Halfords Group PLC: Interim Results: Financial Year 2023

23 November 2022

Halfords Group plc

Interim Results: Financial Year 2023

Resilient H1 performance, with Service-related sales now accounting for 48% of pro forma1 Group revenues vs 23% in FY20.

 Increase in services demand means we are announcing a recruitment drive to fill 1,000 new automotive technician roles in the next 12 months.

Halfords Group plc (“Halfords” or the “Group”), the UK’s leading provider of Motoring and Cycling services and products, today announces its interim results for the 26 weeks to 30 September 2022 (“the period”).

To provide a better understanding of underlying performance, financial comparisons will primarily be made relative to FY20, that is, on a three-year basis, unless otherwise stated. The disruption from COVID-19 to both FY21 and FY22 means that comparators against these years are more difficult to interpret. All numbers shown are on a post-IFRS 16 basis and before non-underlying items, unless otherwise stated.

Overview

H1 FY23

• Strong total revenue growth vs FY20, up +31.4%, or up +13.3% LFL. All segments delivering LFL growth over three years, with Autocentres +30.0%, Retail Motoring +10.2% and Cycling +8.6%.
• Total revenue growth of +10.2% and -1.5% LFL vs FY22 against strong prior year comparatives (see figure 3), when sales benefitted from the UK emerging from the final COVID-19 lockdown. Performance driven by the strength of needs-based spend categories.
  • Service-related sales represent 42.6% of Group revenues in the period and are expected to reach c.48% of sales on an annualised basis following the acquisition of Lodge Tyre. Over half of Group sales expected to come from services in FY24.
  • Our needs-based business has grown over +50% vs FY20 and now accounts for the majority of our revenues.
• Strong strategic progress evidenced through Motoring Loyalty Club membership numbers being above expectations, the acquisition of Lodge Tyre, the expansion of Avayler (our unique, proprietary software business) into Europe with ATU signed post period end, the rollout of a capital efficient Fusion programme, and the continued integration of National Tyres.
• Robust profit performance in the period, in-line with our expectations, with Underlying Profit Before Tax (PBT) of £29.0m, -£1.2m vs. FY20 and -£28.9m vs FY22 despite significant inflationary headwinds and low customer confidence. FY22 includes business rates relief of £9.2m.
• Strong net cash, pre-lease debt of £32.3m and good stock availability.
• Net Debt : EBITDA (post IFRS 16) of 1.8x, within our target range. Our £180m debt facility has been extended until December 2025.
• Interim dividend of 3p per share declared, to be paid in January 2023.

FY23 outlook

• Good visibility on H2 costs, with utilities fully purchased at costs in line with FY22 and 98% of FY23 USD requirements hedged at $1.32. Cost and efficiency programs will exceed £20m of savings vs last year, ahead of the £15m target set out in our preliminary results.
• H2 trading to-date has continued to be strong in needs-based areas, but the more discretionary areas have softened.
• Underlying profit before tax (“PBT”) expected to be at the lower end of our £65m to £75m range.

Graham Stapleton, Chief Executive Officer, commented:

"This has been a period of strong strategic progress and resilient financial performance for Halfords. In such a volatile macroeconomic environment, our strategy of focusing on the kind of predictable and recurring revenue that comes from motoring services and needs-based products has never been more relevant. Once the acquisition of Lodge Tyre has annualised, Service-related sales will account for over 48% of our revenues and we expect this to grow to over 50% next year.  Lodge Tyre will also mean motoring represents around 77% of total sales.

The success of our Motoring Loyalty Club is exceeding our expectations, as customers continue to be attracted by a range of discounts and offers that are aimed at helping motorists across the UK with the rocketing cost of running and maintaining a car. The club is playing a key role in the rapidly growing demand that we are seeing for vehicle servicing, MOTs, maintenance and repairs. In order to help meet that demand, we are today launching a recruitment drive to fill 1,000 new automotive technician roles over the next 12 months. In particular, we are hoping to attract retirees back into the workforce, as well as increasing the number of women in technician roles.”

Group financial summary (fig.1)

 Group revenue summary (fig.2)

Group LFLs vs FY20 comparisons (fig.3)

Group services (fig.4)

As at H1 Close

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