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UK's Howden Joinery shares fall on margin pressure, costs

(Reuters) - Shares of Howden Joinery Group Plc fell nearly 8 percent on Thursday after the British kitchen supplier flagged higher costs and margin pressures, as it exits markets and spends to expand in the UK and Northern Ireland.

The company reported a 2.7 percent rise in full-year profit to 238.5 million pounds for the year ended Dec. 29, which was lower than analysts' estimates.

Howden, which sells fitted kitchens, appliances and joinery products, has also raised prices to mitigate cost pressures. Gross profit margin for the full year fell by 160 basis points to 61.7 percent.

"Comparatives for 1H19 are tough and the market backdrop subdued. Additionally, we expect ongoing supply chain and digital investments to provide further headwinds to margin progression over the medium-term," Stifel analysts said in a note.

The company has stockpiled inventory worth 15 million pounds in anticipation of potential supply hiccups ahead of Britain's exit from the European Union.

Howden on Thursday forecast additional operating costs of 15 million pounds in 2019 to cover expenses related to exiting its Germany and the Netherlands businesses. The company added it was testing a new depot format to increase footfalls and kitchen sales.

The company expects to open around 40 new UK depots this year, including five in Northern Ireland and has earmarked about 60 million pounds for the expansion and digital upgrades.

(Reporting by Devika Syamnath and Noor Zainab Hussain in Bengaluru; Editing by Anil D'Silva and Shounak Dasgupta)