February 28, 2013 / 11:20 AM / 5 years ago

UPDATE 2-UK's small builders help Howden Joinery defy downturn

* 2012 pretax profit 112 mln pounds, vs forecast 98-109 mln

* 2012 UK depot revenue 872.5 mln pounds, up 4 pct

* UK depot revenue up 17 pct in 2013 so far

* Full-year dividend 3 pence vs 0.5 pence

* Shares up 8 pct (Adds comments by CEO, analyst; share price reaction)

By James Davey

LONDON, Feb 28 (Reuters) - Britain’s army of small builders is helping kitchens supplier Howden Joinery buck the economic downturn and increase profits, the surviving remnant of the MFI furniture empire said on Thursday.

Reporting better than expected profits and a big dividend hike, Howden said it has fared well despite a subdued housing market by selling its kitchens from 529 depots to trade buyers, rather than directly to home owners.

“We have got 270,000 small builder account customers. The truth is if they do not sell they do not eat,” Chief Executive Matthew Ingle said.

“These are entrepreneurs, absolutely focused people ... They will be serving whatever market they can serve and we are right behind them,” he said after Howden beat forecasts with a 1 percent rise in 2012 profit and reported a good start to 2013.

The company ended 2012 with net cash of 96.4 million pounds and said it will pay a dividend for the year of 3 pence, up from 0.5 pence last time.

By 1105 GMT the share price was up 15.7 pence at 206.1 pence, valuing the business at 1.3 billion pounds.

“With the risk to consensus (forecasts) on the upside and continued strong cash generation, the investment case remains strong,” said Espirito Santo Investment Bank analyst Sanjay Vidyarthi.

With Britain facing a possible triple-dip recession many retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes, but Howden’s shares have increased by over 60 percent in the last year as it has traded robustly and property liabilities relating to its previous ownership under MFI have been mitigated.

Howden sells around 400,000 kitchens a year at prices ranging from 2,000-15,000 pounds ($3,000-$22,700).

“Whilst people might not be able to move or they don’t want to move they certainly want to improve what they have got,” said Ingle. “Kitchens are increasingly the centre of a home.”

Howden made a pretax profit of 112.1 million pounds in the 53 weeks to Dec. 29, which compared with analysts’ forecasts of 98-109 million pounds and 111 million pounds made in 2011, which was a 52-week financial year. The impact of the extra week was to reduce pretax profit by about 5 million pounds.

UK depot revenue increased 4 percent to 872.5 million pounds, with sales at depots open over a year up 1.9 percent and gross margin up 1.8 percentage points to 61.5 percent.

So far in 2013 UK depot revenue is up 17 percent, reflecting an additional week of trading and the timing of price increases.

The firm, which sees scope for 700 UK depots, expects revenue growth to normalise as the year progresses. ($1=0.6608 British pounds) (Reporting by James Davey; Editing by Hans-Juergen Peters and Greg Mahlich)

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