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14 Aug | Howden Joinery

With all indications that the UK housing market is progressing just swimmingly – house prices in England and Wales hit a record high in July reaching an average of £232,969 – we thought it time to look for some momentum investing opportunities in the housing support sector.

Howden Joinery is one name that our momentum screen threw up. And upon closer inspection there seems a lot to like about this solid, well-established Anglo-French kitchen cabinet producer – not least its 12 month chart:





As well as a stoinking chart, Howden Joinery met 10 of the 12 loose screening criteria, that, in a perfect world, we’d like to nail for any company we’re to invest in. They missed out on our preferred price to book ratio of less than 3.0 (it came in at a lofty 10.6 but we’re on a momentum crusade here, we’re not searching for value) and our preferred rolling earnings per share growth rate of 10% (which sits at a more than respectable 7.45%).

But such minor sins can be forgiven when a company is pushing new price highs in an industry that’s showing few signs of slowing down.

On 25th July, Howden released its half yearly report for the 24 weeks to 15 June 2013, some highlights included:

• Howden Joinery UK depot revenue increased by 7.3% to £383.7m (2012: £364.6m);
• Gross profit margin was 61.5% (2012: 60.3%);
• Operating profit before exceptional items rose to £45.1m (2012: £29.6m);
• Net cash of £102.0m at 15 June 2013 (29 December 2012: £96.4m net cash, 9 June 2012: £37.4m net cash);
• Interim dividend of 1.0p per share declared (2012: 0.3p).

Howden are big and they’re growing:

Eight new depots have been opened in the UK so far this year, bringing the total to 537. A number of other depots are at various stages of the acquisition/shopfitting process, the opening programme being in line with our expectations to open up to 30 depots this year.

They’re tech savvy:

A new version of the Howdens product website (www.howdens.com) was launched. Major improvements to this included the automatic resizing of the website to suit the device on which it is being viewed and improved navigation around the site, making it easier for
users to use. The content has also been enhanced, with the addition of further product movies designed to help bring the kitchen to life. The new website coincided with the
launch of the Howden App.

So based on the above, we took out a little spreading action on Howden Joinery, going long at £3 a point from 276.68 pence.

We’re not expecting price fireworks with Howden but a continuation in the momentum it’s shown in the past 12 months would be something to build on – sorry ’bout that.

Thanks again for dropping by.