Howden Joinery Group H1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 24, 2025

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.
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Earnings Conference Call
Howden Joinery Group H1 2025
00:00 / 00:00

There are 2 speakers on the call.

Speaker 1

Good morning everyone and welcome to Howden Joinery Group's 2025 interim results presentation. I will begin by introducing our performance in the first half and Jackie Callaway, who joined us in June as our new CFO, 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. We will take your questions. 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 were 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.

Speaker 1

In the UK 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. 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 UK which support our trade customers and total sales of our international operations increased significantly at the half year. We had a total of 948 depots trading including 871 in the UK. The business delivered strong operating cash flow and we maintained a robust balance sheet.

Speaker 1

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 million 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. 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 UK we had a record number of customer accounts 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.

Speaker 1

So far in the second half, our performance has been in line with our expectations, 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 expect 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-oriented, trade-only, in-stock local model is the right one to deliver sustainable market share gains. Our model is hard to replicate and difficult to compete with, and we have initiatives in place to make it even more so. The addressable value of our principal UK markets is some £11 billion.

Speaker 1

There are significant long-term growth opportunities for us. We continue to prioritize investments in the business on this basis. 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.

Operator

Thanks Andrew and good morning everyone. I'm delighted to be here for my first set of results for Howden Joinery Group 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 site. 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 ethic of the depot teams and their commitment to serving our trade customers.

Operator

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 Joinery Group in-stock trade only model. 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 2025, let me begin by summarizing the key highlights of our financial performance. Howden Joinery Group 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 million.

Operator

Adjusting for the two fewer sales days at the start of 2025 which were worth around £10 million, the underlying growth rate was a healthy 4.3%. Gross profit was ahead of last year at £620 million 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. As a result, the gross margin % grew by 130 basis points to 62.1% which is sector leading and ultimately reflects the value that Howden Joinery Group generates from its vertically integrated business model. Operating costs were £28 million higher at £498 million. This was predominantly due to the £11 million 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.

Operator

As a result, we generated EBIT of £121 million 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. After net interest costs, profit before tax was £117 million. Finally, on this slide, you can see that the effective tax rate has also edged down slightly from our previous guidance. This was following further analysis of the benefits accruing from the patent box claim on our cabinet leg, which we make in our Howden factory. 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.

Operator

Given these continued market headwinds, we've maintained a disciplined approach to balance price and volume to support our trade customers. Alongside further market share gains, we've made a positive start to the year. Overall, UK revenue increased by 3% to £962 million and was 1.7% ahead on the same depot basis. 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 increase to build through the balance of the year. In our international markets, where we operate from 77 sites, we generated revenue of €43 million, which was 12% ahead of 2024 and 9.5% 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.

Operator

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. 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 £112 million. On the left, gross profit was £32 million ahead of last year. As I mentioned earlier, we were effective in implementing price increases early in 2025 that benefited the business by £6 million. The positive impact of volumes and mix was £14 million, and we also continued to recover purchasing benefits from both our raw materials and finished goods supplies, which totaled around £12 million in the first half.

Operator

Kitchen sales were encouraging in the first half. While we remain focused on expanding our leadership position in entry and mid-priced kitchens, we did continue to develop our offering at the higher price kitchen segment where we see significant future growth opportunities. 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. 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 million of purchasing savings from both raw materials and finished goods.

Operator

These benefits annualized 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. 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.

Operator

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 within our medium-term CapEx plans. Overall operating cost increases were held to £28 million 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 £117 million in the period. Operating costs were tightly controlled in the first half. The incremental costs of the new UK depots totaled £5 million, which included the cost of the 31 depots opened this year and in the prior year.

Operator

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. We invested a further £4 million 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 million related to higher inflationary costs, principally in property and labor. We also incurred £4 million 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 million.

Operator

Other cost increases were tightly controlled, and I'd also highlight the inflationary cost increases of around £10 million have been offset by productivity and efficiency actions taken in the first half. Now moving on to our cash flow. From an opening cash position of £344 million, we ended the period with £321 million of cash, a net outflow of £23 million. You can see from the slide that this was after paying dividends of £90 million and £31 million relating to the share buyback. As we highlighted last year, there was a large movement in working capital in the first half of 2024, and this was due to the timing of both the 2023 peak trading and the 53rd week at the end of 2023. In total, in the period we invested around £14 million in working capital.

Operator

For the first half, inventory increased by £26 million and payables increased by £20 million. 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 million higher as a result of the high sales. At the end of the period, capital expenditure totaled £43 million. 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. On cash tax, we were once again able to offset tax benefits arising from the patent box, and you can see that this is reflected on the payment of £16 million in the period over 2024 and 2025.

Operator

We will have benefited circa £45 million 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% ahead of the prior year and benefited from the lower number of shares in issue as we continued to execute the share buyback. 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 shareholders 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%.

Operator

You can see on the slide, around £32 million 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 million of share buybacks. 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 million a year. Foreign exchange sensitivity in our cost of goods purchases in euros and U.S. dollars is set out on the slide. The tax rate for the full year will be around 24%, which is a little bit lower than previous guidance as we've benefited from the higher than expected patent box benefits in 2025.

Operator

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. There is one less trading day by the end of the 2025 financial year. Looking now at cash flow items, capital expenditure is anticipated at around £125 million, including investments to support future growth. In addition to this, the purchase of the freehold of the Runcorn site is expected to be completed in the second half. We expect to complete the share buyback in the second half. 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. This discipline, along with the price increase at the start of the year, has benefited margins.

Operator

Our balance sheet and cash flow remain very strong and support our continued investment in the business. We expect to maintain this at the current pace in the second half. Since the start of the second half, our performance has been in line with our expectations. 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. Now I'll hand back to Andrew.

Speaker 1

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, 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, and expand our international operations. 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. 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.

Speaker 1

The kitchen display area showcases many of our kitchen families, including paint to water 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 3D, and the restructured warehouses and racking area has enabled us to both free up more front of house space and be backed by livestock surety.

Speaker 1

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 UK versus 869 trading in the UK at the end of 2024. 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 2024, including relocations, we had revamped 350 depots to the updated format. This year, including relocations, we plan to revamp around 60 more depots and completed 14 of those in the first half.

Speaker 1

By the end of the year, we expect to have revamped around 61% of our 669 depots which are trading and were opened in the old format, and to have around 71% of UK depots trading in the updated 1next range and supply management. Sales of new product are a significant contributor to performance. 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 UK product sales, with 2023 MPI being the larger contributor. We are 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 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.

Speaker 1

Our offering is well positioned to take advantage of this. Our kitchen MPI 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 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. 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 price families. These include, for our entry level families, Greenwich in gloss, reed green, and porcelain, and Allendale in Pebble.

Speaker 1

For our versatile mid priced family, Clerkenwell, we have eight new colors, 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. 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 independents. For our 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.

Speaker 1

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 Chilcombe and Elmbridge families, and Ilfracombe is our 12th 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 among the largest in the UK, 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.

Speaker 1

We have a total offering of 60 decors to suit all budgets, and they are 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. In doors, we are adding more styles and colors at all price points. In appliances, we have further additions to our Lemona brand, 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've more styles and colors and finishes. Our own label flooring brand called Oaken Grey was 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.

Speaker 1

Customer and depot feedback on our latest own label brand, which we call Fuller & 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 bedrooms suits the skills of our customers who fit kitchens, and they have a high cabinetry content which matches our manufacturing capabilities. 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.

Speaker 1

So far this year, we've extended our offering with more color styles, adding a total of 10 more bedrooms. The new product increased our total bedroom offering to now 29 bedrooms. Howden Joinery Group 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%, world class performance by any standard. Our in house manufacturing capability is a source of competitive advantage for us, and we always keep under review what we believe is best to make or buy, balancing the cost and overall supply chain availability, resilience, and flexibility.

Speaker 1

Recent investments in manufacturing have strengthened our competitive position by increasing our manufacturing capacity and by adding broader and new capabilities. These assets include new kitchen furniture lines, a second architrave and skirting line both at Howden, and a multi purpose 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 Runcorn factory, with its high volume, low cost cabinet making capability, has always been an integral part of our manufacturing logistics strategy, and our 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 Runcorn about 15% more capacity, more flexibility, and broader capabilities and lead to lower COGS than would otherwise have been the case.

Speaker 1

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.

Speaker 1

Turning to our digital platform, 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 customers and depots alike, has continued to increase. New registrations totaled some 44,000, and around 58% of customers had an online account. That's at least the half year total. Users viewing our trade platform increased by 34%, with around 84% of users regularly logging in to see their individual and confidential pricing. Customers with an online account have on average continued to trade more with us more frequently and spend more than non-users.

Speaker 1

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 on howdens.com. Site visits totaled 10.5 million 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 consistently high levels across the leading social media channels. Our follower user base at around 687,000 was up 4.13%, with around 6.2 million engagements a month. Usage of our upgraded Click and Collect service, which is available for everyday products, has increased significantly so far this year.

Speaker 1

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 UK depots well ahead of autumn peak trading. Finally, international half one sales for international operations based in France increased following a significant rise in half two of last year.

Speaker 1

The business is responding positively to the measures taken to improve existing depot sales performance, 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 65 for the time being. Half one sales in the Republic of Ireland were well ahead of last year's, 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.

Speaker 1

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 UK infrastructure and our digital platform. By the end of 2024, we had opened 13 depots, including eight clustered around Dublin and three serving Cork. We've recently opened a depot in Naas, and in total we expect to open around five depots in 2025, which would increase the number trading to 18 by the year end. 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.

Speaker 1

Our lineup of other product categories is the best that we've had in my time. At Howden Joinery Group, we have a program of Rooster promotions in place to keep Howden's 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 UK 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.

Speaker 1

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. 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.

Speaker 1

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 £100 million to shareholders through the share buyback program. Thank you for listening and we'll now take your questions. Thank you very much. Hi, it's Rob Chantry at Berenberg. Thanks for the presentation guys. Three questions for me. 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 talk about some of the nuances there, specifically on the kind of higher value kitchen area? I know that's a different route to market, different competitive environment, but an area you've really made progress in, so some more color on that part of the competitive journey.

Speaker 1

Secondly, international, I guess obviously good numbers, but pausing, I guess, a depot rollout in France. Just interested strategically, is there a better way to do it in France? It's clearly a €4 billion market for kitchens ex appliances. You guys are 2%. Someone does it well, how do they do it? What do they do? Thirdly, I know in the past few years obviously balance sheet's 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 in-house manufacturing capability now. You can do a lot of these things better, quicker than others. Do acquisitions still play a part of your thought process or are they just off the table? Thank you. Sure.

Speaker 1

Look, as I said, I'm pretty confident that we have grown market share over the last number of years. We've done that through a consistent approach to investing in the business right through the cycle, be it Covid or post Covid. We've been very intent on focusing on developing out the business and focusing on our customers rather than our competitors. The output is that we seem to be gaining market share, and I would say considerably across all pieces. It's not well surveyed, we don't really know, but call it a quarter of the market and a third of the volume as a guide. I think we've been increasing that each year. We talk often to the better end of the kitchen market being very important. Howden Joinery Group is based on volume going through our factories, and we adore getting high volume going through the factories.

Speaker 1

The better end of the kitchen market, that sort of, we call the kitchen market around about £6 billion currently in the round. The best end of the kitchen market, we would consider that sort of eight grand plus plus. That's an area where we would think, have we got into double digits? Possibly, but we're growing fast in that space and we're very intent on developing it out. Adding in solid surface worktops, for example, is not just exclusive to the best end of the kitchen market, but it can go into the medium part of the kitchen market. If you can go into opening price of landlords or student accommodation, that sort of thing, want that type of product because it performs so well. In the better end of the kitchen market, our launch of paint to order solutions in a smart way, the team have done it.

Speaker 1

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. There is plenty of money in it for the fitter, there's money in it for us, there's a huge benefit for the end consumer as they get passed on. 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. We will trade this new format as we go through the rest of the year.

Speaker 1

It includes things like wooden drawer boxes, which is often a feature of what people want at that top end. That's interesting. I think the thing that we're pleased about this year is how the kitchen has developed at opening, mid, and top end. 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. 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. On international, I'm feeling good about what's happening and you can't go into a country if you don't have a competitive differentiator. We turn up in France with something that is really unique in that our model sits on lower cost properties.

Speaker 1

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. That is being picked up by our trade customers as they shop with us. We are confident that the model's 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 have brought more range and we've brought more day-to-day type product and it's very important that customers shop with us frequently. 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 on making sure there are day-to-day products. We are seeing our largest account base in France ever, same in Ireland, and we're seeing them more frequently.

Speaker 1

When we see them more frequently, we can talk to them about kitchen sales, so our lead bank grows off the back of that. Yes, while we're small relatively in France to the business, we're making good progress. I would also point out the investments that we've made in the Senior Leadership Team there, on Sebastian Krajczek's leadership, Zarin Zalek, who's come from the UK over in France, and the other members that have been brought to the team there are as strong as they possibly could be. 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. 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.

Speaker 1

We bought Rotherhams, which is our first entry and our first purchase ever. That was work surfaces and it was sort of experimental. Then we bought Sheridan's, and the two together, we would say, has 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. 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. We really do consider the size of the basket. Jackie and I will be alert to anything that comes across our desk. By the way, loads of stuff comes across our desk every day, but you sift through it.

Speaker 1

Anything that was there that would strengthen manufacturing capability and be interesting from that point of view, of course, we'd be open to having a look. Thanks for your questions. Thanks very much. Morning, Ainsley. Lemon from Investor. 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 throws through? Is it phase in versus last year? What's driving that? I think also you usually deliver a higher gross margin, H2 versus H1. Would that be your expectation for this year? 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?

Speaker 1

What catalysts do you think will turn that? Is it lower interest rates? Interested in your views on that. Thanks.

Operator

Yeah. Just taking the price one first. The pricing is already in place, but it's just the way it came in. It was coming in around about March this year. You get an impact of about 1% in the first half. That'll grow in the second half. It'll be about 2% for the full year. That was the first one. The second one was just on the gross margin. We're holding gross margin at this point, H1, H2. You get a little bit of a different impact coming through in the second half. A bit more price, but we won't have those sourcing efficiencies coming through in the second half. That's why we're holding at this point.

Speaker 1

I think we've done well on landing prices this year. It points to the amount of innovation that's coming through in the business. I think the teams can get more, they 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 Howden Joinery Group versus our competitor set are quite incredible. You can have a kitchen tomorrow, you can adjust it in flight, 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. It is a power. You cannot replicate it in the rest of the market, be it here, Ireland, or France. Regarding your second question, it's not well positioned, it's not well placed. We are in sort of a lower cycle from a volume point of view.

Speaker 1

We think it's down a wee bit this year; next year will be slightly. 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's in an okay place versus last year, maybe call it level, but versus 2014, 2015, and 2016, the market's quite considerably down actually, versus then. If you think of our sort of top line sales performance and holding onto our volumes, I think we've done incredibly well versus the market. What happens going forward is within anybody's sort of guess. The thing that we do is we just continue on delivering what we do, open up depots, invest in manufacturing, and push out the business. We will continue to gain market share.

Speaker 1

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 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. 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.

Speaker 1

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, you know, we like new house build, we like reduced housing rates, you know, interest rates. 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, 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.

Speaker 1

Making homes I think are in quite a sweet spot because the home is just consistently and continues to become more and more important over time. Christian, thank you very much. Christian York from Deutsche Bank. Three from me, please. Sorry, hold that bit further away. Maybe just following up on the gross margin piece, but maybe taking a more sort of medium term view there. Quite a few puts and takes in terms of more manufacturing range, expansion, price, tools, 62%, the right levels and more to go for. That's the first one. Second one on pricing, but probably more industry pricing. What are you seeing in terms of competitor reactions to higher national insurance contributions? Are those being passed on? Are they sort of taking the hit on margins? A mix of both. Finally, you pointed to some mixed benefits. Sold more kitchens relative in the first half.

Speaker 1

Just anything to read into that, the driver of that? Thank you. Yeah, look, we're constantly focused on cash, but I don't think anybody's going to be happy if we drop our gross margins too low. 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. 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. I think we just got good at it, 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.

Speaker 1

We are very good at targeting the depots and making sure that they hit the right value for the product that they sell. Our depot managers are paid 5% of the depot profit and the teams are paid on the gross profit of the depots. We are all aligned from me, Jackie, and the rest of the team, we're all lined up to make sure that we all do the right thing on gross margin. We're introducing a new tool this year which we're calling Pam, and Pam stands for price and margin. It's a tool that helps the depots see what other depots are pricing in terms of particularly everyday products, but also what's going on in the marketplace. We've been putting that in and trialing it.

Speaker 1

It's gaining a tremendous response from the teams 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. I look for now 62, 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 everybody is being success off the back of it. 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. In the first half, in terms of sort of mix benefits, I think innovation drives sales, I think confidence of the teams and their ability to earn money is very important.

Speaker 1

I think both of those things were a feature in the first half. Remember, we've been opening up consistently between 25 and 30 depots and we're still working through the refit program. 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 of the eight of our biggest depots. Very exciting places, those depots, particularly well for the second half. We sold more kitchens in the first half, we'll try and do again the same in the second half. 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?

Speaker 1

Yeah, I'm Charlie Campbell at Stifel here. 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. 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 few years as you move from, as was the lowest hanging fruit first, perhaps? Just wondered what the process was on that. I mean, just taking the second one first. Not really. Not really. I think everything that we've done in the business that has improved the proposition, you know, click and collect, double the amount of displays. We've moved our format from about 450 square feet up to about 850 square feet now.

Speaker 1

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. We find it very costly to replace displays, as do competitors. You don't need huge big kitchen displays to sell a lot of kitchens. We think the interaction and the planning and the design and so on and the availability all do that. We're very happy with paybacks on new depots. We get excited about the new ones that are still on the blocks both here. You know, 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. 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. We will continue.

Speaker 1

Some of the sites that we're finding in Ireland are just fantastic, absolutely fantastic sites in the Republic. Yeah, no, nothing really to point to that's of course concern there. Paybacks in terms of Runcorn. One of the things I don't think that's well enough appreciated about Howden Joinery Group is the capability that we've got in our vertical integration. 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. 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. 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.

Speaker 1

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. Soon we'll probably use that land to support us during peak this year, and that gives us space just to develop out the back, and, you know, 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, you know, more in the future. Shane Carberry, good buddy. Just two for me if I can. Just to go back onto 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? The second one was just regarding H1.

Speaker 1

You kind of mentioned that towards the latter part of H1 performed really well. An increase in promotional activity. Was there anything done differently there? Anything unusual versus prior year that we should be aware of? 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 earned more as a result of that. We put a focus on one particular category. We did the same thing in the previous year. I think the thing that we were pleased about was if you look across the first half was this point about opening middle and the best end. It wasn't driven just by one particular grouping of kitchen families, it was across the piece. I think fairly healthy stuff in France. Yeah.

Speaker 1

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. France, and you get that in any estate where you get really strong ones, medium ones, and underperforming ones. I want the underperforming 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. It was one of the incentives that Zaran Zalek had put on, and the number of towns they talked about where a Howdens was needed was, you know, really quite exciting.

Speaker 1

We have signed a site in Reims, in Reims in 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. Sebastian wants to land it incredibly well, and he'll take his time on that. 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 at 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. I'm very pleased with the management team in. Thanks for taking my questions. Zymica or JP Morgan.

Speaker 1

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? Secondly, on the new product sales, I think you said 23% in H1. What sort of run rate would you like to see for the foreseeable future? Thank you. Yeah, on the vertical integration point, we make about a third 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. 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. We are outstanding at building cabinetry, some doors.

Speaker 1

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. Would 40%, bit more than 40%, 40, 45% in the long run be about right? Probably indicatively, but we will always be balanced up, you know, 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. We won. The supplier won. We keep a very close relation. In fact, we're so close to some of our vertically integrated suppliers that come and help us. The relationship is that tight. We're keen on doing it.

Speaker 1

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 million pieces into our depots in our peak trading period this year. That's what we plan to do. Just to give you a sense, we will drop 3,600 pieces of the 19 million 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 22 seconds. For a kitchen business, not bad. We are very, very supported from a vertical integration point of view.

Speaker 1

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. Innovation. We seem to be running around a quarter of our sales coming through from innovation. That seems to be. I think we've got a particularly high this year versus last, and we pointed out to 2023 being another particularly strong year. We were strong in 2023. A little bit lighter last year. Very strong this year. Yeah. Rajesh Patkhi from Barclays. I've got two, please. Firstly, 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? Secondly, in the Runcorn expansion plan, just interested in the rough magnitude of the site freehold cost there. Thank you. I missed your second question. Apologies.

Speaker 1

The freehold cost of the freehold cost. Yeah. Okay.

Operator

Freehold cost. It's circa £30 million. That's in addition to our BAU CapEx.

Speaker 1

We feel very comfortable about owning. We feel very comfortable about owning strategic sites like that. We're spending, the kit that we're putting into Runcorn will last 25 years. We buy best in breed, make sure we do it well. Promotional activity in H1, there's a few people asking questions about that. I'd be relaxed about what we did in H1. 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. Nothing particularly different that I would point to. Howden's is a very, very steady delivering business. If you look back and you stand back over the last three or four years and you say, when we hit a run rate in individual periods to the year, they tend to be similar. Then you'll have a good or a bad period. 2021, tend to have good ones.

Speaker 1

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 incentivized the teams well. 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 or, yeah, thanks. 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? I haven't said too much about that today. Second one was on the sort of push to grow that market share and the upper market part of the kitchen side of the business.

Speaker 1

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 higher spenders to come and buy the kitchen from Howden? Be interesting to hear what you're doing or thinking about on that front. The third one was around bedrooms. Are you pulling in a different type of customer and tradesmen to do that, or are you seeing very much a sort of shift across from the kitchen installers, who are obviously sort of joinery specialists anyway? They're all good questions. Thank you very much. The joinery versus kitchens thing, most of our money is made out of kitchens. Joinery is important because it drives footfall.

Speaker 1

If we look back and reflect on ourselves, we have definitely spent more time innovating in kitchens and appliances and so on. In joinery, yeah, we've probably, since Matt Norris has been with us as Commercial Director, we've really upped our game there. 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. Bringing more innovation into doors is happening right now and will take time to come through. We're back into good, sensible growth. Skirting and architrave, 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, you know, £1 a meter on skirting and architrave, we just belt through that product like you've never seen.

Speaker 1

It's a very big focus for us and we've done very well with own labels like Oaken Grey in flooring and brought in new colors and styles. I'm very excited about what happens to our new top end handles range, Fuller & Forge, that we've brought in. 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 of product. 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. It represents a significant growth opportunity for us.

Speaker 1

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 see customers coming through our doors. We're in good nick 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, 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 a kitchen like that because of all the details that people want. There is 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.

Speaker 1

XDC has given us the ability to focus on fast sellers in depots. We call those daily traders, and there are about, it changes, but there are around 1,500 SKUs, 70% of the volume. You have to be in stock of all of those, and the systems support that. XDC enables stock to turn up for our customers. That is the most important part of this thing. If we are selling what you might buy in a high street, a £50,000, £60,000 kitchen, and you come to Howden Joinery Group and you get it for £25,000, £28,000, and you can hardly tell the difference between the two. I have just done it in my house in London, and it is breathtaking. When you see the result of, particularly this new in-framed kitchen, you would not go to an independent. Customers are smart, very, very smart. Not to be underestimated.

Speaker 1

I think when customers go in and see big displays and big environments and somebody attacks you and will not let you get out before you have let the lead be there and you get follow-up telephone calls, that can be uncomfortable for folk. We are not like that in Howden Joinery Group. We are there to support the builder in his sale. I think customers, when they see value and they see the quality of the product we offer, and then the builder is there saying this is the right way to go on 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.

Speaker 1

If you are doing it with somebody who you have bought a kitchen from and you get a promise that it is five, six weeks delivery, and then you have forgotten some items or indeed you have not forgotten some items but you decide to do the laundry room, you decide to do a few more cabinets and you cannot get them because some people do not even offer the ability to buy four units or less. It is not an order for them so you cannot get it. If you over deliver on an item and you end up with a larder unit you do not need, good luck. You are selling it in Facebook Marketplace.

Speaker 1

You know the model is so set up for this, going into one of our new formatted depots I think we've hit exactly the right balance between it feeling like a trade environment there for 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. 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. 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.

Speaker 1

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. If I was telling any of you to buy a kitchen, and I wouldn't say just because I run Howdens, I'd be saying it is the perfect place to buy a kitchen because we can support you all the way through the process properly. Hi. I forgot about that one. Yeah. 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.

Speaker 1

We do not want to lose focus on kitchens as the primary driver of profitability. There are a lot of builders who will add on bedrooms to the sale when they're in the customer's home. I think that is a significant opportunity. The business is ticking along very nicely and the additional range expansion that we've done, 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. There are a number of them who really do. 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 do bedrooms.

Speaker 1

We're comfortable with where we're at, we like the margins on it, so we will continue to press forward with it. Hi, Ben Varrow. Obviously, 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? Yeah, it's a good question. The lead bank, we would say, is in a sensible place and surveys in a very good place. 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. A bit of a mixed answer on that. If our lead bank, we are. I mentioned an account management system that we're putting in at the minute.

Speaker 1

It gives us an incredibly accurate view of where we're at going forward, but of course, it lets you view going back. When we look relatively to how we measured it last year, all sensible stuff. One more or so.

Operator

Thank you. Priyal 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, or is it fairly consistent across all three? 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. I think for this year, that number of new openings has sort of crept up from about 20 to 25. What was behind that? Also, is 25 the right sort of number to assume going forward?

Speaker 1

Thanks. Thanks for that. Yeah. On the pricing thing, I commented earlier that Matt, when he's led the price increase, has been very thoughtful about where our competitiveness is on pricing. There's some parts of our range, you know, wouldn't have had a price increase on them and other areas would have taken a little bit more. We would constantly think that through across the piece, but by and large we've moved, you know, the pricing on, you know, across all the price points, but in particular about six some. Probably best I don't talk any more detail on that because it's competitive. On depot openings, yeah, 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 thousand. It's easy for me to sit there and say, let's do 30, let's do 35.

Speaker 1

I do never want to take a property that's not right for us. Often there's a bigger mix of new build, which tend to be slower, or you're trying to get into an estate, but it's just not there. Start of the year, I said 20 feels about right for this year, but as the team have looked through it, it feels easier to get more than that. We've said about 25, but 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 on online that want to be?

Operator

We have no questions from the conference call.

Speaker 1

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

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