Canaccord raises target price on Howden Joinery following 'solid' results

Analysts at Canaccord Genuity raised their target price on Howden Joinery to 525p from 515p on Friday after the group delivered a "solid set of results" a day earlier, with turnover and gross profit as expected and lower than anticipated operating costs boosting earnings.

Canaccord credited Howden's management for improving gross margins "as promised", with an early price rise sticking well, and also highlighted that while volumes had been "more subdued", there appeared to be more growth early in the second half.

As expected, Howden's balance sheet was "strong", with net cash of £217m and earnings growth further boosted by the group's recent share buyback.

"It is too early to conclude how the strategic initiatives are delivering but these are good results from a sound business," said Canaccord.

Looking forward, the Canadian broker said the key issue for Howden's remained the macro outlook and its "all-important period 11 trading period", which is likely to coincide with a "politically eventful" time at the end of October with Britain scheduled to leave the European Union, perhaps causing a decline in consumer spending.

"We have slightly increased our full-year expectations and expect more gross margin improvement in the second half, but acknowledge the risks facing the group in the second half," said Canaccord

"All in all, the group looks very robust."