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Halfords PLC

Halfords Group plc Sales growth despite a tough retail back drop and unseasonal weather

Halfords Group plc (LON:HFD), the UK’s leading provider of motoring and cycling products and services, today announced its preliminary results for the 52 weeks ended 29 March 2019. All numbers shown are before non-underlying items, unless otherwise stated.

Group Financial Summary

FY18£mChangeLike-for-Like Revenue* (“LFL”)
Gross Margin50.9%50.2%+70 bps 
Retail48.0%47.4%+60 bps 
Autocentres68.0%67.5%+50 bps 
Underlying EBITDA*98.2109.5-10.3% 
Underlying Profit Before Tax*58.871.6-17.9% 
Underlying Basic Earnings Per Share*24.5p29.6p-17.2% 
Profit Before Tax51.067.1-24.0% 
Basic Earnings Per Share21.2p27.8p-23.7% 
Proposed Full-Year Ordinary Dividend Per Share18.57p18.03p+3.0%

Sales growth despite a tough retail back drop and unseasonal weather

· Total Group revenue +1.1% on a LFL basis

· Retail performance in the year was impacted by extremely mild winter temperatures, boosting Cycling performance, up +2.6% LFL, but adversely affecting Motoring which, as a result, was down -0.4% on a LFL basis

· Strong overall Q4 performance, despite tough comparators; Cycling at +12.4% LFL growth more than offset -5.4% LFL decline in Motoring

· Autocentres performed strongly across the year, with LFL sales +2.6% reflecting good growth in servicing, tyres and MOTs

· Group online sales, which represent 20% of total Group sales, grew +9.5%, with 83% of Halfords.com orders being collected in store

· Group service-related sales account for 24% of total Group sales, with both fitting income and number of jobs completed in growth year-on-year

Profit in line with guidance; Free Cash Flow supports full-year dividend

· Gross margin improved year-on-year and Group operating costs were tightly controlled in H2

· Autocentres EBIT increased significantly, by 34.1% to £5.5m. A clear focus on the operating model, along with good revenue growth and tight cost control, led Autocentres to a second year of profit growth

· Underlying Profit Before Tax of £58.8m was a reduction of £12.8m on last year. The decline was driven by a lower motoring sales mix year-on-year, due to mild winter temperatures, weakened consumer confidence in the run up to Christmas, retail inflation and investment in strategic projects

· The Group continues to be strongly cash generative, with Free Cash Flow of £42.7m, up £1.2m year-on-year

· Continued focus on working capital improvement; group inventory was down £11.9m year-on-year

· Net debt at £81.8m was £6.0m down year-on-year. Net Debt to Underlying EBITDA 0.8 times (FY18: 0.8 times)

· Proposed final dividend payment of 12.39 pence, which takes the full-year ordinary dividend to 18.57 pence, up 3.0% year-on-year

Outlook FY20

We continue to anticipate FY20 profit before tax to be broadly in line with FY19. Our view assumes average weather conditions across the year and a consumer and economic outlook in line with that experienced during the second half of FY19.

The current economic environment and consumer confidence continues to remain challenging. As a business we are continuing therefore to put greater emphasis on improving our cost base and maximising efficiencies across the Group. This change in emphasis will be key to underpinning profit growth in FY21.

We continue to believe our customer strategy is the right direction for the long-term sustainability of our business. The delivery of this plan is likely to take longer than we expected as we adapt the plan to the current environment. Capital investment is likely to be c.£35m, which is slightly below the £40m to £60m guidance for FY20, while revenue investment will be self-funded via rigorous cost-efficiency programmes. We remain confident in our ability to generate consistent levels of Free Cash Flow which, for FY20, will be underpinned by working capital efficiencies.

Graham Stapleton, Chief Executive Officer, commented:

“Halfords Group has delivered sales and Free Cash Flow growth in what remains a challenging UK consumer environment.

While motoring continued to be impacted by extremely mild weather conditions, we are pleased to have seen continued and sustained growth in cycling, underpinned by improvement in our exclusive own brand ranges.

Autocentres continued to perform well throughout the year, with strong sales growth, margin improvement year-on-year and good cost control. This focus led to a second year of profit growth within the business.

Since launching our new strategy, we have seen encouraging early progress. As we strengthen our unique services proposition, customers are responding positively, and we are particularly pleased that nearly a quarter of all Halfords sales are now service related.

Consumer confidence remains fragile; however, we remain confident that the strength of our customer offer, our people, our strategy and clear focus on our medium-term financial targets leave us well-placed for long-term sustainable growth.”

Performance across the year

 26 weeks ended 28 September2018% change14 weeks ended 4 January2019% change12 weeks ended 29 March2019% changeFull-year ended 29 March 2019FY19% change
Halfords Group+1.9-2.0-0.8+0.3
Halfords Group+2.5-1.7+0.5+1.1
            Car Maintenance+4.5-4.6-6.7-1.1
            Car Enhancement+1.1-2.7-1.2-0.6
            Travel Solutions+4.0+0.2-7.5+1.7

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