Howden Joinery Group Plc

Good morning, everyone, and welcome to Haydn's 2025 results presentation. So I'll begin by introducing our performance for the year. Jackie Calloway, our CFO, will then review our financial results for the period. And then I'll share my perspectives on our 2025 performance and our plans for this year. And then we'll take your questions. The business advanced on all fronts in as we anticipated the challenging UK marketplace. The results were at the top end of our expectations and we've made an encouraging start to 2026. Group sales were up 4% year on year with the business continuing to perform well in the final two periods of the year. In the UK, we gained kitchen market share, which helped us mitigate a small single-digit decline in the overall market size. Our kitchen volumes rose, which helped us consolidate the significant market share gains that we've made over the past five years or so, with our longest established depots making a substantial contribution to the share gains that we've made over this period. We delivered an industry-leading gross margin with gross profit up on last year, and we balanced recovery of cost rises with our commitment to providing competitive pricing for our customers. Reported profit was 5% ahead of last year, increasing at a higher rate than sales. We progressed our strategic initiatives for the UK and total sales of our international operations increased significantly. At the year end, we had a total of 970 depots trading, including 891 in the UK. The business delivered strong operating cash flow and we maintained a robust balance sheet. This gives us flexibility to continue to invest in our growth plans for the business and provide shareholders with an increased total dividend for the year. For 2026, we've also announced today a new £100 million share buyback programme. Our full year 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 the number of customer accounts is at the year end and the number of accounts trading during the year are similar to last year's record levels with customers on average spending more. So far this year, our performance has been in line with our expectations and whilst it's early in the year, we are on track to meet current market expectations for 2026, what remains a competitive marketplace. For 2026, our planning assumptions that the overall size of the kitchen market will be about level year on year following several years of decline. We are well prepared for the challenges and opportunities ahead with our customers who are typically self-employed People are highly adept at winning business in all market conditions. Delivered by our highly entrepreneurial and well-incentivized depot teams, I believe our service-orientated trade-only in-stock local model is the right one to deliver sustainable market share gains. Our model is hard to replicate, difficult to compete with, and we have initiatives in place to make it even more so. In 2025, We believe the value of our principal UK markets totaled some 11 billion versus our UK sales of 2.3 billion, which also includes a contribution from our fitted bedroom initiative, bedrooms being a significant market in its own right. Our markets remain relatively unconsolidated and there are significant long-term opportunities for us. We will invest in the business on this basis. So I'm going to update you on our strategic initiatives, which are key to our longer-term development of the business, after Jackie takes you through our financial results for the year. So, Jackie, thank you.

Thanks, Andrew, and good morning, everyone. I'm pleased to present Howden's financial results for 2025, and I'll begin by summarising the key highlights. The business performed well against all financial metrics in a challenging marketplace. In the second half, we continued the positive trading momentum achieved in the first half, and following our last trading update, the business continued to perform well in the final two periods of the year. Group sales increased by 4.1% to £2.4 billion. Gross margin was 110 basis points ahead of last year. We benefited from the price increase implemented at the start of the year and from effectively managing price and volume as we continued to take market share. We maintained our focus on productivity and delivered further sourcing and manufacturing efficiencies in the year. Operating expenses were tightly controlled and we delivered an EBIT margin of 14.7% with profit growth ahead of sales while continuing to invest in our strategic initiatives. Profit before tax was up 5.1% to £345 million. The effective tax rate was 22.4%, down from 24% in 2024 as we refined the patent box claim. And finally, we delivered an EPS growth of 8%, and this reflected the profit growth achieved in the year, a lower tax rate, and the lower share count as a result of the share buyback programme. Now let's look at sales growth in a bit more detail. In challenging market conditions, we maintained a disciplined approach to pricing and volume. Through delivery of a differentiated business model by our highly entrepreneurial depot teams, we also gained share in a market we estimate fell by around 3%. Overall, UK revenue increased by 3.8% to £2.3 billion, and was up 2.6% on a same depot basis. The price increase implemented at the start of the year had an impact of around 2%. In our international depots, revenue was 99 million euros, 12% ahead of 2024, and 9% higher on a same depot basis. In France, the new senior leadership team focused on strengthening depot capabilities. Our Irish depots have traded well since we entered the market three years ago, and we expect to expand the footprint further this year. Andrew will talk through these initiatives in more detail shortly. Now turning to profit before tax. Starting from profit before tax of £328 million in 2024. Gross profit was £84 million higher. The price increase delivered a £41 million benefit with volumes and mix contributing £29 million and sourcing and manufacturing benefits a further £14 million. Kitchen volumes increased and we grew our share of sales in each of the three price bands we follow as we continue to invest in new kitchens and associated kitchen products. We believe there are significant longer-term growth opportunities across all three price bands. Our in-house manufacturing and strategic sourcing capabilities remain a key competitive advantage for us. We are progressing plans to develop the Runcorn site, which will increase capacity there by around 1 million rigid cabinets, supporting our longer-term ambition for the business while preserving the low-cost manufacturing advantage. Total operating cost increases were held to £68 million, balancing tight cost control with investment in our strategic initiatives. This disciplined approach supported an increase in EBIT margin and a profit before tax of £345 million for the year. Now let's look at operating costs in a bit more detail. Ongoing investment in our strategic initiatives was £28 million in the year. This included the incremental costs of the new UK depots, which totaled £12 million, and included the cost of the 52 depots opened this year and in the prior year. We invested a further £13 million in other strategic initiatives, predominantly digital. We invested in our international businesses, for example, by expanding our presence in the Republic of Ireland. In our existing UK depots, additional costs of £11 million related predominantly to volume increases. We also incurred £11 million of additional labour costs arising from the government's changes to the employees' national insurance and the minimum wage, which came into effect last April. And other costs, this mainly related to variable pay and incentives, which were higher this year given the strong trading performance and the actions we are taking to optimise the depot network in France. I would also highlight that we offset around £27 million of inflationary cost increases with productivity and efficiency actions taken in the year. In 2026, we expect continuing inflationary headwinds of around £30 million in the total cost base in areas such as commodities, labour and additional property costs. And as in previous years, we will offset these where practicable with further productivity and efficiency savings. We will also continue to invest on our strategic initiatives to fund future growth and Angie will take you through our plans for 2026 shortly. Next, our cash flow. Cash generation was strong and we ended the year with £345 million of cash. In total we invested around £26 million in working capital in the year to support our growth. Capital expenditure for the year totalled £125 million, as planned, before the £31 million for the purchase of the Runcorn site. Our normalised capex spend will continue to be around £125 million a year, and aside from maintenance capex, which is around £30 million a year, within this total there are three major investment categories that we are prioritising to support our growth. First, manufacturing. We continue to make investments in our UK manufacturing base to enhance productivity and increase capacity and broaden our capabilities. Second, depot reformats and openings. Our updated format provides the best environment to do business with our trade customers and we continue to see attractive investment returns when we convert a depot. And finally, digital. We will continue to support our trade customers by upgrades to our digital capabilities to make them more productive and to raise brand awareness. We are also using technology to support new services and ways to trade while delivering productivity benefits to the depots. Moving on to cash tax, we benefited from the prior year tax credit arising from our patent box claim. And looking forward into 2026, we expect cash tax to be around £60 million, with an effective tax rate of around 23% to 24%. And finally, you can see that in the year we returned over £216 million to shareholders through ordinary dividends and share buybacks, and we'd expect to have a similar approach in 2026. Moving on to the pension scheme. Over the last nine months, we have worked with the trustees to review the strategy of the defined pension scheme. The scheme is well funded with a surplus on an ongoing funding basis, meaning that no contributions are currently payable by the company. The current funding arrangement is in place to the end of May 2027, while we undertake the next triennial valuation, which is due at the 31st of March this year. We are now actively engaging with the trustee to manage and reduce pension risks over time through a collaborative joint working party framework. This will look to reduce and manage pension risk proactively in areas such as investment strategy, data and benefits and scheme funding. Howdens is a strongly cash-generative business and we have a robust balance sheet which gives us the opportunity to invest in future growth as well as rewarding shareholders with attractive cash returns over a long period of time. In total, we have generated £3.8 billion in operating cash flows in the last 10 years. We've invested over £900 million in the business. This high returning capital investment has been across both strategic organic growth initiatives and bolt-on opportunities like the investment in the solid work surfaces business three years ago, alongside our maintenance capex programs. Howdens remains disciplined in the returns we achieve from our capital allocation and investment. This discipline is unchanged over many years and has driven our overall return on capital employed, which in 2025 is a healthy 23% well ahead of our cost of capital. Over the same timeframe, we've returned over $1.5 billion to shareholders in dividends and buybacks. In 2025, we grew earnings per share by 8% as a result of our earnings growth, a lower tax rate, and the buyback we completed in the year. Now moving on to capital allocation. Our capital allocation policy is unchanged with the principles set out on the slide. We continue to operate within our clear capital allocation framework, and for several years we have operated with a policy where year-end surplus cash, defined as amounts in excess of £250 million, is returned to shareholders. This is unchanged and appropriate for Howdens despite the significant growth in the business over time. This still provides sufficient headroom to accommodate our seasonal working capital requirements, support CapEx into organic growth and ongoing investment into our strategic initiatives and opportunities whilst maintaining our strong balance sheet. We also recognise the importance of the dividend and dividend growth to shareholders. The board is recommending a final dividend for 2025 of 16.9 pence, an increase of 3.7% and resulting in a total dividend of 21.9 pence per ordinary share. And the final dividend will be paid on the 22nd of May, 2026. Taking all of this into consideration and reflecting the group's continued strong financial position, the board is also announcing today a new £100 million share buyback programme for 2026. So to summarise, we have performed well this year in a challenging marketplace. Our trade model is differentiated and our strategy is well defined and we are executing well. For 2026, our planning assumption is that the overall size of the UK kitchen market will be level year on year after several years of decline. We continue to be proactive in delivering productivity and efficiency savings to deliver profit growth and offset inflationary headwinds. Our robust balance sheet and cash generation support our continued investment in the business. And we remain confident of delivering growth ahead of our markets, while generating strong cash flow and attractive returns for shareholders. While it's early in the new financial year, we're on track to meet current market expectations for 2026 and what remains a competitive market. Thank you, and I'll now hand back to Andrew.

Thank you, Jackie. As I mentioned earlier, we believe that our markets give us significant long-term growth opportunities. Our strategic initiatives are key to capitalising on these, and I'm going to use those as a framework to review our 2025 performance and our plans for this year. They're based around the key features of our business model, such as industry-leading levels of service and convenience, trade value, product leadership, but they're all delivered by highly entrepreneurial teams who in turn build long-term relationships with local tradespeople. So our initiatives are to evolve our depot network, to improve our range and supply management, to develop our digital capabilities and services, and to expand our international operations. So first, depot evolution. And high service levels, including local proximity and immediate availability, are very important to our customers. And we continue to see profitable opportunities to open up depots. Overall, we have line of sight to around 1,000 depots in the UK. In 2025, we opened up 23 UK depots, including 18 in the two final periods, with a total of 891 trading at the year end. this year we expect to open around 25 more depots and we continue to take a highly disciplined approach to the location of our depots our updated format enables us to provide the best working environment for our depot teams and to make productivity and space utilization gains in a cost-effective way we will now show you A short video that takes you around our stockport depot which we opened last year and whose layout is very typical of the latest iterations of our formats. The kitchen displays show most of our kitchen families including paint to order options and solid surface. Our trade counter stocks many of our everyday products and provides a chance for a chat and a brew. Our open plan business area makes it easy for our trade customers to easily access advice from our teams. We have space for our designers to plan kitchens for trade customers and a full wall of our kitchen collection known in our depots as the wall of fame. And we have a new selection area for customers to view our kitchen door and worktop combinations, including our solid surface proposition. And our presentation rooms are private and have high-definition screens to bring to life customers' kitchen choices in 3D. Our sales conversions here are extremely high. Our restructured warehousing and racking is a vital Houdens USP and enables us to serve the trade with stock reliably and often instantly. The updated format has strengthened our competitive proposition and our programme to convert older depots to this format is well advanced. Last year, we completed a further 60 revamps, including nine relocations, taking the total so completed to 410. These principally comprise conversions of our larger and longest established depots. Now this year, including relocations, we plan to convert another 45 depots. And by the end of this year, we'll have revamped around 68% of all depots which opened in the old format and we'll have around 77% of all UK depots trading in the updated one. As I mentioned earlier, the latest iteration of the format has a separate area for customers to view kitchens, doors and worktop combinations. And over the next two years or so, we will also be making the minor layout modifications necessary to include this area in the depots that were prior to the 2025 refits. Next, range and supply management. Investment in service, product and availability helps us develop long-term customer relationships and build competitive advantage. Sales of new product are a significant contributor to our performance. Sales of product introduced in 2025 and the prior two calendar years represent around 29% of UK product sales, with product launch in 2023 being the largest contributor. Value for money is a constant feature of our purchasers' buying decisions, and we are committed to providing our customers with market-leading, easy-to-fit and fairly priced product. Given pressures on household budgets, price featured predominantly in 2025, and we expected to do 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 2026 makes more colours, styles and finishes available to more budgets, including at entry and mid-level price points. We are innovating in other long-established product categories and adding more colours and styles to our fitted bedroom offering launched two years ago. As we continue to invest in product innovation to capitalise on the significant growth opportunities we have, efficient management of our kitchen range is crucial to balancing customer choice and availability with our profitability. Our rigid kitchen platform is shared across all our families, which helps us introduce new kitchen options at more price points, cost effectively. and our stock management and replenishment enhancements, including our XDC network, enabled us to provide best availability on a broader offering at a lower cost. More efficient new product testing enables us to bring more proven new styles to market more quickly. Our increased presence in the premium end market, which is where range innovations are usually made, is also informing and accelerating our ranging decisions at other price points. Excluding paint to order, we have 24 new kitchens confirmed for 2026, as compared to 23 last year and 11 in the prior year. We will enter the second half with our entire offering of such kitchens organised into 11 families with a similar total count to last year. In 2025, sales of our entry-level and mid-level kitchen families represented respectively the highest number of kitchens we sold and the most kitchen sales by value. Last year, we brought to market 13 new kitchens for our established entry and mid-level families. and launched Froome in four colours, a new family whose styling updated that of our long-standing Chelford family. This year we have 15 new kitchens for these families. For our entry-level families, our traditional Heartland, we have five new kitchens in colours which are popular elsewhere in our offering, including Greenwich and Whitney in porcelain, and Allendale shown there in reed green. At mid-level, we have discontinued Chelford and we will add six colours to our most modern Shaker range Froome, including Mist and Pebble. Elsewhere, we've introduced some more emerging colours and finishes to our best performing mid-level families, including Clerkenwell in Super Matte Mist and Halesworth in Ash Green. We've upscaled our higher priced kitchen portfolios in recent years, utilising Haydn's scale, supply and manufacturing capabilities to offer the bespoke look most associated with high street independence at competitive pricing. Our offering now comprises four families, including three shaker-style timber families which are closely marketed as classic timber kitchens. In 2025, our classic timber kitchen families performed particularly well, with the paint-to-order options growing in popularity. The number of our Chilcombe and Elmbridge kitchens sold in paint-to-order colours which are priced at a premium to stock colours, increased significantly in 2025. This year, we are refreshing our paint water palette with four new colours, with two of the leading paint colours becoming Chelcombe and Elmbridge stocked colours. Last year, we extended the reach of our timber offering with the launch of a new family called Ilfracombe. an in-framed timber kitchen of classic design. Precision above Chilcombe and Ambridge families, Ilfracombe is exclusively available in 24 paint watercolours. 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. In recent years, we've increased the number of decoers we offer in this service. For this year, we've introduced clearer and simpler ranging and more delineated pricing to demonstrate the value we offer at all price points. Ahead of peak trading later this year, our total offering will comprise a similar number of options to last year, with increased space available to display worktops in more of our depots. We continue to upgrade our offering in other categories, including our own category, specifically own label brands, which compliment the third-party branding product we sell. So our Limona branding is one of the leading integrated appliance brands in the UK. And for this year, we have a major refresh of our brands offering. We've modified the design, lowered the prices of a suite of high volume products without compromising these products functionality. Elsewhere, we've updated the design and specification of a number of high-priced products, including washing machines, fridge freezers and cookers. Launched in 2023, our own label flooring brand, Oak and Grey, now represents a substantial portion of the category sales, having introduced water-resistant laminates last year. New product for this year includes sustainably sourced engineered wood flooring with market leading standing water resistance. In Ironmongery, we launched our own label called Fuller and Forge. Fuller and Forge product has landed well and has significantly improved this offering in our category. And for this year, we have new finishes and new designs and we'll be adding new subcategories. As well as being substantial businesses, doors in joinery remain a key footfall building product for us in our depots. Last year, we launched our more colours and bolder styles at all price points to our door lineup. A new product this year includes a new premium range of Houndwood branded solid engineered doors. In joinery, we will continue to develop the subcategory extensions into wall panelling, stair parts and loft spaces that we initiated in 2025. Fitted bedrooms were well ahead of the previous year. Bedrooms represent a growing source of incremental sales and profit and help us foster customer relationships Installing fitted bedrooms suits the skills of our customers who fit kitchens and last year a substantial portion of our total bedroom sales represented purchases either by new customers or by customers who bought from us relatively infrequently. We developed our bedroom ranges in-house utilising our existing design and supply infrastructure and they have a high cabinetry content which of course matches our manufacturing capabilities. In 2025, our 2025 offering comprised bedrooms in five leading family designs drawn from our kitchen portfolio, including new family Clark and Well launched during the year. This year, we will continue to target entry and mid price points with five new bedrooms, including new colours for Bridgemere and Halesworth. Our product offering is underpinned by our dedicated sourcing operations, which manufacture or source the right product in complex categories and distribute it efficiently across our depot network. Howdens is an in-stock business and the trade tell us that high levels of stock availability is one of the key reasons that they buy from us. The investment in our XDC network, which enables us to offer next day delivery service and other recent initiatives, including daily traders, facilitate exceptional levels of service to our depots. In 2025, deliveries totaled some 73 million pieces and our service level from primary to our depots was at 99.98%. Now that is a world-class performance by any standard. our in-house manufacturing capability has a source of competitive advantage for us. And we always keep under review what we believe is best to make or buy by balancing 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. So our Runcorn factory with its high volume, low cost making capability has always been an integral part of our manufacturing and logistics strategy. With planning permissions in place, our development programme for Runcorn site is now underway. And at the end of last year, we also acquired the freehold of this site. We expect the works will take about three years to complete in line with our long-term ambitions for the business. The programme will give us at Runcorn more capacity, more flexibility and broader capabilities to deliver lower cost of goods sold than would otherwise have been the case. Now turning to our digital platform, and we use digital to reinforce our model of strong local relationships between our depots and their customers. And we do this 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 into our depots and into our depot teams. Usage of our online account facilities, which provide efficiencies and benefits for our customers and depots alike, has continued to increase. New registrations have totaled some 59,000. Around 61% of our customers had an online account at the year end. Total users viewing our trade platform has increased by 45%, with around 80% of users regularly looking at their individual and confidential pricing. Customers with online accounts have on average continued to trade more frequently and spend more than non-users. We generated high levels of engagement with our web platform and grew our social media presence, which also stimulates interest in viewing our products and services online. Total visits totaled some, site visits totaled some 24 million in the year. Amongst kitchen specialists, we continue to have the highest number of fitted kitchen site visits in the UK. The time spent viewing pages and the numbers of sessions were consistently at high levels. Across the leading social media channels, our follower base at around 720,000 was up 18%, with around 6.8 million engagements in a month. Usage of our upgraded Click and Collect service for everyday products increased, and the new depot account management tool introduced last year is helping depots manage their customer relationships more efficiently and more productively. We have also recently introduced a new depot pricing and margin tool, which we call PAM, and it's now operational in all our UK depots. We designed this in-house, and PAM makes depot price management easier and more effective. It provides comprehensive data for depots to make more informed pricing decisions with a higher degree of confidence and enables depots to access quickly and see the impact that it has on their margin. Depot feedback has been very positive and we are seeing both more bespoke local pricing and improvements in depot margins on products which we incorporate in the system. And finally, international. In 2025, year-on-year sales of our international operations based in France increased at a higher rate than in the previous two years. In tough market conditions, the business responded positively to the measures taken to improve existing depot sales performance. We now have in place a highly experienced leadership team adept at depot management and have invested in enhancing offerings of footfall promoting products alongside a number of other initiatives. In 2026, we will continue to build out our depot team's capabilities. particularly account management, and actively manage our depot estate, including by closures and relocations where necessary, as we look to build on the progress that we've made there. We are also trialling a more compact version of our format, initially at a test depot in Reims, or Reims, to the west of Paris. At around 500 square metres, This version is under half the average size of a current UK depot, has a lower rental cost, and the layout incorporates all the latest UK format innovations that you saw in the video earlier. We expect to maintain the aggregate number of depots trading at around the current number as we actively manage our depot estate to optimise its performance. Sales in the Republic of Ireland were well ahead of last year and we will be opening more depots there in 2026. The Irish market suits our differentiated model and one which sets us apart from the competition there. We opened for business in the Republic of Ireland in 2022 and we used a similar depot location strategy to that in France with the local teams supported by our UK infrastructure and also our digital platform. By the end of 2025, we had 16 depots trading, including nine clustered around Dublin, with three serving Cork. This year we expect to open around five more depots, which would increase the number trading to 21 by the year end. So for 2026, we are well planned, including on our strategic initiatives. These are aimed at increasing our market share profitably as day-to-day we deliver value to customers across all price points and product categories. We have 24 new kitchens in stock well ahead of peak autumn trading, plus a very competitively priced paint-to-order kitchen offering. And overall, our line-up in all product categories is the best that we've had in my time at Huygens. We have a programme of rooster promotions in place to keep Houdens at the front of the trades minds, together with other price initiatives. We will continue to improve service and availability and increase the range of services and functionality we offer online to the benefit of our depot teams, customers and end users alike. During 2026, we plan to open around 25 depots in the UK and refurbish around another 45 existing depots to the updated format. In total, we expect to end the year with around 85 depots trading in the Republic of Ireland, France and Belgium together. So lastly, before we take questions, outlook. So far this year, our performance has been in line with our expectations and whilst it's early in our financial year, we are on track to meet current market expectations for 2026 in what remains a competitive marketplace. We are planning for the size of the kitchen mark to be level year-on-year following several years of decline and we are well prepared for 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, working with suppliers to keep product and input costs controlled. We are confident that our business model is the right one to address the opportunities of our markets. And in summary, we're well-placed to outperform our competitors again in 2026, as we both continue to invest in our strategic initiatives and return £100 million to shareholders through the new buyback programme that we've announced today. So thank you very much for listening to me and to Jackie, and we will now both take your questions.