The growth story of FTSE 100 incumbent Howden Joinery Group (LSE: HWDN) has been admirable. It has organically grown market share, performance, and returns in years gone by. This helped propel the business to the UK’s premier index last year.
I already own shares in the firm, and on paper, I’m up 47%! As a shareholder, I was keen to see and dissect yesterday’s half-year results.
I’ve been thinking about the direction of the business recently, as I keep a close eye on all my holdings. I reckon the firm is making a strategic shift at present, and I’m intrigued to see what happens.
Positive trading momentum
Let’s start by breaking down the results released yesterday for the 26 week period ending 10 June 2024. As a long-time follower of the business, I’m used to seeing regular positive updates, and yesterday was no exception.
The main takeaways for me included a 4.3% rise in revenue compared to the same period last year. Plus, profit before tax, net cash to boost its balance sheet, and the interim dividend all increased.
The update did mention higher costs, especially linked to inflationary pressures, which is understandable in the current economic climate. Plus, the business continues to work on efficiencies and cost-cutting.
Overall, management said that performance was in line with full-year expectations.
What’s next?
Personally, I reckon the business is gearing itself up for market domination. Let’s face it, most companies aspire to be the market-leader in whatever industry they operate in. Think Coca-Cola of the soft-drink world, as a good example.
In exchange for increasing market share, near-term profitability has become less of a priority, in my eyes. Don’t get me wrong, the business is still turning a healthy profit, and at a good rate. However, I think the business looks to be sacrificing quick wins, to set itself up for longer-term gain.
I think this is displayed in its recent update via the mention of cost-cutting to boost efficiency. Plus, although it possesses an industry-leading margin level of over 60%, it’s still at similar levels of last year. This is despite an increase in revenue. Furthermore, operating profit remained static.
Let me be clear, I don’t think it’s a secret what the Howden’s board is doing here. However, it seems to be going about it without any fanfare.
Some actions the firm seems to be taking for growth purposes include new depots and staff. Plus, it continues to look at further efficiencies to be leaner.
Final thoughts
Kitchens and joinery aren’t the sexiest products out there, at least not to me. It’s perhaps not as exciting as artificial intelligence (AI) stocks, or other tech stocks. However, there’s plenty of evidence – such as the firm’s track record – to suggest that consistent returns and growth could be on the cards for the future.
Plus, the current housing imbalance in the UK could provide Howden with a great way to catapult its ambitions of market dominance.
I’m personally buoyed by what’s happening, and really happy with the capital growth, and dividends I’ve received to date. I’m planning on holding on to my shares for a long time. If I’m in a position to buy more when I can, I’ll do so.
