Heywood confident despite housing slump

DESPITE the double concerns of UK consumers being reluctant to spend cash on home improvements and the impact of the credit crunch in the United States, building products company Heywood Williams is confident it can make further progress.

The Huddersfield-based group today said pre-tax profits for the year to December 31 would be at least £9m – a similar level to last year's £9.4m – despite difficulties in its US operations which have been hit by a fall in the manufactured housing market.

In a trading update ahead of its annual results, Heywood said trading had been “satisfactory”, but had been boosted by its specialist hardware distribution businesses in the UK and Europe which had offset problems connected to its US operations.

However, the group said despite the UK home improvement market enjoying a strong first half of 2007, it had dipped by between 5% and 10% in the final quarter of the year.

The group said: “Looking forward to 2008, in the UK and Europe, the group is well positioned with its strong market shares and low cost sourcing capabilities to continue to take share in key markets.

“However, there is currently clear evidence in the UK/Ireland that consumers are being much more cautious in relation to undertaking significant home improvements or house purchases.

“In North America, all the latest market feedback indicates that the markets we serve, especially manufactured housing, will remain at significantly subdued levels throughout 2008.”

Heywood Williams said it had been pleased with the way the Avenco Group, which it bought in August for £15.6m, had integrated itself into the group. Avenco is a leading supplier of architectural hardware in Ireland and is also the exclusive suppliers of Heywood Williams' Carlisle Brass group products in Ireland.

Heywood sees the acquisition as enhancing Carlisle Brass's route to market.

It said the acquisition had boosted performance in its hardware distribution business, which serves the new build and home improvement markets in the UK, Ireland, Scandinavia and the Baltics, with sales increasing by 37% to £130m.

In North America, Heywood said its specialist distribution business, LaSalle Bristol, which serves the manufactured housing, recreational vehicle and modular housing markets in North America, continued to be profitable and had utperformed the market but earnings would be lower than in 2006.

However, the difficult market conditions had led to a 17% reduction in staff at the division and a 17% drop in sales to $241m, it said.

Heywood said that changes to the housing market last year had seen slower sales of larger homes to wealthier buyers and growing sales of smaller homes mainly to first time buyers. It makes around two-thirds of its sales to house builders and it said change in the housing market would see it selling both a lower quantity and quality of products to construction firms.

Heywood said sales in the holiday caravan and trailer sector, which accounts for 25% of its sales, were down by 10% for the 10 months to October compared to 2006 although the company said 2007 had been one of the top four years in the last 25 for the sector.

The group added: “The board believes that the froup will continue to demonstrate its resilience in these challenging times due to its strong market positions allied to its proven new product development pipeline, low cost sourcing infrastructure and continued adherence to prudent, strong financial disciplines.”

Heywood also announced today that Alan Parker is stepping down from the board and will leave at the end of February. Martin Wardhaugh will succeed Mr Parker as divisional managing director of the Mila hardware businesses.

Heywood's full year results are expected to be announced on March 4.