REG-Halfords Group PLC FY21 20-week Trading Update
08/09/2020 07:00
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Halfords Group PLC (HFD)
FY21 20-week Trading Update
08-Sep-2020 / 07:00 GMT/BST
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8 September 2020
Halfords Group plc
FY21 20-week Trading Update
Halfords Group plc ("the Group"), the UK's leading provider of motoring
and cycling products and services, today updates the market on its trading
performance for the 20-week period to 21 August 2020 ("the period");
progress on the execution of its strategy; revised outlook comments; and
release of investment case summary.
Key highlights
• The Group delivered a strong trading performance in the period, with
sales up +5.0% on a LFL basis, driven by:
◦ a larger cycling market and a positive impact from the current
staycation trend,
◦ the benefits of our new Group web platform, and
◦ increasing scale in our motoring services business.
• We delivered strong growth in our areas of strategic focus:
Service-related sales were up +6.3%, B2B grew +25.9% and Online sales
grew +160%. We are also on track to deliver 300 bps of gross margin
improvement in our Cycling business in FY21.
• Strong strategic execution and operational agility allowed us to fully
capitalise on market tailwinds
• Assuming expected demand levels in September and stability in the
relative value of the US dollar, underlying H1 FY21 PBT1 is expected
to be in the range of £35-40m.
• Significant uncertainty remains for H2 FY21. Given the natural
fall-off in the relative strength of cycling and staycation products
during winter months, alongside a difficult economic outlook, H2 FY21
PBT could be significantly lower than H1 FY21.
• Our strategy will see us further develop into areas with good
long-term growth prospects, such as motoring services, B2B and
electric mobility, which will also provide us with higher customer
retention, more resilient demand and higher returns on capital.
• We also believe some market tailwinds, supported by Government
investment in infrastructure, will continue for the medium-term.
(1) profit before tax, pre-IFRS 16
Graham Stapleton, Chief Executive Officer, commented:
"This 20-week trading period started on 4 April and therefore coincides
with the most significant impacts of COVID-19 in the UK. Our number one
priority has always been the health, safety and wellbeing of our
colleagues and customers, and on behalf of our Board, I would like to
express my sincere gratitude to our dedicated colleagues and loyal
customers for their support and patience during such a challenging time.
We are pleased to have delivered a strong trading performance during the
period. We have been able to move quickly in order to capitalise on the
continued strong demand for cycling products, with sales of electric bikes
and scooters up 230% year-on-year, while cycling services have been
boosted by our free 32-point bike check and the Government's Fix your Bike
Voucher scheme. We have also seen a return to growth in our motoring
business, driven by an increase in car journeys and by a high level of
demand for staycation-related products such as roof bars and roof boxes.
It has been especially encouraging to see our investments in key strategic
initiatives both drive, and enable, such a resilient performance, allowing
us to capitalise on favourable market shifts. In the last 12 months we
have tripled our investment in the ongoing development of our web platform
to enable a dramatic shift to online ordering, with sales up +160%
year-on-year and representing 54% of total revenue in the period. We have
also reaped the benefits in motoring services of a more scaled operation,
a Group web platform, a best-in-class digital operating model in our
garages and a new media campaign to raise awareness of our unique
proposition. And our strategic focus on B2B channels continues to drive
strong double-digit growth.
However, there is still significant uncertainty around the impact of
COVID-19 and the macro-economic environment in the coming months, and as a
result we are cautious on the outlook for the remainder of this year.
Looking further ahead, we are confident in the long-term strategy of our
business and in the growth prospects of the cycling and motoring markets
in which we operate."
Trading performance for the 20-week period ended 21 August 2020
% change, year-on-year P1 P2 P3 Q1 P4 P5 YTD
4 Apr - 2 May - 30 May 4 Apr - 4 Jul - 1 Aug 4 Apr
1 May 29 May - 3 Jul 3 Jul 31 Jul - 21 - 21
Aug Aug
TOTAL REVENUE
Halfords Group -19.3 -4.0 +14.3 -2.8 +25.3 +29.6 +7.5
Retail -18.8 -8.0 +8.9 -5.8 +20.8 +24.2 +3.8
Autocentres -21.9 +21.0 +45.7 +14.8 +54.7 +65.2 +30.2
LIKE FOR LIKE ("LFL")
REVENUE
Halfords Group -23.0 -7.2 +10.1 -6.5 +21.4 +30.9 +5.0
Retail -20.8 -5.9 +11.2 -4.3 +23.2 +32.9 +7.0
-62.1 -48.4 -24.8 -45.4 -0.3 +7.1 -28.6
Motoring
+43.9 +57.2 +65.9 +57.1 +59.1 +71.0 +59.1
Cycling
Autocentres -46.9 -15.1 +3.6 -19.2 +9.7 +18.7 -7.6
Number of weeks 4 4 5 13 4 3 20
A strong trading performance driven by a larger cycling market and strong
demand for staycation products, alongside the benefits seen from our new
Group web platform and increasing scale in our motoring services business
Financial highlights
• Group revenue was up +7.5% and +5.0% on a L4L basis, with growth
accelerating strongly throughout the period.
• Strong underlying improvements in gross margin, where our Cycling
optimisation plan is gaining real traction. Coupled with recent growth
in our higher-margin motoring services segment, the stronger cycling
margin is helping to partially offset the mix impact of unprecedented
growth in the category.
• Liquidity was strong throughout the period, with net cash of £105m on
21 August 2020, approximately £70m better than the same date last
year, driven in part by lower cycling stock levels but also by strong
cash management and planned faster stock turn as a consequence of
improved lead times, the consolidation of ranges and better
sell-through.
• In Retail:
• Cycling LFL revenue was up +59.1%, with strong growth across all
product categories and up +76% in our performance cycling
business, Tredz. Driven by an increased focus on bringing unique
and differentiated products to market, sales of new products were
up 114% in the period, with our new Carrera range a notable
highlight.
• Motoring LFL revenue was down -28.6% for the 20-week period but
returned to growth in period 5. An increase in car journeys and
our unique fitting proposition drove strong growth in 3Bs
(batteries, bulbs, blades), which were up +13% in periods 4 and
5, whilst staycation-related products, such as roof bars and
boxes, grew +28.4% in the same period. Demand for more
discretionary products, technology in particular, remained
subdued.
• In Autocentres:
• Total revenue was up +30.2%, with our acquisitions of McConechy's
and Tyres on the Drive contributing significantly. On a LFL
basis, revenue was down -7.6% overall but was in growth from June
onwards, as we benefitted from increased customer traffic from
our recently-launched Group web platform, and reaped the customer
and operational benefits of upgrading our digital operating model
('PACE') towards the end of FY20.
• Demand for our mobile services proposition remained high
throughout the period, with record job numbers and sales over the
summer period as the benefits of convenience resonated with
customers and our increasing scale allowed a broader geographic
reach.
• We delivered strong growth in our areas of strategic focus: Online
sales grew +160%, Service-related sales were up +6.3% and B2B grew
+25.9% in the period.
Strategic highlights
Our long-term strategy, which will evolve Halfords into a consumer and B2B
services-focussed business, with a greater emphasis on motoring and a more
profitable cycling category, remains unchanged. In our preliminary results
on 7 July 2020 we laid out our strategic focus for FY21, which was centred
on adapting quickly to new customer trends and laying strong foundations
for FY22. Less than halfway through FY21, we have made significant
progress towards these objectives and some highlights are detailed below:
• Services:
◦ Service-related sales grew +6.3% in the period, driven by last
year's acquisitions of McConechy's and Tyres on the Drive, as we
scaled our motoring services business to take share in a highly
fragmented market.
◦ We added 16 Mobile Expert Vans to serve the increased demand for
this channel, taking the current total to 91 vans, well
progressed towards our target of 125 vans by the year-end.
◦ Similar to sales of cycling products, we also delivered strong
growth in Cycling Services, up +17.5% in the 20-week period and
+48% in periods 4 and 5, boosted by our free 32-point bike check
and the Government's Fix your Bike Voucher scheme, of which we've
taken a sizeable share.
◦ We invested in a media campaign to drive awareness of our
integrated motoring services offer across retail stores, garages
and mobile vans. This drove considerable uplift in awareness
metrics and boosted consideration of Halfords by nearly 40%.
• Cycling profitability:
◦ We are on track to improve our Cycling gross margin by 300 bps in
FY21, driven by more favourable buying terms, component
rationalisation and more effective promotional activity.
• Cost and Efficiency:
◦ Regardless of stronger than expected sales so far this year, we
will continue to target operating cost reductions across the
Group, through location closures, labour efficiencies, and other
initiatives. Specifically, as announced in our preliminary
results on 7 July 2020, we have accelerated the right-sizing of
our physical estate (across both stores and garages) that was
already underway prior to the COVID-19 outbreak. We are making
good progress towards our target of closing up to 10% of our
property estate in FY21 (c. 80 sites), of which we have exited 22
Cycle Republic stores and seven additional stores and garages so
far this financial year.
The successful execution of our strategic areas of focus in FY21 and a
strong balance sheet to enable further investment, will place the Group in
a strong position to continue its strategic journey in FY22.
Notwithstanding the near-term challenges, the successful execution of our
strategy has enabled us to capitalise on market tailwinds, some of which
we believe will continue for the medium-term even if H2 proves to be more
difficult than H1. Higher levels of bike ownership are likely to drive
longer-term demand for accessories, servicing and replacements; avoidance
of public transport and the consequential increase in shorter car journeys
may lead to higher servicing requirements; and the staycation trend could
continue for the foreseeable future given fears of travelling abroad.
For the longer-term, we remain confident in our strategy and the
underlying strength of the markets in which we operate. We have a
market-leading retail business, supported by strong omni-channel
capabilities and a strong portfolio of unique and differentiated products
and services. Our strategy will also see us further develop into areas
with good long-term growth prospects, such as motoring services, B2B and
electric mobility, which will also provide us with higher customer
retention, more resilient demand and higher returns on capital.
Outlook
In our preliminary results announcement on 7 July 2020, we provided
details of potential outcomes for profit and net debt based on differing
LFL trading scenarios for the remaining three quarters of the year. This
provided insight on the margin and cost impact of a higher cycling mix and
the incremental costs of operating with COVID-19. These factors have not
changed and so the relative dynamics of the scenarios remain valid today
when applied to a range of possible performance outcomes. Since our last
market update, our trading performance has strengthened and the seven
weeks since Q1 were significantly better than we anticipated in early
July. This has given us more confidence in our profit2 outturn for H1,
which, assuming expected levels of trading in September and stability in
the relative value of the US dollar, we now expect to be in the range of
£35-40m.
Beyond H1, there remains too much uncertainty in the trading environment
to provide meaningful full year guidance. Within our own business there
are stark differences in the relative performance of product categories
and this is exacerbated by extreme uncertainty on macro factors such as
the impact of second waves of COVID-19, an economic contraction driven by
rising unemployment, and the impact of Brexit. Like most retail businesses
currently, relatively high operating leverage and a highly uncertain
trading environment mean that the range of possible profit outcomes for H2
is very wide. The macro headwinds we are likely to face, the continuing
cost of operating with COVID-19, and a natural fall-off in the relative
strength of cycling and staycation products during the winter months,
means that profit in the second half could be significantly lower than the
first half.
(2) Underlying profit before tax, pre-IFRS 16
Investment Case
Our investment case can be found on our corporate website using this link:
1 https://www.halfordscompany.com/investors/investment-case/
Next trading statement
We will report our interim results on 18 November 2020.
Enquiries
Investors & Analysts (Halfords)
Loraine Woodhouse, Chief Financial Officer
+44 (0) 7483 360 675
Neil Ferris, Corporate Finance Director
neil.ferris@halfords.co.uk
+44 (0) 1527 513189
Andy Lynch, Head of Investor Relations
andrew.lynch@halfords.co.uk
Media (Powerscourt) +44 (0) 20 7250 1446
Rob Greening halfords@powerscourt-group.com
Lisa Kavanagh
Conference call
A conference call for analysts and investors will be held today, starting
at 08:30am UK time. Attendance is by invitation only. A transcript of the
call will be available at 2 www.halfordscompany.com in due course. For
further details please contact Powerscourt on the details above.
Notes to Editors
www.halfords.com 3 www.halfordscompany.com
4 www.tredz.co.uk
Halfords is the UK's leading provider of motoring and cycling products and
services. Customers shop at 444 Halfords stores, 3 Performance Cycling
stores (trading as Tredz and Giant), 367 garages (trading as Halfords
Autocentres and McConechy's) and have access to 91 mobile service vans
(trading as Halfords Mobile Expert and Tyres on the Drive). 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
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ISIN: GB00B012TP20
Category Code: TST
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
Sequence No.: 83663
EQS News ID: 1128415
End of Announcement EQS News Service
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