REG - Howden Joinery Grp - 2023 Half Year Results
20/07/2023 07:00
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RNS Number : 5654G Howden Joinery Group PLC 20 July 2023
Further market share gains and on track for 2023
Results summary
£ millions (unless stated) H1 2023(1) H1 2022 Change Change(2
vs H1 2022 ) vs H1 2019
Group revenue 926.9 913.1 +1.5% +42.0%
- UK 895.1 889.3 +0.6%
- International 31.8 23.8 +33.6%
Gross profit margin, % 61.0% 61.9%
Operating profit 117.0 149.1 (21.5%)
Profit before tax (PBT) 111.9 145.0 (22.8%) +43.3%
Basic earnings per share, p 15.4p 19.6p (21.4%)
Interim dividend per share, p 4.8p 4.7p +2.1%
Cash at end of period 117.8 249.7
(1) The information presented relates to the 24 weeks to 10 June 2023, and the
24 weeks to 11 June 2022, unless otherwise stated. The 2022 and 2021 results
are presented under IFRS 16, 2019 results have not been restated for IFRS 16.
(2) 2019 included to show pre-COVID-19 financial performance.
Highlights(1)
- Revenue growth of 1.5% against very strong prior year comparatives
of +16.3%.
o UK revenue was 0.6% ahead of last year or 1.6% ahead on an underlying
basis after excluding £8.3m of third party sales following the acquisition of
Sheridans in 2022, not repeated in 2023.
o International revenue was 33.6% ahead of last year with continued strong
growth in France.
- Industry leading gross margin of 61.0%, normalising from an
exceptional level a year ago when we benefited from early implementation of
price rises ahead of inflationary cost increases.
- Operating costs, before investments in strategic initiatives, were
maintained at similar levels to H1 2022 with £23m of efficiency actions
offsetting cost inflation. Profit before tax was £111.9m.
- Robust balance sheet enabled us to continue to fund a further
£32m investment in our ongoing strategic initiatives, which accounted for
predominantly all the increase in H1 operating costs. These include:
o nine new depots across the Group and 28 reformats in the UK.
o further investment in manufacturing capabilities and capacity and in
digital platforms.
o optimisation of our recently completed network of 12 cross docking (XDC)
hubs.
- Strong cash generation with £137.8m of shareholder returns
completed in the period. This comprised of the prior year final dividend of
£87.8m and the £50m share buy back completed in H1.
- Interim dividend up 2.1% to 4.8p per share.
- Continued progress on sustainability with new targets submitted to
the Science-Based Targets initiative.
- Full year expectations for 2023 unchanged.
Andrew Livingston, Chief Executive said:
"Howdens performed well in the first half in a more challenging marketplace,
making progress on the record year we delivered in 2022. Our trade-only,
in-stock model is hard to replicate and compete with, and we are continuing to
invest in our strategic initiatives to drive growth.
"We are delivering value to our customers at all price-points as we continue
to gain market share and we are well set up for further success in the second
half, which includes our Autumn peak trading period. The combination of more
local depots in convenient locations, an ever-stronger product line-up,
first-class service and high stock availability, continues to represent a
compelling proposition for our customers. While we are cautious about the
short-term macroeconomic outlook for our markets, we remain confident that
Howdens will make good progress in 2023 and our full year expectations are
unchanged."
Operational developments
- Expanding our network with 33 new UK depots, and 90 depot
reformats planned for 2023. We also plan to open around 10 new International
depots this year.
- Launched 23 new kitchen ranges ahead of our Autumn peak trading
period with more emphasis on entry and mid-point ranges which account for the
majority of our cabinet volumes.
- Invested in expanding our manufacturing capabilities with new
kitchen furniture lines and a second architrave and skirting line is fully
operational. We are making good progress in upgrading and optimising our solid
surface worktop capabilities to support increased demand.
- Introducing a premium 'paint to order' service with 15 new colours
in H2 for our most popular 'best' kitchen ranges, with two new production
lines commissioned and installed to support this.
- Optimised the supply chain to support our in-stock model. 12 XDCs
are now fully operational to optimise depot inventory and deliver better
service.
- Introduced the 'Daily Traders' initiative to ensure the highest
availability for our best selling SKUs in the UK depots. These everyday items
are a large proportion of our total product volumes and promote customer
loyalty and footfall.
- Invested in our digital platform which supports our trade
customers to run their businesses more efficiently, and optimises the buying
process for end-users.
- Good progress in France. New depot performance has been
encouraging and is similar to the historical performance achieved by new
depots in the UK.
Current trading and outlook for 2023
Despite the continued challenging macroeconomic backdrop, our builder
customers remain busy, with activity levels normalising from the exceptional
levels of a year ago. Across the Group, we are maintaining our focus on
competitive pricing to support our customers, while balancing inflationary
pressures to optimise volumes. Our inventory remains healthy underpinning our
in-stock model and, in aggregate, is reducing in line with our expectations as
we normalise the levels of safety-stock utilised during the pandemic.
In the current environment, we are maintaining a disciplined approach to
managing our cost base to optimise operational performance, while leveraging
our robust balance sheet to effectively implement our strategic initiatives.
Our results are strongly second half weighted, given the Autumn peak trading
period and, since the start of H2 overall revenue trends have been similar to
the first half. We are on track with our plans for the business and our
expectations for 2023 are unchanged. We remain confident of delivering growth
ahead of our markets, while generating strong cash flow, and attractive
returns for shareholders over the medium-term.
For further information please contact
Howden Joinery Group Plc Media Enquiries
Paul Hayes, CFO Nina Coad, David Litterick (Brunswick)
Tel: +44 (0) 207 535 1110 Tel: +44 (0) 207 404 5959
Email: howdens@brunswickgroup.com (mailto:howdens@brunswickgroup.com)
Mark Fearon, Director of IR and Communications
Mob: +44 (0)7711 875070
Email: ir@howdens.com
Results presentation:
Due to the rail strike on 20 July, an in-person presentation is not taking
place. A conference call and webcast covering the results and including a
Q&A with Andrew Livingston (CEO) and Paul Hayes (CFO) will be held
starting at 0830. Dial in numbers are below and the event webcast links are
below. www.howdenjoinerygroupplc.com (http://www.howdenjoinerygroupplc.com) or
on https://brrmedia.news/HWDN_HY23 (https://brrmedia.news/HWDN_HY23) .
We recommend you register before 0815 (UK time).
Dial in phone numbers:
UK-Wide: +44 (0) 33 0551 0200 USA: +1 786 697 3501
UK Toll Free: +44 (0) 808 109 0700
Quote HOWDENS' HALF YEAR RESULTS when prompted by the operator.
The webcast will be recorded and available on our website after the event at:
www.howdenjoinerygroupplc.com (http://www.howdenjoinerygroupplc.com)
Notes to editors:
1. About Howden Joinery Group Plc
Howdens is the UK's number one specialist kitchen and joinery supplier. In the
UK, the company sells kitchens and joinery products to trade customers,
primarily local builders, through 808 depots at the end of 2022. In 2022, the
business generated revenues of around £2.3 billion and profit before tax of
£405.8 million. Around one-third of Howdens' cost of goods sold are products
manufactured in house at its two principal factories in Runcorn, Cheshire, and
Howden, East Yorkshire both of which have achieved carbon neutral status. At
the end of 2022 Howdens operated 60 depots in France and Belgium and five
depots in the Republic of Ireland.
2. Timetable for the interim dividend
The timetable for payment of the proposed interim dividend of 4.8p per
ordinary share is as follows:
Ex-dividend date: 12 October 2023
Record date: 13 October 2023
Payment date: 17 November 2023
3. Provisional financial calendar
2023
Trading update 2 November 2023
End of financial year 30 December 2023
2024
Full year results 29 February 2024
Financial review
Financial results for H1 2023(1)
Revenue £m (unless stated) H1 2023 # of depots at period end H1 2022
Howden Joinery UK - same depot basis(2) 881.1 778 880.6
UK depots opened in previous two years 14.0 38 8.7(3)
Howden Joinery UK depots 895.1 816 889.3
Howden Joinery International depots 31.8 66 23.8
Group 926.9 882 913.1
Local currency revenue €m (unless stated) H1 2023 # of depots at period end H1 2022
International - same depot basis(2) 27.9 35(4) 27.2
Depots opened in previous two years 8.4 31 0.3
Revenue from closed depots - - 0.7
International depots 36.3 66 28.2
(1) The information presented relates to the 24 weeks to 10 June 2023, and the
24 weeks to 11 June 2022, unless otherwise stated.
(2) Same depot basis for any year excludes depots opened in that year and the
prior year and accordingly at present it excludes the Republic of Ireland
(3) 2022 includes £8.3m of additional third-party sales generated by the
Sheridans solid work surface business acquired in the first half.
(4) Five French depots were closed in the first half of 2022.
Total Group revenue of £926.9m was 1.5% ahead of the prior year (2022:
£913.1m) and 42.0% ahead of 2019, which was a good performance against a
tough prior year comparator of +16.3%. UK depot revenue grew 0.6% to £895.1m
(2022: £889.3m) and was ahead by 1.6% before £8.3m of additional external
third-party sales generated last year by the Sheridans solid work surface
business. Revenue was in line with the prior year on a same depot basis(2) at
£881.1m (2022: £880.6m), this excludes the additional revenue from depots
opened in 2023 and 2022 of £14.0m (2022: £8.7m).
Revenue in our International depots was ahead by 33.6% at £31.8m (2022:
£23.8m). On a local currency basis, revenue generated by the International
depots increased by 2.6% on a same depot basis(2).
Gross profit
Gross profit of £565.4m (2022: £565.0m) was in line with the prior year as
we maintained a sharp focus on competitive pricing to support our customers
while balancing ongoing inflationary pressures. Gross margin of 61.0% (2022:
61.9%) was in line with our plans, with last year being particularly strong
due to early implementation of price increases ahead of commodity cost rises.
Operating profit
Operating profit of £117.0m was £32.1m below last year (2021: £149.1m) and
the operating profit margin was 12.6% (2022: 16.3%). Selling and distribution
costs and administrative expenses (SD&A) increased to £448.4m (2022:
£415.9m) which was predominantly as a result of planned investment in our
strategic initiatives. This included new depots and reformats, range
optimisation, distribution and digital expansion. Productivity and efficiency
actions were taken in the first half which fully offset inflationary cost
increases of £23m, most notably higher labour and energy costs.
Profit before and after tax
The net interest charge was £5.1m (2022: £4.1m). Profit before tax of
£111.9m was £33.1m below the exceptional performance in the prior year
(2022: £145.0m).
The tax charge on profit before tax was £27.3m (2022: £30.7m) and
represented an effective tax rate of 24.4% (2022: 21.2%). The increase in the
rate is mainly as a result of the movement to a higher corporation tax rate
for businesses in the UK which came into effect from 6 April 2023. In
addition, the Group continues to prepare its financial statements to include
the impact of the previously announced claim under the Patent Box Tax Relief
Scheme which allows companies to benefit from investments made in intellectual
property including new product innovations. The success of the claim is
subject to review by HMRC. The Company expects, assuming prevailing marginal
tax rates, a benefit to the underlying effective tax rate of around 3% in
subsequent years. The cash benefit will be realised following approval by
HMRC.
As a result, profit after tax was £84.6m (2022: £114.3m). Basic earnings per
share were 15.4p (2022: 19.6p) and include the benefit of the share buy back
programme.
Cash
The net cash inflow from operating activities was £182.3m (2022: £209.2m).
Net working capital increased by £108.9m. Receivables at the end of the
period were £5.8m higher than at the beginning of the period, with good
ageing, and we continue to monitor this closely. Payables were £62.9m higher
and stock was £40.2m higher mainly as a result of inventory build ahead of
the peak trading period, and commodity cost increases. The difference between
the pension operating charge and cash paid was £11.5m (2022: £0.1m) which
includes £12.5m of contributions paid into the scheme. Capital expenditure
was £46.7m (2022: £46.0m) as we continued to focus on the execution of our
strategic initiatives to support growth. Corporation tax payments were £21.2m
(2022: £42.4m), and dividends amounted to £87.8m (2022: £88.9m). Share buy
backs were £50.0m (2022: £139.5m). The interest and principal paid on lease
liabilities totalled £50.5m (2022: £30.9m).
As a result, there was a net cash outflow of £191.6m (2022: outflow of
£265.6m), leaving the Group with cash at the period end of £117.8m (10 June
2022: £249.7m). The Group has in place a £150m multi-currency, revolving
credit facility which remained undrawn at the balance sheet date.
Capital allocation and returns to shareholders
Our approach to capital allocation continues to focus on achieving sustainable
profit growth by investing in and developing our vertically integrated
business. We also want to maintain and grow our ordinary dividend in line with
earnings growth to reward shareholders with an attractive ongoing income
stream. After allowing for these uses of cash, Howdens remains committed to
returning any surplus capital to shareholders.
Our capital allocation policy is that where year-end cash is in excess of
£250m we expect to return surplus cash to shareholders. This provides
sufficient headroom to support organic growth, our working capital
requirements and ongoing investments in our strategic priorities. At this
level of cash, the balance sheet will remain strong.
The Board announced a £50m share buyback programme with the Full Year results
earlier this year. During the period, we completed the programme buying 7.3m
shares, at an average purchase price of 682.5 pence per share. The interim
dividend for 2023 of 4.8p per ordinary share (2022: 4.7p per share) represents
an increase of 2.1% and will be paid on 17 November 2023 to shareholders on
the register on 13 October 2023.
Pensions
At 10 June 2023, the defined benefit pension scheme had a deficit of £15m (24
December 2022: deficit of £42m) on an IAS 19 basis. The scheme was closed for
future accrual on 31 March 2021.
The Recovery Plan sets out that if the funding level on a Technical Provisions
(TP) basis is above 100% for two consecutive months then deficit contributions
cease and if they are below 100% for two consecutive months then contributions
of £2.5m per month recommence. Consequently, payments into the scheme of
£2.5m commenced in January 2023. The triennial valuation is being carried as
at 31 March 2023 and we are currently working with the Trustees to agree a new
Recovery Plan. The Company will provide an update on the scheme funding
position once this has been completed.
Operational review
Strategic initiatives
Howdens has made good progress on its strategic initiatives, which are aimed
at achieving profitable growth and market share gains over the medium term.
The four strategic initiatives are:
1. Evolving our depot model by using space more efficiently to provide
the best environment in which to do business with our customers.
2. Improving our range and supply management to help customers' buying
decisions, to improve service and to enhance productivity in our
manufacturing, sourcing and supply chain activities.
3. Developing our digital platforms to raise brand awareness, support
the business model and to deliver productivity gains and more leads for depots
and customers.
4. Expanding our presence in selective countries with attractive kitchen
and joinery markets outside the UK.
These ongoing investments support the execution of our growth strategy and are
within our overall capital expenditure guidance. Progress on each of these
initiatives is reviewed below:
Evolving our depot model
Since the start of the year, we have made good progress in finding new depot
sites and we are now planning to open 33 new depots in 2023, ahead of our
previous guidance, having opened eight in the first half. We are opening all
new depots in our updated format which is designed to provide the best
environment in which to do business with our customers. At maturity, we expect
to operate with around 1,000 depots in the UK, versus the 808 trading at the
end of 2022. This will be supported by our cross docking (XDC) facility which
enables depots to optimise their stock holdings and provide high levels of
service across the product range. It also enables us to operate out of depots
with smaller footprints, without impacting sales, service, or product
availability. This is particularly useful for infills in metropolitan
districts where lease costs are relatively higher than in less populated
areas.
We have also continued with our reformatting programme for existing depots.
Depot reformats have a pay back of around four years and the programme is
delivering incremental sales and has received very positive feedback from
depot teams and customers. In the first half, including relocations, we have
we reformatted 28 depots, and we now plan to reformat 90 depots in 2023, 10
more than our previous guidance. By the end of 2023, we expect to have
reformatted around 275 of the 671 depots which were opened in the old format.
Improving our product range and supply management
Range Management
In recent years we have reorganised our range architecture to support growth
and improve the balance between new kitchen introductions and timely
discontinuations. This year, our range count will be around 90, organised in
10 families. At a time when many competitors are paring back their range
offerings, Howdens has accelerated new product introductions to ensure we are
at the forefront of the industry, inspiring our customers with the latest
trends and design highlights. For 2023, we have increased the net number of
ranges aimed at the entry and the mid-market segments, making more kitchen
looks and styles accessible to all budgets. Value for money is a consistent
feature of buying decisions, particularly given current pressures on household
budgets. We have continued to develop our offering of higher priced kitchens,
a significant segment of the market where we are under-represented.
This year we have launched 23 new kitchen ranges including:
- For our entry ranges, we have added more colour options including
Greenwich in Reed Green, Witney in Pebble and Navy and Allendale in Dusk Blue
and we have new frontals for Greenwich and Witney to match the new Croft Grey
cabinet platform we introduced this year. We have refreshed the look of our
bestselling shaker family, which we have named Halesworth and we have added a
new mid-priced beaded shaker family, Bridgemere, initially available in three
colours.
- In recent years, introductions of higher priced kitchens have
proved very popular, and in 2023 we have updated our offer to these market
segments but kept to a similar in-stock range count to last year.
- A strategic priority for us is the development of a market-leading
supply and fit capability for premium solid work surfaces. Following the
acquisition of the Sheridans business, our in-house solid surface capacity is
amongst the largest in the UK. The number of solid surface worktop orders
taken by depots has increased significantly in 2023 and we continue to improve
our offer and expand our range.
- In the second half we are launching a new premium paint to order
service for our 'Best' timber kitchen ranges in the Chilcomb and Elmbridge
families initially in 15 new colours. The offer will support requirements for
a bespoke look, which will be priced at a premium to the range colours
available in stock. Dedicated manufacturing will ensure a short lead time
between order placement and delivery.
- For 2023, we have also reinvigorated our offering in other
categories, for example in doors, where we have introduced more colours and
bolder styles at all price points, and in flooring, where we have launched of
a new in-house brand, "Oake & Gray". We have added to our private label
Lamona appliance brand, which is the leading integrated appliance brand in the
UK and we have also extended our range of third party branded appliances. In
sinks and taps we have introduced more styles, colours and finishes.
Manufacturing and supply chain
Howdens is an in-stock business and a high level of stock availability is one
of the key reasons our customers buy from us. Our dedicated manufacturing and
supply chain is critical to the success of our in-stock offer. We supply all
product, whether manufactured or sourced, to all depots. We keep under review
what we believe it is best to make or buy, balancing cost, overall supply
chain availability, resilience and flexibility. Over time we continue to see
opportunities to increase the proportion of products we make. As a result of
improving supply chain stability, we will continue to operate with enhanced
safety stocks in 2023 as a contingency against unexpected demand patterns and
interruptions to supply, but at more normalised levels by volume than in
recent years.
In 2019, investment in manufacturing technology enabled us to make the doors
for our popular Hockley kitchen ranges. Since then, we have invested in new
lines at our Howden site, which are amongst the most advanced of their type in
Europe. These give us the ability to make a variety of kitchen furniture,
principally doors and panels, for more of our ranges, at the same quality as
we can source externally but at a lower cost and at a reduced lead time to
delivery. Our second architrave and skirting line is operational, enabling us
to service in-house more of the substantial increase in demand we have seen
for these products and for which we are extending our offering in 2023.
At the end of 2022, in tandem with the implementation of a new stock
management system, we trialled a new initiative, "Daily Traders", which we
have subsequently rolled-out to all UK depots. This improves customer service
and increases sales by optimising in-depot stock holdings of the best-selling
SKUs and associated "range completers" in a depot. Sales of these products are
outperforming those of non-Daily Trader SKUs and we are seeing improvements to
other key metrics including a reduction in customer back-orders and a higher
proportion of stock being replenished via a depot's core weekly delivery
order. This gives us efficiencies as it reduces utilisation of our XDC
regional cross docking service.
With the extension of the XDC service to Scotland in January 2023, it is now
operating across all mainland regions, supplied by a network of 12 regional
hubs. With mainland XDC coverage completed, our focus is now on using these
assets most efficiently. The improved depot stock mix following the
introduction of a new re-ordering system and the Daily Traders initiative have
enabled us to reduce annualised XDC capacity, leading to lower operating
costs.
Developing our digital platforms
Our digital strategy reinforces our model of strong local relationships
between depots and their customers by raising brand awareness, supporting the
business model with new services and ways to trade with us and delivering
productivity benefits for depot employees and customers. In 2023, usage of our
online account facilities, which benefits customers and depots, has continued
to increase and we now have around 45% of our customers using our digital
platform.
In 2023 we are adding new services and capabilities to our trade platform
which collectively improve stock and account knowledge, promote frequency and
ease of trading and reduce time consuming manual tasks in depots, including
stock allocation. These include a new "multi-list" feature which gives
visibility of dates saved for future projects enabling depots to prioritise
leads on a daily basis and customers to manage all their jobs efficiently in
one place. We have commenced first phase testing of a digitised in-depot stock
management system to record and pick deliveries, check allocations and
determine depot stock levels.
We are also continuing to focus on helping end-users interact with Howdens on
line at each stage of their buying decision, creating higher quality leads for
our designers and customers. Our "Kitchen Visualiser" is raising end-user
familiarity with our kitchens, including how our solutions meet their needs,
as well as our appreciation of their priorities. Our market leading search
functionality enables users, including our teams, to find what they are
looking for much more efficiently. We have also equipped our kitchen designers
with an upgraded CAD tool which features faster rendering, photo realistic
imagery and is easier to use than the previous version. As our digital
presence has grown, awareness of Howdens amongst end-consumers has increased.
Our unprompted brand awareness amongst end-consumers is now at 25%, which has
more than doubled since 2019, and we see the potential to raise awareness to
higher levels.
Developing our international operations
Our International operations, predominantly based in France, continue to make
good progress. The business model for France is similar to the UK with a
market size in kitchens of around €4.3bn, excluding appliances. The French
market has low penetration rates of integrated kitchens and most are purchased
through DIY outlets and specialist small independent businesses. The maturity
profile of new depots, which is similar to new depots in the UK. We believe
appreciation of the advantages of our trade-only in-stock model, our service
levels and competitive pricing is growing and with around 90% of common
product versus our UK ranges this helps us realise scale benefits.
Since 2019, we have been opening depots in small clusters within cities which
benefit from word of mouth between customers and our ability to build a local
and trusted brand. Clustering also helps to build the Howdens culture within
our business teams. Over the next eighteen months, we expect to open up to 20
more depots, including five or so this year. This would take the number
trading to around 80 by the end of 2024 with around 35 located in Paris.
We also opened for business in the Republic of Ireland in 2022 and we are
using a similar approach to that in France. Our initial phase opening five
depots was clustered around Dublin, and the reaction from trade customers has
been very positive. We have opened two depots so far this year, including our
first located in Cork in the West of Ireland, and we expect to have 10 or so
trading by the end of the year.
Environment, social and governance (ESG)
We want to create an inclusive environment and make a positive contribution to
all our stakeholders, including our customers, staff, communities, suppliers
and shareholders. We believe that our business needs to be worthwhile for all
concerned. We actively manage risks and identify opportunities across the
business to improve our environmental, social and governance performance to
minimise our impact on the environment.
Our focus remains on:
- reducing direct emissions in our own manufacturing and logistics
- working closely with suppliers to reduce emissions throughout our
external supply chain
- accelerating our product and packaging sustainability programme.
Our top 30 suppliers account for over 80% of our total emissions and we
continue to engage with them to work together to minimise emissions in the
supply chain. An early priority has been accurate measurement of emissions
which will help us prioritise activities and make better informed decisions.
Since the start of the year, we have been logging Scope 1, 2 and 3 emissions
through our ESG 360 online system in the supply base.
Several significant milestones were reached in the period. First, we submitted
our Net Zero plan to SBTi for their approval, 12 months ahead of schedule,
with an objective to achieve net zero carbon emissions by 2050, having halved
our direct emissions by 2030. Second, we want to continue to be a carbon
neutral manufacturer and our main factories in Howden and Runcorn have been
recertified this year. We recently received carbon neutral accreditation for
one of our new solid surface facilities at Spaldington and we are continuing
to work towards achieving accreditation for Normanton (formerly the Sheridan
site). Finally, we achieved our objective to ensure that 100% of our kitchen
range SKUs are FSC(Ò) or PEFC(Ô) certified by the end of 2022, which
independently certifies that the wood comes from responsibly managed forests.
Our network of over 816 UK depots has also been running on sustainable energy
sources for over six months. We are also making good progress with our waste
reduction initiatives with our factories achieving zero waste to landfill
again this year. We have now achieved 99.7% zero waste to landfill in our
depot network. With respect to fleet management, we have also recently
committed to expanding our trial of Hydrotreated Vegetable Oil (HVO) in our
vehicle fleet as an alternative to diesel, which is a major contributor to our
Scope 1 greenhouse gas emissions. We now have around 5% of the fleet running
on HVO and replacing diesel in this way will significantly reduce our own
fleet emissions. This will have no negative impact on fuel efficiency or
maintenance costs. We continue to trial electric vehicles (EVs) within the
overall fleet and are operating our first two EVs as part of a trial in our
XDC network. XDC deliveries tend to be within a region and therefore more
suited to the range limitations of current battery technology.
Going concern
The directors have adopted the going concern basis in preparing these
half-yearly condensed financial statements and have concluded that there are
no material uncertainties leading to significant doubt about the Group's going
concern status. The reasons for this are explained below.
Going concern review period
This going concern review period covers the period of 12 months after the date
of approval of these financial statements. The directors consider that this
period continues to be suitable for the Group.
Assessment of principal risks
The directors have reached their conclusion on going concern after assessing
the Group's principal risks, as set out immediately below this going concern
statement. While all the principal risks could have an impact on the Group's
performance, the specific risks which could most directly affect
going concern are the risks relating to continuity of supply, changes in
market conditions, and product relevance. The Group is currently
holding additional amounts of fast-moving inventory as a specific mitigation
against supply chain disruption, and considers that the other effects of
these risks would be reflected in lower sales and/or lower margins, both of
which are built into the financial scenario modelling described below.
Review of trading results, future trading forecasts and financial scenario modelling
The directors have reviewed trading results and financial performance in the
first half of 2023, as well as trading in the weeks between the half-year
end and the date of approval of the half-year results. They have reviewed the
Group's balance sheet at the half-year end, noting that the Group is
debt-free, has cash and cash equivalents of £118m, and appropriate levels of
working capital.
They have also considered three financial modelling scenarios prepared by
management:
1) A "base case" scenario. This is based on the latest 2023 Group
forecast, made in June 2023. The basis of this scenario has been approved by
the Board.
This scenario assumes future revenue and profit in line with management and
market expectations as well as investments in capital expenditure and cash
outflows for dividends and share buy backs in accordance with our announced
capital allocation model.
2) A "severe but plausible" downside scenario based on the worst
12-month year-on-year actual fall ever experienced in the Group's history.
This is more significant than the combined effect of COVID and Brexit on 2020
actual performance.
This scenario models a reduction in most of the variable cost base
proportionate to the reduction in turnover. It includes capital expenditure
at a lower level than in the base case, but which is still in line with our
announced strategic priorities for growth, namely: new depot openings and
refurbishments, investment in our manufacturing sites, investment in digital
and expanding our international operations. It also includes dividends and
share buy backs in line with the Group's stated capital allocation model.
In this scenario the Board considered the current economic conditions that the
company and its customers are facing and, noted that the downside scenario
included allowances for reduced demand and increased costs to reflect such
adverse conditions.
3) A "reverse stress-test" scenario. This scenario starts with the severe
but plausible downside model and reduces sales even further, to find the
maximum reduction in sales that could occur with the Group still having
headroom over the whole going concern period, without the need to take
further mitigating actions.
Capital expenditure in this scenario has been reduced to a "maintenance"
level. Variable costs have been reduced in proportion to the reduction in
turnover on the same basis as described in the severe but plausible downside
scenario. It assumes no dividends or share buy backs.
Borrowing facility and covenants
The Group has a five-year, committed, multi-currency revolving credit facility
of up to £150m, which expires in July 2027 and which was not drawn at the
half-year end. A summary of the main terms of the facility is set out in note
19 to the December 2022 Group financial statements.
As part of the scenario modelling described above, we have tested the
borrowing facility covenants and the facility remains available under all
of the scenarios. We have therefore included the credit available under the
facility in our assessment of headroom.
Results of scenario modelling
In the base case and the severe but plausible downside scenarios, the Group
has significant headroom throughout the going concern period after meeting
its commitments.
In the reverse stress-test scenario, the results show that sales would have to
fall by a significant amount over and above the fall modelled in the severe
but plausible downside scenario before the Group would have to take further
mitigating actions. The likelihood of this level of fall in sales is
considered to be remote.
Conclusion
Taking all the factors above into account, the directors believe that the
Group is well placed to manage its financing and other business risks
satisfactorily and they have a reasonable expectation that the Group will have
adequate resources to continue in operational existence for the going concern
review period set out above. Accordingly, they continue to adopt the going
concern basis in preparing these half-yearly condensed financial statements.
Principal risks and uncertainties
The principal risks and uncertainties that could have a material impact on the
Group's performance over the remaining half of the financial year have not
changed from those which are set out in detail in the Group's 2022 Annual
Report and Accounts. One risk has decreased - 'Supply chain'.
* Market conditions - Challenging conditions could affect our ability to achieve
sales and profit forecasts, impacting on our cash position. Exchange rates
fluctuation could increase our cost of goods sold.
* Supply chain - Any disruption to our relationship with key suppliers or
interruption to manufacturing and distribution operations could affect our
ability to deliver the in-stock business model and to service our customers'
needs. If this happened, we could lose customers and sales. This risk has
decreased as our supply-base continues to improve, reducing the likelihood of
a significant impact.
* Business model and culture - if we lose sight of our model and culture, we may
not serve our customers successfully and our long-term profitability may
suffer.
* Maximising growth - if we do not understand and exploit our growth
opportunities in line with our business model and risk appetite, or if we do
not meet the related challenges, we will not get maximum benefit from our
growth potential.
* People - Our operations could be adversely affected if we were unable to
attract, retain and develop our colleagues, or if we lost a key member of our
team without succession.
* Health and Safety - Poor management or an incident could compromise the safety
and wellbeing of individuals, and the reputation and viability of the
business.
* Cyber security - Events such as ransomware attacks continue to rise globally.
A major security breach could cause a key system to be unavailable and/or
sensitive data to be compromised.
* Product - If we do not offer the builder the products that they and their
customers want, we could lose sales and customers.
* Business continuity and resilience - We have some business operations and
locations in our infrastructure that are critical to business continuity and
are essential for ensuring our customers can get the product and services they
want when they need them.
Cautionary statement
Certain statements in this Half Year results announcement are forward-looking.
Although the Group believes that the expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that these
expectations will prove to have been correct. Because these statements contain
risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements. We undertake no
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
Responsibility statement
We confirm that, to the best of our knowledge:
(a) the condensed consolidated set of financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R
(indication of important events during the first 24 weeks and description of
principal risks and uncertainties for the remaining 29 weeks of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R
(disclosure of related parties' transactions and changes therein).
The directors are responsible for the maintenance and integrity of the
corporate and financial information included in the company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
By order of the Board
Andrew Livingston Paul Hayes
Chief Executive Officer Chief Financial Officer
19 July 2023
Independent review report to Howden Joinery Group Plc
Conclusion
We have been engaged by Howden Joinery Group Plc ("the Company") to review the
condensed set of financial statements in the half-yearly financial report for
the 24 weeks ended 10 June 2023 which comprises the condensed consolidated
balance sheet of Howden Joinery Group Plc and the related condensed
consolidated income statement, condensed consolidated statement of other
comprehensive income, condensed consolidated statement of changes in equity
and condensed consolidated cash flow statement and the related explanatory
notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 24 weeks ended 10 June 2023 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting as
adopted for use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it contains
any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the
Group/Company to cease to continue as a going concern, and the above
conclusions are not a guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Robert Brent
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
19 July 2023
Condensed consolidated income statement
Notes 24 weeks to 24 weeks to 52 weeks to 24 December 2022
10 June 2023
11 June 2022
audited
unaudited unaudited
£m
£m £m
Continuing operations
Revenue - sale of goods 4 926.9 913.1 2,319.0
Cost of sales (361.5) (348.1) (907.8)
Gross profit 565.4 565.0 1,411.2
Operating expenses (448.4) (415.9) (996.0)
Operating profit 117.0 149.1 415.2
Finance income 7 2.4 1.5 3.8
Finance costs 7 (7.5) (5.6) (13.2)
Profit before tax 111.9 145.0 405.8
Tax charge 6 (27.3) (30.7) (31.6)
Profit for the period attributable to the equity holders of the parent 84.6 114.3 374.2
Earnings per share pence pence pence
Basic earnings per 10p share 8 15.4 19.6 65.8
Diluted earnings per 10p share 8 15.3 19.5 65.6
Condensed consolidated statement of comprehensive income
Notes 24 weeks to 24 weeks to 52 weeks to 24 December 2022
10 June 2023
11 June 2022
audited
unaudited unaudited
£m
£m £m
Profit for the period 84.6 114.3 374.2
Items of other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on defined benefit pension plan 11 15.5 2.8 (183.0)
Deferred tax on actuarial gains/(losses) (3.7) (0.5) 34.8
Change of rate on deferred tax (0.2) (0.2) 11.0
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (0.7) 0.3 2.1
Other comprehensive income for the period 10.9 2.4 (135.1)
Total comprehensive income for the period, attributable to equity holders of 95.5 116.7 239.1
the parent
Condensed consolidated balance sheet
Notes 10 June 2023 11 June 2022 24 December 2022
unaudited unaudited audited
£m £m £m
Non-current assets
Intangible assets 40.0 35.5 35.9
Property, plant and equipment 10 410.6 329.5 398.7
Lease right-of-use assets 624.4 576.3 614.3
Pension asset 11 - 143.7 -
Deferred tax asset 23.4 - 35.9
Prepaid credit facility fees - - 1.0
1,098.4 1,085.0 1,085.8
Current assets
Inventories 413.5 415.6 373.3
Trade and other receivables 239.1 223.8 233.3
Cash and cash equivalents 117.8 249.7 308.0
Current tax asset 34.9 - 32.3
805.3 889.1 946.9
Total assets 1,903.7 1,974.1 2,032.7
Current liabilities
Lease liabilities (81.1) (76.2) (95.3)
Trade and other payables (367.4) (409.0) (433.9)
Corporation tax - (8.3) -
Provisions 12 (9.4) (9.5) (12.0)
(457.9) (503.0) (541.2)
Non-current liabilities
Pension liability 11 (15.1) - (41.5)
Lease liabilities (591.3) (546.4) (570.0)
Deferred tax liability (3.8) (30.1) (3.8)
Provisions 12 (3.3) (9.4) (4.5)
(613.5) (585.9) (619.8)
Total liabilities (1,071.4) (1,088.9) (1,161.0)
Net assets 832.3 885.2 871.7
Equity
Share capital 55.4 57.9 56.1
Capital redemption reserve 9.8 7.3 9.1
Share premium 87.5 87.5 87.5
ESOP and share-based payments 14.6 8.5 11.7
Treasury shares (25.5) (25.5) (25.5)
Retained earnings 690.5 749.5 732.8
Total equity 832.3 885.2 871.7
Condensed consolidated statement of changes in equity
24 weeks to 10 June 2023 Share capital Capital redemption reserve Share premium account ESOP and share-based payments Treasury shares Retained earnings TOTAL
£m £m £m £m £m £m £m
As at 24 December 2022 - audited 56.1 9.1 87.5 11.7 (25.5) 732.8 871.7
Profit for the period - - - - 84.6 84.6
Other comprehensive income in the period - - - 10.9 10.9
Total comprehensive income for the period - - - - - 95.5 95.5
Movement in ESOP - - - 2.9 - - 2.9
Buyback and cancellation (0.7) 0.7 - - - (50.0) (50.0)
of shares
Dividends - - - - - (87.8) (87.8)
As at 10 June 2023 - unaudited 55.4 9.8 87.5 14.6 (25.5) 690.5 832.3
The item "Movement in ESOP" consists of the share-based payment charge in the
period, together with any receipts of cash from employees on exercise of share
options.
At the current period end there were 5.2 million ordinary shares held in
treasury, each with a nominal value of 10p (June 2022: 5.2 million shares,
December 2022: 5.2 million shares).
24 weeks to 11 June 2022 Share capital Capital redemption reserve Share premium account ESOP and share-based payments Treasury shares Retained earnings TOTAL
£m £m £m £m £m £m £m
As at 25 December 2021 - audited 59.8 5.4 87.5 5.9 (27.1) 860.0 991.5
Profit for the period - - - - - 114.3 114.3
Other comprehensive income in the period - - - - - 2.4 2.4
Total comprehensive income for the period - - - - - 116.7 116.7
Current tax on share schemes - - - - - 0.5 0.5
Deferred tax on share schemes - - - - - 0.7 0.7
Movement in ESOP - - - 4.2 - - 4.2
Buyback and cancellation of shares (1.9) 1.9 - - - (139.5) (139.5)
Transfer of shares from treasury into share trust - - - (1.6) 1.6 - -
Dividends - - - - - (88.9) (88.9)
As at 11 June 2022 - unaudited 57.9 7.3 87.5 8.5 (25.5) 749.5 885.2
Condensed consolidated statement of changes in equity - continued
52 weeks to 24 December 2022 Share capital Capital redemption reserve Share premium account ESOP and share-based payments Treasury shares Retained earnings TOTAL
£m £m £m £m £m £m £m
As at 25 December 2021 - audited 59.8 5.4 87.5 5.9 (27.1) 860.0 991.5
Profit for the period - - - 374.2 374.2
Other comprehensive income for the period - - - - (135.1) (135.1)
Total comprehensive income for the period - - - - - 239.1 239.1
Current tax on share schemes 0.4 0.4
Deferred tax on share schemes - - - - (1.3) (1.3)
Movement in ESOP - - 7.4 - - 7.4
Buyback and cancellation of shares (3.7) 3.7 - - - (250.5) (250.5)
Transfer of shares from treasury into share trust - - (1.6) 1.6 - -
Dividends - - - - (115.0) (115.0)
At 24 December 2022 - audited 56.1 9.1 87.5 11.7 (25.5) 732.8 871.7
Condensed consolidated cash flow statement
Notes 24 weeks to 24 weeks to 52 weeks to
10 June 2023
11 June 2022
24 December 2022
unaudited unaudited audited
£m £m £m
Group operating profit before tax and interest 117.0 149.1 415.2
Adjustments for:
Depreciation and amortisation of owned assets 21.6 19.6 44.0
Depreciation, impairment and loss on termination of leased assets 40.0 36.3 80.8
Share-based payments charge 2.7 4.2 7.3
Decrease in prepaid credit facility fees 1.0 0.3 (0.7)
Profit on disposal of property plant & equipment - (0.3) (0.1)
Operating cash flows before movements in working capital 182.3 209.2 546.5
Movements in working capital
Increase in inventories (40.2) (112.1) (69.8)
Increase in trade and other receivables (5.8) (14.1) (23.7)
Increase in trade and other payables and provisions (62.9) 22.3 41.8
Difference between pension operating charge and cash paid (11.5) (0.1) 2.0
(120.4) (104.0) (49.7)
Cash generated from operations 61.9 105.2 496.8
Tax paid (21.2) (42.4) (101.5)
Net cash flows from operating activities 40.7 62.8 395.3
Cash flows used in investing activities
Payments to acquire property, plant and equipment and intangible assets
(46.7) (56.0) (140.8)
Receipts from sale of property, plant and equipment and intangible assets
- - 0.7
Acquisition of subsidiary - net of cash acquired - (14.6) (14.6)
Interest received 2.4 1.4 1.1
Net cash used in investing activities (44.3) (69.2) (153.6)
Cash flows from financing activities
Payments to acquire own shares (50.0) (139.5) (250.5)
Receipts from release of shares from share trust 0.3 0.1 0.1
Dividends paid to Group shareholders 9 (87.8) (88.9) (115.0)
Repayment of principal on lease liabilities (43.6) (25.3) (66.1)
Interest paid - including on lease liabilities (6.9) (5.6) (13.1)
Net cash used in financing activities (188.0) (259.2) (444.6)
Net decrease in cash and cash equivalents (191.6) (265.6) (202.9)
Cash and cash equivalents at beginning of period 308.0 515.3 515.3
Currency translation differences 1.4 - (4.4)
Cash and cash equivalents at end of period 117.8 249.7 308.0
Notes to the condensed financial statements
1 General information
The results for the 24 week periods ended 10 June 2023 and 11 June 2022 are
unaudited but have been reviewed by the Group's auditor, whose report on the
current period forms part of this document. The information for the 52 week
period ended 24 December 2022 does not constitute statutory accounts as
defined in section 434 of the Companies Act 2006. A copy of the statutory
accounts for that period has been delivered to the Registrar of Companies, and
is available via the Group's website at www.howdenjoinerygroupplc.com
(http://www.howdenjoinerygroupplc.com) . The auditor's report on those
accounts was not qualified or modified, did not draw attention to any matters
by way of emphasis, and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
2 Accounting policies and basis of preparation
The condensed consolidated set of financial statements included in this
half-yearly report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting", as adopted for use in
the UK.
Basis of preparation
These condensed consolidated financial statements are prepared on the going
concern basis, as we explain in detail in the "Going Concern" section of the
interim management report, above. The Group's business activities, together
with the factors likely to affect its future development, performance, and
position are set out in the interim management report, which precedes these
condensed consolidated financial statements and includes a summary of the
Group's financial position, its cash flows, and borrowing facilities, its
principal risks, and a discussion of why the directors consider that the going
concern basis is appropriate.
The annual financial statements of the group for the 53 weeks ended 30
December 2023 will be prepared in accordance with UK-adopted international
accounting standards. As required by the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority, the condensed set of
financial statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the company's published
consolidated financial statements for the 52 weeks ended 24 December 2022
which were prepared in accordance with UK-adopted international accounting
standards, except that the taxation charge for the half-year is calculated
by applying the annual estimated effective tax rate to the profit for the
period.
3 Segmental results
Basis of segmentation
Information reported to the Group's Executive Committee, which is regarded as
the chief operating decision maker, is focused on one operating segment,
Howden Joinery. Thus the information required in respect of segmental
disclosure can all be found in the condensed consolidated income statement and
condensed consolidated balance sheet.
4 Seasonality of revenue
In a typical year, Howden Joinery sales are more heavily weighted to the
second half of the financial year. This partly reflects the fact that there
are 24 weeks in the first half of the financial year and 28 weeks in the
second half. It also reflects that our peak trading period falls in the second
half of the year. Historically, the typical trend has been that approximately
60% of sales have been in the second half of the year.
5 Write down of inventories
During the period, the Group has recognised a net credit of £0.7m in respect
of writing inventories down to their net realisable value (24 weeks to 11 June
2022 - net charge of £9.2m; 52 weeks to 24 December 2022 - net charge of
£14.0m).
6 Tax
The half year effective tax rate is 24.4% (24 weeks to 11 June 2022: 21.2%).
This is arrived at by applying the estimated full year effective tax rate to
the actual half year profit, after adjusting for the tax effect of items which
are recognised entirely in the current period and are not spread over the full
year (such as actual share option exercises and payments to the pension
scheme).
The effective tax rate includes the benefit of the previously announced claim
under the Patent Box tax relief scheme, and is subject to review by HMRC.
7 Finance income and finance costs
Finance income 24 weeks to 24 weeks to 52 weeks to 24 December 2022
10 June 2023
11 June 2022
£m
£m £m
Other finance income - pensions - 1.2 2.7
Other interest income 2.4 0.3 1.1
Total finance income 2.4 1.5 3.8
Finance costs 24 weeks to 24 weeks to 52 weeks to 24 December 2022
10 June 2023
11 June 2022
£m
£m £m
Interest expense on lease liabilities (6.9) (5.5) (13.1)
Other finance expense - pensions (0.6) - -
Other interest payable - (0.1) (0.1)
Total finance costs (7.5) (5.6) (13.2)
8 Earnings per share
24 weeks to 10 June 2023 24 weeks to 11 June 2022 52 weeks to 24 December 2022
Earnings Weighted average Earnings per share Earnings Weighted average number Earnings Earnings Weighted average number Earnings
£m number p £m of shares per share £m of shares per share
of shares m p m p
m
Basic earnings per share 84.6 550.7 15.4 114.3 583.9 19.6 374.2 568.6 65.8
Effect of dilutive share options - 2.3 (0.1) - 1.5 (0.1) - 2.1 (0.2)
Diluted earnings per share 84.6 552.9 15.3 114.3 585.4 19.5 374.2 570.7 65.6
9 Dividends
(a) Amounts recognised as distributions to equity holders in the period
24 weeks to 24 weeks to 52 weeks to
10 June 2023
11 June 2022
24 December 2022
£m £m £m
Final dividend for the 52 weeks 87.8 - -
to 24 December 2022 - 15.9p/share
Final dividend for the 52 weeks - 88.9 88.9
to 25 December 2021 - 15.2p/share
Interim dividend for the 52 weeks - - 26.1
to 24 December 2022 - 4.7p/share
87.8 88.9 115.0
(b) Proposed dividends
On 13 July 2023, the Board approved the payment of an interim dividend of 4.8p
per share to be paid on
17 November 2023 to ordinary shareholders on the register on 13 October 2023.
24 weeks to 24 weeks to 52 weeks to
10 June 2023
11 June 2022
24 December 2022
£m £m £m
Proposed interim dividend for the 53 weeks 26.2
to 30 December 2023 - 4.8p/share
Proposed interim dividend for the 52 weeks 26.3
to 24 December 2022 - 4.7p/share
Proposed final dividend for the 52 weeks 87.9
to 24 December 2022 - 15.9p/share
10 Property, plant and equipment
During the period, the Group made additions to property, plant and equipment
("PPE") of £31.8m (24 weeks to 11 June 2022 - £51.8m; 52 weeks to 24
December 2022 - £138.9m).
There were no disposals of PPE in the current or prior periods which had any
significant net book value.
There are non-cancellable commitments to purchase PPE of £17.1m at the
current period end (11 June 2022 - £25.5m; 24 December 2022 - £16.1m).
11 Retirement benefit obligations
(a) Total amounts in respect of pensions in the period
24 weeks to 24 weeks to 52 weeks to
10 June 2023
11 June 2022
24 December 2022
£m £m £m
Charged to the income statement:
Defined benefit plan - administrative costs 1.0 1.1 2.4
Defined benefit plan - total operating charge 1.0 1.1 2.4
Defined benefit plan - net finance charge/(credit) 0.6 (1.2) (2.7)
Defined contribution plans - total operating charge 17.5 14.1 37.6
Total charged to profit before tax 19.1 14.0 37.3
Included in other comprehensive income:
Defined benefit plan - actuarial (gains)/losses (15.5) (2.8) 183.0
(b) Other information - defined benefit pension plan
The Group operates a funded defined benefit pension plan which provides
benefits based on the career average pensionable pay of participating
employees. This plan was closed to new entrants from April 2013, and closed to
future accrual on 31 March 2021.
Key assumptions used in the valuation of the plan 24 weeks to 24 weeks to 52 weeks to
10 June 2023
11 June 2022
24 December 2022
Discount rate 5.20% 3.60% 4.70%
Inflation assumption - RPI 3.20% 3.35% 3.15%
Inflation assumption - CPI 2.75% 2.90% 2.70%
Life expectancy (yrs): pensioner aged 65
- male 86.7 86.6 86.6
- female 88.5 88.4 88.4
Life expectancy (yrs): non-pensioner aged 45
- male 87.7 87.6 87.6
- female 90.3 90.3 90.2
Balance sheet
The amount included in the balance sheet arising from the Group's obligations
in respect of defined benefit retirement benefit scheme is as follows:
11 June 2022 11 June 2023 24 December 2022
£m £m £m
Present value of defined benefit obligations (876.9) (1,122.8) (930.5)
Fair value of scheme assets 861.8 1,266.5 889.0
Surplus recognised in the balance sheet (15.1) 143.7 (41.5)
If there is a pension surplus at the end of the an accounting period, the
Group has considered the conditions and guidance given in IAS 19 and IFRIC 14
and has concluded that: it is appropriate to recognise a surplus in full;
there is no issue affecting the availability of a refund or reduction in
future contributions due to minimum funding requirements, and there is no
requirement to recognise an associated liability.
Movements in this amount during the period are as follows:
24 weeks to 24 weeks to 52 weeks to 24 December 2022
10 June 2023
11 June 2022
£m
£m £m
(Deficit)/surplus at start of period (41.5) 140.8 140.8
Administration cost (1.0) (1.1) (2.4)
Employer contributions 12.5 - 0.4
Other finance (charge)/credit (0.6) 1.2 2.7
Actuarial gains/(losses) 15.5 2.8 (183.0)
(Deficit)/surplus at end of period (15.1) 143.7 (41.5)
Statement of comprehensive income
Amounts taken to equity via the statement of comprehensive income in respect
of the Group's defined benefit plan are shown below:
Actuarial differences 24 weeks to 24 weeks to 52 weeks to 24 December 2022
10 June 2023
11 June 2022
£m
£m £m
Actuarial loss on plan assets (42.3) (381.8) (753.5)
Decrease in plan liabilities due to financial assumptions 63.8 407.4 622.8
(Increase) in plan liabilities due to experience (6.0) (26.3) (55.8)
Decrease in plan liabilities due to demographic assumptions - 3.5 3.5
Total actuarial gains/(losses) 15.5 2.8 (183.0)
12 Provisions
Property Warranty French post employment benefits Total
£m £m £m £m
As at 24 December 2022 - audited 5.0 11.2 0.3 16.5
Created in the period 0.3 0.9 - 1.2
Utilised in the period (0.2) (3.3) - (3.5)
Released in the period (1.5) (0.0) - (1.5)
As at 10 June 2023 - unaudited 3.6 8.8 0.3 12.7
Presented as current liabilities 2.6 6.8 - 9.4
Presented as non-current liabilities 1.0 2.0 0.3 3.3
3.6 8.8 0.3 12.7
Property provision
The property provision covers obligations to make dilapidation payments to
landlords of leased properties. Following the guidance in the IFRSs
governing leases and provisions, our assessment is that, in general, the
likelihood of a cash outflow for dilapidations at the time of signing a lease
is remote, and therefore it would be unusual for us to recognise any costs
relating to dilapidations at that time.
In these cases, the event which changes our assessment of the likelihood of a
cash outflow for dilapidations from being remote to being probable, and which
therefore triggers our recognition of a provision for that probable outflow,
typically occurs as we come towards the end of a lease and we can assess the
condition of the leased property and the likelihood of dilapidations being
payable.
The timing of any outflows from the provision is variable, and is dependent on
the timing of dilapidations assessments and works. Although circumstances will
differ from property to property, a typical pattern would be that the outflow
would occur within 1-3 years of the provision being made. The amounts provided
are specific to each property and are based on our best estimate of the cost
of performing any required works or, in cases where we will not be directly
contracting for the works to be done, our best estimate of the outflow
required to settle any claim from the landlord. Where the amounts involved
are significant, we would typically take advice on the likely costs from
third-party property maintenance specialists.
For the purposes of allocating this provision between current liabilities and
non-current liabilities we have used our best estimate of when we would
reasonably expect outflows to occur, based on circumstances at each relevant
property.
Warranty provision
The warranty provision relates to the estimated costs of product warranties.
As products are sold, the Group makes provision for claims under warranties,
based on actual sales and on historical average warranty costs incurred. As
claims are made, the Group utilises the provision and then uses the historical
data on the rate and amount of claims to periodically revise our expectations
of the amount of future warranty costs and therefore the rate at which it is
appropriate to provide for warranty costs on each sale in the future.
For the purposes of allocating this provision between current liabilities and
non-current liabilities we have used the historical data on timing and amount
of claims to estimate the costs for the next 12 months and have classified
this as a current liability.
French post-employment benefits provision
This provision relates to a benefit which is payable to employees in our
French subsidiary under French law on retirement. It is a lump sum payable
on retirement, not a recurring pension. There will only be an outflow from
this provision if any of the eligible employees are employed by our French
subsidiaries immediately before their retirement.
The provision represents our best estimate of the potential liability and it
is calculated based on several factors, mainly the age profile and salary
details of the current workforce in France, and the current rate of staff
turnover. The calculation to arrive at the best estimate of the required
provision is revised periodically by third-party specialists and our provision
is adjusted in line with the results of this calculation if necessary.
We have assumed that the whole of this provision is non-current.
13 Related party transactions
There have been no changes to related party arrangements or transactions as
reported in the 2022 Annual Report & Accounts.
Transactions between Group companies, which are related parties, have been
eliminated on consolidation and are therefore not disclosed. Other
transactions which fall to be treated as related party transactions are: those
relating to the remuneration of key management personnel, which are not
disclosed in the half-yearly report, and which will be disclosed in the
Group's next Annual Report; and transactions between the Group and the Group's
defined benefit pension plan, which are disclosed in note 11.
14 Financial instruments
The carrying amount of trade receivables, trade payables and leases is a
reasonable approximation of their fair value.
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