Tag: Howden Joinery

  • Friday Reading

    More Results & a Pearl of Wisdom

    I like company results time, because results give me a tangible feeling of whether I'm doing well or not. I suppose even that's a little self-indulgent, as I desperately try to stay away from the folly of market watching, but at least it gives me a good hint as to the underlying direction of the company. That's something that the price doesn't reflect - a core principle behind being a value investor - so results days give me a nice chance to catch up, reassess, and hopefully give a company some fresh eyes. Alongside my post on Wednesday, then, we had two sets of figures come out yesterday.

    Firstly, Howden Joinery, a stock which I admire for more than just the cheap price - I'm hoping that isn't influencing my rational investing brain. Firstly, I like their annual reports - they have an easy to follow explanation of everything they do, from start to finish, thorough explanations of why they do what they do, and good supporting figures. In management statements, wording is concise and clear, and - something I wish more companies would do - when they note a figure is 'in line with market expectations' they state what those believe those market expectations to be. This is a breath of fresh air. In a sense, I'm not sure I am so concerned that it leads me to like the company more - because I think a management which values transparency and good communications is a management likely to be fair in other senses, too, and that's the sort of business investors should align themselves with. I should say I'm not being paid by Howden for this and, joking aside, I remain driven by the numbers and the relative valuation of the business. The interim statement looked to confirm my faith; it reported, as usual, revenues continuing to rise and the company continuing to steadily expand. Revenues were up 5.9% this time, with 20 new depots (they currently operate 510) planned for this year. They continue to occupy a significant chunk of my portfolio at a pre-exceptional P/E of less than 10, and happily so; things seem to be going along more or less in line with my original analysis, found here. (more…)

  • Twelve for 2012

    Part Two

    With six of my stock choices briefly explained here, I conclude my twelve for 2012 in this post. The format for my last picks is exactly the same as for my first - I want to explain them briefly, simply, and without too much jargon. If you want a more detailed analysis, of course, I did do full posts on all these companies - just use the search bar above right or tags at the bottom to find them!

    Howden Joinery

    Howden Joinery, makers of predominantly kitchens and fittings, have a very low cost business model and growth which is both deceptively recession-proof and surprisingly strong. Due to Howden's approach to selling to the trade instead of consumers, stores tend to 'mature' over time as they increase in account holders - something which is still driving growth even before store expansion. On top of that, though, Howden is continuing to pursue growth in the vein of its existing model - cutting out the expensive high street stores customer-facing sellers need, and allowing themselves to focus on margins, which continue to be very strong. French expansion is on hold at the minute due to the uncertainty, but the business seems solidly run and consistently profitable since their troubled beginning.


    Cranswick make sausages and meat products, and were memorably described in one of my very early blog posts thus:"This seems like a Buffettesque company. I think the company will slowly accrete value." That's a description I probably agree with as, through various cycles of pork selling prices, Cranswick has continuously grown and remained profitable. In fact, they've grown revenue year on year for the last 10 years, and almost grown profit consistently for that same period. The balance sheet is extremely conservative, the management seem the same, and so the question always came down to valuation; and at a P/E of below 11 an extremely safe, consistent grower whose margins had been slightly squeezed seemed a solid bet. (more…)

  • Howden Joinery (HWDN)

    An Update

    Howden Joinery released an IMS today - hence why I deviated slightly from my usual Mon/Wed/Fri schedule this week. It's been a while since I covered them - their business being one of the first ones I ever covered on this site back in June and, since I felt like it was time for an update, I thought things timed up rather nicely! One thing to note - we've had a half yearly statement and an IMS since that first post, but the business is obviously materially the same. If you want a more general overview of the business - and if you don't know, take a look, as it's a great company - follow the link to the first post where I try and aim a bit more bottom up.

    Nonetheless, since it's been a few months, I think the best thing to do is to take a look at the performance of the share price over that time period - shown in the graph above right and also compared to the FTSE All-Share, my chosen benchmark. There's some significant outperformance there, as their revenues have proven to be remarkably resilient in the face of continuing consumer malaise, as I suspected they would be from their previous history of performance. That said, the graph doesn't include today, and today we're seeing a rather significant reversal of that trend - with the market marginally up and HWDN down 5%. Outperforming still, but not quite so strong!

    That 5% downtick is interesting from my point of view, as it's not immediately obvious what has caused it. The IMS to me looks strong; some key figures I've picked out include: (more…)

  • Howden Joinery (HWDN)

    Sustainable Profits

    Howden Joinery is the sort of business that makes me feel good. It's a kitchen/cabinet/door etc. supplier that services local builders - not a retail business, but serving hundreds of thousands of small builders across the country from its 500 depots. It's easy to understand, clear and forthcoming with how it makes its money, and relentlessly customer focused. The 2009 annual report has a fantastic diagram (7th page, if you're interested) which effectively outlines the length and breadth of their operations. They design the kitchens, source wood from UK forests, assemble the cabinets in factories in the UK to keep costs down - though using some imported parts - and deliver to local depots where they sell to trade.

    They've certainly come far from the uncertain days of their 2005 split off from MFI. This left them with long-term debt, leases, and a shaky pension plan. Much of their first few years were spent sorting out these backroom issues but, since then, they've become a solid business in their own right with few of the scars remaining. Last year they earned £66.9m which, against their market cap of roughly £670m, leaves them on a P/E of around 10.  Debt is practically non-existent, though the firm does obviously have facilities in place. Operating lease commitments sit at a total of £325.9m, which gives no cause for concern, as they paid only £48m last year. The cheap rates are primarily down to Howden's refusal to target the mass market - they have no need for flashy prime location showrooms. The only concerning factor is the pension deficit, which is never a pretty sight on a balance sheet. Still, while I'm no expert on this particular field, the deficit looks reasonable and the assumptions used when calculating it tally with my own opinion. Salary increases of 4.5% pa, expected return on assets of 6.3%, and a CPI of 2.8% all seem fine for the long term. Attempting to analyse a pension scheme in any detail is a first for me, so I may well have missed some of the more intricate workings.