Highlights

Chief Executive, Matthew Ingle, said:

"Howdens has performed well, with sales increasing significantly in the first half. Cash generation remains strong, feedback from our depots is positive and we've seen a good start to the second half of the year.

"Howdens' successful business model has always been focused on providing real, personal service to our small builder customers and their end-clients. Through the consistent implementation of this model Howdens has grown into a large, profitable and cash-generative business with significant prospects for further growth.

"The range and extent of the opportunities we have identified, and on which our business model thrives, are increasing. We are opening more customer accounts, designing more kitchens and selling a wider range of product than ever before.

"We are increasing our investment in capacity in all areas of Howdens' business, including in property, people, product and continuity of supply. This investment will support our continuing ability to offer better service to the builder, while meeting growing demand in a rapidly sophisticating market."

Financial results (continuing operations)

The information presented here relates to the 24 weeks to 13 June 2015 and the 24 weeks to 14 June 2014, unless otherwise stated.

• Howden Joinery UK depot revenue increased by 11.1% to £475.8m (up 8.6% on a same depot basis). Group revenue was £482.6m (2014: £435.4m);
• Gross profit margin was 63.7% (2014: 63.2%), reflecting the benefit of exchange rate movements;
• Operating profit rose to £60.9m (2014: £57.6m);
• Profit before tax increased to £59.2m (2014: £57.2m), the net interest charge rising by £1.3m (due to an increase in the pensions finance charge);
• Basic earnings per share increased to 7.1p (2014: 6.6p);
• Share buyback programme underway (£4.1m spent so far);
• Net cash of £223.3m at 13 June 2015 (27 December 2014: £217.7m net cash, 14 June 2014: £161.1m net cash);
• Interim dividend of 2.8p per share declared (2014: 1.9p).

Business developments

• Investment in the future growth of the business remains a priority:
  • in line with our plans,  14 new UK depots opened so far in 2015, bringing total to 603, and three depots opened in northern France;
  • product portfolio enhanced by introduction of new kitchen ranges, and roll-out of granite and premium brand appliances;
  • capital expenditure totalled £11.7m (2014: £17.2m).

Current trading and outlook

• Howden Joinery UK depot revenue increased by 13.1% in the first four week period of the second half of the year;

• The Board is pleased with the positioning of the Group and, while we still have our important "Period 11" to come, the Group is well placed to achieve its expectations for the full year.

Note for editors:

Howden Joinery Group Plc is the parent company of Howden Joinery (Howdens). In the UK, Howdens is engaged in the sale of kitchens and joinery products to trade customers, primarily small local builders, through over 600 depots. Around one-third of the products it sells are manufactured in the company's own factories in Runcorn, Cheshire, and Howden, East Yorkshire. The business also has small operations in France and Belgium, with plans to extend these to Germany and Holland.

Website: www.howdenjoinerygroupplc.com

SUMMARY OF GROUP RESULTS

1. There were no discontinued operations in the first half of 2015. In the first half of 2014, there was an exceptional profit after tax on discontinued operations of £9.8m.

INTERIM MANAGEMENT REPORT

FINANCIAL REVIEW

FINANCIAL RESULTS FOR FIRST HALF OF 2015

The information presented below relates to the 24 weeks to 13 June 2015 and the 24 weeks to 14 June 2014 (continuing operations), unless otherwise stated ¹.

The financial performance of the Group during the first half of 2015 benefited from the Group's competitive position and the continuing focus on improving operational performance. We also benefited from stable market conditions.

Total Group revenue increased by £47.2m to £482.6m.

Howden Joinery UK depots' revenue rose by 11.1%, increasing 8.6% on a same depot basis.

This growth has been achieved through a number of factors and is testament to the strength of our business model. We have continued to open new depots and increased the number of customer accounts. As well as driving an increase in revenue, the business continued to focus on price discipline and margin.

Sales by our depots in continental Europe totalled £6.8m. In constant currency terms, underlying sales of the original 11 French depots were up slightly.

Gross profit rose by £32.1m to £307.3m. The gross profit margin of 63.7% (2014: 63.2%) reflects the benefit of exchange rate movements. Offsetting this was the impact of increased sales of discontinued products to make way for new ranges.

Selling and distribution costs, administrative expenses and other income increased by £28.8m to £246.4m. In addition to the costs of new depots, this reflects additional costs incurred across the business to support growth. In particular, these related to additional headcount, warehousing, our business in continental Europe, and development of our longer term strategy and plans.

Operating profit increased by £3.3m to £60.9m.

The net interest charge increased by £1.3m to £1.7m, due to a higher finance expense in respect of pensions. The net result was that profit before tax rose by £2.0m to £59.2m.  The tax charge on profit before tax was £13.2m, an effective rate of tax of 22.3%.

Basic earnings per share were 7.1p (2014: 6.6p).

At 13 June 2015, the pension deficit shown on the balance sheet was £79.5m (27 December 2014: £142.6m). The decrease in the deficit in the period was due to an increase in the discount rate used to calculate liabilities and asset returns, and the Group's contribution to fund the deficit.

There was a net cash inflow from operating activities of £20.3m. This was after a cash contribution to the Group's pension deficit of £20.8m.
Working capital increased by £18.0m.  Within this, debtors at the end of the period were £16.7m higher than at the beginning of the period and stock levels increased by £13.9m, reflecting the seasonality of sales. Offsetting this, creditors increased by £12.6m, and included the then still to be paid 2014 final dividend.

Also included within net cash flows from operating activities was tax paid totalling £15.8m.

Payments to acquire fixed and intangible assets totalled £11.7m (2014: £17.2m).

As part of its £70m share repurchase programme, announced on 25 February 2015, in the period the Group acquired 800,000 shares for consideration of £4.1m.  These shares are held in treasury.

Reflecting the above, there was a £5.6m net cash inflow in the first half of the year, the Group having net cash at the end of the period of £223.3m (27 December 2014: £217.7m net cash,
14 June 2014: £161.1m net cash). Excluding payments in respect of the contribution to the pension deficit, there was a cash inflow of £26.4m.

DIVIDEND

It is the Group's policy to pay an interim dividend equal to one third of the previous year's full dividend (2014: 8.4p).

Reflecting this, the Board has approved the payment of an interim dividend of 2.8p per share (2014: 1.9p). It will be paid on 20 November 2015 to shareholders on the register at close of business on 23 October 2015.

Note 1 There were no discontinued operations in the first half of 2015. In the first half of 2014, there was an exceptional profit after tax from discontinued operations of £9.8m.

OPERATIONAL REVIEW

The business model of Howden Joinery is "To supply from local stock nationwide the small builder's ever-changing, routine, integrated kitchen and joinery requirements, assuring best local price, no-call-back quality and confidential trade terms".

Since it started in autumn 1995, the business has opened new depots and increased turnover continuously, except for a 12-month period in 2008-9.

Even today, with over 600 depots across the UK, we continue to see the opportunity to transform the scale of the business, seeing scope for at least 700 depots. We continue to invest in all aspects of the growth and performance of the business, including new depots and depot operations, new and existing employees, product development, and manufacturing and distribution.

UK depot network and operations

14 new depots have been opened in the UK so far this year, bringing the total to 603. 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 30 depots this year.

When we interact with our builder-customers' clients during the design of their new kitchen, we use our 'My kitchens' website to enable them to view visualisations of their new kitchen. Until now, this included static pictures and a video of the kitchen. This has now been enhanced with the addition of a facility that enables a 3600 panorama of the new kitchen to be viewed on an iPad and other devices.

Product and marketing

We continue to enhance our product offering, having introduced a number of new products during the first half of the year across all product categories. Notable amongst these were the introduction of 13 new kitchens. These included 'tongue and groove' options within our popular Burford family and a new Stockbridge family of ultra smooth matt kitchens, along with the extension of stone coloured options to most of our existing kitchen families and the introduction of ivory coloured options to a number of our kitchen ranges.

Last autumn, we trialled selling affordable granite worktops from stock, beginning in a small number of depots. At the start of this year, the trial was extended, granite now being sold from 200 depots, with more planned for the second half of the year.

Since its launch in 2009, our Lamona range of kitchen appliances has been very successful. Whilst we continue to invest in the range, as we develop it further, we are undertaking a trial of some additional branded appliances in a limited number of depots. At this stage, we have decided to sell AEG and Neff appliances throughout our depot portfolio.

We continue to invest in our marketing communications and brand advertising.

• In our latest kitchen collection brochure, we have introduced a new format to highlight each kitchen family and have added a flooring section. We have redesigned our appliance literature, introducing lifestyle photographs to make it more appealing and aspirational for end-consumers.
• To further raise awareness of the Howdens brand, we are attending 17 county shows and agricultural fairs throughout the UK during the summer.

Where appropriate, our branding now includes the Royal Arms, following the award to Howden Joinery of a Royal Warrant By Appointment to Her Majesty The Queen. This features on our websites and our vehicle fleet livery, and in our marketing material.

Manufacturing and logistics operations

Our UK-based manufacturing and logistics operations play a vital role in ensuring that we are able to supply our small builder customers from local stock nationwide at all times, having the flexibility to respond to each depot's individual needs. We continue to invest in these operations so as to ensure that this aspect of the Howdens model is never compromised, even during our critical 'Period 11', when sales are more than double the level seen in other periods.

The replacement of 460 'trailer units' for our fleet of lorries has begun, more than half having already been delivered. These have been custom-designed and built to meet our requirements, and have a revised livery that has been designed to have more visual impact and improve brand awareness. This follows last year's replacement of the fleet's 100 'tractor units'.

Continental Europe

Following our decision to extend our trial in northern France by adding a second phase of seven new depots, three of these have now been opened, with the remainder to follow later this year. Our plans to open an additional outlet further south in France and a depot in Holland, both towards the end of this year, are on course. We also intend to begin a trial in Germany, where we plan to open a depot in the first half of 2016.

CURRENT TRADING AND OUTLOOK

The good sales performance seen in the first half of 2015 has continued in the first four weeks of the second half of the year. In this period, total sales of Howden Joinery UK depots rose by 13.1% on the same period in 2014.

With our confidence in our growth prospects, we are increasing our investment in capacity in all areas of Howdens' business, including in property, people, product and continuity of supply. This investment will support our continuing ability to offer better service to the builder, while meeting growing demand in a rapidly sophisticating market.

The Board is pleased with the positioning of the Group and, while we still have our peak trading period (Period 11) to come, the Group is well placed to achieve its expectations for the full year.

GOING CONCERN

The Group meets its day-to-day working capital requirements through cash generated from operations. If required, the Group also has access to an asset-backed lending facility of £140m which expires in July 2016.

The Group's forecasts and projections have been stress-tested for reasonably possible adverse variations in economic conditions and trading performance. The results of this testing show that the Group should be able to operate within the level of its current facility and covenants. After making due enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

RELATED PARTIES

Related Party transactions are disclosed in Note 12 to the condensed set of financial statements. There have been no material changes to the related party transactions described in the last Annual Report & Accounts.

RISKS AND UNCERTAINTIES

The Board continually assesses and monitors the key risks of the business.  The principal risks and uncertainties that could have a material impact on the Group's performance over the remaining 28 weeks of the financial year have not changed from those which are set out in detail on pages 20 to 21 of the Group's 2014 Annual Report & Accounts, and which are summarised below:

• Market conditions – a severe downturn in market conditions could impact on our ability to achieve sales and profit forecasts, which in turn could put pressure on our cash availability and banking covenants;
• Failure to implement the Group's business model and culture – could have an adverse effect on the Group's future financial condition and profitability;
• Failure to maximise exploiting the growth potential of the businesses – could adversely affect the Group's ability to obtain maximum benefit from its growth potential;
• Continuity of supply - could adversely affect the Group's ability to implement the business model;
• Loss of key personnel – could adversely affect the Group's operations.

A copy of the Group's 2014 Annual Report & Accounts is available on the Group's website, www.howdenjoinerygroupplc.com.

CAUTIONARY STATEMENT

Certain statements in this Half-Yearly Report 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:

1. the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
2. 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 28 weeks of the year); and
3. 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

22 July 2015

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

Condensed consolidated balance sheet

Condensed consolidated statement of changes in equity

Condensed consolidated statement of changes in equity - continued

Condensed consolidated cash flow statement

Condensed consolidated cash flow statement - continued