PRESS RELEASE

from Halfords (isin : GB00B012TP20)

Halfords Group PLC: Unaudited Preliminary Results: Financial Year 2024

Halfords Group PLC (HFD)
Halfords Group PLC: Unaudited Preliminary Results: Financial Year 2024

27-Jun-2024 / 07:00 GMT/BST


 

 

27 June 2024

Halfords Group plc

Unaudited Preliminary Results: Financial Year 2024

 

 

Strong revenue growth of +7.9%, with underlying profit before tax of £36.1m1

 

Good strategic progress; market share gains helping to offset significant external headwinds

 

Strategically important Services business now represents more than half of Group revenue

 

Halfords Group plc (“Halfords” or the “Group”), the UK’s leading provider of Motoring and Cycling services and products, today announces its unaudited preliminary results for the 52 weeks ended 29 March 2024 (the “Period”).

 

FY24 Overview

Our focus in FY24 has been to deliver on the areas that are within our control. We have made good progress both strategically and in further optimising the business to create a solid foundation for future growth. Business performance has, however, been impacted by continuing declines in the Consumer Tyres and Cycling markets, and in consumer demand for big ticket purchases.

Successfully delivered on the areas within our control:

  • Share gains in all four of our core markets, outperforming our expectations.
  • Strong Group revenue growth of +7.9% and +5.0% on a Like-for-Like (“LFL”) basis.
  • A very strong performance in Autocentres and the success of our Better Buying programme helped to offset FX headwinds and increased promotional activity driven by Cycling market consolidation, resulting in gross margin of 48.5%, down 40bps.
  • Delivered cost savings of over £35m, ahead of original target of £30m, bringing cumulative cost savings to c. £70m in the last three years.
  • Balance sheet strong and liquidity well managed. Retail inventory down £24m versus last year. Net debt, excluding leases, of £8.2m. RCF extended to April 2028.
  • Underlying profit before tax (“PBT”) from continuing operations was down 7.9% to £43.1m. Including discontinued operations, underlying PBT was down 18.3% to £36.1m, which was in line with revised market guidance.
  • Final dividend of 5 pence per share proposed, which would result in a full year dividend of 8 pence per share.

Good strategic progress:

  • Grew strongly in the strategically important areas of Services and B2B, which are more resilient and improve overall quality of earnings. Autocentres Group revenue was up +17.6% and +10.7% LFL, whilst underlying EBIT from total operations (Continuing and Discontinued) was £13.8m, £10.7m higher than FY23.
  • The Motoring Loyalty Club grew to 3.4m members by the year-end, doubling in one year. The club also beat its targets for customer retention and premium membership.
  • Avayler, our SaaS business, signed a 15-year commercial agreement with Bridgestone alongside a 5% equity investment.
  • Major restructuring of our tyre supply chain, which will result in cost savings of c.£5m per annum, an improved customer proposition and the opportunity to significantly improve working capital efficiency.
  • Integrated the acquired Lodge business, creating UK’s largest commercial fleet tyre provider and winning significant nationwide contracts.

 

 

 

 

Headwinds outside of our control worse than anticipated:

  • Market volumes in Cycling and Consumer Tyres, as measured by the Bicycle Association and GfK respectively, declined year-on-year, worse than industry expectations. These markets remain depressed versus pre-Covid, with bike volumes down c. 30% and tyres c. 14%.
  • The Cycling Market consolidated at a faster rate than expected, leading to much higher levels of promotional activity, which put significant short-term pressure on gross margin.
  • Customers cut their spend on big-ticket, discretionary products (e.g. Bikes and Touring) even further and we now expect volumes to decline in the cycling and consumer tyres markets in FY25.
  • Elevated cost inflation continued to be a significant headwind, increasing the cost base by approximately £37m in FY24 and bringing cumulative cost inflation to c. £120m in the last three years.

Whilst these headwinds have inevitably impacted the Group’s financial performance in the short-term, our strong and growing market positions provide us with significant opportunities for profitable growth. For example, the consolidation of the Cycling Market had a severe impact on Halfords in FY24, but as the clear market leader we expect to emerge in an even stronger position once market conditions normalise. In addition, a recovery in the Consumer Tyres market closer to Pre-Covid levels would provide significant opportunity for revenue growth. The Group’s ability to capitalise on these opportunities is underpinned by its strong balance sheet.

 

1. PBT from ‘Total Operations’, which is comparable to previous market guidance. Further explanation is provided in the Group Financial Summary.

Graham Stapleton, Chief Executive Officer of Halfords, commented:

“This has been a year of strong strategic and operational progress for Halfords, and we are pleased to have delivered a resilient financial performance against challenging core markets. We have continued to invest in our strategically important Services business, which for the first time now represents over half of our total revenues.

 

Our Autocentres business was the star performer yet again. This was delivered despite a challenging tyre market, where drivers continue to delay the replacement of unsafe tyres. In a recent survey of 6,000 tyres at Gatwick, Manchester and Edinburgh airports, we found that one in four vehicles had tyres that were dangerously worn or damaged.

 

We are determined to improve tyre safety in the UK, and we are equally committed to supporting our customers through the cost-of-living crisis, by delivering great value when they need it most. None of this would be possible without the hard work and commitment of our highly skilled colleagues and I am very grateful for their ongoing support.

 

While the short-term outlook remains challenging, we continue to build a unique, digitally-enabled, omni-channel business, which is well positioned for profitable growth”.

 

Current Trading and FY25 Outlook
 

Trading since the start of FY25 has continued to be soft, impacted by low consumer confidence around big ticket, discretionary purchases, and poor spring weather, which has reduced store footfall and affected sales of both cycling and staycation products. Whilst we continue to expect market share gains in the year ahead, based on what we are currently seeing we now expect market volumes to decline in FY25 in cycling and consumer tyres, and to remain broadly flat in motoring servicing and retail motoring products.

Inflation remains a material headwind, particularly driven by the 10% increase in the national minimum wage. More recently we have seen very significant increases in sea freight rates, with spot rates more than doubling since the start of our financial year. Whilst we continue to successfully secure rates well below market spot rates, we now forecast freight costs to be £4-7m higher than we anticipated at the start of the year.

Against this backdrop, we continue to focus on optimising the platform we have built, and controlling what we can. As such, we plan for proportionately fewer resources to be allocated to strategic transformation, as set out in more detail at the end of the Strategic and Operational review.

We do not expect these headwinds to persist in the long term. Consumer price inflation is easing and our core markets are expected to improve in the mid-term. We remain confident that the financial targets announced at the April 2023 CMD are achievable assuming markets ultimately recover as forecast, albeit this will take longer than we envisaged last year.

We remain very confident in the Group’s strategy, as we build a stronger and more resilient platform for the future and continue to take market share.

Group Financial Summary

Results from Continuing Operations:

£m

FY24

FY23

Change

%

Revenue

1,696.5

1,572.7

+7.9%

Autocentres

699.4

594.8

+17.6%

Retail

997.1

977.9

+2.0%

Gross Margin %

48.5%

48.9%

-40 bps

Autocentres

50.2%

48.4%

+180 bps

Retail

47.3%

49.2%

-190 bps

Underlying Profit Before Tax

43.1

46.8

-7.9%

Profit Before Tax

38.8

39.0

-0.5%

Underlying Basic Earnings per Share

15.1p

17.6p

-14.2%

During FY24, we committed to close our tyre supply chain operation, outsourcing the activity to a third-party, Bond International. As such and in accordance with financial reporting standards, these operations (Viking and BDL) have been classified as ‘Discontinued’ in our accounts for both the FY24 reported period and the FY23 comparator. The Income Statement further below has been presented to show Continuing Operations as the primary view, in accordance with IFRS 5.

However, the total result of the Group is a more accurate comparison to previous market guidance. It is also more reflective of ongoing profit because it includes the ongoing cost of running the tyre supply chain, which in future will be outsourced. We have, therefore, presented in the table below the total results of the business, including the Discontinued Operations. Further details of the restructuring are provided in the Chief Executive’s statement.

Results from Total Operations (Continuing and Discontinued):

£m

FY24

FY23

Change

%

Revenue

1,712.8

1,591.8

+7.6%

Autocentres

715.7

613.9

+16.6%

Retail

997.1

977.9

+2.0%

Gross Margin %

48.2%

48.7%

-50bps

Autocentres

49.4%

48.0%

+140bps

Retail

47.3%

49.2%

-190bps

Underlying Profit Before Tax (“PBT”)

36.1

44.2

-18.3%

Profit Before Tax

19.9

36.2

-45.0%

Underlying Basic Earnings per Share

12.7p

16.1p

-21.1%

 

 

 

Group Revenue Summary

 

Year-on-Year

Growth

Continuing operations:

Total

LFL

Halfords Group

+7.9%

+5.0%

Autocentres

+17.6%

+10.7%

Retail

+2.0%

+2.2%

Motoring

+4.6%

+4.9%

Cycling

-3.0%

-2.8%

 

 

Market Volume and Share

 

Market Volume and Share – FY24

Autocentres

Retail

 

Consumer

Tyres

Motoring Servicing

Retail Motoring

Cycling

Market Volume

 

 

 

 

Growth forecast YoY

+2.6%

Broadly flat

+0.5%

-1.0%

Actual growth YoY

-1.3%

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