DJ Halfords Group PLC: Interim Results: Financial Year 2022
Halfords Group PLC (HFD) Halfords Group PLC: Interim Results: Financial Year 2022 10-Nov-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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10 November 2021
Halfords Group plc
Interim Results: Financial Year 2022
Strong H1 performance; confident outlook, upgrading full year profits to GBP80m - GBP90m.
Market leading position in electric car and bike servicing and repair; plans to double trained electric technicians next year.
Halfords Group plc ("Halfords" or the "Group"), the UK's leading provider of Motoring and Cycling products and services, today announces its interim results for the 26 weeks to 1 October 2021 ("the period").
To provide a better understanding of underlying performance, comparisons of sales, profit and debt will primarily be made relative to FY20, that is, on a 2-year basis unless otherwise stated. The disruption to last year (FY21) from COVID-19 means that one-year comparators are more difficult to interpret but are provided within the tables below. All numbers shown are on a post-IFRS 16 basis and before non-underlying items, unless otherwise stated.
Overview
H1 FY22
-- Strong revenue growth of +19.2% vs. FY20, growing market share in Retail Motoring and Autocentres, withrevenues +7.7% and +88.8% respectively. Cycling growth of +8.8%, despite the known supply chain disruption.
-- Material contribution from areas of strategic focus: Group Services growing +75%, online +81% and B2B+78%.
-- Underlying Profit Before Tax of GBP57.9m, +GBP27.7m (+91.7%) vs. FY20 (note: FY22 includes business ratesrelief of GBP9.2m).
-- Compared to FY21, Group Revenue grew +8.7% and underlying PBT +GBP2.1m (+3.8%).
-- Period ended with Net debt of GBP232.7m or net cash of GBP91.6m when excluding IFRS lease debt; workingcapital abnormally low.
-- Declared interim dividend per share of 3p.
Outlook
-- Positive start to H2, with sales momentum continuing across the business.
-- Confident in our ability to navigate the well-publicised inflationary and operational headwinds throughH2. Supply chain disruption beginning to ease.
-- As previously disclosed, H2 investment in motoring pricing and higher transformation spend to impactnear-term profitability but drive long term growth.
-- Upgrade our FY22 full year underlying PBT forecast to GBP80m - GBP90m, post IFRS 16; previous guidance wasabove GBP75m.
-- Longer term, our more resilient operating model - underpinned by a larger Services, B2B and Retailmotoring business - will enable us to continue to deliver progress, despite the inflationary headwinds whichremain.
Graham Stapleton, Chief Executive Officer, commented:
"We are delighted to have delivered a strong H1 performance, driven by market share gains in Motoring products, Garages and our mobile services business, which now account for more than two thirds of our revenue. We also continued to see a significant contribution from areas of strategic focus, with revenue from Group Services, Online and B2B, all growing by more than 75% on a two-year basis. In cycling, demand levels remain good, and we are pleased with the current availability of kids bikes and e-bikes as we head into the Christmas trading period. We have carried good sales momentum into H2 across our business, supported by the easing of supply chain disruption. This has enabled us to increase our FY22 underlying profit before tax guidance to between GBP80m and GBP90m.
"We are seeing significant growth in the number of customers choosing electric forms of transport, and we continue to have a market-leading position in the servicing and repair of electric vehicles. Sales of e-bikes, e-scooters and accessories grew by more than 140% on two years ago, and servicing for electric cars in our garages was up 120% year-on-year. We have already invested in the training of more than 1,300 electric technicians and are on track to train 2,000 by the end of FY22, equating to more than two per store or garage. This number will double next year."
"There is good momentum in our existing business, the strategically important area of Motoring Services continues to grow strongly, and our recent acquisitions are all performing well. As a result, despite the challenging trading environment, I am very excited about our future growth prospects."
Group financial summary**
FY22 FY20 Var FY21
Var FY20 Var FY21 Var FY21
H1 H1 FY20 H1
% GBPm %
GBPm GBPm GBPm GBPm
Revenue 694.8 582.7 112.1 19.2% 638.9 55.9 8.7%
Retail 538.7 500.0 38.7 7.7% 524.2 14.5 2.8%
Autocentres 156.1 82.7 73.4 88.8% 114.7 41.4 36.1%
Gross Margin 51.7% 50.1% +167bps 49.3% +230bps
Retail 50.6% 47.0% +360bps 46.9% +370bps
Autocentres 55.6% 68.6% -1300bps 60.6% -500bps
Underlying EBITDA* 115.7 90.8 24.9 27.4% 115.5 0.2 0.2%
Underlying Profit Before Tax ("PBT")* 57.9 30.2 27.7 91.7% 55.8 2.1 3.8%
Profit Before Tax 64.3 27.5 36.8 133.8% 55.4 8.9 16.1%
Underlying Basic Earnings per Share* 24.0p 12.2p 96.7% 23.0p 4.35%
*before non-underlying items. **Alternative performance measures are defined and reconciled to IFRS amounts in the glossary on page 21. The LFL change measure adjusts for the in-year store openings and closures, and acquisitions.
Group revenue summary
Total Revenue LFL Revenue Total Revenue LFL Revenue
Vs FY20 % Vs FY20 % vs FY21 % Vs FY21 %
Retail Motoring 6.2% 11.9% 34.1% 41.0%
Retail Cycling 8.8% 25.3% -25.2% -20.5%
Retail Total 7.7% 17.8% 2.8% 7.0%
Autocentres 88.8% 15.5% 36.1% 19.3%
Group 19.2% 17.5% 8.7% 9.3%
Key H1 highlights
-- Group revenue growth over two years +19.2% and +17.5% LFL, driven by market share gains in Autocentresand Retail Motoring, and Retail Cycling growth, despite ongoing supply chain issues.
-- Group Services +75%, now representing 33% of Group revenues, driven by good growth in our underlyingbusiness and boosted by our acquisitions.
-- Recent sales growth rates from the first half have carried forward to current trading and are broadly inline with first half averages across the business.
-- In Retail two-year comparisons show:? Revenue +7.7% and +17.8% LFL. - Retail Motoring revenue +6.2% and LFL +11.9%, driven by market share gains in core categories andstrong demand for staycation products, up +45%. - Retail Cycling +8.8% and LFL 25.3%, with our award-winning own brand ranges of premium and electricbikes continuing to see high levels of demand, despite supply chain issues. - Electric mobility revenue (i.e., e-bikes, e-scooters and associated accessories) up +140%.
-- In Autocentres two-year comparisons show:? Autocentres revenue +88.8% and +15.5% LFL as we expand our commercial business, leverage ouracquisitions, and group-wide marketing initiatives increase customer awareness. - Strong demand for our Halfords Mobile Expert ("HME") vans. In two years, we have grown to 172 vans,14 hubs and 250 technicians. - Accelerating growth in demand for electric vehicle servicing, with the number of EVs being brought toour garages increasing 123.6% year-on-year.
-- Group sales growth against FY21, whilst lower than the two-year comparator, remains strong at +9.3% LFLand +8.7% total against a very strong comparative. Cycling sales stepped back as supply challenges hit, but RetailMotoring and Autocentres growth was very strong.
-- Group gross margin improved by +167bps over two years (+230bps vs FY21) as our Cycling performance showsa significant improvement against FY20 and our business mixes into higher margin Autocentres.
-- Operating costs were managed well, +16.0% versus FY20 and decreasing as a proportion of revenue by-1.2ppts. Operating Costs include the benefit of GBP9.2m Business rates not levied.
-- Profit Before Tax ("PBT") of GBP57.9m, up +91.7% on FY20 (+3.8% vs FY21).
-- Cash movement of GBP25.0m, driven by strong profit generation, but lower working capital continues toflatter the balance sheet position.
-- Non-underlying items were a credit of GBP6.4m, primarily a result of closed store provisions being revisedas the Group continues to negotiate lease disposals. 1. Group Services includes revenues across both Retail and Autocentres and includes the revenue fromservices provided (e.g., car service, cycling repair, dash cam fit etc) along with any associated products sold inthe same transaction. 2. B2B includes revenues from C2W, Commercial, Fleet and product sales to businesses in both Retail andAutocentres
Enquiries
Investors & Analysts (Halfords)
Loraine Woodhouse, Chief Financial Officer
Neil Ferris, Corporate Finance Director
Andy Lynch, Head of Investor Relations +44 (0) 7483 457 415
Media (Powerscourt) +44 (0) 20 7250 1446
Rob Greening halfords@powerscourt-group.com
Nick Hayns
Results presentation
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DJ Halfords Group PLC: Interim Results: Financial -2-
A webcast and conference call for analysts and investors will be held today, starting at 08:00am UK time. Attendance is by invitation only. A copy of the presentation and a transcript of the call will be available at www.halfordscompany.com in due course. For further details please contact Powerscourt on the details above.
Next trading statement
On 13 January 2022 we will report our Q3 trading update for the 13 weeks ending 31 December 2021.
Notes to Editors
www.halfords.com www.tredz.co.uk www.halfordscompany.com
Halfords is the UK's leading provider of motoring and cycling services and products. Customers shop at 404 Halfords stores, 3 Performance Cycling stores (trading as Tredz and Giant), 374 garages (trading as Halfords Autocentres, McConechy's and Universal) and have access to 172 mobile service vans (trading as Halfords Mobile Expert and Tyres on the Drive) and 192 Commercial vans. Customers can also shop at halfords.com and tredz.co.uk for pick up at their local store or direct home delivery, as well as booking garage services online at halfords.com.
Cautionary statement
This report contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Halfords Group plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Halfords Group plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.
Chief Executive's Statement
The Group has delivered another strong performance in the first half of FY22. Strong revenue growth, increasing market share and good profitability, with underlying PBT of GBP57.9m, almost double that of FY20 and GBP2.1m ahead of FY21. We continue to see our services business, the focus of our strategic investment, go from strength to strength, resulting in a more resilient business going forward. For the remainder of this commentary, we will draw comparisons vs FY20 unless otherwise stated as we feel this is a more helpful reflection of our performance due to the COVID-19 disruption seen in FY21. Stated results are on a post IFRS16 basis and before non-underlying items, unless otherwise stated.
Revenue
Group revenues were GBP694.8m, with both Retail and Autocentres delivering strong growth over two years. The scale and increased customer awareness of our Autocentres business is clearly beginning to pay dividends and our Retail business, after last year's disruption, has also benefited from investment over the last two years, with improved customer experience and convenience at the centre of our efforts.
Retail Motoring
The motoring side of our Retail business has grown +6.2% over two years, with a strong performance across many core categories. This performance is even more remarkable given the contraction in some markets in which we operate, e.g., the mature and more discretionary categories of Sat Nav and Audio. In contrast, our essential and specialist product categories have shown strong results. Maintenance and our 3B's ("Blades, Bulbs and Batteries") have grown over +5%, Workshop +23% and Car Cleaning +15% as we refresh ranges and bring new products to market. Development of our online customer journey has been key to the growth.
We have also seen longer term trends emerge. Staycations and a more fitness and environmentally conscious customer shop our range of touring products, from roof carrying, roof boxes and cycle carriers, to transport everything they need to enjoy what the UK has to offer. Staycation products grew +45%, with customers selecting the correct equipment they need online, or by speaking to one of our colleagues, before getting everything fitted to their car on demand or on their chosen day.
Finally, we have also seen a strong performance on child travel, growing +20% over two years. We stock popular brands, as well as bringing exclusive, high quality own brand products to market, offering choice and value to customers as well as expert advice and fitting.
Retail Cycling
Cycling undoubtedly had a very strong FY21 and sales this year, while strong, have been constrained by supply chain issues and industry specific bottlenecks on production. Cycling availability started the year lower than we would like, and while we hoped to see availability normalise, it unquestionably deteriorated further during the first half. Although supply challenges have now begun to ease, we saw shortfalls in our premium ranges of own brand and exclusive mechanical bikes through most of H1, which saw demand outstrip an irregular and unpredictable supply. Nevertheless, we are confident, as supply normalises in the future, that we will see good sales in the categories hardest hit this year and we believe we are well set for Christmas trading.
Autocentres
Our Autocentres business provides the clearest evidence of our strategic progress over the last two years. Greater convenience and scale, coupled with targeted initiatives to attract new customers, has resulted in sales almost doubling over two years to GBP156m and 22% of our Group. Traffic levels through much of H1 have been broadly in line with pre pandemic levels, signalling our growth in market share, but with a market share estimate of only 4%, there is a lot of room for future growth.
The profitability of the Autocentre business was impacted in the first half by a shift in the MOT season to the second half of the year, driven by the Government extending MOTs during COVID-19. This seasonal shift impacts labour productivity, with the benefit usually seen in the first quarter moving to our third quarter trading period. We remain confident in the full year performance of our Autocentres.
Areas of strategic focus
It has been another strong period for our areas of strategic focus, again demonstrating the resilience and relevance of our strategy in the face of a tough operating environment.
Group Services1
Group revenue from services was GBP232m, growing 75% since FY20, and now accounts for 33% of total revenue. This is one of our most notable strategic achievements and, despite the demonstrable progress, we see significant further growth yet to come. We have acquired three Motoring Services businesses that have given us greater scale, convenience and ability to leverage our expertise in technology and training. Since the acquisition of Tyres on the Drive in 2019, we have grown from 7 vans offering tyre fitting to a fleet of over 170 Halfords Mobile Expert vans offering 19 different services. McConechy's Tyre Services and Universal Tyres have provided us with geographical access to more of the UK and a greater ability to grow our share of commercial markets.
B2B2
B2B has delivered another excellent sales performance, growing +78% vs. FY20 and accounting for 20% of Group revenue. We continue to see strong revenue growth across all aspects of our offer, including Cycle 2 Work ("C2W") growing 53%, and bulk product and gift voucher sales to businesses growing 44%. Most notable, however, is the progress we have made in our commercial motoring business over the last two years. Commercial sales, representing service and repair to fleets, agricultural vehicles or lorries, have grown 350% since FY20. This has been achieved through our strategic acquisitions of McConechy's Tyre Services and Universal Tyres, which have given the Group improved national coverage, enabling us to win larger contracts to support businesses with a single partner across the UK, rather than disparate and fragmented coverage from multiple providers. As with many services, the essential nature of this business strengthens our resilience and provides growth opportunities for the future as we continue to scale.
Online
Convenience to many customers is defined by receiving the right product or service with the least possible effort. Clearly this needs to be achieved throughout the purchase journey but, for many, this begins online by showcasing the range of solutions to a customer's needs clearly and concisely. We continue to make significant strides in this area, proven by our revenue growth online of +80% over two years. Whether guiding customers through our range of specialist car cleaning products, choosing how or where they would like a tyre fitted or, more recently, easily identifying which bikes are in stock for immediate delivery, our digital proposition has changed substantially since 2019.
Operational Review
The operating environment remains challenging for all retailers across the UK, but we continue to focus on keeping colleagues and customers safe, improving efficiency across the Group, and identifying cost reductions where possible.
The Supply Chain
Moving anything around the globe over the last 6 months has been particularly challenging. Even if goods are manufactured and a container is found to ship them to the UK, the recent HGV driver shortage has meant that this final leg of the supply chain has been more costly and unreliable. The freight spot market has, at times, been 10x the normal rate, with some suppliers reneging on volumes or prices, but as the Cycling market leader in the UK, we have worked closely with freight partners.
Integration of Our Acquisitions
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