Howden Joinery Group Plc

Good morning and welcome to the Howdens 2026 interim results presentation. I'll begin by introducing our performance in the first half and Jackie Callaway, our CFO, will then review our financial results for the period. And I'll then share my perspective on our 2026 performance to date and our plans for the remainder of the year. And then we'll take your questions. In the first half, the business continued to advance on all fronts in what remains a challenging marketplace. The results met our expectations for the period and we're on track for 2026. Group sales in the first half increased by 3.3% and we're up 3.7% on a trading adjusted basis. In the UK, the number of kitchens we sold increased and we are well positioned to take market share again this year. We maintained an industry leading gross margin with gross profit ahead of last year and we balanced recovery of cost rises with our commitment to providing competitive prices across the board for our customers. Underlying profit before tax for the period was also ahead of last year, increasing at a higher rate than reported sales with underlying operating profit increasing more so. We progressed our strategic plans for the UK business which support our trade customers and total sales of our international operations continue to increase. At the half year, we had a total of 975 depots trading, including 893 in the UK. The business delivered strong operating cash flow and we maintained a robust balance sheet. This gives us the flexibility to continue to invest in our growth plans for the business and provide shareholders with an increased interim dividend for this year. We will also return a total of 100 million to shareholders through our latest buyback programme announced in February. The interim results demonstrate the strength of our local trade-only in-stock model. A market-leading product line-up, consistently 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 as of the half year with a similar proportion trading as last year. As well as maintaining an industry-leading gross margin, our total KPI sales volume was ahead of last year. Our performance to date 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 year is unchanged. We have a robust business model and operate in fragmented markets with significant growth opportunities. This year, we planned for the size of the kitchen market to be level on the year and we believe this outcome remains the most likely outcome. We are well prepared for the challenges and opportunities ahead in what remains a challenging marketplace and our customers, namely self-employed people, are highly adept at winning business in all market conditions. Delivered by our highly entrepreneurial and well-incentivised depot teams, our service-orientated, trade-only, in-stock model is hard to replicate and it's difficult to compete with, and we have initiatives in place to make it more so. At present, we believe the value of our principal UK markets, which are relatively unconsolidated, is some £11 billion, and that there are significant long-term growth opportunities for us. We continue to prioritise investment in the business on this basis. So I'll update you on our strategic initiatives, which are key to the longer term development of the business after Jackie has taken you through our financial results for the period. Before handing over to Jackie, I will briefly cover our acquisition of DIY Kitchens business for an enterprise value of 390 million, which completed on the 23rd of June. DIY Kitchens is a vertically integrated kitchen business which sells its products exclusively online, principally to end users, particularly those looking to self-manage the purchase of their kitchen. And as such, its online self-service business model is quite distinct from our own relationship-based, trade-only, fully in-stock model. And one through which we can access directly non-trade kitchen purchasers, thereby expanding the group's addressable UK market base It's a very profitable business, cash generative and a growing enterprise like Howden's. It has well invested manufacturing, scalable capabilities and also an entrepreneurial culture. Whilst DIY Kitchens is much smaller than our trade-only kitchen and joinery business, the two are complementary because of their disciplined focus on serving distinct customer bases, which have very different requirements. We believe that they are each the best at what they do. and that both businesses have plenty of room to grow. Accordingly, DIY will operate on a standalone basis from Howden Trade and will continue to be an online-only business focusing on non-trade customers with a differentiated kitchen product which is made to order and displayed in a small number of destination showrooms. In summary, by size, this is an incremental acquisition which is additive through DIY Kitchen's differentiated online self-service model which extends our direct customer reach and is accretive to revenue EBIT and EPS. So having said that, I'll hand over to Jackie who will take us through our financial results for the first half and our guidance also for the full year. Thanks Jackie.

Thanks Andrew and good morning everyone. I'm pleased to present Howden's half year results for 2026 and I'll begin by summarising the key highlights. Howden's first half performance shows the resilience and growth potential of our differentiated, in-stock, trade-only business model. Following our last trading update in April, the business continued to perform well in the final two periods of the half. Group sales increased by 3.7%, adjusted for the one fewer trading day this year. We maintained our industry-leading gross margin, which was 70 basis points ahead of last year, as we balanced price and volume effectively. The margin reflects the benefit of the price increase implemented at the start of the year and our focus on productivity, sourcing and manufacturing efficiencies. Operating expenses were tightly controlled and we delivered an underlying EBIT margin of 12.4% with profit growth ahead of sales while continuing to invest in strategic initiatives that strengthen our competitive position. Underlying profit before tax was up 4.3% to 122 million pounds. The underlying effective tax rate was 23%. Finally, we delivered underlying EPS growth of 5.5%. Let's now look at sales growth in a bit more detail. We maintained a disciplined approach to balancing pricing and volume. While the market remains competitive, our differentiated trade-focused business model Delivered by our highly entrepreneurial local depot teams, supported continued volume growth in a kitchen market we still expect to be about flat this year. Overall UK revenue increased by 3.3% to £991 million and was up 2.3% on a same depot basis. The price increase implemented at the start of this year had an impact on sales of around 1.6%. International depot revenue was 46 million euros. 8.5% ahead of 2025 on an adjusted basis and 7% higher on a same depot basis. In France, sales for the first half continue to increase. Our focus remains on both developing our depot team's capabilities and actively managing the depot estate to optimise performance, including by trialling a more compact depot format that incorporates recent UK format innovations. In the Republic of Ireland, our depots traded well, and we're opening more depots there this year. Angie will take you through our international operations in more detail shortly. Now turning to profit before tax. Starting from profit before tax of £117 million in 2025, gross profit was £28 million ahead of last year. The price increase at the start of the year delivered a £16 million benefit with volumes and mix contributing £12 million. Kitchen volumes increased as we continued to invest in new product introductions and associated kitchen products. Overall, within our cost of goods sold, despite the ongoing uncertainty in the Middle East, we've offset inflationary increases of around $8 million in the first half. Howden's supply chain has remained robust and our predominantly near-sourced, vertically integrated business model is resilient across all macroeconomic conditions. We are maintaining very good ongoing stock availability which supports our trade customers in securing and delivering work and we've hedged fuel and energy expenses through to the end of the year. And we will continue to stay vigilant in the current environment, keeping a sharp focus on productivity, efficiency and disciplined cost control. Looking at operating costs, increases were held to £21 million. balancing tight cost control with a further £9 million investment in our strategic initiatives. This disciplined approach supported an increase in underlying EBIT margin and an underlying profit before tax of £122 million for the half year. Now looking at operating costs in a bit more detail. Ongoing investment in our strategic initiatives was £9 million in the year and this included the incremental costs of the new UK depots which totalled £5 million included the cost of 25 depots opened from the beginning of 2025. We invested a further £3 million in other strategic initiatives predominantly digital. We also invested in our international businesses, for example, by opening depots in the Republic of Ireland. In our existing UK depots, additional costs of £7 million related to a combination of labour costs, property costs and volume increases. We also incurred £3 million of additional labour costs arising from the government's changes to the employer's national insurance and the minimum wage which came into effect last April. I would also highlight that we've offset around £11 million of inflationary cost increases with productivity and efficiency actions. In 2026 we now expect inflationary headwinds of around £40 million in the total cost base, so that's across both cost of goods sold and operating costs. These headwinds are in areas such as commodity, labour and additional property costs. This is 10 million pounds higher than our previous guidance and reflects the additional cost pressures as a result of the uncertainty in the Middle East. As in previous years, we will take a disciplined approach on costs with ongoing actions to offset these inflationary headwinds where practicable. In the first half our actions delivered combined cost savings of around £19 million across operating costs and cost of goods sold. We will also continue to invest in our strategic initiatives to fund future growth and Andrew will take you through our plans for 2026 shortly. Next let's look at the cash flow. Cash generation was strong and we ended the first half with £333 million of cash. In total we invested around £12 million in working capital to support our growth. Capital expenditure was £41 million as planned. 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 there are three major investment categories that we are prioritising to support profitable growth and strengthen our competitive position. Firstly, manufacturing. We continue to make investments in our UK manufacturing base to enhance productivity, increase capacity and broaden our capabilities. And this includes our plans to develop the Runcorn site which will increase capacity there by around 1 million rigid cabinets. In 2025 we acquired the lease for some additional land and this enabled development work to begin on a new trailer park which frees up space for the expansion of the factory. and in the first half, following clearing and development of this land, the first trailer has now been parked there enabling work to start on the site extensions which is progressing to plan. Secondly, we'll invest in 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, we will invest in digital. We will continue to support our trade customers by upgrade to our digital capabilities to make them more productive and to raise brand awareness. We're also using technology to support new services and ways to trade while delivering productivity benefits to the depots. Moving now on to cash tax. In previous years we've benefited from the prior year tax credits arising from our patent box claim. This is normalising now and looking forward we expect cash tax to be around £60 million A year with an effective tax rate of around 23-24%. Finally our 100 million share buyback is underway with £7 million completed in the first half and a total of £39 million completed by the close of business on Tuesday 21st July. We remain on track to complete the full buyback by the end of this year as planned. Moving on to capital allocation. Howdens is a highly cash-generative business and we continue to take a disciplined approach to capital allocation. Our priority is to invest in and develop a differentiated business model to deliver sustainable profit growth. At the same time, we aim to maintain a progressive and sustainable ordinary dividend, providing shareholders with an attractive ongoing income stream. Following completion of the acquisition of DIY Kitchens, the group retains a robust balance sheet and expects to remain in a net cash position. and going forward we will continue to prioritise organic growth, maintain our progressive dividend and look to return surplus capital to shareholders while maintaining a net cash position. And importantly, following the acquisition, our existing dividend policy and the previously announced 100 million share buyback programme for 2026 are unchanged. The Board has declared an interim dividend for 2026 of 5.1 pence per an ordinary share An increase of 2% which will be paid on 20th November to shareholders on the register on the 16th of October. We continue to expect to remain in net cash position to support future investment and growth and ongoing shareholder value creation. So to summarise, we have performed well in the first half. Our differentiated in-stock trade-only model continues to demonstrate its resilience and growth potential and our strategy is well defined and being executed well. Our robust balance sheet and strong cash generation support continued investment in our strategic initiatives and in the future growth of the business. We are firmly focused on growing our profits faster than sales and it was pleasing to achieve this in the first half. Looking ahead, we are well prepared for our peak trading period in the autumn, supported by our strongest ever product line-up across kitchens and joinery and the strength of our local depot teams, first rate product quality, market leading stock availability and the skill of our trade customers and winning work. We remain well positioned to continue to grow profitably and meet current market expectations for 2026. Thank you and I'll now hand you back to Andrew.

Thank you, Jackie. We believe our markets give us significant longer term growth opportunities. and our strategic initiatives are key to capitalising on these. And I'm going to use them as a framework to review our first half performance and our plans for the rest of the year. So based around our key features of our business model, the initiatives are to evolve our depot network, to improve our range and supply management and to develop our digital capabilities and service and to grow our international operations. So firstly, we will look at depot evolution. High service levels, including local proximity and immediate availability, are very important to our trade customers. We continue to see profitable opportunities to open depots. For the medium term, we continue to see scope for around 1,000 depots in the UK versus the 891 trading at the end of 2025. This year, we expect to open around 25 more depots as compared to 23 in 2025, of which two were opened in the first half Last time I took you through the latest iteration of the updated format and the format enables us to provide the best working and trading environments and to make productivity and space utilization gains in a cost effective way. The format innovations have strengthened our competitive position and our program to revamp depots opened in the old format is now well advanced. By the end of 2025, including relocations, we had revamped 410 depots to an updated format. These principally comprised of conversions of our larger and longest established depots. This year, including relocations, we plan to update the format of around 30 more depots and computed 10 of these in the first half. So by the year end, We expect to have revamped around 66% of the depots which opened in the old format and to have around 75% of all UK depots trading in the updated one. We're also modifying the layers of some of the depots converted earlier in the programme so that these incorporate more of the latest format innovations. The next point is range and supply management. Sales of new product are a significant contributor to our performance. The first half sales of product introduced this year and over the preceding 18 months represented over 15% of the UK product sales. A higher proportion of sales than for the comparable 24 months in H1 last year. And value for money always features in purchasers buying decisions and we're committed to providing our customers with market leading, easy to fit and fairly priced product. Given the pressures in the household budget, price featured predominantly in 2025, 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. This year's new kitchen programme makes more colour styles and finishes available to more budgets, principally at entry and mid-level price points. Excluding Paint to Order, we have 23 new kitchens so far this year and we entered the second half of our entire offering with such kitchens organised around 11 families with a similar kitchen count to last year. Elsewhere we're innovating other long established product categories and adding more colours and styles to our fitted bedroom offering launched two years ago. This year we have A total of 13 new kitchens for our established entry and mid price families, most of which have been in depot since the start of the year and all of which are now in stock well ahead of our peak trading period. For our entry level families, we have introduced five new colours which are popular elsewhere in our offering, including Greenwich, Innatural Walnut, which we launched at the start of the second half. At the mid-level, we've launched nine new kitchens for our established families, including five more colours for our more modern shaker kitchens. So Froome, which going forward replaces Chelford in our line-up, and recent additions to these families include Froome in reed green and Halesworth in mist, both shown For the second half, we also have our new mid-level contemporary family, Winterton, for the first time. Winterton's available in five colours, including gloss sandstone and gloss white. Our higher price kitchen portfolio comprises four families, including three shaker-style families, which are collectively marketed as classic timber kitchens. In the first half, the proportion of our classic timber kitchens sold paint to order continued to increase. For the second half, we've refreshed our paint to order palette with four new colors. And for our top end in frame shaker family Ilfa Coombe, which is exclusively available in paint to order, we've added a new beaded style door frame option as shown in the picture. This year, we have also migrate in two of the leading paint water colours over to the in-stock offering of our Chilcombe and Elmbridge families. And for the second half, we have also just launched our new natural walnut effect cabinet, which replaces our croft grey cabinet and is our first cabinet refresh in several years. The natural walnut cabinet complements a wide colour palette can be specified for all of our kitchen families and offering it from stock for immediate delivery is a first for the UK mass market. Solid surface work tops 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 where we trade as Heidens Work Surfaces or HWS is underpinned by our in-house manufacturing capability, which is among the largest of the UK, helping us offer rapid templates to fit times. In recent years, we've increased the number of decors we offer in this service. And for this year, we've introduced clearer, simpler ranging and more delineated pricing to demonstrate the value that we offer at all price points. Ahead of peak trading, Our total offering will comprise a similar number of options to last year. In 2026, we've continued to upgrade our offering in other categories, including our own label brands, which complement the third-party brands and products that we sell. In appliances, we've put in place a major refresh to our Lamona brand, which is one of the leading integrated appliance brands in the UK. And we've modified the design, lowered the prices of a suite of high-volume products without compromising these products functionality and updated the design and specification of several higher priced products including washing machines, fridge freezers and cookers. Elsewhere in flooring and ironmongery, we've extended the offering of our own label brands, Oak and Gray, Fuller and Forge and added new product finishes, designs and subcategories. As well as being substantial businesses, doors in Joinery remain a key footfall driver of building product for us. For our door lineup, new product includes a new premium range of Haydn's branded solid engineered doors and in Joinery we've developed the subcategory extensions into wall panelling, stair parts and loft spaces which we initiated in 2025. As one fitted bedroom sales continue to increase, as well as representing a source of incremental sales and profit, they help us foster customer relationships. Installing fitted bedrooms suits the skills of our customers who fit kitchens and a significant portion of total bedroom sales compromise purchases either by new customers or by customers who had bought from us relatively infrequently. We develop our bedroom ranges in-house utilizing our existing designs and supply infrastructure and they have a high cabinet content which matches our manufacturing capabilities. Our 2025 offering comprised bedrooms in five leading family designs drawn from our kitchen portfolio including a new family Clark & Well launched during the year and this year our focus is on entry and mid-level bedrooms which have a total of five new ones including and including for the second half, a new mid-level family, Winterton, which was just launched in three gloss colours. Howden's is an in-stock business and the trade tell us that a high level of stock availability is one of the key reasons that they buy from us. The investment in our XDC network, which enabled us to offer a next-day delivery service and other initiatives, including daily traders, facilitate exceptional levels of service. In the first half, deliveries totaled some 30 million pieces, and our service level from primary to depots was a world-class 99.98%. Our in-house manufacturing capability, which is a source of competitive advantage for us, and we keep under review of what we believe is best to make or buy, balancing cost and overall supply chain availability, resilience and flexibility. and investments in manufacturing in recent years have strengthened our competitive position by increasing our manufacturing capacity and by adding broader and newer capabilities. Our Runcorn factory with its high volume, low cost cabinet making capability has always been an integral part of our manufacturing and logistics strategy. Our three year development programme for Runcorn site is now underway and is proceeding as planned. In line with our long-term ambitions for the business, the program will give us at Runcorn more capacity, more flexibility, broader capability and lead to lower COGS than would otherwise have been the case. Turning to our digital platform, we use digital to reinforce our model of strong local relationships between depots and their customers. We use it to raise brand awareness to support the business model with new ways to trade with us and to deliver productivity benefits and more leads to our depot teams and our customers. In the first half, new registrations for our online account facilities which provide efficiencies and benefits for customers and depot staff alike increased. New registrations totaled some 56,000. Around 62% of customers had an online account at the year end with 80% of trade users regularly looking at their individual and confidential prices. Customers with an online account have on average continued to trade with us more frequently and spent more than non-users. We saw high levels of engagement with our web platform and growth in our social media presence which also stimulates interest in viewing our products and services online. and site visits totaled 11.3 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 a consistently high levels. Across the leading social media channels, our follower base is at over 800,000, that's up 17%. with about 4.6 million engagements a month. We are seeing increased usage of our upgraded Click and Collect service for everyday products and new account management tools introduced last year is helping depots manage their relationships more efficiently and productively. This year, our new depot pricing and margin tool, PAM, is operating in all UK depots. and it was designed in-house and PAM makes depot pricing management easier and more effective. It provides comprehensive data for depot teams to make more informed pricing decisions with a higher degree of confidence and enables depots to access quickly the impact on margin of those price changes. Depot feedback has been very positive and we see both more bespoke local pricing and improvements in depot margin on the product incorporated in the system. And finally, international. Total half one sales of our operations based in France increased following a significant year-on-year increase in half one last year. We now have in place an experienced leadership team adept at depot management in tough market conditions. The business has continued to respond positively to measures taken to improve existing depot sales performance. In 2026, we continue to focus on both developing our depot teams capabilities, particularly account management, and actively managing our depot estate, including by closures and relocations where necessary. As we look to optimize the existing depot performance, as we guided last time, we anticipate closing up to six depots in suboptimal locations later this year. having closed two such depots last year. Alongside this, we're trialing a more compact version of our format. It is under half the average size of the current depots in France, has lower rental costs, and the layout incorporates recent UK format innovations. In the first half, we opened one of these depots in France to the west of Paris, and in the second half, we're intending on opening another one serving the city of Tours in the Loire Valley. Overall, we expect to end the year with around 60 depots trading. Half-won sales in the Republic of Ireland were well ahead of last year and we are opening more depots there in 2026. The Irish market suits our differentiated model and one which sets us apart from the incumbents. We commenced trading in the Republic of Ireland in 2022 using a similar format location strategy to down in France with the local team supported by our UK infrastructure and our digital platform. By the end of 2025 we had 16 depots trading including nine clustered around Dublin and three serving Cork. In the first half of this year we opened two more depots which respectively serve the areas around Wexford and Athlone and in the second half we expect to open at least three more which would increase the number of trading to 21 depots by the year end. So for 2026 we are well planned including on our strategic initiatives as day to day we deliver value to customers across all price points and product categories. We already have 23 kitchens in stock well ahead of peak autumn trading plus a very competitively priced paint to order kitchen offering and our lineup in other product categories is the best that we've had in my time at Howdens. We have a program of rooster promotions in place to keep Howdens at the front of the trades mind together with other price initiatives and we continue to improve service and availability and increase functionality We offer online to the benefit of our depot customers and end users alike. During 2026 we plan to open around 25 depots in the UK and reformat around another 30 existing depots. We expect to end the year with around 80 depots trading in France, Belgium and the Republic of Ireland. And finally in the second half, BRY Kitchens will contribute to the group's results for the first time and we're looking forward to working with the team there. Lastly, outlook. Whilst we have peak trading ahead of us, we're on track with our plans for the business and our outlooks for the full year is unchanged in what remains a challenging marketplace. We plan for the size of the UK kitchen market in 2026 to be level year and year, which in our view remains the most likely outcome. and we are 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're confident that our business model enables us to address the opportunities in the market across changing conditions and in summary we're well placed to outperform our competitors in 2026 as we both continue to invest in our strategic initiatives and return a further £100 million to shareholders through our latest buyback programme. So thank you very much for listening and Jackie and I will now take your questions.