projects and identifying opportunities for efficiency improvements. We've always been outstanding of that in the vertically integrated part of the business and I think we've got even stronger. And we do the same thing at the front end of the business as well, driving productivity and depots, taking some of the depot drudgery out to help in productivity terms and things like livestock and XDC have made the depot manager's life so much easier and all the teams so much easier. But yes, I think we'd be with some of the European suppliers under considerable pressure for volume. If you're out and you're touting for business, Haydn's is your best account.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And that comes at a price. And we've been very strong on our vendor buying agreements at the start of this year and we're seeing some good early successes on that. So that will be part of the mix this year.

[Benjamin Pfannes-Varrow, VP - Equity Research at RBC Capital Markets]

Ben Verra, RBC. I'll do three as well, please. Just firstly on the UK depot target. So you've reiterated the 1,000. How should we think about the road to that?

[Benjamin Pfannes-Varrow, VP - Equity Research at RBC Capital Markets]

Is 20 depots a year the new thinking? And second on France, just a follow-up. What do you need to see there to pull the trigger again with regards to accelerating the depot rollout? And what's your thinking on the depot targets there? And then thirdly, just on CapEx, how should we think about that over the coming years as you look to build out additional capacity?

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Okay. I'll leave the last

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

one to Paul and I'll do the other two. Look, I think we've signaled we've always done around about 30 new depots a year and we've signaled 20 this year. I wouldn't read anything peculiar into that at all. I think it's just a matter of the maths. It's we want to get more depots in London because it's just so difficult to get around London for the trades and we want to put more in, it's just harder to find them.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I think we find a feature that there's more new builds and they take longer to come through. And I will be absolutely adamant that we never will take a depth one that's not in the primary site. So of our B8 trading industrial estate type sites, we always want to be pretty prominent when you get in there. So I'm fussy, part of the 20 is me being a bit fussier. I could probably do a few more than 20.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

I'll see, I've said around about 20 that sort of feels to be the figure. And I suspect it will be that sort of cadence as we get through to the 1,000, that feels about right. So I think we're very comfortable with that and we're very comfortable with how we're landing depots. We've become very programmatic and everybody's comfortable with how we lay it out. The amount of displays that we do at the front is the right sort of number of displays for a builder wanting to bring in his end consumer, our behind the counter product works very well and the whole place feels open, easier for people to manage on one level.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So I think our format is fantastic. In France, yes, we look, I think at times when you want to grab control of a business, you put the right team in. I had we had the 10 of the managers over in London celebrating the success that they had had in the second half of last year. So there were some event winners. And I had dinner with them with Zoran and Sebastian on Wednesday night.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

The excitement about opening up new depots in France is amazing. And we were talking about opportunities in Beirut and in Tours and the list went on and on. So they are mad team to get back to an opening program. And I'm saying, no, we stabilize, we get the sales per depot up to the right sort of level, which isn't the case in every case. So then we get the team in the right place and I'm very confident that we're getting there.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So we'll be back on with opening up depots, I would have thought next year and the year after and we will not let good sites pass us by. If we need to mothball something, we will take it and secure it. On depot targets in France, I think we can very comfortably see two fifty there, very comfortably see that. In Southern Ireland, I can see 40 And we'll see how we go because you're sort of exploring, I think the heightens of old, always used to see 100 depots ahead of it. But France is a very large market and the kitchen market size, including appliance isn't that different to The UK.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And the competitor set over there would have operated in that traditional model. They haven't got stock, they're not serving trade. I think they look at us coming in and seeing the rate of growth that we've got versus the market and you'd say that Haydn's is really making a difference in France. And just to give you some sort of reassurance around the team, the belief in the business model amongst the Depa managers and the leadership team is unquestionable. This in stock serving trade, helping the trades make money, being there from all the way through, it's just simply the best way to get a kitchen done and that seems to be working as well in France and Ireland as it does in The UK.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

In terms of CapEx levels, sort of indicated million for 2025. As we look forward, we've obviously done our strategic planning and we can see that we'll continue to support the business in terms of the right investments It's round about 5% of sales, which seems like a sensible level of investment just to keep working through and investing where it makes sense. The one thing I did mention is there's sometimes some opportunities around maybe some land transactions. We mentioned Runcorn. It's an opportunity to potentially buy a site that we will be there for another twenty five years or so.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

So actually the maths make it more sensible to own it rather than leasing it. So we're looking at things like that. That would be on top, but very much stands on its own. I don't want to share too many details because obviously we're in commercial negotiations. But if you're thinking something like million or so or something like that, it will be that kind of ballpark well within our sort of balance sheet capability.

[Clyde Lewis, Deputy Head - Research at Peel Hunt]

Thank you. Clive Lewis at Peel Hunt. You've pushed on obviously fairly hard with the branch refurbishment program in The UK. How have you sort of been evolving that? Are you starting to tweak what you're doing with the refurbs?

[Clyde Lewis, Deputy Head - Research at Peel Hunt]

And do you need to sort of start to move that on again? So the early refurbs again are sort of looking at the newer refurbs and think, oh, we wish we had that. So that was one question. I suppose linked to that as well is the XDCs. How are you evolving your thoughts around what they're doing?

[Clyde Lewis, Deputy Head - Research at Peel Hunt]

How they're doing it? Is that an area for some sort of future change, I suppose, in the nearer term? Third one was really around the bedroom performance. It'd be really useful to sort of get an idea of, I I suppose, the scale of the market there, where you are, how easy is it to sell bedrooms from a kitchen depot? Again, I suppose partly the racking bedroom doors were significantly taller generally than a lot of kitchen doors.

[Clyde Lewis, Deputy Head - Research at Peel Hunt]

So how are you evolving things on that front? The last one, no more after this one, is joinery. How would the joinery performance have fared relative to the overall branch performance? Was it better or worse than that number?

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Yes. So, yes, I think when I inherited Haydn's, I inherited the state that I think was quite tired actually and needed spend on, I think, Geoff, you probably pointed that out when I first joined. And I didn't want to do what often retailers do is invest in a revamp program that sort of becomes an exciting thing and then it doesn't quite pay back and we've developed something here that absolutely has. Of course, our thinking has moved forward with it, but I think what we've been so pleased with the principles of the layout are very solid. So you know, walking in and seeing probably twice the level of displays, 400 square feet moving up to 800 square feet, still small, but it packs a punch.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And you look across to a manager sitting out front, not in an office, he's out front with his customers and there's a business development team out front and there's a counter with somebody serving that's always there. So you do not see somebody in New York into our depth as it's a highly interactive environment. And then it gets more private as it goes back. So into the planning areas and then there's a room where we take customers in and we convert at a very, very successfully high rate. So the layout and the principles we feel are absolutely solid and don't need changing.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

You remember we did this because we went into the warehouse and we vertically racked products and we did it more efficiently and then all the work on XDC and making sure we had fast selling SKUs in the warehouse. So we're happy with all of that. But displays do need changing and they go as part of the Depa managers team, they update their displays. I think at the same time, we have got better and we've built a mop shop in Rawlins where we bring suppliers and we get our latest thinking. So they've moved on, but they're not massively different from the initial ones.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

It's not like you need to go back in and blow them up and start again. But as we've done solid work surfacing, as we've done bedrooms, you've got to bring some of those products in and show them off and we're capable of doing that within the layout and very minimal sort of CapEx. So, yes, that all feels pretty good. The team have built a skill that they wouldn't have had, which is going back and refitting a depot and doing it with minimal disruption to the teams. XDC has been an innovation that you probably wouldn't see anywhere in the world from a kitchen retail point of view.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And I started thinking this through the team because we were moving around about 11,000,000 pieces in between depots. And we're down well below 1,000,000 pieces moved in between depots. There was a small industry going on and of course a sort of hidden cost in the business to it. So XDC was funded by taking out that I think wasteful work of moving stuff around customers not getting factory fresh product and availability being quite difficult to get all in one go, but we still did it because, you know, the upper managers incentivize to make sure builders do well. But we've become very sophisticated on how depots get stock and when XDC is used.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

XDC is the most expensive route to market. So our systems will look at an order, they'll look at when the customer needs the order and they'll use the cheapest route until it fulfills through XDC. And then really smartly, what the teams have done is they've put an auctioning process between depots. So an XDC will come around and depots can take space of the cube and with it for themselves if you like. So there's always a hotly fed competition between depots using the space.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And our utilization of XDC has gone way up to high 90s now, so there's very little wastage and we're covering the costs pretty much across the business. Bedrooms, I'll correct you on this one. We use we don't put ranges in for bedrooms. You'll have seen in kitchens, larder units and walk in cupboards have become a very big feature of what people want from The UK. You open up the Alardi unit, you see coffee and breakfast and all that kind of stuff or drinks cabinets.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Those tall height units work in the kitchen, in the bedroom. So we haven't added any extra SKUs into that. Look, we've been very encouraged by bedroom sales. I think it's done exactly what we thought it would do and it's growing at the rate we want it to. I've always been very careful about this because I do not want anybody being distracted from kitchens and doing bedrooms.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So we've been very clear about you do not take kitchen displays out to do this. And we carefully think how we do present kitchens, whether it's on the edge of the display space in the showroom. It's the icing on the cake for us. It's never instead of the kitchen. We saw a really nice adoption rate of people buying kitchens and doing bedrooms during peak trading.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We've made a great start to bedrooms this year. And the new bedroom brochure of which there are copies outside is a substantial move forward as we're serious about the market. From memory, there's a couple of players in the mid part of the market, Sharps and Hammonds that do about 100,000,000 each. The market I think is about 1,000,000,000, the accessible part of the market is about three quarters of that for us. So it's a chunky little opportunity for us and very much the type of stuff we like to sell.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

So if you're up doing a bedroom in between the kitchen fit, generally there's no plumbing, generally there's no electric. So it's a nice easy fit in job for the trades. What we've got to do is make sure all the trades know and you can tell them, but you've got to tell them and tell them and tell them again, we do bedrooms. And often a big win is when a tradesman does a bedroom for himself and the fit, the feedback we get from the fit and the quality of the product is fantastic. And we've been stronger on sort of opening price.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Our entry into the kitchen market originally was zero to sort of £3,000 kitchen territory, same thing we will be doing on bedrooms even stronger this year. That was it. Joinery, joinery, it's not much really to pull out of sort of joinery versus kitchens. I think we found the door market just slightly harder. We were in transition on flooring last year, both again getting into good growth this year.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We always measure sort of the footfall through joinery and flooring, particularly things like skirting. So there's not a huge differential really to point out between the two.

[Charlie Campbell, Managing Director, Equity Research at Stifel Financial Corp]

Hi, Charlie Campbell, this is Steve Field. A couple of questions. Just firstly on the buyback, just wondering why $100,000,000 or another number? And then secondly, just thinking about residential landlords, a lot of changes in that industry, quite a few landlords selling up. Are they changing the way that they or the frequency or the spend on renewing kitchens?

[Charlie Campbell, Managing Director, Equity Research at Stifel Financial Corp]

Because obviously, it's a reasonable chunk of your business. Just wondering what you're hearing from that segment.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

If I take the buyback question, we've always been sort of very open about our capital allocation policy and looking obviously investing in the business is the priority, progressive dividend that we continue to deliver. And then we look at sort of anything strategic that we're making and then the rest we look at distributing back to shareholders and buyback is sort of the preferred mechanism that we get feedback on. So sort of the decision to make million was kind of very much driven by the strength of our balance sheet and where we're at. So within that you saw the strong cash performance this year that benefit also from things like the patent box where we collected that cash in the year as well, took into account where we are and receivables are in great shape and aging. So that very much sort of mathematically drove that decision and sort of just generally demonstrates the strength of the Haldens cash generation model, which hopefully everyone appreciates.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

And so regarding your comment on the sort of residential people selling up, I mean, there's not much in it for folk doing the buy to let type market. Those flats are still around and those flats even though they're owned by not owned by landlords still need kitchens changing from time to time. And that would largely center on our anything up to 4,000 pound kitchen range, which we are absolutely knocking it out of the park on. So we see no shortage of demand at that sort of end of the market. Where we do get excited, we see a lot of university change.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

We do very well on that. We do a lot of work with councils. I would say, we like people moving homes and I think we would also say that we will see that coming more as the Labour government gets into building more. And I don't think we would point to the change in landlords either being private landlords being involved more or not as a thing for us, we just wouldn't see it. Is that largely it then?

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Great. I'll call it quits there.

[Andrew Livingston, CEO & Executive Director at Howden Joinery Group]

Thank you very much indeed. Thanks for joining us.

[Paul Hayes, CFO & Executive Director at Howden Joinery Group]

Thank you.

Participants

Executives

• Andrew Livingston, CEO & Executive Director
• Paul Hayes, CFO & Executive Director

Analysts

• Priyal Woolf, Equity Analyst at Jefferies
• Christen Hjorth, Equity Research Director at Deutsche Numis
• Geoff Lowery, MD, Retail & Sporting Goods Analyst at Redburn Atlantic
• Benjamin Pfannes-Varrow, VP - Equity Research at RBC Capital Markets
• Clyde Lewis, Deputy Head - Research at Peel Hunt
• Charlie Campbell, Managing Director, Equity Research at Stifel Financial Corp