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LONDON (Thomson Financial) - Galiform PLC said its Howden Joinery business has continued to see an improvement in underlying sales, sending its shares higher.
In a statement published ahead of its annual shareholders meeting the group said that in the first four months of 2007 (to 21 April), Howden's sales increased by 9.8 pct versus the comparative period last year, and were up 5.9 pct on a same depot basis -- an acceleration from growth of 4.4 pct for the first two months of the year, reported March 6, and a touch ahead of some analysts' forecasts.
The group said the improvement partly reflected the maturing of depots opened in recent years. Gross margin was described as 'similar' to that seen in 2006.
Galiform, which sells kitchens and joinery products, was previously called MFI Furniture Group PLC but changed its name in October after the troubled MFI retail business was offloaded to Merchant Equity Partners, the private equity group.
So far this year, nine Howden depots have been opened and the business is on course to open 60 depots this year, as previously flagged.
'The development of Galiform is continuing on track and in line with management expectations,' it said.
The group also has a supply business that manufactures and sources products for sale by Howden and has supply contracts with external parties, notably the MFI retail business.
Today Galiform announced it had amended its supply and logistics deal with MFI retail.
The deal was due to terminate on March 31 2008, with Galiform fulfilling orders placed before this date up until June 30 2008. The deal will now cease on Dec 21 2007, with final deliveries and payments made on that date.
'The amended terms enable us to bring forward a full review of the manufacturing, warehousing and logistics requirements of [the] supply [business] after the new termination date,' Galiform said.
It noted the amended terms also bring forward the time at which the group will be able to give greater attention to focusing on the business opportunities available to Howden and the supply business.
Nick Bubb, retail analyst at Pali International, welcomed the news, noting it will enable Howden to switch the factory that supplies MFI retail with flat-pack kitchens to produce rigid-kitchens for the Howden business.
He points out that as the group's other factory in Runcorn is running at near capacity it will need a new supply source, given the scale of the store opening programme.
And he reckons that with more efficient processes and predictable order books, Galiform's overall manufacturing losses (40 mln stg in 2006) will come down sharply over the next two years.
Bubb raised his current year pretax profit forecast by 3 mln stg to 70 mln stg, while Richard Ratner, analyst at Seymour Pierce, maintained his forecast at 66 mln stg.
At 11.14 am shares in Galiform were up 1-1/2 pence at 160-1/2 pence, valuing the business at 1.02 bln stg.
Analysts regard Galiform as a possible takeover target, of interest to both builders merchants such as Travis Perkins PLC and the UK's DIY players -- notably Homebase, owned by Home Retail Group PLC and B&Q, owned by Kingfisher PLC. However, in March Travis Perkins ruled out an approach for Galiform in the short term. james.davey@thomson.com jdd/jlc COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
© 2007 AFX News