Howden Joinery hikes dividend and unveils buyback after excellent year

26th Feb 2015 08:18

After an excellent year in 2014, kitchens and joinery depot chain Howden Joinery has looked to share results of its strengthening cash flow via a larger dividend and £70m share buyback.Full year results from FTSE 250 group showed sales not only topped £1bn for the first time, as recently foreshadowed, but reached £1.09bn as 30 new depots were opened in the UK and a European trial extended.Gross profit margin improved by 200 basis points to 63.7%, thanks to management's disciplined approach to pricing, leading to profit before tax up 40% to £188.8m helped by a big cut in the pension interest charge.Basic earnings per share increased 45% to 23.2p and the group enjoyed a net cash inflow from operating activities of £147.8m.This, added to continued strong revenue growth in 2015 of 9.9%, put the board in a confident mood to recommend a 53% increase the total dividend to 8.4p and announce a £70m cash return to shareholders by way of a share buyback."The recovery in the market seen since the summer of 2013 and our performance since then has caused us to review our growth prospects," said chief executive Matthew Ingle, who said the company intended to increase investment in our manufacturing and logistics operations."As a result, we have identified the need for increased investment in the business. This is to ensure that we can take advantage of the growth opportunities that we now foresee, and to address the challenges of a more complex market and security of supply."For 2015 the group well as planning to open 30 new depots in the UK, we plan to open seven more depots in northern France.Independent analyst Nick Bubb was impressed, saying the gleaming set of results was "quite a turnaround from the mess things were in a few years ago".N+1 Singer analysts said: "The share buyback confirms the existence of surplus cash even after factoring in a much higher capex outlook as management prepares for further future growth and a slightly more substantial trial on the continent."The broker has downgraded its rating to 'hold' on the rising share price and "the possibility that any more material upgrades might be weighted to the back end of the year" given the comparatives.