Howden Joinery lifts profit expectations

8th Jan 2015 08:00

Retailer Howden Joinery fired out an unscheduled trading statement to reveal that it expected profits for the full year will beat market expectations.The kitchens and joinery seller said the good trading performance it had hitherto reported in 2014 had continued for the remainder of the year, with total annual sales from its UK depots up 14% to roughly £1.07bn, or 11% higher on a like-for-like basis."The group has also seen good performance on other key measures, including gross margin," it added.This gross margin improvement led it to expect profits before tax and exceptional items from continuing operations, which will be released in preliminary results on 26 February, would be higher than analysts' expectations, which it said ranged between £172m to £179m. The 30 new depots opened over the course of the year have performed well, it added, with the total number of 589 recently increased by two depots in Belgium.Broker Liberum noted that the amount by which the company had beat expectations was unquantified but the quantum was "likely to be of the order of 5% to justify putting out the statement".Analysts at Numis said after upgrading estimates on Howden three times in 2014 prior to this surprise year-end update, they believed this latest upgrade was "further evidence that the company is seeing the benefits of an improving underlying market which complements the business model which continues to drive self-generated sales and margin growth."This profile can be expected to be maintained in 2015 given that Howden is one of the most operational geared stocks in our merchanting universe, and we also believe that this increases the likelihood of surplus cash return this year. As a result we upgrade estimates here and also our target price, retaining a positive stance on the company."The stock was nearly 7% higher at 419.5p by 11:09.