Howden Joinery Group PLC

Howden Joinery Group PLC (HWDN) is a London, the United Kingdom-based manufacturer and supplier of fitted kitchens, joinery, and appliances products. The company’s operations are differentiated into various locations namely the United Kingdom, France, and Belgium.

On 27^th February 2020, the company will announce the 2019 preliminary results.

Trading Update (as on 7^th November 2019)
The company released the trading statement for 16 June 2019 to 2 November 2019 period. The company has provided a strong trading performance, comprising the crucial October/November trading period, against a robust comparator for the corresponding period of the last year. For the current period, the total revenue in UK depots' division increased by 4.9 per cent (surged by 2 per cent on the same depot basis) as compared with the corresponding period of the last year. During the current period, the gross margin was in line with the management anticipations.  The company has acquired 1.7 million shares since July 2019, and a total consideration of 10.8 million shares in 2019 to date, at a total cost of 55.2 million pounds.

Financial Highlights (for the half-year ended 15th June 2019, £million)

(Source: Interim Report, Company Website)

In H1 FY19, the company’s reported revenue increased by 5.4 per cent to £652.6 millionas compared with the corresponding period of the last year. Basic earnings per share stood at 10.3 pence, an increase of 15.7 per cent from the previous year same period data. Through the share buyback programmes, the total amount returned to the shareholders was £46.3 million. The company’s board has approved an interim dividend per share of 3.9 pence, an increase of 5.4 per cent against the 3.7 pence in H1 FY18.

Share Price Performance

Daily Chart as at November-13-19, before the market closed (Source: Thomson Reuters)

On 13^th November 2019, Howden Joinery Group PLC shares were trading at GBX 578.60 at the time of writing before the market close (at 11:30 AM GMT), down by 0.482% against the previous day closing price. Stock's 52 weeks High and Low are GBX 601.20/GBX 412.40. The company's stock beta was 0.54, reflecting the lower volatility as compared to the benchmark index.

Valuation Methodology


Conclusion
The group currently faces some of the risks which can impact the business performancelike Failure to maximise the growth potential of the business, Deterioration of the business model and culture, Changes in the market conditions, Interruption to the continuity of supply, Loss of key personnel, Cyber security incident, Product design relevance, and Credit control failure.

For the full year 2019, the group stays on track to meet the Board's anticipations for sales and profits.The company plans to open 40 more depots this year, adding to its existing estate of around 734. Five new depots are also anticipated to be opened in France. Many are located on industrial estates where they pay lower rents and have lower fit-out costs than conventional DIY stores, while depot managers have wide autonomy over pricing and promotions. The company has closed its operations in Germany and in the Netherlands, but it believes that France region has great potential. The company is also trading near 52-week high, indicating limited upside potential.

On the basis of risks as aligned with the business operations, and the valuation done as shown in the above table, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 581.40 (as on 12^th November 2019), while any correction with support from few catalysts needs to be evaluated at a later stage.
 

Senior PLC

Senior PLC (SNR) is a Hertfordshire, United Kingdom-based engineering and manufacturing solutions provider with 32 operating businesses in 14 countries. The company serves original equipment producers in the power & energy, land vehicle, defence and aerospace markets by designing, manufacturing and marketing high-technology components and systems. The operations of the group are differentiated in two operating segments, namely Flexonics and Aerospace.
On 2^nd March 2020, the company will announce the 2019 full-year results.

Trading Statement (as on 7^th November 2019)
The company released the trading statement for the ten months ended October 2019. In the current period, the Flexonics division had been widely in line with the company’s anticipations in spite of markets deteriorating in the last four months. Over the last four months, the Flexonics truck, off-highway and passenger vehicle markets in Europe, Asia, and North America have softened. In the ten months of 2019, the company had seen year-on-year aerospace sales growth as compared to the prior year. In the last four months, the aerospace revenue was down from the prior anticipations, driven by the additional effect of the 737 MAX situation and vulnerability in wide-body commercial aircraft engine demand.

Financial Highlights (for the half-year ended 30 June 2019, £million)

(Source: Interim Presentation)
The half-year 2019 trading was in line with expectations as revenue rose by 10.9% to GBP 580.4m(H1 2018: GBP 523.3m), while on a constant currency basis, revenue was up by GBP 34.7m, which excluded the favourable exchange rate impact of £22.4m. Basic earnings per share were 4.81 pence (H1 2018: 5.90 pence),while adjusted EPS rose by 6.5% to 7.84 pence (H1 2018: 7.36 pence). The company approved an interim dividend of 2.28 pence per share (H1 2018: 2.19 pence).
Share Price Performance

Daily Chart as at November-13-19, before the market closed (Source: Thomson Reuters)

On 13^th November 2019, Senior PLC shares were trading at GBX 180 at the time of writing before the market close (at 10:00 AM GMT), down by 0.77% against the previous day closing price. Stock's 52 weeks High and Low are GBX 261/GBX 163.60. The company's stock beta was 0.77, reflecting the lower volatility as compared to the benchmark index.

Conclusion
Currently, the company is dealing with several challenges in some of the Aerospace and Flexonics markets. The group is also executing a restructuring programme to drive enhanced returns.

The company continues to meet current expectations for 2019, despite the ongoing uncertainty around the current geopolitical and macro-economic backdrop and 737 MAX production rate cuts, which would hit margins at its aerospace business as Boeing is one of its top customers.

The group is financially robust and operates in an attractive end markets, with many industry experts predicting the air traffic growth in excess of 4% per annum over the next 20 years, indicating a robust demand for new aircraft. The company continues to focus on cost and efficiencies, and stronger sales on other civil and military programmes helped to mitigate the impact on revenue by the grounding of 737 MAX. Combined with a lower central cost and marginally lower projected tax rate, this indicates that the company's performance in the financial year 2019 will be widely in line with the anticipations.

Therefore, based on the above discussion, we have given a “Hold” recommendation at the current price of GBX 180 (as on 13^th November 2019, before the market close).
 
*All forecasted figures have been taken from Thomson Reuters.

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