Keep some kitchen shares, they’re built to last

THE British spend around £1.3 billion a year on new kitchens, generally splashing out when they move home, fancy a change or their existing cabinets fall apart. Invariably the experience is both painful and expensive.

Howden Joinery tries to help on both counts. Founded in 1995, the company prides itself on being different from the competition. It operates from industrial estates, rather than the high street. It works almost exclusively with builders, rather than homeowners. And its depots are stocked with almost everything that builders need so kitchens can be chosen and collected in a matter of days not weeks or months.

The approach seems to work. Howdens is the UK market leader by a significant margin and the shares have come on in leaps and bounds. Midas recommended the stock in 2013, when the price was 235p. Last week, the shares closed at 485p, following a reassuring update about recent trading.

Back in 2013, Howdens had 560 depots, made profits of £138 million and paid a dividend of 5.5p. Today, there are 694 depots, 2018 profits are expected to be around £250 million and a dividend of just over 12p is forecast.

Chief executive Andrew Livingston hopes to add at least another 100 depots in this country and there may be expansion overseas too, as Howdens already has a foothold in France, Germany, the Netherlands and Belgium. But will the shares continue to thrive?

Optimists note the firm is well run, profitable and more resilient than its peers to economic cycles.

Sceptics say consumers are tightening their belts, the outlook is uncertain and the group may suffer over the next few years.