Howden Joinery Group H1 2025 Earnings Report

Howden Joinery Group EPS Results

• Actual EPS: GBX 16.40
• 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: H1 2025
• Date: 7/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 24, 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 H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In the first half, group sales rose by 3.2% (4.3% adj.), gross profit grew to £620m with sector-leading 62.1% margin, and EBIT margin expanded by 10 basis points.
• Positive Sentiment: The business delivered strong operating cash flow, maintained a robust balance sheet, raised the interim dividend by 2%, and plans to return £100m to shareholders via share buybacks.
• Positive Sentiment: Howden’s continues to invest in growth with 948 depots trading (including 871 in the UK), plans to open about 25 more and refurbish around 60, and is expanding manufacturing at Runcorn to boost capacity by ~15%.
• Negative Sentiment: Operating costs increased by £28m in H1, driven mainly by £11m of strategic investments and a full-year impact of ~£18m from higher employer national insurance and minimum wage costs.
• Neutral Sentiment: Management expects UK market conditions to remain challenging for 2025 but remains confident its trade-only, in-stock local model will deliver market share gains and sustainable growth.

Presentation

[Andrew Livingston, CEO at Howden Joinery Group]

Good morning, everyone, and welcome to Haydn's twenty twenty five Interim Results Presentation. I will begin by introducing our performance in the first half. And Jackie Calloway, who joined us in June as our new CFO, will will then review our financial results for the period. Welcome, Jackie. I will then share my perspectives on our 2025 performance to date and our plans for the remainder of the year, and then we'll take your questions.

[Andrew Livingston, CEO at Howden Joinery Group]

The business has performed well in the first half in, as we anticipated, a challenging marketplace. The results met our expectations for the period and we're on track for 2025. Group sales in the first half increased by 3.2% and were up 4.3% when adjusted for the lower number of trading days this year. In The U. K, we believe we gained kitchen market share in the period, which helped us mitigate a small single digit decline in the overall size of the market.

[Andrew Livingston, CEO at Howden Joinery Group]

We maintained an industry leading gross margin with gross profit ahead of last year as we balanced recovery of cost rises with our commitment to providing competitive pricing across the board for our customers. Profit for the period was ahead of last year, increasing at a higher rate than sales. We progressed our strategic plans for The U. K, which support our trade customers, and total sales of our international operations increased significantly. At the half year, we had a total of nine forty eight depots trading, including eight seventy one in The U.

[Andrew Livingston, CEO at Howden Joinery Group]

K. 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 to provide shareholders with an increased interim dividend for this year. During this year, we also expect to return a total of £100,000,000 to shareholders through our latest share buyback program, which we announced in February. The interim results demonstrate the strength of our local, trade only, in stock model.

[Andrew Livingston, CEO at Howden Joinery Group]

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 investments in our strategic initiatives. In The U. K, we had a record number of customer accounts as of at the half year, with a similar proportion trading as last year. As well as maintaining an industry leading gross margin, our total KPI sales volumes were ahead of last year. So far in the second half, our performance has been in line with our expectations.

[Andrew Livingston, CEO at Howden Joinery Group]

And whilst we have peak trading ahead of us, we are on track with our plans for the business and our outlook for the full year. In 2025, we expected market conditions to remain challenging, and this year has proved to be the case so far. We are well prepared for this, and our customers, mainly self employed people, are adept at winning business in such times. Delivered by our highly entrepreneurial, well incentivized teams across the business, I believe that our service orientated, trade only, in stock local model is the right one to deliver sustainable market share gains. Our market is hard our model is hard to replicate and difficult to compete with, and we have initiatives in place to make it even more so.

[Andrew Livingston, CEO at Howden Joinery Group]

The addressable value of our principal UK markets is some GBP 11,000,000,000, and there are significant long term growth opportunities for us. We continue to prioritize investments on this in the business on this basis. So I'll update you on our strategic initiatives, which are key to the long term development of our business after Jackie has taken you through our financial results for the first half. Jackie?

[Jackie Callaway, CFO at Howden Joinery Group]

So thanks, Andrew, good morning, everyone. I'm delighted to be here for my first set of results for Howden's, and I look forward to getting to know those of you who I haven't met yet in the coming weeks. Since joining the group in June, I've spent my first few weeks working in the depots, meeting our trade customers and our customer facing teams, and visiting our main manufacturing and logistics sites. The entrepreneurial culture of the business is very strong and I've been impressed by both the quality of our people, but also the service service ethic of the depot teams and their commitment to serving our trade customers. Our strategic direction is well defined and it's very clear that there is significant opportunity to generate shareholder value given the size and attractiveness of the kitchen and joinery markets and the success of the Howden's in stock trade only model.

[Jackie Callaway, CFO at Howden Joinery Group]

The business is backed by a very strong balance sheet which supports investment and gives us plenty of options to generate shareholder value. Now turning to the results for the first half of twenty twenty five, let me begin by summarizing the key highlights of our financial performance. Howdons performed well in the first half as we continued further positive trading momentum and gained market share supported by our ongoing investment in the strategic initiatives. Group sales increased by 3.2% to £998,000,000, Adjusting for the two fierce two fewer sales days at the start of 2025, which were worth around £10,000,000, the underlying growth rate was a healthy 4.3%. Gross profit was ahead of last year at £620,000,000 and benefited from the price increase implemented at the start of the year, ongoing purchasing benefits, and a stronger weighting of the mix of kitchens to joinery than last year.

[Jackie Callaway, CFO at Howden Joinery Group]

As a result, the gross margin percentage grew by a 130 basis points to 62.1%, which is sector leading and ultimately reflects the value that Houdouns generates from its vertically integrated business model. Operating costs were £28,000,000 higher at £498,000,000 and this was predominantly due to the £11,000,000 of investment in our strategic initiatives and higher labor costs arising from the government's changes to employees, national insurance and the minimum wage which came into effect in April. As a result, we generated EBIT of a £121,000,000, and we grew our EBIT margins by 10 basis points as a result of a continued focus on cost control and productivity, which I'll talk about later in the presentation. And after net interest costs, profit before tax was a £117,000,000. And finally, on this slide, you can see that the effective tax rate has also edged down slightly from our previous guidance.

[Jackie Callaway, CFO at Howden Joinery Group]

This was following further analysis of the benefits occurring from the patent box claim on our cabinet leg, which we make in our Howden factory. So now let's look at sales growth in a bit more detail. We outlined in February that our expectation for 2025 was that The UK kitchen market would contract further, although at a slower rate than in 2024. Given these continued market headwinds, we've maintained a disciplined approach to balance price and volume to support our trade customers and alongside further market share gains, we've made a positive start to the year. Overall, UK revenue increased by 3% to £962,000,000 and was 1.7% ahead on a same depot basis.

[Jackie Callaway, CFO at Howden Joinery Group]

We implemented a price increase at the start of the year, and the impact of this was around 1% in the first half, and we expect that to increase that increase to build through the balance of the year. In our international markets where we operate from 77 sites, we generate revenue of €43,000,000, which was 12% ahead of 2024 and nine point five percent ahead on a same depot basis. The new senior leadership in France is focused on strengthening our depot team's capabilities, particularly account management, and on expanding our range of joinery products to drive depot footfall. We will maintain the number of depots in France at the current level and expect further depot expansion in time. Our Irish depots have continued to trade well since we set up there two years ago, and we will expand our footprint there later this year with around five additional depots.

[Jackie Callaway, CFO at Howden Joinery Group]

Andrew will take you through these initiatives in more detail shortly. Now moving on to profit before tax. Bridging from 2024 profit before tax of a £112,000,000 on the left, gross profit was £32,000,000 ahead of last year. As I mentioned earlier, we were effective in implementing price increases early in 2025 that benefited the business by £6,000,000. The positive impact of volumes and mix was £14,000,000, and we also continued to recover purchasing benefits from both our raw materials and finished goods supplies, which totaled around £12,000,000 in the first half.

[Jackie Callaway, CFO at Howden Joinery Group]

Kitchen sales were were encouraging in the first half. While we remain focused on expanding our leadership position and entry in mid priced kitchens, we did continue to develop our offering at the higher priced kitchen segment where we see significant future growth opportunities. And across all of these three kitchen segments, the margin percentage is broadly consistent. So this remains an excellent opportunity for future growth. We also saw a strong mix of kitchens to joinery which was a benefit to margins in the first half.

[Jackie Callaway, CFO at Howden Joinery Group]

Our in house manufacturing and strategic sourcing capabilities are a source of competitive advantage for us, and our recent investments here have strengthened our competitive position by increasing our capacity and by adding broader and new capabilities. In the first half, we delivered £12,000,000 of purchasing savings from both raw materials and finished goods. These benefits annualize in the second half, so we would expect no further benefit through the balance of the year. We otherwise held our manufacturing cost base flat offsetting ongoing inflation with further efficiencies. Cabinet and panel manufacturing underpins our kitchen offering.

[Jackie Callaway, CFO at Howden Joinery Group]

Our Runcorn factory with its high volume, low cost cabinet and panel making capability has always been an integral part of our manufacturing and logistics strategy. And in line with our longer term growth ambitions, we are progressing our plans to develop the site, which will increase the capacity by around 15% and will enable us to maintain our low cost manufacturing competitive advantage. Andrew will take you through the plans to expand Runcorn later. Once work on the site commences, we expect the project will take around three years to complete. And excluding the freehold purchase of the site, the expected costs of delivering the plant upgrades site and plant upgrades, I should say, are with our are within our medium term CapEx plans.

[Jackie Callaway, CFO at Howden Joinery Group]

Overall, operating costs increases increases were held to £28,000,000 as a net result of managing our costs tightly while continuing to fund the investment in our strategic investments. This disciplined approach supported us edging up our EBIT margins, and we delivered profit before tax of a £117,000,000 in the period. Operating costs were tightly controlled in the first half. The incremental costs of the new UK depots totaled £5,000,000, which included the cost of the 31 depots opened this year and in the prior year. We are planning to open around 25 depots in 2025, so the incremental costs will be a bit higher for the balance of the year.

[Jackie Callaway, CFO at Howden Joinery Group]

We invested a further £4,000,000 in other strategic initiatives to drive growth, and we're also continuing to invest in our international business to drive same depot growth in France and adding new depots in Ireland. The existing UK depot increases of £6,000,000 related to higher inflationary costs principally in property and labor. We also incurred £4,000,000 of higher labor costs arising from the government's changes to employer national insurance and the minimum wage, which came into effect in April. We will therefore get a full period of these costs in the second half, the annualized impact of which is around £18,000,000. Other cost increases were tightly controlled, and I'd also highlight the inflationary cost increases of around £10,000,000 have been offset by productivity and efficiency actions taken in the first half.

[Jackie Callaway, CFO at Howden Joinery Group]

And now moving on to our cash flow. From an opening cash position of 344,000,000, we ended the period with £321,000,000 of cash, a net outflow of £23,000,000. You can see from the slide that this was after paying dividends of £90,000,000 and £31,000,000 relating to the share buyback. As we highlighted last year, there was a large movement in working capital in the first half of twenty twenty four, and this was due to the timing of both the 2023 peak trading and the fifty third fifty third week at the end of twenty twenty three. In total in the period, we invested around 14,000,000 in working capital for the first half.

[Jackie Callaway, CFO at Howden Joinery Group]

Inventory increased by £26,000,000, and payables increased by £20,000,000 since the year end, which was in line with the normal seasonal phasing of the stock build ahead of our peak trading period. Receivables were £7,000,000 higher as a result of the higher sales at the end of the period. Capital expenditure totaled £43,000,000 as we continue to focus on the execution of our strategic initiatives. The major investments continue to be in depot expansion and reformat programs. Other initiatives included investments in our supply chain and manufacturing sites as well as expanding our digital capabilities.

[Jackie Callaway, CFO at Howden Joinery Group]

On cash tax, we were once again able to offset tax benefits arising from the patent box, and you can see that this reflected on the payment of £16,000,000 in the period. Over 2024 and 2025, we will have benefited circa 45,000,000 to cash tax because of the patent box. And in 2026, we expect the cash tax rate to move more in line with the profit and loss rate. Now turning to earnings per share and dividends. EPS in the first half was 16.4p, which was 6.5 percent ahead of the prior year and benefited from the lower number of shares in issue as we continued to execute the share buyback.

[Jackie Callaway, CFO at Howden Joinery Group]

We are strongly cash generative and we have a robust balance sheet, which gives us the opportunity to both invest in the future as well as rewarding shareholder with attractive returns over a long period of time. Our progressive dividend policy remains unchanged, and I'm pleased to announce that the board has declared an interim dividend of 5p, an increase of 2%. You can see on the slide around 32,000,000 of share buybacks were completed in the first half. Since the period end, we've pushed on. And as of last Friday, we've now completed around £48,000,000 of share buybacks.

[Jackie Callaway, CFO at Howden Joinery Group]

Turning now to our technical guidance for the rest of 2025. First, profit and loss guidance. The higher contributions to employers, national insurance, and the increase in the national minimum wage, which came into effect in April, is around £18,000,000 a year. Foreign exchange sensitivity and our cost of goods purchases in euros and US dollars is set out on the slide. The tax rate for the full year will be around 21, sorry, 24%, which is a little bit lower than previous guidance as we've benefited from the higher than expected patent box benefits in 2025.

[Jackie Callaway, CFO at Howden Joinery Group]

And just to remind you that there were two fewer trading days in the first half compared to last year. We get one of these back in the second half, so there is one less trading day by the end of the twenty twenty five twenty twenty five financial year. Looking now at cash flow items. Capital expenditure is anticipated at around a £125,000,000, including investments to support future growth. In addition to this, the purchase of the freehold of Runcorn site is expected to be clean completed in the second half.

[Jackie Callaway, CFO at Howden Joinery Group]

We expect to complete the share buyback in the second half. So in summary, we've performed well in the first half in a challenging marketplace. We continue to be proactive in delivering productivity and efficiency savings to protect profits, and this discipline along with the price increase at the start of the year has benefited margins. Our balance sheet and cash flow remains very strong and support our continued investment in the business, and we expect to maintain this at the current pace in the second half. And since the start of the second half, our performance has been in line with our expectations.

[Jackie Callaway, CFO at Howden Joinery Group]

We are on track with the outlook for 2025, and we feel well set up for the second half and our peak trading period. We remain confident of delivering growth ahead of our markets while generating strong cash flows and attractive returns for shareholders. Thank you. And now I'll hand back to Andrew.

[Andrew Livingston, CEO at Howden Joinery Group]

Thank you, Jackie. In reviewing our first half performance and plans for this year, I will use our strategic initiatives for the business as a framework. Based around our key features of our business model, such as leading service and convenience, trade value and product leadership, we are which are delivered by our highly entrepreneurial teams, These are to evolve our depot model, improve our range and supply management, develop our digital capabilities and services, expand our international operations. So first, depot evolution. Our updated format enables us to provide the best working and trading environment and to make productivity gains and space utilization gains in a cost effective way.

[Andrew Livingston, CEO at Howden Joinery Group]

As a reminder, the format incorporates a trade counter, which displays many of our everyday products, providing an initial focus point for interactions with our customers. To provide customers with in depot inspiration and choice, the kitchen display area showcases many of our kitchen families, including paint to order options and accompanying solid surface choices. The business developer area makes it easy for our trade customers to get support and advice and for our depot teams to build relationships with them. Elsewhere, we display all the styles and colors of our kitchen families that they come in, And we have a separate area for customers to see, which is a configuration of products such as worktops, frontals and taps to best suit their kitchen choices. Our presentation rooms are spacious and private with large and high quality screens to show customers their kitchens visualized in three d.

[Andrew Livingston, CEO at Howden Joinery Group]

And the restructured warehouses and racking area has enabled us to both free up more front of house space and, backed by livestock surety, the ability to serve trade customers more efficiently and reliably. High service levels, including local proximity and immediate availability, are all very important to our customers, and we continue to see profitable opportunities to open depots. Overall, we have line of sight to around 1,000 depots in The U. K. Versus eight sixty nine trading in The U.

[Andrew Livingston, CEO at Howden Joinery Group]

K. At the end of twenty twenty four. This year, we expect to open around 25 more depots, of which three were opened in the first half. The trading and working environment the updated format provides is important to our competitive position, and we are converting more depots to the updated format. By the end of twenty twenty four, including relocations, we had revamped three fifty depots to the updated format.

[Andrew Livingston, CEO at Howden Joinery Group]

This year, including relocations, we plan to revamp around 60 more depots and complete 14 of those in the and we completed 14 of those in the first half. By the end of the year, we expect to have revamped around 61% of our six sixty nine depots, which are trading and were opened in the old format, and to have around 71% of U. Depots trading in the updated one. Next, range and supply management. Sales of new product are a significant contributor to performance.

[Andrew Livingston, CEO at Howden Joinery Group]

We have upgraded our new product program in recent years. And in the first half, sales of product introduced in the last two calendar years represented 23% of U. K. Product sales, with twenty twenty three NPI being the larger contributor. We are committed to providing market leading and competitively priced product for our customers, and the value for money is a consistent feature of purchasers' buying decisions.

[Andrew Livingston, CEO at Howden Joinery Group]

Given pressures on household budgets, price featured very prominently in 2024, and it's doing so again this year. With an emphasis on value for money and choice at all price points, our offering is well positioned to take advantage of this. Our kitchen NPI for 2025 makes more colors, styles and finishes available to more budgets, including at entry level and mid price points. Excluding paint to order, we have launched 22 new kitchens so far this year, and our entire offering of such families is of such kitchens is organized into 11 families. We are innovating in our other long established product categories and have added more colors and styles to our fitted bedroom offering, which we sold from all depots for the first time last year.

[Andrew Livingston, CEO at Howden Joinery Group]

Across all product categories, we have also introduced clearer and more delineated pricing to demonstrate the value we offer at all price points. This year, we have 13 new kitchens for our established entry and mid priced families. These include for our entry level families, Greenwich in gloss reed green and porcelain and Allendale in pebble. For our versatile mid priced family, Clark and Well, we have eight new colours, including mass market leading metallic bronze and titanium options. We have also just launched Froome, a new family whose styling complements that of our long standing Chelford family.

[Andrew Livingston, CEO at Howden Joinery Group]

Froome is currently available in four colors, including ash green and porcelain. We also continue to develop our premium kitchen portfolio, which is a large segment of the market and one most associated with the High Street independence. For contemporary styling, Hockley family, we have added five new colors, including reed green and textured dark oak. Elsewhere, the popularity of our paint to order service is growing, and the new timber kitchens we have this year move our offering up a notch. The number of our Chilcombe and Elmbridge kitchens sold in paint to order, which are priced at a premium to stocked colors, has significantly increased this year.

[Andrew Livingston, CEO at Howden Joinery Group]

We have also recently extended the reach of our timber offering with the launch of a new family, Ilfracombe, an in frame kitchen of classic design. This is positioned above our Chilcum and Elmbridge families, and Ilfricoom is our twelfth family and is exclusively available in paint to order in the color options there. Collectively, these families are now marketed under classic timber kitchens. Solid surface worktops, which are often but not exclusively associated with the sale of higher priced kitchens, continue to represent significant opportunities for the group. Our offering in this category is underpinned by our in house manufacturing capacity, which is amongst the largest in The U.

[Andrew Livingston, CEO at Howden Joinery Group]

K. And sales of solid surface worktops have increased again so far this year. Last year, we increased significantly the number of decors we offer in this service, and this year, we have improved our range further. We have a total offering of 60 decors to suit all budgets in well placed and they're in place well ahead of peak autumn trading, during which kitchen sales represent an above average portion of the mix. We continue to upgrade our offering in other categories, deploying both third party branded product and our own in house brands.

[Andrew Livingston, CEO at Howden Joinery Group]

So indoors, we are adding more styles and colors at all price points. In appliances, we have further additions to our Limona brand, which is the leading integrated appliance brand in The U. K, alongside extensions to our range of third party branded product. And in sinks and taps, we have more styles and colors and finishes. Our own label flooring brand called Oak and Grey was launched in 2023 and now represents a substantial portion of the category sales.

[Andrew Livingston, CEO at Howden Joinery Group]

A new flooring product for this year includes innovative water resistant laminates and refreshed entry level decors. Customer and depot feedback on our latest own label brand, which we call Fuller and Forge, has been very positive. The brand features our door furniture in a variety of designs, finishes and styles and improves our offering in the ironmongery category, where we are underrepresented. Half one fitted bedroom sales were well ahead of last year, and bedroom represents a growing source of incremental sales and profit for us. Installing fitted bedroom suits the skills of our customers who fit kitchens, and they have a high cabinetry content, which matches our manufacturing capabilities.

[Andrew Livingston, CEO at Howden Joinery Group]

Ranges are developed in house, utilizing our existing manufacturing and sourcing infrastructure. Our initial offering was organized into four families using leading designs from our kitchen portfolio matched with internal accessories, including pull down rails, mirrors and internal storage solutions. And so far this year, we've extended our offering with more colors, styles, adding a total of 10 more bedrooms. The new product increased our total bedroom offering to now 29 bedrooms. Howdens is an in stock business, and our trade tell us that a high level 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 recent initiatives, including daily traders, facilitate exceptional levels of service. For the first half of this year, our service levels from primary to depots was 99.99, a world class performance by any standard. Our in house manufacturing capability is a source of competitive advantage for And we always keep under review what we believe is best to make or by balancing the cost and overall supply chain availability, resilience and flexibility. Recent investments in manufacturing have strengthened our competitive position by increasing our manufacturing capacity and by adding broader and new capabilities.

[Andrew Livingston, CEO at Howden Joinery Group]

These assets include new kitchen furniture lines, a second architrave and skirting line, both at Haydn, and a multipurpose facility for paint to order kitchens. Cabinet and panel manufacturing underpins our kitchen offering, which constitutes the principal source of group sales and a higher portion of gross profit. Our Rumcorn factory, with its high volume, low cost cabinet making capacity capability, has always been an integral part of our manufacturing and logistics strategy. And our plans for the site development and plans for the development of the site are progressing well. In line with our long term ambitions for the business, our plans give us, at Rumkorn, about 15% more capacity, more flexibility and broader capabilities and lead to lower COGS than would otherwise have been the case.

[Andrew Livingston, CEO at Howden Joinery Group]

Our plan for this site involves installing a new high volume panel machining line to replace the existing one with an automated work in progress solution to manage storage and dispatch to rigid assembly, building two extensions to existing building to house new equipment and to increase significantly on-site warehousing capacity. To do this and to increase on-site trailer parking space, we also intend to lease for the long term some council land next to the site. The requisite planning processes are well underway and negotiations with current landlords are progressing well. Following planning being granted, the works would then take some three years to complete. Turning to our digital platform.

[Andrew Livingston, CEO at Howden Joinery Group]

We use digital to reinforce our model of strong local relationships between 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. Usage of our online account facilities, which provides efficiencies and benefits for our customers and depots alike, has continued to increase. New registrations totaled some 44,000, and around 58% of customers had an online account as of the half year. Total users viewing our trade platform increased by 34%, with around 84% of users regularly logging in at their individual to see their individual and confidential pricing. Customers with an online account have an average continued to trade more with us more frequently and spend more than nonusers.

[Andrew Livingston, CEO at Howden Joinery Group]

We saw high levels of engagement on our web platform with growth in our social media presence, which also stimulates interest in viewing our products and services in hygmans.com. Site visits totaled 10,500,000 in the period. Among kitchen specialists, we continue to have the highest number of fitted kitchen site visits in The UK, And the time spent viewing pages and the number of pages viewed per visit were at constantly consistently high levels. Across the leading social media channels, our follower user base at around 687,000 was up 13% with around 6,200,000 engagements a month. Usage of our upgraded Click and Collect service, which is available for everyday products, has increased significantly so far this year.

[Andrew Livingston, CEO at Howden Joinery Group]

Online account customers can check real time stock availability on a depot by depot basis, review their individual and confidential pricing at their selected depot and place orders for collection at the time of their choosing. This year, among other initiatives, we are supporting depots in the management of their customer relationships by making our depot account management tools more efficient and productive. Our new account management tool captures information from multiple sources and makes it available via a single dashboard. Initial functionality enables automation of time consuming manual tasks in depots, provides comprehensive account data for each customer and real time overviews of accounts, leads and contacts. The system is now operational in all U.

[Andrew Livingston, CEO at Howden Joinery Group]

K. Depots, well ahead of autumn peak trading. And finally, International. Half one sales for international operations based in France increased following a significant rise in half two of last year. The business is responding positively to the measures taken to improve existing depot sales performance.

[Andrew Livingston, CEO at Howden Joinery Group]

And we've put in place a new highly experienced senior leadership team with a focus on depot team development, investing in enhanced offerings of footfall driving products alongside other initiatives. For the present, our focus remains on building out our depot team's capabilities, particularly account management, as we look to build on the progress made. We expect to maintain the number of depots trading at around about 65 for the time being. Half one sales in The Republic Of Ireland were well ahead of last year's with and we are opening more depots there in 2025. The Republic Of Ireland is a market which suits our differentiated model and one which sets us apart from the incumbents.

[Andrew Livingston, CEO at Howden Joinery Group]

We commenced trading in The Republic Of Ireland in 2022, utilizing a similar depot strategy to that in France, with the local team supported by our U. K. Infrastructure and our digital platform. By the end of twenty twenty four, we had opened 13 depots, including eight clustered around Dublin and three serving Cork. We've recently opened a depot in Nace.

[Andrew Livingston, CEO at Howden Joinery Group]

And in total, we expect to open around five depots in 2025, which would increase the number trading to 18 by the year end. So for 2025, we are well planned, including on our strategic initiatives. These are aimed at increasing our market share profitably as day by day we deliver value to our customers across all price points and product categories. We have 22 new kitchens in stock, well ahead of autumn peak trading, plus very competitively priced paint to order kitchen offering. And our lineup of other product categories is the best that we've had in my time at Haydens.

[Andrew Livingston, CEO at Howden Joinery Group]

We have a program of rooster promotions in place to keep Haydens at the front of the mind of the trade, together with other price initiatives. We will continue to improve service and availability, for example, by utilizing XDCs efficiently and through our Daily Traders livestock and click and collect initiatives. We are increasing the range of services and functionality we offer online to the benefit of the depot teams, the customers and end users alike. During 2025, we plan to open around 25 depots in The U. K.

[Andrew Livingston, CEO at Howden Joinery Group]

And refurbish another 60 existing depots to the updated format. We expect to end the year with around 65 depots trading in France and Belgium, and we have 18 or so trading in The Republic Of Ireland. Lastly, outlook. Whilst we have peak trading ahead of us, we are on track with our plans for the business and our outlook for the full year. Given the prevailing macroeconomic environment, we expect market conditions to remain challenging and anticipate that the total Kitchen market may well contract again this year, but less so than last year.

[Andrew Livingston, CEO at Howden Joinery Group]

We are, however, well prepared for the challenges and opportunities ahead. We aim to retain a profitable balance between price and volume as we continue to maintain competitive pricing whilst aligning operating costs and work with suppliers to keep product and input costs controlled. We are confident that our business model is the right one to address the opportunities that our markets represent across changing conditions. And in summary, we're well placed to outperform our competitors in 2025. As we both continue to invest in our strategic initiatives and return a further GBP 100,000,000 to shareholders through the share buyback program.

[Andrew Livingston, CEO at Howden Joinery Group]

So thank you for listening, and we'll now take your questions, please.

[Robert Chantry, Head - UK Company Research at Berenberg]

Thank you very much. Hi, it's Rob Okay. Chantry at Berenberg. Thanks for the presentation guys. So three questions for me.

[Robert Chantry, Head - UK Company Research at Berenberg]

So firstly, just on I guess the market share story. I know historically you've not really talked about precise numbers. But clearly, in a relatively tough market that's contracting, you continue to kind of grow the business. Can you just talk about some of the nuances there, specifically on the kind of higher valued kitchen area? I know, perhaps, different route to market, different competitive environment, but an area you've really made progress into some more color on that part of the competitive journey.

[Robert Chantry, Head - UK Company Research at Berenberg]

Secondly, international, I guess, obviously, good numbers, but pausing, I guess, the depot rollout in France. Just interested strategically, is there a better way to do it in France? It's clearly a €4,000,000,000 market for kitchens ex appliances. You guys are 2%. Someone does it well.

[Robert Chantry, Head - UK Company Research at Berenberg]

How do they do it? What do they do? And then thirdly, I know in the past few years, obviously, balance sheet has been great. But on the kind of acquisition side, to what extent do acquisitions play a role in your thinking about these different areas? You've clearly got a very wide manufacturing capability now.

[Robert Chantry, Head - UK Company Research at Berenberg]

You can do a lot of these things better quicker than others. But do acquisitions still play a part of your thought process or are they just off the table? Thank you.

[Andrew Livingston, CEO at Howden Joinery Group]

Sure. Look, I'm pretty as I said, I'm pretty confident that we have grown market customers rather than our competitors. The output is that we seem to be gaining market share and I would say considerably across all pieces. We don't it's not well surveyed, we don't really know, but quarter to quarter of the market and a third of the volume as a guide. But I think we've been increasing that each year.

[Andrew Livingston, CEO at Howden Joinery Group]

Yes, we talk often to the better end of the kitchen market being very important. Howdens is based on volume going through our factories and we adore getting high volume going through the factories. The better end of the kitchen market that sort of we call the kitchen market around about GBP 6,000,000,000 currently in the round. The best end of the kitchen market, we would consider that sort of $8 plus, plus. That's an area where we would think, have we gotten to double digits possibly, but we're growing fast in that space and we're very intent on developing it out.

[Andrew Livingston, CEO at Howden Joinery Group]

So adding in solid work surfacing, for example, is not just exclusive to the best in the kitchen market, but it can go into the medium part of the kitchen market. If you can go to opening price of landlords or student accommodation, that sort of thing, want that type of product because it performs so well. But in the better end of the kitchen market, our launch of paint to order solutions in a smart way, the team have done it, not offering too much, but just a great range of choice. And in the introduction of a new family, an in frame family called Ilfracombe, I think will play very well for us this year and really does challenge the independents properly. The Ilfracombe offering really does tackle the independents, but it does it at a very good value offering.

[Andrew Livingston, CEO at Howden Joinery Group]

So there's plenty of money in it for the fitter, there's money in it for us, there's huge benefit for the end consumers, they get passed on. And we've wrapped this up, you'll see outside that we've launched a new brochure. And I'm pretty sure the independents would look at this and they'll take a gulp when it comes out in the coming weeks. And we will trade this new format as we go through the rest of the year and includes things like wooden draw boxes, which is often a feature of what people wanted at top end. So that's interesting.

[Andrew Livingston, CEO at Howden Joinery Group]

But I think the thing that we are pleased about this year is how the kitchen has developed at opening mid and top end. So it's not just we're winning at the best end and growing. We've been growing at all levels, and that's what I find particularly encouraging in the first half. So plenty, plenty more to go at. If we've got a quarter of the market, we want an awful lot more than that and we will not rest until we achieve it.

[Andrew Livingston, CEO at Howden Joinery Group]

On international, yes, I'm feeling good about what's happening. And you can't go into a country if you don't have a competitive differentiator. And we turn up in France with something that is really unique in that our model sits on lower cost properties. We are deeply in stock of product and there is literally nobody else doing it in the way that we do it in the market. And that is being picked up by our trade customers as they shop with us.

[Andrew Livingston, CEO at Howden Joinery Group]

So we are confident that the model is right, and we can see that in many of the depots that we are performing in the right way. Where we've strengthened our proposition, we've brought more range and we've brought more day to day type product. And it's very important that customers shop at this frequently. And we've been doing that in Ireland and we've been doing it in France. And the team over there have just done an exceptional job of making sure there are day to day products.

[Andrew Livingston, CEO at Howden Joinery Group]

So we are seeing our largest account base in France ever, same in Ireland. And we're seeing them more frequently. And when we see them more frequently, we can talk to them about kitchen sales, so our lead bank grows off the back of that. So yes, while we're small relatively in France to the business, we're making good progress. And I would also point out the investments that we've made in the senior leadership team there and Sebastian Krycek's leadership.

[Andrew Livingston, CEO at Howden Joinery Group]

Zarinzalek, who's come from The U. K. Over in France and the other members have been brought to the team there are as strong as they possibly could be. So that team will develop out that business very well and we're confident that the model will land. On acquisitions, look, we've not been acquisitive historically.

[Andrew Livingston, CEO at Howden Joinery Group]

We've bought a couple of things that are relevant to strengthening our business model. And when we see something like that, of course, we're well placed to go and do something like that. We bought Rotherham's, which is our first entry and our first purchase ever, that was work surfaces and it was sort of experimental and then we bought Sheridan's and the two together. We would say it's been a fantastic investment and really supported not just those businesses on its own, but has grown out our cabinetry business, which is primarily what we want to do. And it's easier for customers when they're making a purchase with us to buy the whole kitchen solution with us, appliances and flooring and worktops, lighting, all that sort of stuff.

[Andrew Livingston, CEO at Howden Joinery Group]

So we can really do consider the size of the basket. But yes, look, Jackie and I will be alert to anything that comes across our desk. And by the way, loads of stuff comes across our desk every day. But you sift through it. But anything that was there that would strengthen manufacturing capability and be interesting from that point of view, yes, of course, we'd be open to having a look. Thanks for your questions.

[Aynsley Lammin, Equity Analyst - Building & Construction at Investec]

Aynesley Lammin from Investo. Just two questions. On the gross margins, I think you said the price impact was 1% in H1, and you said that would grow in H2. Just interested, is that you expect to push more price through? Is it phase in versus last year?

[Aynsley Lammin, Equity Analyst - Building & Construction at Investec]

What's driving that? And I think also you usually deliver a higher gross margin in H2 versus H1. Is would that be your expectation for this year? And second question, just on the overall kitchen market, could you give us a kind of sense or feel for where you think volumes are relative either to the recent peak or what you would consider to be a normal market? And kind of what catalysts do you think will turn that?

[Aynsley Lammin, Equity Analyst - Building & Construction at Investec]

Is it lower interest rates, interest rate, your views on that? Thanks.

[Jackie Callaway, CFO at Howden Joinery Group]

Yes, taking the price one first. So the pricing is already in place, but it's just the way it came in. It was coming in around about March. So you get an impact of about 1% in the first half. That will grow in this in the second half, it'll be about two percent for the full year.

[Jackie Callaway, CFO at Howden Joinery Group]

So that was the first one. The second one was just on the the gross margin. So we're holding gross margin at this point, h one, h two. So you get a little bit of a different impact coming through in the second half. So a bit more price, but we won't have those sourcing efficiencies coming through in the second half. So that's why we're holding at this point.

[Andrew Livingston, CEO at Howden Joinery Group]

I think we've done well on landing prices this year. Points to the amount of innovation that's coming through in the business. I think the teams can get more can get more price from innovative product coming through, but also just holding the value of the proposition. The things that we can do in Haidens versus our competitors set are quite incredible. You can have a kitchen tomorrow.

[Andrew Livingston, CEO at Howden Joinery Group]

You can adjust it in flight. You if something gets broken and we've never met a builder who's broken anything on-site, but we can replace it and we can fix it straight away. And it is a power, it's you cannot replicate it in the rest of the market, be it here, Ireland or France. Regarding your second question, look, it's not well positioned it's not well placed, but we are in sort of a lower cycle from a volume point of view. We think it's down a wee bit this year.

[Andrew Livingston, CEO at Howden Joinery Group]

Next year will it be slightly down again? I just don't know. I think we'll call that when we get through the peak trading period. By value, I think the market in an okay place versus last year, maybe call it level. But versus sort of 2014, 'fifteen and 'sixteen, the markets quite considerably down actually versus then.

[Andrew Livingston, CEO at Howden Joinery Group]

So if you think of our sort of top line sales performance and holding on to our volumes, I think we've done incredibly well versus the market. I mean what happens going forward is within anybody's sort of guess, but I think the thing that we do is we continue on delivering what we do, open up depots, invest in manufacturing and push out the business and we will continue to gain market share. Others have been retreating and going to asset light models. And when the market comes back, they're not going to be placed to come back and chase after us because we love gained the stronghold and we continue to grow our account base and make sure that they are trusted to work with us regularly and become complete trusted partners with us and ensure our teams are very well incentivized. And particularly in the second half, I want the teams to be very, very well incentivized to drive our peak trading performance and I want them to do very, very well.

[Andrew Livingston, CEO at Howden Joinery Group]

So just to be quite clear on that. Things that could change, I don't know. I don't think we're expecting any market help, if you like, and I don't know what's going to happen in autumn budgets and so on. But I would say we like people moving. We like new house build.

[Andrew Livingston, CEO at Howden Joinery Group]

We like reduced housing rates, interest rates. But having said all of that, there's a lot of people if they choose not to move or can't move for whatever constraints there are in that stamp duty or whatever people, there's still a huge market for us for staying and improving. And there's still an awful lot of kitchens need to be put in and walls taken down between kitchens and living spaces and opened out and making homes. I think we're in quite a sweet spot because the home is just consistently and continue to become more and more important over time. Christian?

[Christen Hjorth, Equity Research Director at Deutsche Numis]

You very much. Christian York from Deutsche Bank. Three from me, please. Sorry, hold that a bit further away. Maybe just following up on the gross margin piece, but maybe taking a more sort of medium term view.

[Christen Hjorth, Equity Research Director at Deutsche Numis]

There are quite a few puts and takes in terms of more manufacturing, range expansion, price tools. Is 62% the right level? Is there more to go for? Just that's the first one. Second one on pricing, but probably more industry pricing.

[Christen Hjorth, Equity Research Director at Deutsche Numis]

What are you seeing in terms of competitor reactions to higher National Insurance contributions? Are those being passed on or are they sort of taking the hit on margins and mix of both? And then just finally, you pointed to some mix benefits, so sold more kitchens relative in the first half, just anything to read into that, the driver of that?

[Andrew Livingston, CEO at Howden Joinery Group]

Yes. Look, we're constantly focused on cash, but I don't think anybody is going to be happy if we drop our gross margins too low. And you remember when I took over the business back in 2018, some eight years ago, my first job was to get the margin back in the right place because we dropped prices and we were going for significant volume and there was volume uplift. But finding this right balance between price and volume is the job of what we do day in, day out and selling the value of our operation. Think we just got good at it.

[Andrew Livingston, CEO at Howden Joinery Group]

We've got even better at it in the first half of this year. The team have been incredibly thoughtful about how we place prices into what we put into the depots, then we're very good at targeting the depots and making sure that they hit the right value for the product that they sell. Our depots managers are paid 5% of the depot profit and the teams have paid on the gross profit of the depot. So we are all lined from me, Jackie and the rest of the team, we're all lined up to make sure that we will do the right thing on gross margin. We've been introducing a new tool this year, which we're calling PAM.

[Andrew Livingston, CEO at Howden Joinery Group]

And PAM stands for price and margin, and it's a tool that help the depots see what other depots are pricing in terms of particularly everyday products, but also what's going on in the marketplace. And we've been putting that in and trialing and it's gaining tremendous response from the teams. So and it's a very capable tool to help them make sure that they are at absolutely the right price. Sometimes that leads to improved gross margins as well. So I look for now 62%, a bit above 62 feels about right, but just always bearing in mind that we're leaving enough money for the builders to make money and where everybody is being successful off the back of it.

[Andrew Livingston, CEO at Howden Joinery Group]

I think on this sort of industry pricing, I would imagine a lot of people have priced away half of it and tried to save cost on half of it as a guide, would be my sense. And in the first half, in terms of sort of mix benefits, look, I think innovation drives sales. I think confidence of the teams and their ability to earn money, very important. And I think both of those things were a feature in the first half. Remember, we've been opening up consistently between twenty five and thirty depots, and we're still working through the refit program.

[Andrew Livingston, CEO at Howden Joinery Group]

I was having dinner with eight of our depot managers Wednesday night, just talking about incentives and making sure that they're well placed for the second half. Three of the eight were going through refits and they were three the eight of our biggest depots. Very exciting places those depots particularly well for the second half. So look, we sold more kitchens in the first half. We'll try and do again the same in the second half.

[Andrew Livingston, CEO at Howden Joinery Group]

But we are interested in day to day footfall driving businesses because a healthy door joinery, flooring, skirting, architrave type business is good. It's good for footfall. It's good that we see the customers regularly and then we can sell them more kitchens. Charlie?

[Charlie Campbell, MD - Equity Research at Stifel Financial Corp]

Charlie Campbell at Stifel. I've got a couple of questions, please. Just to understand, I suppose, on Runcorn, the risks to disruption of production and how you manage that? And then secondly, you touched on the answer to the last question, but just thinking about payback from new depots and refurbs. Just wonder, have you seen that diminish sort of materially considerably over the last sort of few years as you move from as was lowest hanging fruit first perhaps. Just wondered what the process was on that?

[Andrew Livingston, CEO at Howden Joinery Group]

I mean just taking the second one first, not really. Think everything that we've done in the business that does improve the proposition, click and collect, double the amount of displays. We've moved our format from about four fifty square feet up to about eight fifty square feet. And I know that's an awful lot less than a number of our competitors offer in terms of display. We don't think that's the right way to do it.

[Andrew Livingston, CEO at Howden Joinery Group]

We find it very costly to replace displays as do competitors and you don't need huge big kitchen displays to sell all the kitchens. We think the interaction and the planning and the design and so on and availability will do that. So we're very happy with paybacks on new depots. We get excited about the new ones that are still on the blocks both here and whilst we've paused in France, we're only pausing for a moment. We've still got our eyes on new depots, new territories to open up.

[Andrew Livingston, CEO at Howden Joinery Group]

We're just stabilizing it first. In fact, we have signed off one extra one that will come out at the start of next year in France. So we will continue and some of the sites that we're finding in Ireland are just fantastic, absolutely fantastic sites in The Republic. So yes, no, nothing really to point to that's of concern there and paybacks. In terms of run coin, I mean, one of the things I don't think that's well enough appreciated about Hayden's is the capability that we've got in our vertical integration.

[Andrew Livingston, CEO at Howden Joinery Group]

We're vertically integrated, but we are massively capable under Julian's very strong leadership there. And Julian has built out a very, very strong team. A chap called Nick Fisher will be developing out Runcorn for us. Nick has done huge projects for Amazon. He's done huge projects for Jaguar Land Rover, where he was there most recently, very capable.

[Andrew Livingston, CEO at Howden Joinery Group]

So it's planned. We will take our time. We will do it correctly. The unlock has been taking the extra land. That is, we call it, land under the bridge.

[Andrew Livingston, CEO at Howden Joinery Group]

It's adjacent to the factory, and we've been able to move off vehicles at the back of that factory and place them elsewhere. We'll get that land pretty soon. We'll probably use that land to support us during peak this year. And that gives us space just to develop at the back and we'll move around. We are excellent at managing new factory developments and I would have no concerns on our ability to do this and more in the future.

[Shane Carberry, Head - Industrials Equity Research at Goodbody]

Shane Carberry, Goodbody. Just two for me, if I can. Just to go back on to that kind of France rollout point. With the new management team in place now, do you have a kind of better view on how far away we are from kind of stabilization and then a resumption of growth? And then the second one was just regarding H1, you kind of mentioned that towards the latter part of H1 performed really well and increase in promotional activity.

[Shane Carberry, Head - Industrials Equity Research at Goodbody]

Was there anything done differently there, anything unusual versus prior year that we should be aware of?

[Andrew Livingston, CEO at Howden Joinery Group]

I would say we only just played a slightly better game year on year. There was really nothing that different. I think we gave our teams the opportunity to earn more and they drove more sales and earn more as a result of that. We put a focus on one particular category. We did the same thing in the previous year.

[Andrew Livingston, CEO at Howden Joinery Group]

So I think the thing that we were pleased about was if you look across the first half with this point about opening mid and the best end, it wasn't driven just by one particular grouping of kitchen families, it was across the piece. So I think fairly healthy stuff. In France, yes, as I said before, the job is to stabilize and make sure that we've worked through all of any underperforming depot. We're very pleased with a significant number of the depots in France. You get that in any estate where you get really strong ones, medium ones and underperformer ones.

[Andrew Livingston, CEO at Howden Joinery Group]

I want the underperformer ones fixed and the team were very clear on that. Resumption of growth, I had dinner with a number of the depot managers in London as one of the incentives that Zarendzala could put on. And the number of times they talked about where Haidens was needed was really quite exciting. So we've we have signed a site in France Rimes, France France in the Champagne District. And we found a site that's at the right size for us and we'll be able to just pack a punch in that proposition and Sebastian wants to land it incredibly well, he'll take his time on that.

[Andrew Livingston, CEO at Howden Joinery Group]

And whilst we're not adjusting any part of the model, we will just make sure the size and the rental affordability is right. The business runs a great margins already. So that feels like the right way forward. I'm not putting any sort of numbers on it, but we will build out the capability of the teams very, very well before we roll out further, but I'm very pleased with the management team in France.

[Analyst]

For taking my questions. Zaim Mika with JPMorgan. Just to come back on the vertical integration point. Can you remind us where you are and where you see that going in the future and the potential that could have on margins? And then secondly, on the new product sales, I think you said 23% in H1.

[Analyst]

What sort of run rate would you like to see for the foreseeable future? Yes.

[Andrew Livingston, CEO at Howden Joinery Group]

On the vertical integration point, we make about onethree of the volume that we sell. And we do consider what we're capable of manufacturing, what we're not. We're very clear on what our competencies are. And just remember, we would be extremely close to our European supply base. And there are things that our supply base are, frankly better at doing than we would be doing, but we have been challenging it.

[Andrew Livingston, CEO at Howden Joinery Group]

So we are outstanding at building cabinetry, some doors, Julian pushes to do more and more doors. In fact, we have taken volumes of product from Europe and brought them back to The UK. So with 40%, a bit more than 40%, 40%, 45% in the long run be about right, probably indicatively, but we will always be balanced up what we do, what we make and what we buy. We built some capability to bring some doors back from Italy to Europe. And the supplier fought incredibly hard to keep the business, and we repurposed the production lines to make sure we were building end panels instead.

[Andrew Livingston, CEO at Howden Joinery Group]

So we won, the supplier won. Yes, but we keep a very close relation. In fact, we're so close to some of our vertical integrated suppliers that come and help us. It's the relationship is that tight. So we're keen on doing it.

[Andrew Livingston, CEO at Howden Joinery Group]

Of course, it has a benefit to gross margin. But it's not just that, it's the flexibility, the ability to spin stuff up. And what Julian and the team can do when we get into peak trading period is quite incredible. We will deliver 19,000,000 pieces into our depots in our peak trading period this year. That's what we plan to do.

[Andrew Livingston, CEO at Howden Joinery Group]

And just to give you a sense, we will drop 3,600 pieces of the 19,000,000 pieces. And all those 3,600 pieces will be fixed within two days for the depots. That's the reassurance that our depots have in terms of selling product. It's really unbelievable what goes on in this business around peak. 70,000 deliveries will happen during our peak trading period, one delivery into depot every twenty two seconds.

[Andrew Livingston, CEO at Howden Joinery Group]

For kitchen business, not bad. So we are very, very supported from a vertical integration point of view. And I think the teams are dead excited about peak in the second half this year. We love a scrap. Apologies, I didn't answer your question on innovation.

[Andrew Livingston, CEO at Howden Joinery Group]

We seem to be running around onefour of our sales into coming through from innovation. That seems to be I think we've got a particularly high the year this year versus last. And we pointed out 2023 being another particularly strong year. So we were strong in 'twenty three, a little bit lighter last year, very strong this year.

[Rajesh Bhatia, Vice President at Barclays Investment Bank]

Rajesh Bhatthi from Barclays. I've got two, please. Firstly, I think could you talk a bit about the promotional activity at the end of the first half? Do you think there was any pull forward in that period from the second half? And secondly, on the Rankon expansion plan, just interested in the rough magnitude of the site freehold cost there. Thank you.

[Andrew Livingston, CEO at Howden Joinery Group]

I missed your second question, apologies.

[Rajesh Bhatia, Vice President at Barclays Investment Bank]

The freehold cost?

[Andrew Livingston, CEO at Howden Joinery Group]

Oh, the freehold cost, yes. Okay.

[Jackie Callaway, CFO at Howden Joinery Group]

Take the freehold cost, it's circa GBP 30,000,000. That's in addition to our BAU CapEx.

[Andrew Livingston, CEO at Howden Joinery Group]

We feel very comfortable about owning we feel very comfortable about owning strategic sites like that, where we're spending. The kit that we're putting into Runcorn will last twenty five years. We buy best in breed, make sure we do it well. Promotional activity in H1, there's few people asking questions about that. I'd be relaxed about what we did in H1.

[Andrew Livingston, CEO at Howden Joinery Group]

It feels like a run rate rather than anything that we've pulled forward from H2 into H1. It just doesn't feel like that. So nothing particularly different that I would point to some Haidens is a very, very steady delivering business. And if you look back and you stand back over the last three or four years, and you say, well, when we hit a run rate in individual periods to the year, they tend to be similar and then you'll have a good or a bad period 'twenty one. So tend to have good ones.

[Andrew Livingston, CEO at Howden Joinery Group]

So I wouldn't particularly point to anything in the first half. We incentivized our teams well. If there was one thing that we did well in the first half, we incentivize the teams well and I intend, saying it for the third time, to do it in the second half of this year. I want our people to earn well. Any more questions?

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

Clyde Lewis at Peel Hunt three, if I may. First one was on, I suppose, on joinery as opposed to kitchens. It sounds very much like you're gaining share in kitchens. Are you also doing the same in joinery? You haven't said too much about that today.

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

Second one was on the sort of push to grow that market share in the upper market part of the kitchen side of the business. Do you think the way you sell at the moment through the branches, again, with a very limited display area, obviously, you've got the design room at the back to sort of take customers through. But is that enough of a draw for the highest spenders to sort of come and buy the kitchen from Houdon? I'd interested to hear what you're doing or thinking about on that front. And the third one was around bedrooms.

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

Are you pulling in a different type of customer and tradesman to do that? Or are you seeing very much a sort of shift across from the kitchen installers who are sort of joinery specialists anyway?

[Andrew Livingston, CEO at Howden Joinery Group]

Yes, they're all good questions. Thank you very much. Yes, look, the joinery versus kitchens thing, most of our money is made out of kitchens. Joinery is important because it drives footfall. We've I suppose if we look back and reflect on ourselves, we have definitely spent more time innovating in kitchens and appliances and so on.

[Andrew Livingston, CEO at Howden Joinery Group]

And in joinery, yes, we've probably since Matt Norris has been with us as Commercial Director, we've really upped our game there. But it does take time for some of this product to come through. Could we have done more on doors, for example? I believe we could have and bringing more innovation into doors is happening right now and will take time to come through. But we're back into good sensible growth.

[Andrew Livingston, CEO at Howden Joinery Group]

Skirting and Archertrave, we've got a couple of big production lines at the factory that we love feeding. We love just belting the stuff out. It's like us selling milk. A quid a meter on door on Skirting and Archertrave, We just built through that product like you've never seen. So it's a very big focus for us.

[Andrew Livingston, CEO at Howden Joinery Group]

And we've done very well with own labels like oak and gray and flooring and brought in new colors and styles. I'm very excited about what happens to our new top end handles range, Fuller and Forge that we've brought in. And we've reinvigorated things like stair parts and stairs, things like that. We've started playing around with things, people moving into the attic. It's the joinery type product that is right for us and anything that's related to that, that helps our customers fit that type

[Andrew Livingston, CEO at Howden Joinery Group]

So stuff for the van, stuff for the job, even stuff for the builder themselves are all things that fit in that type of joinery category. I think our pricing tool that's launching will make sure that we're even keener and more on the money every time, but it represents a significant growth opportunity for us. But in the overall profitability figures for the year, you wouldn't really you're not going to notice it. We just worry about how often, how frequently we're seeing customers coming through our doors. We're in good nick.

[Andrew Livingston, CEO at Howden Joinery Group]

At the upper end of the market, selling kitchens in this modern way has been really facilitated by the extraordinary work that the team have done on XDC. XDC, a big cost for us doing it, but it was a complete unlock to us being able to service what are often complicated, more SKUs involved in the kitchen like that because of all the details that people want. And there's often the case where we would not want the stock to be in a depot because it ends up being trapped in a depot. We get excited about this color, it goes off and then the stock is trapped. So XDC has given us the availability the ability to focus on fast sellers in depots.

[Andrew Livingston, CEO at Howden Joinery Group]

So we call those daily traders and there's about changes, but it's around about 1,500 SKUs, 70% of the volume, you've got to be in stock of all of those and the system support that. XDC enable stock to turn up for our customers. That's the most important part of this thing. If we're selling what you might buy in a high street of £50,000 £60,000 kitchen and you come to Houdon's and you get it for 53,000 and you can hardly tell the difference between the two. I've just done it in my house in London.

[Andrew Livingston, CEO at Howden Joinery Group]

And it is breathtaking when you see the result of particularly this new in framed kitchen, you wouldn't go to an independent. Now customers are smart, very, very smart, not to be underestimated. And I think when customers go in a big see big displays and big environments and somebody attacks you and won't let you get out before you've let the lead be there and you get follow-up telephone calls, that can be uncomfortable for folk. And we're not like that in Haidens. We're there to support the builder in his sale.

[Andrew Livingston, CEO at Howden Joinery Group]

And I think customers, when they see value and they see the quality of the product we offer, and then the builders there saying, this is the right way to go in this. These jobs are complicated and stuff goes wrong. Every time on a kitchen, stuff goes wrong. Our ability to fix it and rectify it is breathtaking. If you're doing it with somebody who's you've bought a kitchen and you get a promise that it's five, six weeks delivery and then you've forgotten some items or indeed you haven't forgotten some items, you decide to do the laundry room, you decide a few more cabinets and you can't get them because some people don't even offer the ability to buy four units or less.

[Andrew Livingston, CEO at Howden Joinery Group]

It's not an order for them, so you can't get it. Or if you over deliver on an item and you've end up with a large unit you don't need, good luck, you're selling it in Facebook marketplace. It's the model is so set up for this. So going into one of our new format of depots, I think we've hit exactly the right balance between it feeling like a trade environment, therefore the trade, a tool for the trade, where you walk in and you see nice displays, a good representation of all the families. But you don't need to see every family in every color.

[Andrew Livingston, CEO at Howden Joinery Group]

You want to go and see a nice display of an Elmbridge kitchen, and then you can show the colors, and you can show how people match it up. And then our designers do this most incredible job of taking a builder's customer and bringing them into one of our design rooms and showing them the designs. And our conversion rate is unbelievable. When we get a customer in one of our design rooms, we convert almost at a perfect level. So I am very, very comfortable with where we're at from a design point of view, not just about pretty displays, but also about a very strong back end supporting.

[Andrew Livingston, CEO at Howden Joinery Group]

If I was telling any of you to buy a kitchen, and I wouldn't say just because I run Heidens, I'd be saying it is the perfect place to buy kitchen because we can support you all the way through the process properly. Forgot about that one. Yes, I don't think it's a different customer. I think it's exactly the same customer. I think this time in peak trading is going to be interesting as well because the depots, we say peak trading is best time to buy a kitchen and then some of the depots can we say best time to buy a kitchen and a bedroom.

[Andrew Livingston, CEO at Howden Joinery Group]

So we do not want to lose focus on kitchens is the primary driver of profitability. But there's a lot of builders who will add on bedrooms to the sale when they're in the customer's home. And I think that is a significant opportunity. The business is ticking along very nicely. And the additional range expansion that we've done.

[Andrew Livingston, CEO at Howden Joinery Group]

It's not for every one of our builders. Some builders are just happy being in the kitchen and don't want to go into bedrooms and do bedrooms, but there's a number of them really do. And it's very interesting because our builders have worked with us for so long. It takes time for them to learn. Even some of them will still not realize, even though we've told them several times that we do two bedrooms.

[Andrew Livingston, CEO at Howden Joinery Group]

But we're comfortable with where we're at. We like the margins on it. So we will continue to press forward with it. It's good.

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

Ben Vara, RBC. Just I'll just take one. Just in terms of sales leads and how that perhaps developed throughout the half, did you see an improvement there? Or was the strong result mainly sort of an uptick in conversion rates?

[Andrew Livingston, CEO at Howden Joinery Group]

Yes, it's a good question. And the lead bank, we would say, is in a sensible place and surveys in a very good place. So conversion would have been better in the first half, but the lead bank is ticking on at the right sort of rate that we'd want it to. So bit of a mixed answer on that. But if our lead bank, we are I mentioned an account management system that we're putting in at the minute and it gives us an incredibly accurate view of where we're at going forward.

[Andrew Livingston, CEO at Howden Joinery Group]

But of course, let's give you a view going back. But when we look relatively to how we measured it last year, all sensible stuff.

[Priyal Woolf, Equity Analyst - European Building & Construction at Jefferies]

You. Priya Wool from Jefferies. I've just got two left. The first was just on the guidance for around 2% price inflation this year. Will that be particularly skewed to certain sort of price points in the Kitchen market?

[Priyal Woolf, Equity Analyst - European Building & Construction at Jefferies]

Or is it fairly consistent across all three? And then the second question was just on depot openings in The UK. I think you made the point back in February that actually as you get close to that 1,000 target, it will be more difficult to find the right number of sites per annum. But I think for this year, that number of new openings has sort of crept up from about 20 to 25. What was behind that?

[Priyal Woolf, Equity Analyst - European Building & Construction at Jefferies]

And also, is 25 the right sort of number to assume Yes. Going

[Andrew Livingston, CEO at Howden Joinery Group]

On the pricing thing, commented earlier that Matt, when he's led the price increase, he's been very thoughtful about where our competitiveness is on pricing. So there are some parts of our range wouldn't have had a price increase on them. And other areas would have taken a little bit more. So we constantly think that through across the piece. But by and large, we've moved the pricing on across all the price points, but in particular about some.

[Andrew Livingston, CEO at Howden Joinery Group]

And probably best, I don't talk any more detail on that because it's competitive. On depot openings, yes, I look, I don't want to put the team under the wrong level of pressure when we're trying to find depot openings, particularly as you're moving closer to the 1,000. So it's easy for me to sit there and say, let's do 30, let's do 35. And I do never want to take a property that's not right for us. And often, there's a bigger mix of newbuild or which are tend to be slower or you're trying to get into an estate, but it's just not there.

[Andrew Livingston, CEO at Howden Joinery Group]

So at the start of the year, said 'twenty feels about right for this year. But as the team have looked through it, it feels easier to get more than that. So we've said about 25%. But I that sort of range does not feel wrong for us in this cycle as we see profitable opportunities to open up depots. I think we're done. Is there any calls online that want to be

[Priyal Woolf, Equity Analyst - European Building & Construction at Jefferies]

We have no questions from the conference call. Thank Well, you for closing

[Andrew Livingston, CEO at Howden Joinery Group]

thank you very much, everybody, for coming. Appreciate it. We'll be around for a bit longer if you want to chat further.

Participants

Executives

• Andrew Livingston, CEO
• Jackie Callaway, CFO

Analysts

• Robert Chantry, Head - UK Company Research at Berenberg
• Aynsley Lammin, Equity Analyst - Building & Construction at Investec
• Christen Hjorth, Equity Research Director at Deutsche Numis
• Charlie Campbell, MD - Equity Research at Stifel Financial Corp
• Shane Carberry, Head - Industrials Equity Research at Goodbody
• Analyst
• Rajesh Bhatia, Vice President at Barclays Investment Bank
• Clyde Lewis, Deputy Head - Research at Peel Hunt
• Benjamin Pfannes-Varrow, VP - Equity Research at RBC Capital Markets
• Priyal Woolf, Equity Analyst - European Building & Construction at Jefferies