Howden Joinery Group Plc (OTCPK:HWDJF) Q2 2024 Earnings Conference Call July 25, 2024 3:30 AM ET
Company Participants
Andrew Livingston - Chief Executive Officer
Paul Hayes - Chief Financial Officer
Conference Call Participants
Robert Chantry - Berenberg
Aynsley Lammin - Investec Bank
Benjamin Pfannes-Varrow - RBC Capital
Ami Galla - Citigroup
Christen Hjorth - Numis Securities
Charlie Campbell - Stifel
Shane Carberry - Goodbody
Sam Cullen - Peel Hunt
Andrew Livingston
Welcome to the Howden's 2024 Interim Results Presentation.
I'll begin by introducing our performance for the first half. Paul Hayes will then review our financial results for the period and then share my perspectives on our 2024 performance to date and our plans for the remainder of the year. And then we'll take your questions.
The Group delivered an encouraging first half performance in as we anticipated a challenging marketplace. The results met our expectations for the period and we are on track for 2024. We continued with our investment program, which is focused on our key capabilities and which gives us, end-to-end, a stronger business.
Group sales in the first half, which included an extra week's trading in January were 4.3% ahead of those in 2023 and we're 48% up on 2019 being the year prior to the onset of the pandemic. In the UK, we believe we gained kitchen market share, which helped us mitigate a decline in the overall size of the kitchen market. Entry-level kitchens represented a higher proportion of the kitchens we sold, with sales of product in our kitchen categories increasing at a higher rate than in our joinery categories.
We maintained an industry-leading gross margin with gross profit ahead of last year as we balanced recovery of cost rises with our commitment to providing competitive pricing across the board for our customers. Reported first half profit was in line with last year's and 44% up on 2019. Excluding net spend on strategic investments above last year's level, first half profit increased at a similar rate to sales.
Our builders remained busy and we made good progress in our strategic initiatives for the UK and total sales of our international operations increased. The business delivered strong operating cash flow and we maintained a robust balance sheet. This gives us the flexibility to continue to invest in our growth plans for the business and to provide shareholders with an increased interim dividend for this year.
The interim results demonstrate the strength of our local trade-only in-stock model. A strong product lineup, high stock availability, industry-leading service levels and a very engaged team have all contributed to our performance, which benefits from the ongoing investment in our customer-focused strategic initiatives.
We had a record number of customer accounts at the half year with a similar proportion trading as last year. As well as maintaining an industry-leading gross margin, the business continued to deliver KPI volumes which in aggregate were well ahead of pre-COVID times. So far in the second half, our performance has been in line with our expectations and whilst we have peak trading ahead of us, we're encouraged by our sales performance in the year-to-date.
In 2024, we expect market conditions and trends to be broadly unchanged from those seen in 2023 and this has proved to be the case so far this year. We are well prepared for this and our customers, mainly self-employed people, are adept at managing their businesses in such times. Delivered by our highly entrepreneurial and well-incentivized teams across the business, I believe that our service-orientated trade-only in-stock local model is the right one to deliver sustainable market share gains.
Our model is hard to replicate, difficult to compete with and we have initiatives in place to make it more so. The addressable value of the UK markets in which we have an established presence is some GBP12 billion and there are significant long-term growth opportunities for us. We continue to prioritize investment in the business on this basis.
I will update you on our strategic initiatives which are key to the long-term development of the business after Paul Hayes has taken you through our financial results for the first half. Paul?
Paul Hayes
Thank you, Andrew, and good morning everyone.
I'm pleased to be presenting Howden's financial results for the period ending 15th June 2024. Howdens performed well in the first half in a challenging market. Group sales increased by 4.3% to GBP966 million as we supported our trade customers with a strong product lineup, high stock availability and outstanding customer service.
We also made further market share gains. Gross profit was ahead of last year at GBP587 million and we have continued to recover increases in commodity and energy costs through price increases and productivity improvements.
The gross margin percentage is sector-leading and included the dilutive impact of growing sales of our solid work surface category. Operating costs were GBP22 million higher at GBP470 million, predominantly due to GBP16 million of investments in our strategic initiatives.
During the period, we took further productivity and efficiency actions to broadly offset around GBP12 million of higher inflationary costs. Now I'm going to cover that in more detail shortly. As a result, we generated an operating profit of GBP117 million and after net interest charges, profit before tax was at GBP112 million.
So let's look at revenue growth in a bit more detail. We continue to face challenging macroeconomic conditions in the first half, but we have maintained a disciplined approach to balancing price and volume to support our trade customers. As a result, UK revenue increased by 4.3% GBP934 million and was 2.8% ahead on a same depot basis.
As I've mentioned, the major driver of our strong performance has been the ongoing investment in our strategic initiatives. We prioritized opening new depots and we also revamped 26 older depots into the new format, which drives incremental revenue growth. At the half year, we had 850 depots in the UK, 480 of those are in the new format.
In 2024, new products have been a key focus with infills to our existing kitchen ranges and new joinery categories. We have also refreshed our paint-to-order colors and introduced new decors in our solid work surface ranges at all price points. All these new products will be available ahead of our peak trading period. We're also continuing to prioritize digital investments to make it easier for our customers to trade with us.
In the international depots where we operate from 76 sites, we generated revenue of EUR38 million, which was 4.7% ahead of 2023. After a period of significant depot rollout in France, we are building out the existing depot team's capabilities. We're also expanding our joinery ranges in France and Ireland to drive depot footfall, including higher-quality doors, new skirting and architrave lines to supplement our kitchen ranges.
Our Irish depots have continued to trade well since we set up there around two years ago and we will continue to expand our depot footprint there this year. Now, Andrew is going to take you through these initiatives in more detail shortly.
So now let me move to profit before tax. Written from 2023 PBT of GBP112 million on the left, gross profit was GBP22 million higher versus last year. We were effective in implementing price increases early in 2024 that benefited the business by GBP10 million. The positive impact of volumes and mix was GBP14 million, which was encouraging as this was net of the dilutive effect from stronger sales of solid work surfaces. To remind you, these products have a lower gross margin percentage but an attractive cash margin.
Kitchen sales were encouraging in the first half and while we remain focused on expanding our leadership positions in entry-level and mid-price kitchens, we continue to develop our offering in the higher-priced kitchen segment where we are underrepresented. Across these kitchen segments, the margin percentage is broadly consistent and this remains an excellent opportunity for future growth.
We've delivered further productivity improvements in our manufacturing operations, which almost offset the increases in freight, commodities, wage inflation and energy costs. These costs are still inflating, although not at the levels of the past two years and there is a lag in the P&L account as the impact is only realized as these items are sold.
We keep under review what we believe is best to make or buy, balancing cost and overall supply chain availability, resilience and flexibility. Recent investments have included new panel and lamination lines at our Howden factory with expanded capacity of our two solid work surface factories in the North of England and two new lines to facilitate our paint-to-order initiatives. All these investments are providing good returns.
Operating costs increased by GBP22 million as a net result of managing our costs tightly while continuing to invest in our strategic initiatives. This discipline supported us in delivering PBT of GBP112 million in the period.
Now this slide here shows how we've managed our operating costs. Bridging from left to right, the incremental costs of the new UK depots totaled GBP7 million. We invested in our international businesses with a continued focus on the city-based strategy. The GBP2 million increase includes the incremental costs of the 10 depots that we opened in 2023.
Other strategic initiatives included our investments in depot revamps, work surfaces, paint-to-order and digital. The existing depot increases of GBP4 million related to higher inflationary costs, principally in property and labor. Other cost increases were tightly controlled, with the majority of inflationary cost increases being offset by productivity and efficiency actions taken in the first half.
So now let's move on to the cash flow. From an opening cash position of GBP283 million, we ended the period with GBP166 million of cash, a net outflow of GBP117 million. Now you can see from the slide that this was after paying dividends of GBP89 million.
Overall, working capital increased by GBP107 million in line with our normal seasonal phasing. Stock increased by GBP27 million due to the usual stock build ahead of our peak trading period and ongoing inflation. And we are carefully managing stock levels given the number of new product introductions and the continued geopolitical uncertainty.
Debt has increased by GBP62 million since the year-end, with aging in good shape and creditors were GBP17 million lower. Both these balances were impacted by the late finish to the prior year due to the 53rd week.
Capital expenditure totaled GBP40 million, as we continue to focus on the execution of our strategic initiatives. Just under half of the investment was in depot expansion and revamps. Other initiatives included investments in our supply chain and manufacturing sites as well as expanding our digital capabilities.
Now turning to earnings per share and dividends. EPS in the first half was 15.4p, which was level with the prior year. And our progressive dividend policy remains unchanged and I'm pleased to announce that the Board has declared an interim dividend of 4.9p, an increase of 2.1%.
So let's turn to technical guidance for the rest of 2024. Now first looking at P&L guidance. As I've mentioned already, there is an earlier start to trading this year with our depots open in the first week of our financial year when they were closed in 2023. Now, this reverses in the second half of the year. There was also a benefit in the second half from the non-repeat of the additional 53rd week in 2023, which was worth around GBP17 million.
We expect a continuation of higher container costs which have risen in the first half. Now at current pricing, we expect around GBP5 million of additional costs in the second half as inventory procured and shipped in the first half is sold. With respect to foreign exchange sensitivity within cost of goods sold, we've set out the impact on a full year of a one-cent movement in both the Euro and US dollar as shown on the slide.
Now, in terms of cash flow items, we'd expect capital expenditure to be broadly in line with last year at GBP125 million as we continue to invest for growth. Working capital is expected to increase this year, impacted by the higher debtors as a result of the timing of our peak trading period, Period 21.
This year, the last two days of Period 21 fall into November, which means that a significant proportion of customer payments won't be due until after the year-end. Now, we expect that overall impact to the year-end date will be around GBP50 million, but I just want to be clear that, that is simply a timing issue. The cash will come through early next year and overall our working capital remains in great shape.
So in summary, we have performed well in the first half in a more challenging marketplace. We've been proactive in delivering productivity and efficiency savings to protect the P&L account. Our balance sheet and cash flow remain very strong and support our continued investment in the business and we expect to maintain this at the current pace in the second half.
Since the start of the second half, our performance has been in line with our expectations and despite the ongoing macroeconomic headwinds, we are on track with our guidance for the full year. We remain confident of delivering growth ahead of our markets while generating strong cash flow and attractive returns for our shareholders.
Thank you. And I'll now pass back to Andrew.
Andrew Livingston
Thank you, Paul. In reviewing our first half performance and plans for this year, I will use our strategic initiatives for the business as a framework.
Fully aligned with our trade customer-only focus and entrepreneurial culture and based around our core building blocks of service and convenience, trade value and product leadership, these are to evolve our depot network, to improve our range and supply management, to develop our digital capabilities and services, and to expand our international operations.
So, first, depot evolution. High service levels, including local proximity and immediate availability, are very important to our customers and we continue to see profitable opportunities to open depots. We are using our updated format for all depot openings.
Deployed in several forms, the format enables us to provide the best depot environment in which to work and conduct business and to make space utilization and productivity gains in a cost-effective way. Overall, we continue to believe there's scope for around 1,000 depots in the UK versus 840 trading at the end of 2023. We plan to open around a further 30 depots in 2024, of which 10 were opened in the first half.
We have progressed our revamp program for existing depots. This continues to receive very positive feedback from depot staff and customers alike and providing such a trading and working environment is important to our competitive position. By the end of 2023, including relocations, we had revamped 274 depots.
In 2024, including relocations we plan to revamp around a further 85 depots and completed 26 of these in the first half. And by the end of 2024, we expect to have revamped around 54% of the 670 depots which were opened in the old format and have around 64% of all UK depots trading in the updated one.
Next, range and supply management. Sales of new product make a significant contribution to our performance and we have upgraded our NPI program in recent years. Total sales of new product introduced in the last 18 months or so represent around 17% of total UK product sales, with new product introduced so far in 2024 and the two prior years representing 28% of UK product sales.
Sales of new product introduced in the first half of last year alone increased by some 52% this year. As in 2022 and 2023, our higher-priced kitchens continue to contribute more to the kitchen mix by volume than previously, which is a positive impact on our average kitchen invoice value.
Managing our portfolio of kitchen ranges efficiently is crucial for both best availability, which is highly valued by our customers, and for profitability. In recent years we reorganized our range architecture, removing duplications and improving the balance between new kitchen introductions and timely discontinuations.
The more efficient ways of testing new kitchen colors and finishes is enabling us to bring more proven kitchen styles to market more quickly and our new paint-to-order service is also informing are from stock-ranging decisions.
At the end of 2023, around 60% of the kitchens available from stock comprised ranges brought to market between 2021 and 2023 and we have a further 11 new ranges confirmed for 2024 with our entire kitchen offering organized into 10 families, the same number as 2023.
We are committed to providing market-leading and competitively priced product for our customers to sell to theirs and value for money is a constant feature of purchasers buying decisions. Given pressures and household budgets, price featured predominantly in 2023 and as we expected is going to do so again this year.
Our offering, as enhanced by our 2024 NPI program, is well-positioned to take advantage of this. With an emphasis on value for money and choice at all price points, our NPI for 2024 includes 10 new kitchen ranges aimed at the entry and mid-price segments. We have also introduced clearer and more delineated pricing within ranges and across families and we are innovating in other product categories and have added bedrooms to our overall depot offering.
In 2023, we brought to market seven new kitchen, entry kitchen ranges, adding new frontal options, and this year we have added two more, Greenwich in Marine Blue and Witney in Reed Green.
Last year, we also refreshed the look of our best-selling shaker family and we renamed Halesworth and launched a new mid-priced shaker family called Bridgemere. For these families, we have six new colors for 2024, including Halesworth in two of the best-selling paint-to-order colors, which are Antique Rose and Seafoam, and Bridgemere in Linen and also in Sage Green.
Our bestselling mid-priced family, Clerkenwell, we're adding two new colors, Super Matt Black and Gloss Reed Green. We also continue to develop our high-priced kitchen portfolio, which is a large segment of the market in which we are underrepresented. The paint-to-order service for customers buying our top-end Chilcomb and Elmbridge ranges, which we introduced in the second half of 2023, continues to be very favorably received by customers and depot teams alike.
Priced at the premium to the nine range colors and available from -- which are available from stock, for 2024, we are offering 15 paint-to-order color choices from which customers can opt to have either or all or just part of their kitchen furniture and we are about to refresh the paint-to-order palette with five new colors.
For customers looking for a bespoke look, we believe the paint-to-order service is very competitively priced with, by market standards, a short lead time between order being placed and the kitchen being ready for delivery.
A strategic priority for us is the development of the market-leading supply and fit capability for premium work surfaces. Solid surface worktops are often, but not exclusively associated with the sale of higher priced kitchens and this product category is one with significant opportunity for us.
Following the acquisition of the Sheridan's worktop business and other investments in our in-house solid surface manufacturing capability, we're now amongst the largest in the UK. The number of solid surface worktop orders taken by depots increased significantly in 2023 and we continue to improve our offering and orders have increased again this year.
In the second half of 2023, we reduced the time between template to fit at national scale, an industry-leading five days, and this year we've also reduced the time between order and template to fit five days.
So far in 2024, we've added 14 more decors to our solid surface template and fit service, with eight more to come in the early part of the second half. In total, we have a comprehensive offering of 58 decors to suit all budgets in place well ahead of peak autumn trading, during which kitchen sales represent an above-average proportion of our sales mix.
In 2023, we've also reinvigorated our offering in other categories and are innovating again in 2024. Indoors, we've added more color and bolder styles at all price points. Our new own-label flooring brand, Oake & Gray is performing very well and new flooring product for 2024 includes a market-leading third-party premium price brand called Karndean.
In appliances, we've added further additions to our Lamona brand, which is the leading integrated appliance brand in the UK alongside extensions to our range of third-party branded product. And in sinks and taps, we've added more styles, colors and finishes.
In the latter part of 2023, we tested demand for new fitted bedroom ranges supplied by us and by the end of the year, all depots were able to sell them. Installing fitted bedroom suits the skills of customers who fit kitchens and they have a high cabinetry content which matches our manufacturing capabilities. The ranges were developed in-house, utilizing our existing manufacturing supply infrastructure.
The first half, our offering comprised of 16 new bedroom ranges in four leading family designs drawn from our kitchen range portfolio, matched with new internal accessories including pull-down rails, mirrors and internal storage solutions. For the second half, we are adding three more comprising of our entry-level Greenwich range in Gloss White and in Natural Oak and in Hockley and Textured Oak.
We are committed to providing competitively priced product for our customers and we have reinforced our focus on price and promotions which demonstrate the value we offer to promote footfall across the year.
Howdens is an in-stock business and the trade tell us that the high level of stock availability is one of the key reasons that they buy from us. In the first half of 2024, our service level from primary to depots was 99.97%, a world-class performance by any standard.
In 2023, facilitated by our new stock management system which we call TED, we rolled out our Daily Traders initiative to all UK depots, which has benefited for us in a number of areas. Daily Traders is a means to improving customer service levels and promoting footfall and increasing sales by optimizing in-depot stockholding of bestselling SKUs and associated range completers.
We are also using the insights from the Daily Traders to help optimize new depot opening stock and to provide stock guidance for depot revamps and relocations so that these are configured to hold the right stock in the right depth.
This year, we have maintained improvements in key metrics, including at a higher proportion of stock being replenished by via a depot's core weekly delivery order than previously and this gives us efficiencies as it helps optimize utilization of our XDC service, which I'm going to talk about next.
In recent times, we've improved stock replenishment by supplementing a depot's core weekly delivery order with investments in next-day service by a network of 12 regional cross-docking centers or XDCs combined with a rebalancing of where we hold stock. XDCs are a key enabler to deliver the levels of high service and availability which differentiate our offer, and with mainland coverage for in place, our focus is now on using these assets more efficiently.
The improved depot stock mix following the introduction of a new reordering system and the Daily Traders initiative have enabled us to reduce annualized XDC capacity, leading to lower operating costs. We can also utilize XDC to bring new products such as bedroom to market quickly and more efficiently, and we can build stock as demand increases rather than being fully stocked for a full rollout at launch.
We make all of our kitchen cabinets and some of our other product as well, which is a source of competitive advantage for us in several ways. We keep under review what we believe is best to make or buy, balancing cost and overall supply chain availability, resilience and flexibility.
In 2023, several major investments came to fruition. Production of the new furniture lines at our Howden site, which are amongst the most advanced of their type in Europe, totaled around 600,000 pieces in 2023, with a full year capacity of around 2 million pieces for 2024 and subsequent years.
These give us the ability to make a variety of kitchen furniture, principally frontals and panels, and more of our ranges at the same time as we can source externally, 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 lines also commenced manufacturing in 2023, and the performance levels of the new line are now ahead of those of the original one. The line increases our full year capacity to some 10 million pieces and also broadens the range of such product we can manufacture, enabling us to continue to service in-house substantially all of the growing demand we see for these products.
Separately, we have also invested in two lines to facilitate our paint-to-order initiative. Located in a purpose-built facility near our Howden site, these lines give us an industry-leading production capability in this area. We are achieving the order turnaround times that we set ourselves and we have capacity to supply some 5,000 kitchens a year.
So, turning to our digital platform. We use digital as to reinforce our model of strong local relationships between customers, depots and their customers by raising brand awareness to support the business model with new services and ways to trade with us and to deliver productivity benefits and more leads for our depot teams and for our customers.
Usage of our online account facilities, which provide efficiencies and benefits to depots and customers alike has continued to increase. New registrations totaling some 44,000 and around 50% of our customers had an online account by the half year.
Total users viewed our platform -- total users viewing our trade platform increased by 17%, with around 80% of users regularly looking at their individual confidential pricing. Customers with an online account have an average continued to trade more with us more frequently and spent more significantly than non-users and proportionately more of them bought across product categories.
We saw high levels of engagement with our web platform and growth of our social media presence, which also stimulates interest in viewing our products and services on howdens.com. Site visits totaled 11.6 million in the period.
Amongst kitchen specialists, we continue to have the highest number of fitted kitchen site visits in the UK and the time spent viewing pages and the number of pages viewed per visit were consistently at high levels. Across social media sites, our follower base is now 669,000. That's up some 21% with around 5.5 million monthly engagements.
In 2023, amongst other initiatives, we tested a digitized in-depot stock management system, or Live Stock as we call it, to record and pick deliveries, check allocations and determine depot stock levels.
Amongst other benefits, the system frees up time for depots to use productively and the system now operates in all UK depots. It also enables us to have complete visibility of our locations of stock by SKU holding across our factories, primary warehouses and depots.
The stock surety, Live Stock and other initiatives such as Daily Traders provide have enabled us to offer an upgraded Click and Collect service to our trade customers. Rollout of the service was completed during the first half, which enables online account customers for all our UK depots.
To check real-time availability of stock on a depot-by-depot basis, review their individual confidential prices at their selected depot, place orders for collection at a time of their choosing, Click and Collect is available for all of our products except those for which a survey or a CAD planning is generally required prior to placing an order, such as kitchen range.
Our initiatives are contributing to an increase in digitally sourced leads for depots. Digitally sourced depot lead contacts on the metrics that we use have more than doubled in the first half, albeit from a low base. These represent high-quality leads for depots and customers, including for kitchens. A significant proportion converts to kitchen sales with above-average order values and we are looking to promote higher levels of lead generation online.
And finally international. Versus the first half of 2023, the first half performance of our operations based in France progressed significantly. In a market at least as challenged as the one in the UK, the business is on track to deliver a material increase in sales in the year. The kitchen market in France is estimated to be worth around EUR4 billion, excluding appliances, with most kitchens purchased through kitchen specialists and DIY stores.
As long-term followers of Howdens will know, we tested our ability to access this sizable market in several ways before adopting a city-based approach, serving solely trade customers to be led and staffed by people who embraced the Howden's way of doing business. By the end of '22, we had doubled our depots in France and Belgium to 60 in a two-year period and opened a further five at the end of 2023.
Consequently, when compared with their UK counterparts, many of our depot managers in France are less experienced in nurturing trusted trade relationships. For 2024, we're focusing on team development to foster these, and we may open a few more depots towards the end of the year. We are investing elsewhere in the business through enhanced offerings of footfall-promoting products, and we've introduced a regular schedule of trade days at all depots with aligned promotional activity and more supplier support.
Sales in the Republic of Ireland continue to be encouraging and we are opening more depots there in 2024. We identified the Republic of Ireland as a market which suits our differentiated model and one which sets us apart from the incumbents. We commenced trading in the Republic in 2022 using a similar depot strategy to that in France with the depot team supported by our UK infrastructure and our digital platform.
During 2022, we opened five depot clusters around Dublin and our arrival in the Irish market has attracted much attention. We opened five depots in 2023, three more around Dublin, two serving Cork and we are taking the total traded to 10 year-end. In the first half of this year, we added one more depot serving Waterford and the total we could open up to around five in 2024 and we'd increase the total trading to around about 50 by the year-end -- 15 by the year-end.
So for 2024, we are as well planned as we've ever been, including on our strategic initiatives. These are aimed at increasing our market share profitably as we deliver value to our customers across all price points.
High stock availability is a major contributor to our performance and in 2024, we are maintaining our safety stock policies for the most part at the levels by volume we deployed in 2023. We will have all of our new kitchen ranges for 2024 in stock well ahead of our peak autumn trading with an emphasis on entry and mid-price ranges together with our very competitively priced premium kitchen offering.
We have a program of Rooster promotions in place to keep Howdens at the front of the trade's mind, together with other price initiatives. And we will continue to make improvements to service and availability, for example, by utilizing XTCs efficiently and through our Daily Traders, Live Stock and Click and Collect initiatives.
We are increasing the range of services and functionality we offer online to the benefit of our depot teams' customers and end users alike. And we'll be making more in the UK as our new lines at Howdens move up towards full production capacity and solid surface business continues to grow and bedroom volumes increase.
During 2024, we plan to open around 30 depots in the UK and refurbish around 85 existing depots to the updated format. And by the end of 2024, we expect to have around 65 depots trading in France and Belgium and up to 15 trading in the Republic of Ireland.
Lastly, outlook. Whilst we have peak trading ahead of us, we have made an encouraging start to the year. Our plans for the business are on track and our expectations for the full year remain unchanged. We expect market conditions and trends to continue to be broadly unchanged from those in 2023 and we are well prepared for the challenges and opportunities that such market conditions may present.
We aim to retain a profitable balance between margin and volume as we continue to maintain competitively priced -- competitive pricing whilst aligning operating costs and working with our suppliers to keep product and input costs controlled.
We are that confident in our business model, being the right one to address opportunities in our markets. And in summary, we are well placed to outperform our competitors in 2024 as we continue to invest in our capabilities and grow opportunities which are pivotal to the long-term development of the business.
And finally, I would like to take this opportunity to thank everyone who works for Howdens and many listening in now, whether in depots, our factories, our commercial operations, our support functions, for their extraordinary commitment to providing exceptional service for our customers, which is a key component that sets us apart from so many others.
So, thank you for listening and we'll now take your questions.
Question-and-Answer Session
Q - Robert Chantry
Hi. Rob Chantry at Berenberg. Thanks for the presentation. And three questions, all on market structure, I guess. And I'm aware you may not give precise numbers, so some color would be useful. Firstly, could you just comment on where you see market share on a volume and value basis, given all the moving parts and your strategic focus at the moment? And secondly, some commentary on where you see kitchen market volume versus 2019 in 2024. And then thirdly, early days of bedroom furniture. I know it's roughly GBP1.2 billion market, and there's probably a third you're not interested in, but what do you see as a realistic market share target maybe three years to five years out? And who are you displacing in that mix? Thank you.
Andrew Livingston
Yeah. So, we started off the year by putting around about a 3% price increase across the piece. Looks like we've retained about one of that. We've maintained a healthy balance between volume and value, I would say, across the start of the year. Look, I think it's not tremendously well-tracked market in terms of share, but given what we've seen from competitors and some of our key competitors backing off, either slowing down on some of their freestanding units, we would see that we've taken a considerable amount of share at the start of this year. And we don't think the market's in particularly good shape this year. We think it could be down as much as 6% or 7% so far this year. So we're pleased with our positioning and our gains in that period. We can see it in appliances where we've made good share gains versus the market. And that's one that's reported pretty well. But we also look into the supply base and see how they're getting on in the UK. We get anecdotal feedback from some of the independents and it feels like we are really making quite a significant dent on the independent market. And we're also working very effectively at the opening of mid-price, particularly the opening price in the market, where we've got a real stronghold. So, yeah, I think we've made substantial progress this year. Bedroom furniture, you're right. And that's about the size that we see the market, about GBP1.2 billion. There's a freestanding element that we don't want to play in. So we've got on with our program. We're pleased with what's happened so far because it has come in exactly where we thought it would be. And that's pre-us taking our second move, which is opening up into opening price, which we are about to start in the next month. And we keep bedrooms rightly in its right place for us. We're a kitchen business primarily, that's our absolute focus and we don't want our teams getting distracted into bedrooms. But we like it. It's the type of work our customers do. We had 200 depots selling kitchen -- selling bedrooms in our peak trading period last year and everybody's got it now. And there was some interesting anecdotal feedback around depots selling bedrooms, selling bedrooms with kitchens during peak trading last year. So we look with interest as we go through the second half this year. But we're pleased with the margins, we're pleased with what's happening so far. And it's been enabled by the initiatives like XDC that has enabled us not to distract our depots from holding stock in the right areas, which should really be Peak Traders, Daily Traders.
Aynsley Lammin
Thanks. And Aynsley Lammin from Investec. Just two from me, please. Just following on the kind of pricing. Just wonder if you give a bit more color of the trends you've seen on the price. Have you lost a bit more price as the kind of half-year progressed? Essentially just trying to gauge how much pressure there might be on gross margins in the second half, what your expectation is there. And then secondly, just obviously net cash was high, you ticked up the dividend, literally. Just wondered where your thoughts are on share buybacks at this point. See you.
Andrew Livingston
Yeah. Look, I think we're pretty happy with where we're at on price and I think what we're seeing from the competitors, some pretty random stuff. And I think when people are under pressure, the teams will get presented with quotes from competitors and our instruction to them is you take those kind of -- you take that business. We're interested in profitable volume growth through the year. I don't know that I'd point to anything particularly on the gross margin that we should be particularly concerned about in the second half. The teams are working very hard and driving customers into the business. So when we're very active on joinery, flooring, doors, that kind of business, we drive footfall in. That gives us the opportunity to build conversations with our builder customers around kitchens. You can see those two things work very well together. Good footfall drivers. That's why the teams get very behind doing trade days, national trade day this year, and we keep activity going in the business. Once we see the customers, we've got the opportunity to work very hard on kitchen. So we're very focused on keeping the kitchen margin in the right place, taking the bits of business that we need to take, and then we trade very hard in joinery. That's been a consistent strategy and one we've been focused on very clearly through this year. Yeah, so, I wouldn't add an awful lot more color on that.
Paul Hayes
If I take the question on share buybacks, our capital allocation policy, we've always been very clear on that. This year, the priority is really investing in the business and delivering growth. And I think you've seen that in sort of a level of capital investment of around GBP125 million or so, which helps us do that. We're excited about the business and in the longer term we will look and we're investing, increasing our capabilities and capacity. So as we look forward, there will be some other investments in terms of things like increasing our capacity in manufacturing cabinets and things like that, where there will be sort of larger investments in equipment, products, processes that we know and really understand well and pay back. So we will see that, but we will advise as and when we get to those sorts of investments. So that's one thing we're aware of in terms of managing the cash appropriately. We've already picked up on the progressive dividend and then we're very clear around the policy of cash in excess of GBP250 million. Then we look to make share buybacks. What we will be aware of is the timing issue around this. I talked about that GBP50 million of the timing due to the way the calendar falls. When we look at our capital allocation policy and where we stand at the year-end, we'll take that into account. But we understand the share buybacks is an important part of our approach as a business. Just to remind you, we bought back GBP300 million over the last couple of years and we continue to remain committed in terms of sort of managing a strong balance sheet, the share buybacks, where it makes sense.
Benjamin Pfannes-Varrow
Hi, there. Ben Varrow from RBC. And I'll take two, please. Just in terms of heading into P21, what are your thoughts there in terms of volume and price? I mean, do you change anything that you've seen so far in the first half with regard to price? And then the second on the international business. Could you give a bit of an update there and then is there any color on the path to breakeven?
Andrew Livingston
Yeah. Thanks for those two. Look, there's always a -- we would -- we have a pretty steady rhythm about how we play H1 versus H2 in the business. We come out in January, we do a price increase separate. In the past couple of years, we've had to do a bit more than that, but a good rhythm for us is to come in with a January price increase and get it settled in well and let the teams know exactly where we're at from us sort of landing the price increase and get that settled in the first couple of months. I think we're in the right sort of place as we position ourselves forward for Period 21. And our -- we're very ambitious about what we want to achieve in the second half, as always. And we are in a place now where our depots will be building the lead banks looking forward into Period 21. Given where we're positioned and on margin, they'll be building their lead banks and we'll be very focused on where the lead banks are at, where the target lead banks need to get to glide us to the right place for Period 21. Also the conversion rate is a -- we run a very high conversion rate with our builder customers. So I think it's really hard to call how H2 is going to happen. We think we will do very well. We think we're incredibly well set up. And what I mean set up, we've bought sensibly for volume growth. We've got the right incentives in place for the teams that are planned. They don't know exactly what they're getting yet, but it's all planned and set up. Our availability, as I mentioned in my speech, is perfect, almost perfect, 99.97% and we've sprinkled on some new product as we go in. So I would say morale in the business is good, which is a key feature of our performance in the second half. I think everybody's eyes are on the prize. And I've been going out and spending time with -- we do regional boards where we get 90 managers together, nine regions, seven meetings a year, and we spend a lot of our time out in front of the depot managers. And I've been overlaying this year with smaller meetings with 10 managers and really getting down into some deep issues with them. And I think we're in as good a place as we could be. We'd like a bit of help from the market. We're expecting none. This is about self-help in the second half and I think we'll make a good fist of it. So I think the price-volume mix similar to the first half in balance, I would hope. The international business has been interesting because we came out of COVID in France and I'll come back to Ireland a little bit later. But we came out of COVID in France very confident about our French business and we moved too fast I would say. We put down 20 odd depots in one year on quite a small base and we learned from it. We absolutely tackled into fixing it. We appointed Andy Witts to oversee the operations and he's brought that sort of steady Chairmanship too. We put in Zoran Zailac who was our Operations Director in London, part of his development, he's gone out to be Operations Director in France. And I was doing an internal conference call with the teams and we were talking about post their peak trading last year, it was like sunflowers and their sort of heads were down a wee bit. You go back into that business now all the sunflowers are pointed in the right direction. It's actually quite encouraging and they've had a good first half. I expect them to have a good sales growth in the second half. And it's encouraging to hear some of the stories about how the brand is getting out there and how we're affecting like-for-like performance. We've -- and it's encouraging. Not everything goes perfectly in a business. We saw it, we identified the issue. We sorted out. On top of that, we have a chap called Sebastien Krysiak joining our international business. Sebastien was Commercial Director at Kingfisher. He joins in September. It's a big appointment for us. And Sebastien's chap who loves people and he loves product and he's Polish and he's French and he's very excited about joining the team to develop out that business. Ireland, I think the Howdens brand is falling on very fertile soil. The economy looks good. There's an awful lot of building going on out there. We're up to 11 depots. We'll do a few more this year. We keep them around cities. It's an interesting market for us and there is nobody doing what we do in Ireland or in France. When you go into the depot and you see teams customer-facing, fantastic product quality, amazing value and then stock in depth. There's just nobody. There's nobody doing that there and in either of those two countries that we're operating in. So we're pretty excited about.
Ami Galla
Thanks. Ami Galla from Citi. Just a few questions for me. First one was a follow-up in France. One, in terms of the sort of price points that you typically get more interest in France, can you give us some more color there? Do you think there's now a bigger appreciation for a fitted kitchen model versus, which is primarily a flat package in market? And in terms of breakeven point in France, from a line of sight, do we have that more visible milestone inside as to when do we get there? The second one was really in terms of UK and current trading. Post-election, have you seen any discernible sentiment boost coming -- as a feedback coming from your depot manager? And the last one was on cost trends in the sort of input cost line. I mean, is there anything to call out on what you're seeing in your input cost side?
Andrew Livingston
Yeah. Okay. Look, people can keep on asking me about France and what the differences are and sort of spin around and sort of say, there's many more similarities between the France and the UK when we look at the markets. And the more we lean into what we do as a business, serving trade customers, doing the right thing for the trade customers, the better we seem to do. So, whilst the market has got a predominantly flat pack feel to it, our rigid cabinets are a very important thing for us to be given the trade, because it means the fit is so much faster, the cost that they can make on the project with the customer, they can make more money. I sort of had always felt that we were probably more contemporary in styling than traditional in France, and that may be because of our dominance around Paris, where we've got a big number of depots. But I think we're discovering that that's not quite the case. And the balance may not be the same as it is in the UK, which is sort of 50-50. It could be 70-30 in France. So that's an interesting opportunity for us. The point I made earlier about driving footfall into the depots in the UK and keeping our depots active and busy, whether it's trade days, or selling joinery or flooring or skirting and architrave, these kind of things that, in supermarket terms are milk and butter for us. Those types of products we are getting really good at selling in France, and they're growing well. So I think that feels good. Around breakeven, we reduced the losses significantly in France this year with all the good work that the team are doing. It's largely a sales job. There are some -- it's about driving volume through the business. But as we've been adding on more depots through the year, it takes time for those depots to mature. I don't see us breaking even next year. Following year, I think we would, depending on how it goes, I think we would have a chance. And certainly, trading profitably in the year after that in '26, I would see that quite sensibly. But it's always that balance between rolling out depots and you're incurring losses in new depots and you're trying to mature the estate. But I think this is the right sort of proportion of investment a business of this size should be doing to try and make the brand work in a different country. And I think the team are doing a fantastic job on it. Regarding sort of the input costs, there's not a lot to talk about. And Paul picked up the point about freight. There's two dynamics going on. There's less pressure on raw materials. I would say there's probably still pressure from a labor point of view in our supply base. There's sort of labor inflation. But then you've got a competitive dynamic going on where we are a big purchaser of kitchen product in Europe, I'd say everything that we don't make. So there are deals to be done and people want volume with us. Particularly when we're sort of making more ourselves, there's always those tough conversations between, we're going to make it or do you want to keep it? So we always keep that strong tension and we understand the cost profile incredibly well in our supply base because we're involved in many of those activities ourselves. So that's what I would sort of say on the input costs. Look, regarding the UK, the election, I would say, and what we have sort of said to the team, it's great that it's done and it's out of the way. I don't know that we would say we're seeing anything different than we've seen. I think probably far too early to tell. I would have thought an interest rate reduction to make us all feel good. But I think if we look at our 0.5 million customer base, it's -- the strong continue to be very strong and we continue to work very hard to support the tail of our customer base. But I'd say our customers are in reasonably good condition, actually, going into the second half.
Ami Galla
Thank you.
Andrew Livingston
Yeah.
Christen Hjorth
Hello. Christen Hjorth from Numis. Two from me, please. So, first of all, just on higher priced kitchens, just a bit more detail on how things are going there, what's gone right, what's maybe not gone quite so well. And then secondly, historically, a lot of Howden's market share gains has been through new depots. But if we look through maybe since 2019, where you've clearly taken a lot of share, how should we think about the mix between new depots gaining that share and actually mature depots driving market share gains? And I think as a sort of supplement to that, looking forward, should we think about mature depots continuing to outperform the market and being a bigger driver of that market outperformance? Thank you.
Andrew Livingston
Yeah, that's a good question, Christen. Thank you for that. Look, we -- I think one of the things that we have done well is because a lot of businesses get excited about an increased higher value of kitchens and moving up market. And I think there's probably a history of businesses that have done that and got excited about the high-value end of the market and ignored the opening of mid-price. We have absolutely not done that. Kitchen cabinet volume is critical for us and our mantra in the business is about nought to 2K kitchens driving volume. Be that with councils, be that with buy to lets, wherever those kitchen is good, that is vitally important for us. And that has been a very healthy part of our business, sort of our first segment nought to GBP4,000 kitchen, a very healthy segment. The mid-price is well competed around and you've seen some of the innovation that we're bringing in to make sure that we've got a strong second half in the mid-price kitchens. But that's where most people kind of compete with this at opening, it's a foldover area in the mid-space. The top end is very exciting because it's our -- we bring our ability on our common carcass platform to bring a really high-quality door with a solid surface worktop, light it well and you really are challenging the independence at a price point that is really surprising. Leaving money for the builder, great experience for the end customer. So, we continue to do that. We are not stopping innovating there. So you'll see a brochure at the back of the room with a range called yield for cooling that we're testing at the minute. It's a complete in-frame solution, makes it easier for the builder and it will shock some of the independents when it hits the market in volume. And we think we've got a lot to do. You add that with paint-to-order service at pace and our fitted solid surface offering at pace and it's very, very hard to compete with. So it's going to be a slow, low burn and we will continue to grow in that space very effectively, but we're making a massive difference. And of course, it all ties into how we position the brand online, what the depots look like and the reformatted offering, just -- it's just substantially different from how it was before. It still feels like a trade environment, but it's a brilliant place for our trade customers to do business with their customers. We got good at that. So we're encouraged by what's happening on the better end of kitchens. Lots of room for growth. I mean, it's our smallest market share. We still think we're around single-digits on that better end of the market with lots to go after. But not forgetting opening price and mid-price. Look, I think one of the things I identified when I joined the business with the mature depot state is it is where the gold is in this business. We've got an opportunity to get up to 1,000 depots and we always talk about depots maturing at around seven years or eight years. But I take you up to our Glasgow depot, where our manager Davey runs it, and he has consistently grown that depot despite us opening, I think, four depots within his catchment. And he is going to hit significant numbers this year. He's going to hit a number that we've not seen yet, is what he tells me. We've not broken through that barrier. So the reason why growing, the opportunity for us to grow the mature depots is all the other activities that I've described. So it's the refit program, it's the rebranding, it's the innovation that we're bringing through in product, it's the Click and Collect service that just makes it so easy for our customers to interact with our depots, its amazing stock availability, its XDC supporting extra range as you go into the tail. So I would always take my read by some of our best mature depot managers and they're in a pretty good place.
Paul Hayes
And just adding a bit more colour on that. If you bridge back to 2019, for instance, and you look at the sales since then about -- and that's grown by 48%, it's very clearly half of that is price and then half of that is volume. Then when you dig into the volume, you see within that the benefit of some of the new UK depots, but you also see quite a benefit from volume and mix and a lot of these initiatives starting to sort of contribute into the business. Things like HWS would be a part as well. So that shows that we are -- those initiatives are adding long-term value and supports our sort of continuation of the investment and therefore the opportunity as we continue to grow.
Andrew Livingston
And this is happening in a market that's under pressure. So something changes, it improves. We are incredibly well-played.
Charlie Campbell
Hi. It's Charlie Campbell with Stifel. Just a couple of questions, please. Can you just remind us where we are on the percentage of product manufactured in-house? And also just remind me kind of what's euros and dollars within that. Apologies, I should know. And just your aspirations, whether that's changed, just where that percentage might get to. And the second question was on XDCs, I think when you first talked about them, you said that these would reduce the amount of cross-depot shipments coming in. I just wonder if there's any KPIs you could share with us on that to show the progress you've made on that front.
Andrew Livingston
Yeah, I'd start with the XDC one, because it is very interesting. And when I was taking over the business from Matthew, one of my early observations was our split between As, Bs, C and D SKUs in the estate. You'd expect far more emphasis on A and B fast sellers. We were actually pretty even across the estate and we've completely reshaped that with most of our cash being in As and Bs and then the XDCs. But I was also observing the amount of inter-depot transfers that were going on. That was at least 10 million pieces being moved in between depots and were well below 1 million pieces now. And there's a lot of benefit from that, in that you'd be in a depot with particular responsibility around arranging stock for a customer, and you'd be spending a big portion of your time finding out stock, sending balance to go and pick it up. It's not factory fresh product when the customer gets it, but it's a distraction from what some of those teams and the depots should have been doing, and gives them more time to do all the things we want to do is especially sell kitchens and joinery and take care of our customers. So that has been a brilliant game changer for us in terms of availability and customer experience. But it also gives the opportunity to bring more product to market, given the box doesn't change any size, doesn't change its size, but it also means further on down the line, it's supportive to margin. The best way of not encouraging exit stock, or red bucket as we call it in our business, wherever the manager's got accountability, exit stock does not put the stock there in the first place. And if you're focusing on As and Bs SKUs, and we've not reduced stock levels in the depots at all, we've just invested heavier on faster sellers. You're not creating trapped stock, which can be a problem, and we can remove trapped stock and bring it back centrally, but use a lot of value -- and use a lot of value in it. So I think XDC I would hold this and probably our depot managers, they were all sat here, would say it's one of the biggest things that has been a huge use to them and it's driven customer experience. On manufacturing, we manufacture around about a third of our volume and a bit more by values towards 40%. We would have an aspiration over the coming years to make that 30%, more like 40%. I think that sort of feels about right. And then it might be half the value somewhere around that to give you a guide. And the stuff that we are incredibly strong at is cabinets and end panels and some of the detail high margin, low change type product that we can get ourselves very busy at. But the factory are also curious about what else they can work on or if there's any joinery products and so on they might get involved with. So we've been thinking through how we increase our cabinet volume capacity to hit our five-year plan, because we love growth in France, growth to 1,000 depots. We'll have investments to make over the coming years in those. But that's probably the best guide we would give you at the minute. Euros and dollars.
Paul Hayes
Yeah. If you look at this in terms of, as Andrew sort of explained, we manufacture a fair amount of our product in the UK. The products that we then tend to look and source at more sort of around Europe would be things like kitchen frontals, appliances, those sorts of items that are more defined in euros. And you're looking at a spend in euros of about EUR190 million, something like that, in the mix of things from that. And then other currencies would pick up things like product that shift further afield sort of doors and things like that, that are more sort of a dollar-driven.
Shane Carberry
Shane Carberry from Goodbody. Two from me. Just with regards to France, first of all. You gave good color around kind of the rollout in 2024. I'm just thinking beyond that in the medium term, you mentioned that maybe 20 was too fast a couple of years ago. But do we get back to that sort of level on a two, three, four-year sort of view? How should I think about the kind of pace of rollout there? And then the second was just regards to Ireland. You mentioned how kind of, I suppose, differentiated your product is, or the offering is in Ireland versus peers. How have competitors reacted? And two years in now, does it make you think any differently about just how big a portion of the pie Ireland could be for you?
Andrew Livingston
Yeah. No, thanks, though. The French question around how many we roll out, we will build back up to that sort of figure again, but we'll do it more steadily. So we will open depots next year and we'll grow our confidence again in doing that. We will not jump back to 20 in one go, even though we know there are opportunities and markets and so on because it's about building the capability and building managers, you've got the capability to run an entrepreneurial depot in their way. And the work that Zoran has been doing on acquiring managers to our standard and area managers to the standard to operate at Howden's depot is working very well. So we will continue to build capability within depots, grow the skill, and then those people go off and run depots. So we're making good progress in that. Then, of course, having a French national running it who will know people in the market also helps a lot as well. And I think the systems work that we've been doing, like the system TED, that we talked about, that supports managers, doesn't take control away from them, but supports managers in knowing what reorder points they should have. We put it into the business, it systemizes a bit more. It doesn't take power away, but just empowers them a bit more and gives them more opportunity to serve customers and sell. But what Zorin is doing so brilliantly in France is bringing that drive, that real strong selling culture that we have, as well as operational excellence. It's the two things brought together in Howdens. You have to go out work by -- to work to sell kitchens. People just don't walk in like they do for a pint of milk. You have to go out, hunt it down, build account bases and work it out and they're effectively doing that. Ireland, I mentioned earlier, it's great. There's what, 5.1 million people or so in Ireland. We sort of compared it to Scotland before where there are about 5.4 million. And in Scotland, we've got 86 depots. Now we would look at some of the population densities. And it's quite dramatically different between Ireland and France. And we would keep our eye on what screw fix are doing in Ireland. They've got approaching 40 depots and we like being next to them and I think they like being next to us. And so we -- I think we'd have our eyes on something like 40 depots serving that population would be a guess. 40, maybe 45, something like that. How the competitors reacted, it's not -- it's very fragmented. But I think the market is very fragmented. I mean, we've probably become the number three player overnight since being there and only operating for a couple of years. As the team keep on reminding me, we're only just trading here for two years. The business is running twice the size it was last year. But yeah, all to plan. I think we're a tough competitor to compete with, I think because, we're -- it's rigid cabinets where our design service is incredible, the product offering is right, we're in stock and we'll do what it takes to take the market.
Sam Cullen
Thanks. Sam Cullen from Peel Hunt. I've got three if possible. I think they're all sort of follow-ups. First is going back to bedrooms and probably bathrooms as well. Is there any investment you need to make in the factories to expand the range of product there? And both those were all pretty rectangular in terms of the product on offer at the moment. Is that just repurposed kitchen designs or is there more stuff you need to invest in as you grow that? The second one is more sort of conceptual around the take up of what you might call a higher price, I guess, ancillaries, whether it's Quooker taps, Karndean flooring, paint-to-order. Are you selling a great deal of those products or do you view them more as a ticket into the customer to push more cabinets through the factories? And then the third one is, I guess, back to France and Ireland and the relative kind of differing levels of success over the last 12 months. And do you view the French market as sufficiently sort of serviced based in terms of, you kind of alluded to the fact that, that needs to improve the management skills a little bit? Is that in some sense the reciprocal of the market's desire for that level of service?
Andrew Livingston
Yeah. The bedrooms one, I mean, we were not doing much bathrooms at all. Some kitchens are repurposed and used in bathrooms and there's a small business there that we're very happy to take. But we've tried bathrooms. I think you need to do the pottery if you want to get really involved in that category. So the focus would be on bedrooms and from a manufacturing point of view, it couldn't suit us any better. Actually, it's similar stuff. We back the range into what we sell in kitchens. We smartly thought about cabinet sizes, so our builders are used to the cabinet shapes and sizes that they're using in the bedrooms. So it's really very little to do on bedrooms. Some items that we're buying in, like the drawer box, is slightly different from the kitchen drawer box, it tends to be wood rather than a metal one. We're buying those in at the minute. The factory may decide to do something different on that later on. But from a manufacturing point of view, all good. We are highly commercial on what we take in from a product point of view. We build a relationship with Quooker Taps. We're doing it for all the right reasons. And we're also keeping Quooker on their toes by having an opening price and a mid-price underneath it to ensure that we've got a fair operating. But these are -- I have a very strong view that people want better things over time. One of the reasons why we're doing so well on solid work surface is, people understand performance and longevity of it. And many of our customers will be prepared to trade off a top-end door, go to the mid-end of the range and use the GBP2,000 or GBP3,000 that's available there to invest in a solid surface rather than doing chipboard-based, laminate-based work surface. And there are conveniences, like a hot water boiling tap. If you don't own one, you need to get down to your local Howden store and buy one, because they are unbelievably convenient. You throw your cattle away. So our fitters like to fit high-quality trade product. Our cabinet is one of the best cabinets in the industry, happens to be the most sold cabinet in the UK. But we are obsessive about the quality. And when our fitters are fitting Karndean flooring, they love it. And many of our fitters are saying they've tried it, they don't want to try anything else because they find it so easy to fit. But our trades always want no callback quality. But you've got an end consumer also, who's becoming more demanding. Well-informed, well-informed on colors, well-informed on styles. Spend half an hour on Pinterest and your possibilities become amazing. We've got some amazing technology that David Sturdee is going to bring into the business later on to help customers, end customers, visualize what the kitchens might look like and state-of-the-art stuff where you can pick a range and a style and then drop different colors on it. We'll have that to market quite soon. And we think that will help with lead bank generation, help with lead bank conversion, because we understand what customers want more. But very comfortable where we're taking the product, because I made the point earlier about we are not losing up any price, we're also not designed to -- we're not denying ourselves the opportunity of selling better product as long as it's done at the right price and the builders can make some money out of it. Selling Quooker taps is a good example. It's a big business for us now with Quooker. And we don't deploy the stock into the depots. In the old model pre-Howdens, the Quooker tap range is actually quite big, it's quite wide. And if you add on sparkling water functions, with hot water boiling functions and different tap options, you'd find yourself in such a mess from a stock point of view. So we hold one stock holding location in our Raunds facility and we next go to the depots, works brilliantly. No discontinued stock, any issues that the stock is not tied into the depots. I think that was the questions. France and Ireland. I think I'll probably go back to the same point I made earlier, that these, the way we do business and what we sell, French customer is no different from other -- from UK customers and builders appreciating the quality of product that we sell. We've just done a kitchen in a French property that my wife's mother owns. And the only piece we sort of couldn't help was taking this wall down between the kitchen and the living space. And as my wife is phoning up different builders, the first builder came on the phone and said, come on Tuesday and we'll give you a quote. And said -- and this is in tour in the Loire Valley, about an hour and a half from our nearest depot, and said, you're obviously doing a kitchen. Where are you getting a kitchen from? My wife smartly said, we haven't decided yet. And he said, I'm working with this fantastic British business called Howden Joinery. And kind of encouraging when you know word of mouth is spreading like that.
Paul Hayes
We've probably got started bringing to a close, I think, unless there's any final questions. It looks great. Thank you, everyone.
Andrew Livingston
Thanks very much, everybody.
Paul Hayes
Thank you very much indeed.