REG-Halfords Group PLC Preliminary Results: Financial Year 2020
07/07/2020 07:05
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Halfords Group PLC (HFD)
Preliminary Results: Financial Year 2020
07-Jul-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
EQS Group.
The issuer is solely responsible for the content of this announcement.
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7 July 2020
Halfords Group plc
Preliminary Results: Financial Year 2020
Underlying profit+ exceeded guidance: a strong operating performance, with gross margin improvements and tight cost control. Strategic
focus on motoring services led to +18.8% growth in Autocentres revenue
Halfords Group plc ("Halfords" or the "Group"), the UK's leading provider of Motoring and Cycling products and services, today announces
its preliminary results for the 53 weeks to 3 April 2020 ("the period"). To aid comparability, all numbers shown are before adopting IFRS
16, before non-underlying items and on a 52-week basis, unless otherwise stated.
Group financial summary
FY20 FY20 FY19
(53 weeks) (52 weeks) (52 weeks) 52-week change
£m £m £m
Revenue 1,155.1 1,142.4 1,138.6 +0.3%
Retail 961.0 950.6 977.2 -2.7%
Autocentres 194.1 191.8 161.4 +18.8%
Gross Margin 51.1% 51.1% 50.9% +27bps
Retail 48.2% 48.2% 48.0% +20bps
Autocentres 65.4% 65.5% 68.0% -250bps
Underlying EBITDA* 92.6 95.3 98.2 -3.0%
Underlying Profit Before Tax ("PBT")* 52.6 55.9 58.8 -4.9%
Net Non-Underlying Items, pre-IFRS 16 (32.1) (32.1) (7.8)
Impact of Adopting IFRS 16 (1.1) (1.1) -
Profit Before Tax, after impact of IFRS 16 19.4 22.7 51.0 -55.5%
Underlying Basic Earnings per Share* 22.9p 24.3p 24.5p -0.8%
+Before IFRS 16, before non-underlying items and on a 52-week basis. *Alternative performance measures are defined and reconciled to IFRS
amounts in the glossary on page 18.
Key Highlights
• Underlying PBT was £55.9m, ahead of guidance despite the late impact of COVID-19. Excluding acquisitions and the impact of COVID-19,
underlying PBT would have been in line with last year.
• In Retail:
◦ Overall sales were -2.7% (-2.3% LFL) lower than last year, with a strong Cycling performance not fully offsetting a tough market
for Motoring products.
◦ Cycling sales grew +2.3%, boosted by our H1 investment in store merchandising and bike ranges, improving both the customer
experience and the financial returns of the category.
◦ In Motoring, we continued to take market share in core categories, but sales of big-ticket discretionary products and winter items
were weaker. Despite the very mild winter, sales of 3Bs ("Bulbs, Blades, Batteries") grew over the full year, demonstrating the
strength of our related services offer.
• Autocentres revenue grew +18.8% (+1.4% LFL), boosted by the acquisitions of McConechy's and Tyres on the Drive ("ToTD") in H2. The
underlying Autocentres business, excluding acquisitions, continued to make good progress on its strategic execution, increasing EBIT by
over +40% year-on-year to £7.8m.
• Group gross margin improved by 27bps, with underlying improvements more than offsetting the dilutive impact of acquisitions.
• Operating costs were tightly controlled, reducing by -0.5% year-on-year excluding acquisitions. Our strong focus on efficiency and
procurement savings outweighed inflationary pressures and strategic investments.
• Strong cash generation maintained, with Free Cash Flow of £54.6m, having delivered further improvement on working capital, which on
average was £10.6m lower than last year. Net debt was £73.2m, £8.6m lower than last year and 0.8x underlying EBITDA.
• Non-underlying items were £32.1m, the majority of which related to the previously announced exit of Cycle Republic.
Graham Stapleton, Chief Executive Officer, commented:
"This has been another year of good progress against the backdrop of a retail market that was challenging even before the emergence of the
COVID-19 pandemic. We are particularly pleased to have delivered strong revenue growth in Group Services (+9%), Online (+17%) and B2B
(+25%), which are our main areas of strategic focus. Our Autocentres business grew strongly, boosted by the acquisitions of both
McConechy's and Tyres on the Drive, and more broadly in motoring services we expanded our fleet of Mobile Expert vans from 3 to 75. This
was particularly timely given strong demand for at-home services.
The start of the current financial year has of course been dominated by the impact of COVID-19, and our status as an essential retailer was
a clear endorsement of the wider role that Halfords has to play in keeping the UK moving. Having responded quickly and decisively to cater
for the surge in popularity of cycling during lockdown, we are now seeing increased demand for motoring services and products as people
start using their cars regularly again having not done so for the last few months.
Despite the wider uncertainty caused by COVID-19, we remain confident in the long-term prospects for Halfords given the strong macro
tailwinds within our market-leading Motoring and Cycling businesses. The strong progress we have made in FY20 and in the first quarter of
FY21 has been made possible by the hard work and dedication of our thousands of colleagues, who I am proud to work alongside".
Current trading and liquidity update
Halfords is classified as an essential retailer by the UK Government and, as such, has continued to trade despite the COVID-19 pandemic.
For the majority of the first quarter of the current financial year ("the period"), we have operated from a reduced Retail estate on a
'dark-store' basis, serving customers at the store entrance to ensure both colleague and customer safety. We have gradually increased the
number of 'dark stores' open during April and May and converted some of these to 'Lite' stores from 27 May. 'Lite' stores are fully open
but limit the number of customers allowed inside at any one time to ensure appropriate physical distancing measures. As of 3 July, 359
stores are trading under the 'Lite' format, 8 under the 'dark-store' format, and 77 remain closed. Autocentres has operated from a reduced
number of garages across Q1, with open garages increasing during May and June and was fully reopened by 3 July. Significant safety measures
have been in place throughout the period in both Retail and Autocentres.
Group sales for the 13 weeks to 3 July were -2.8% below last year and -6.5% on a LFL basis, significantly better than anticipated in
late-March and an improvement on the -23% LFL decline for the four weeks to 1 May that we reported on 6 May 2020. Sales in our online
channel were very strong, up 200% year-on-year in Q1, highlighting the value of the investment in our new web platform, which dealt well
with the unprecedented shift to online ordering during the COVID-19 lockdown, when physical store operations were severely curtailed.
Our Cycling business has performed very strongly throughout the period, up +57.1% on a LFL basis, significantly boosted by the avoidance of
public transport, favourable weather conditions and increased adoption of cycling as a health and leisure activity. The easing of the
lockdown has led to the gradual reopening of schools and workplaces, and while public transport is avoided and road congestion increases,
cycling is becoming an essential way of commuting for many people. For consumers with older bikes, which we estimate could amount to 7m in
the UK, servicing and repairs have proved an inexpensive and popular way to reengage in cycling, with cycling service-related revenue up
41.9% on a LFL basis in the 4 weeks to 3 July. Alongside mainstream cycling, our performance cycling business, Tredz, has also traded very
strongly, up 87.3% year-on-year on a LFL basis, benefitting from the successful transfer of inventory and customers from our Cycle Republic
business, which closed in April.
Motoring revenue was down -45.4% LFL, reflecting a material drop in car journeys across the UK impacting this higher margin category. We
have seen improving trends in Motoring in recent weeks as the lockdown has eased, boosted by the performance of stores open for customer
browsing in the 'Lite' format. Essential categories performed well after the gradual increase of cars on the road, with batteries and
battery care products in high demand.
Autocentres revenue was +14.8% higher than last year and -19.2% lower on a LFL basis, but this improved significantly in recent weeks as
lockdown has eased, motoring journeys have increased and the garage estate has reopened. Despite the Government's 6-month extension of MOT
expiry dates, we have seen increasing demand in recent weeks for MOTs and related servicing and repair, demonstrating the essential nature
of these services. Halfords Mobile Expert has seen a record number of jobs per day, with more customers opting to have their cars serviced
from the safety of their homes. All 75 of our vans have been well utilised throughout Q1, delivering record average jobs per day at peak
times.
Reflecting the challenging environment, and as previously announced, we have implemented a range of measures to reduce costs and preserve
cash, including suspending the dividend, reducing goods-not-for-resale spend and making use of the Government's business rates relief and
wage support schemes. As of 3 July, we had £200m of total liquidity available in our existing RCF and overdraft facilities and £10m of
cash. Alongside an amendment to existing covenants, we have also secured a further £25m of additional funding through the Government's
CLBILS scheme, which we consider as contingency funding.
Our positive trading performance in Q1 and the additional measures we have taken give us confidence in our ability to trade through the
pandemic and end the year in a sound financial position.
Outlook
Despite a better than anticipated trading performance in Q1, the uncertainty that currently exists because of COVID-19 means that we have
withdrawn guidance for FY21. Although trading has been ahead of the scenario we shared on 25 March 2020, we remain cautious on the months
ahead. We have developed three trading scenarios to model a range of potential outcomes, including the estimated impact on profit and net
debt.
The table below shows our updated scenarios for possible revenue outturns in FY21:
LFL revenue growth (YOY%) Scenario 1 Scenario 2 Scenario 3
Quarter 1 -6.5% -6.5% -6.5%
Rest of year -10.5% -7.5% -4.5%
Full year -9.5% -7.5% -5.0%
We saw a relatively strong performance in Q1, part of which may have been boosted by a pull-forward in cycling sales given the customer
response to lockdown and favourable weather conditions during the period. We believe cycling demand will remain strong throughout the year
and we will work hard to supply these unprecedented levels of demand. We expect a shift towards commuter bikes, as people return to
workplaces and cycling infrastructure improves, and we expect bike servicing and repairs to become more in-demand as consumers take
advantage of the Government's voucher repair scheme. We also expect motoring demand to improve during the year, as car journeys pick-up,
workplaces and schools reopen and our retail stores can open with fewer safety restrictions in place. The transmission risk of COVID-19 is
significantly higher in confined indoor spaces, meaning that car journeys will be seen as a safer alternative to public transport and, as
winter approaches, a more pragmatic and comfortable alternative to cycling and walking.
As lockdown restrictions ease, we expect an improving trend throughout the year, with H2 profitability expected to be improved on H1. An
economic contraction and low levels of consumer confidence will inevitably dampen demand for discretionary products, but we are well
positioned to deliver essential and less discretionary products and services in both our Retail and Autocentres businesses, demonstrating
again the resilience and strength of the Group.
Based on the revenue scenarios above, we estimate the following range of possible profit and net debt outcomes:
FY21, £m Scenario 1 Scenario 2 Scenario 3
Underlying Profit Before Tax -£10m to £0m £0m to +£10m +£10m to +£20m
Net debt £55m - £65m £45m - £55m £35m - £45m
It seems likely that our mix will remain biased towards cycling and away from motoring in the short-term. Although this tailwind is
welcome, cycling is a lower margin, more capital-intensive segment than motoring and, as such, the incremental benefit to Group profit will
be lower. We announced in November 2019 that whilst Cycling remains an important growth driver of the Group, we will focus our efforts on
improving the profitability and returns of this segment. We have made good progress since then and are encouraged by the opportunity that
lies ahead.
In each of these scenarios we have forecast a significant reduction in variable and discretionary costs, such that the profit differential
between the scenarios is driven principally by the sales outturn. In addition to the cost reductions assumed, we are working on a more
strategic reduction of our cost base to lay a strong foundation for FY22. In all these scenarios we have significant liquidity available
throughout the financial year.
Clearly this is a time of unprecedented challenge for the retail sector. We are only three months into FY21 and the COVID-19 pandemic, and
as such the short-term future is very uncertain, but our focus is on preparing the Group for all possible outcomes. The scenarios we have
laid out are neither guidance or forecasts but are aimed at giving some insight into the impact on Group profitability and net debt under
different sales outcomes, which are illustrative only. Our weekly trading performance informs our decision making, ensuring we remain agile
in managing costs, inventory and strategic investments.
Whatever the future holds, we remain confident in the long-term prospects of the Group and its ability to adapt to new challenges. We have
a large and growing Services business, market-leading Motoring and Cycling businesses with strong macro tailwinds, and an experienced
management team supported by thousands of dedicated colleagues.
For information purposes: Revenue growth across the year
52 51
weeks weeks
26 weeks ended 27 14 weeks ended ended
September 12 weeks ended 27 March 27 11 weeks ended 20 March 20
ended 3 January March March
2019 2020 2020 2020 2020
% change % change % change % change 2020
%
change %
change
TOTAL
REVENUE
Halfords -2.9 +4.6 +2.3 +0.3 +4.3 +0.8
Group
Retail -3.8 +0.6 -4.9 -2.7 -2.7 -2.2
+3.2 +31.2 +36.3 +18.8 +37.6 +19.2
Autocentres
LFL REVENUE
Halfords -2.4 +1.3 -4.0 -1.8 -2.4 -1.3
Group
Retail -3.1 +0.8 -4.2 -2.3 -2.6 -1.8
-5.3 -2.7 -8.4 -5.3 -4.6 -4.4
Motoring
+0.2 +5.9 +2.2 +2.3 +1.0 +2.1
Cycling
Autocentres +2.1 +4.6 -2.9 +1.4 0.0 +2.2
Enquiries
Investors & Analysts (Halfords)
Loraine Woodhouse, Chief Financial Officer +44 (0) 7483 360 675
Neil Ferris, Corporate Finance Director
Media (Powerscourt)
+44 (0) 20 7250 1446
Rob Greening
halfords@powerscourt-group.com
Lisa Kavanagh
Results presentation
A conference call for analysts and investors will be held today, starting at 09:00am UK time. Attendance is by invitation only. A copy of
the presentation and a transcript of the call will be available at 1 www.halfordscompany.com in due course. For further details please
contact Powerscourt on the details above.
Next trading statement
On 8 September 2020 we will report our trading update for the 20 weeks ending 21 August 2020.
Notes to Editors
www.halfords.com 2 www.halfordscompany.com 3 www.boardmanbikes.com 4 www.tredz.co.uk
Halfords is the UK's leading provider of motoring and cycling services and products. Customers shop at 446 Halfords stores, 3 Performance
Cycling stores (trading as Tredz and Giant), 371 garages (trading as Halfords Autocentres and McConechy's) and have access to 75 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.
Chief Executive's Statement
Operational review
Retail
Over the full year, Retail revenue of £950.6m was -2.3% below last year on a LFL basis. Week 52 of FY20 was materially impacted by COVID-19
and, as such, sales up to week 51 were better at -1.8% LFL.
Motoring
Our market share continued to grow in core motoring categories against a backdrop of low consumer confidence and mild winter weather.
Overall LFL sales declined -5.3% for the full year and -4.4% up to week 51. We performed well in the more resilient and less discretionary
categories such as 3Bs, which grew +2.4%, Child Safety products, which grew +9.1% as we gained share from weaker competitors, and Car
Security, which was up +14%. As in Cycling, we continue to innovate, successfully introducing a 'weCheck' services offer into the
proposition on a free and paid-for basis.
Cycling
Cycling performed strongly in H2, resulting in +2.3% LFL growth for the year and three successive quarters of growth. Sales of E-bikes,
which were up +45% year-on-year and accounted for nearly 20% of adult bikes, benefited from improved merchandising in stores and high
customer demand, and Adult Mechanical and Kids bikes also grew over the full year. Our own-brand and exclusive ranges of electric bikes,
mechanical bikes and scooters offer our customers unrivalled levels of choice and value and we continue to bring new and innovative
products to the market. We are well positioned to serve the increasing demand for these products and, as the largest national provider of
cycling services, we are also ready to support customers beyond their first purchase.
Retail gross margin
Retail gross margin increased by 20bps with strong progress across both Motoring and Cycling. In line with our strategy to improve Cycling
profitability, gross margins increased +117bps versus last year, driven by significant improvements in adult bikes. In Motoring, gross
margin was up +138bps year-on-year, helping to offset the adverse mix impact of lower Motoring sales. Our strong margin performance was
driven by several factors, including buying efficiencies and better focussed promotions.
Retail operating costs
Retail operating costs were well managed and declined -1.5% year-on-year, before the impact of IFRS 16. This was the result of a sharp
focus on operational efficiency and improved procurement discipline, the benefits of which more than offset important strategic investments
and ongoing inflationary pressures such as national minimum wage increases.
Autocentres
Full year Autocentres revenue was £191.8m, growing 18.8% year-on-year and +1.4% on a LFL basis. Autocentres was also subject to a material
COVID-19 impact with sales up to week 51 stronger, at +2.2% LFL. The acquisitions of McConechy's and Tyres on the Drive during H2 provide a
significant opportunity in the medium term as we successfully integrate these businesses into the Group. The underlying business, excluding
the acquisitions, increased EBIT by over 40% to £7.8m, the third consecutive year of strong profit growth. This reflects the development of
an enhanced operating model which also led to a significant improvement in customer service scores.
Group Services
Group Services revenue, which comprises fitting and repair services and the associated product, grew +8.9%, representing 26% of Group sales
in FY20. We continued to expand our range of services, adding weCheck and new cycle care services in Retail, trialling on-demand fitting in
Autocentres, and expanding our Mobile Expert vans from 3 to 75. Growth in Services is a critical part of our strategy and our ability to
provide these from approximately 900 fixed and mobile locations across the UK provides customers with a convenience unmatched by any other
UK business.
Online
Group online sales had another very strong year, with revenue growth of +17%, now accounting for 24% of Group sales in FY20. Growth was
strong before and after the launch of our new Group web platform in February 2020, which provides customers with a vastly improved digital
experience and, for the first time, gives them access to an integrated services offer across mobile, stores and garages through one
website. The new web platform coped well with an unprecedented shift to online ordering during the COVID-19 lockdown, when physical store
operations were severely curtailed. The importance of our store network, colleague expertise and services proposition continued to be
evidenced by the strength of Click & Collect, with over 80% of orders placed on Halfords.com picked up in stores.
B2B
Group B2B sales grew +25% year-on-year and represented 15% of Group sales in FY20. In the past year we have focussed on developing deeper
relationships with key strategic partners to support growth within our key markets. This has been supported by investment in our technology
infrastructure to streamline key customer & client processes. We have also broadened our proposition range to expand our B2B offering
within motoring services.
Progress on strategy in FY20
To Inspire and Support a Lifetime of motoring and cycling
In November 2019 we announced an acceleration of our strategy 'To Inspire and Support a Lifetime of motoring and cycling'. We made
significant progress against our strategic objectives in FY20, which laid strong foundations to support our response to COVID-19 and
positioned us well for FY21 and beyond. Notable highlights include:
• Our Group web platform launched as planned in Q4, transforming the digital customer experience and consolidating our broad services
offer in one website.
• We exited Cycle Republic and the Boardman Performance Centre, enabling us to focus investment on our higher-returning mainstream offer
in Halfords and our performance cycling proposition in Tredz.
• Continued development of our Halfords Mobile Expert proposition, delivering best-in-class customer service reflected by strong
Trustpilot scores. The acquisition of Tyres on the Drive increased our mobile hub footprint from 1 to 7 and our van footprint from 3 to
75, providing a strong platform for future growth.
• Acceleration of our growth in Autocentres through the acquisition of McConechy's. Through this we acquired one of the UK's leading
garage chains with 57 sites and 100 vans, establishing strong coverage in Scotland and the North of England.
• Completed the upgrade of PACE, our digital operating platform, in all Autocentres garages. PACE puts a tablet in the hands of every
technician, providing customers with the assurance of quality and enabling our garages to optimise resource allocation and labour
efficiency.
• Delivered significant cost savings through supply chain efficiencies, Retail productivity programmes, property savings and improved
procurement practices, and reduced Working Capital by £11m on average throughout FY20.
• Strategic buying alliance agreed with Mobivia, a leading player in the European motoring products and services market. The
relationship, in its early stages, is progressing well.
FY21 strategy focus
In November 2019 we announced an acceleration of our strategy, emphasising the importance of growing our motoring services and B2B
businesses. The strategy remains absolutely the right direction for Halfords but, given the unprecedented impact of the COVID-19 pandemic,
we are moderating our near-term plan. COVID-19 has materially changed the retail outlook for the coming months and has overshadowed Brexit
as the emerging risk. We have therefore adjusted our short-term focus to reducing cost and working capital, ensuring our colleagues are
engaged in the success of the business and, of particular importance, adapting quickly to new customer trends. We will continue to
transform the business and develop our customer strategy in FY21, but we will put greater emphasis on responding to emerging trends and
laying solid foundations for FY22. Our areas of focus in FY21 are:
• A stronger emphasis on reducing the operating costs of the Group, including but not limited to:
◦ an acceleration of the right-sizing of the Group's physical estate that was already underway, with the planned closure of up to
10% of the Group's physical estate (across both stores and garages), which includes the 22 Cycle Republic stores and 5 Halfords
stores and garages that we have already exited this year
◦ targeted rent reductions reflecting the current market dynamics
◦ a review of all GNFR contracts and the tendering of several key agreements
◦ revisiting the costs of our logistics network
• Continuing to grow the profitability and returns of our core categories, particularly Cycling, through buying efficiencies, more
targeted promotional campaigns and working capital reductions.
• Developing our Halfords-branded customer proposition by continuing to transform our Group web platform and digital customer experience.
In addition, we will invest in expanding our Services business, leveraging our financial services offer and growing our B2B channels.
• Swiftly integrating the acquisitions of McConechy's and Tyres on the Drive, using our best-in-class technology across the Services
offer.
• Continuing to develop PACE, our digital operating platform in Autocentres, with a view to transferring best practice to services
delivery in retail and mobile vans.
• Expanding our Mobile Expert vans to under-served parts of the UK, increasing our original target of 100 vans to a revised target of 120
vans by the end of FY21.
• Upweighting investment in the engagement and development of our colleagues, ensuring they are strongly engaged in our transformation
journey.
In FY21, we will be more focussed on delivering the most important initiatives that provide the quickest and most attractive returns,
whilst building the underlying strength of the business for FY22 and beyond. We are planning for lower capital expenditure in FY21, which
we now expect to be in the range of £20-30m. As trading conditions improve, however, we will seek to continue our transformation journey at
pace, in line with the current strategy but adjusted for a new post COVID-19 world.
Graham Stapleton
Chief Executive Officer, July 2020
Halfords Group plc's LEI code is 54930086FKBWWJIOB179
Chief Financial Officer's Report
Halfords Group plc ("the Group" or "Group")
Reportable Segments
Halfords Group operates through two reportable business segments:
• Retail, operating in both the UK and Republic of Ireland; and
• Autocentres, operating solely in the UK.
All references to Retail represent the consolidation of the Halfords ("Halfords Retail") and Cycle Republic businesses, Boardman Bikes
Limited and Boardman International Limited (together, "Boardman Bikes"), and Performance Cycling Limited (together, "Tredz and Wheelies")
trading entities. All references to Group represent the consolidation of the Retail and Autocentres segments.
The "FY20" accounting period represents trading for the 53 weeks to 3 April 2020 ("the financial year"). To ensure a meaningful comparison
with the prior year, all commentary unless otherwise stated is for the 52-week period ending 27 March 2020 and is before non-underlying
items. The impact of week 53 is described in detail below, explaining that due to the exceptional circumstances of COVID-19 the Group made
an operating loss in this period. Most of our commentary on profit and cost measures is before the impact of IFRS 16, which is stated where
relevant. The impact of IFRS 16 is shown in the table below and further details of this impact are provided later within this report. The
comparative period "FY19" represents trading for the 52 weeks to 29 March 2019 ("the prior year").
Group Financial Results
FY20 FY20 FY19
52 week
(53 weeks) (52 weeks) (52 weeks)
change
£m £m £m
Group Revenue 1,155.1 1,142.4 1,138.6 +0.3%
Group Gross Profit 589.7 584.0 579.0 +0.9%
Underlying EBIT pre-IFRS 16* 55.4 58.7 62.2 -5.6%
Underlying EBITDA pre-IFRS 16* 92.6 95.3 98.2 -3.0%
Net Finance Costs (2.8) (2.8) (3.4) -17.6%
Underlying Profit Before Tax pre-IFRS 16* 52.6 55.9 58.8 -4.9%
Net Non-Underlying Items (32.1) (32.1) (7.8) 311.5%
Impact of Adopting IFRS 16 (1.1) (1.1) - -
Profit Before Tax 19.4 22.7 51.0 -55.5%
Underlying Basic Earnings per Share pre-IFRS 16* 22.9p 24.3p 24.5p -0.8%
* This report includes Alternative Performance Measures (APMs) which we believe provide readers with important additional information on
the Group. A glossary of terms and reconciliation to IFRS amounts is shown on page 18.
The financial year of FY20 was somewhat overshadowed by the ongoing turbulence caused by Brexit and Halfords undoubtedly felt the impact of
subdued consumer confidence throughout the year. The concluding period of the financial year also saw a new and emerging threat - the
COVID-19 pandemic. The impact in the closing two weeks of the year was significant with two full days of trading lost in week 52, followed
by an almost complete lockdown of the UK. Yet despite seeing impacts on Group revenues from both, Halfords clearly demonstrated its
resilience in delivering underlying Group PBT, pre-IFRS 16 of £55.9m. In fact, if it were not for the lost trading in week 52 and the
dilutive impacts of acquisitions, the underlying Group PBT would have been in line with last year. The business worked hard to mitigate
some of the top line revenue impacts through gross profit improvements and tight cost control, whilst continuing to deliver on longer term
growth plans through the acquisitions of Tyres on the Drive ("ToTD") and McConechy's Tyre Services ("McConechy's") in the second half.
Alongside a strong P&L result we also achieved targeted working capital reductions through more efficient stock management and improved
creditor days, enabling our longer term growth strategy. That said, whilst the FY20 impact was contained within the final two weeks of
trading, the pandemic is likely to materially impact the trading environment in FY21, amid significant uncertainty on the short-term
outlook.
Group revenue in FY20, at £1,142.4m, was up 0.3% and comprised Retail revenues of £950.6m and Autocentres revenue of £191.8m. This compared
to FY19 Group revenue of £1,138.6m, which saw Retail revenue of £977.2m and Autocentres revenue of £161.4m. Group gross profit at £584.0m
(FY19: £579.0m) represented 51.1% of Group revenue (FY19: 50.9%), reflecting an increase in the Retail gross margin of 20 basis points
("bps") to 48.2% and decrease in the Autocentres gross margin of 250 bps to 65.5%. The overall Group gross profit % was impacted by both
mix of product and by the acquisitions within Autocentres. Retail saw strong improvements in gross margin % compared to FY19, particularly
the Cycling segment, but benefits were somewhat offset by both weaker winter product results and the relative mix into Cycling. Within
Autocentres, the underlying business performed well, improving gross profit % by 180 bps, but the overall impact was eroded by the
acquisitions, which were dilutive in the near-term but offer a good longer term opportunity.
Total operating costs before non-underlying items and pre IFRS-16 saw a modest increase of 1.6% including mid-year acquisitions. Excluding
these acquisitions, operating costs of the underlying businesses declined -0.5% after a continued focus on efficiency and better
procurement practices. We worked hard on process efficiency in stores to mitigate National Minimum Wage increases. Lease renewal
negotiations saw an average decrease of 15% and investments in store infrastructure saw energy consumption reduce by close to 20%. Cost and
efficiency remain a significant opportunity for the Group and one which will see a greater focus as we move through FY21. Total underlying
costs, pre IFRS-16, increased to £525.3m (FY19: £516.8m) of which Retail comprised £404.3m (FY19: £410.5m), Autocentres £118.9m (FY19:
£104.2m) and unallocated costs £2.1m (FY19: £2.1m). Unallocated costs represent amortisation charges in respect of intangible assets
acquired through business combinations, namely the acquisition of Autocentres in February 2010, Boardman Bikes in June 2014, and Tredz and
Wheelies in May 2016, which arise on consolidation of the Group. Group Underlying EBITDA pre-IFRS 16 decreased 3.0% to £95.3m (FY19:
£98.2m), whilst net finance costs pre-IFRS 16 were £2.8m (FY19: £3.4m).
Underlying Profit Before Tax pre-IFRS 16 for the year was down 4.9% at £55.9m (FY19: £58.8m). Non-underlying items of £32.1m in the year
(FY19: £7.8m) related predominantly to the closure of Cycle Republic and Boardman Performance Centre, as well as costs related to
organisational restructure and strategic review. After non-underlying items, Group Profit Before Tax was £23.8m (FY19: £51.0m).
After non-underlying items and including IFRS 16, Group Profit Before Tax was £22.7m (FY19: £51.0m). The impact on the Group of adopting
IFRS 16 in the period was a £1.1m net decrease to Group Profit Before Tax. Further details on the impact of IFRS 16 is shown later in this
report.
As noted earlier, FY20 was a 53-week year and therefore saw an additional week of trading included in the full year results. In a normal
operating environment, this would typically result in additional profit of around £3m, but the UK lockdown announced on the 23rd March due
to COVID-19 resulted in an estimated trading loss of -£3.3m. Although the Group was deemed an essential retailer and continued to trade
throughout week 53, sales were materially impacted and as such resulted in the loss. At this early stage of the pandemic we operated from a
very limited number of stores and garages with limited customer interaction due to social distancing.
Retail
FY20 FY20 FY19
52 week
(53 weeks) (52 weeks) (52 weeks)
change
£m £m £m
Revenue 961.0 950.6 977.2 -2.7%
Gross Profit 462.8 458.4 469.3 -2.3%
Gross Margin 48.2% 48.2% 48.0% +20bps
Operating Costs (410.8) (404.3) (410.5) -1.5%
Underlying EBIT pre-IFRS 16* 52.0 54.1 58.8 -8.0%
Non-underlying items (29.5) (29.5) (8.7) +239.4%
Impact of adopting IFRS 16 (1.2) (1.2) - -
EBIT post IFRS 16 21.3 23.4 50.1 -53.3%
Underlying EBITDA pre-IFRS 16* 81.1 82.7 87.1 -5.1%
* This report includes Alternative Performance Measures (APMs) which we believe provide readers with important additional information on
the Group. A glossary of terms and reconciliation to IFRS amounts is shown on page ** .
Revenue for the Retail business of £950.6m reflected, on a constant-currency basis, a like-for-like ("LFL") sales decrease of -2.3%. Total
revenue in the year declined -2.7% after the impacts of closed stores are included. The Cycling performance was strong, with like-for-like
growth of +2.3% rebounding from a slow start to FY20. Motoring finished the year with a like-for-like decline of -5.3%. A similar trend
prevailed with results improving as the year progressed, but it was Motoring that was significantly impacted by the pandemic and lockdown
from week 52.
Conversely, cycling demand was boosted by a more health conscious consumer and the avoidance of public transport. The Retail Operational
Review in the Chief Executive's Statement contains further commentary on the trading performance in the year. Like-for-like revenues and
total sales revenue mix for the Retail business are split by category below:
FY20 FY20 FY19
LFL (%) Total sales mix (%) Total sales mix (%)
Motoring -5.3 58.4 60.4
Cycling +2.3 41.6 39.6
Total -2.3 100.0 100.0
Gross profit for the Retail business at £458.4m (FY19: £469.3m) represented 48.2% of sales, 20bps up on the prior year (FY19: 48.0%).
Underlying gross margin improved more significantly than the headline number, which was diluted by product mix into lower margin cycling,
and out of the motoring category, alongside gross profit adjustments for IFRS 15. The gross margin improvement reflected the significant
work carried out over the last 18 months on our sourcing strategy for both bikes and motoring products, as well as our work to optimise
promotional activity throughout the year. Over the year, cycling gross margins improved by 117bps and Motoring by 138bps vs FY19.
The table below shows the average exchange rate reflected in cost of sales along with the year-on-year movement.
FY20 FY19
full year full year
Average USD: GBP rate reflected in cost of sales $1.33 $1.32
Year-on-year movement in rate $0.01 $0.03
Retail operating costs before non-underlying items and IFRS 16 were £404.3m (FY19: £410.5m) a decline of 1.5% on FY19. The focus on
operational efficiency and procurement continued in FY20 and, as mentioned previously, helped to mitigate a challenging market. Our stores
saw only modest increases in overall labour costs despite a 4% increase in the National Minimum Wage, as we continued with our 'We Operate
4 Less' programme. Rent costs also reduced as the market begins to reflect excess supply in the Retail rental market and we continued to
negotiate improved lease terms on renewals. These initiatives were coupled with capital investments such as LED lighting, which
significantly reduced energy consumption across the estate.
Autocentres
FY20 FY20 FY19
52 week
(53 weeks) (52 weeks) (52 weeks)
change
£m £m £m
Revenue 194.1 191.8 161.4 +18.8%
Gross Profit 126.9 125.6 109.7 +14.5%
Gross Margin 65.4% 65.5% 68.0% -250bps
Operating Costs (121.4) (118.9) (104.2) +14.1%
Underlying EBIT pre IFRS 16* 5.5 6.7 5.5 +21.8%
Non-underlying items (2.6) (2.6) 0.9 -388.9%
Impact of adopting IFRS 16 0.1 0.1 - -
EBIT post IFRS 16 3.0 4.2 6.4 -34.4%
Underlying EBITDA pre IFRS 16* 11.5 12.6 11.1 +13.5%
* This report includes Alternative Performance Measures (APMs) which we believe provide readers with important additional information on
the Group. A glossary of terms and reconciliation to IFRS amounts is shown on page 18.
Autocentres generated total revenues of £191.8m (FY19: £161.4m), an increase of 18.8% on the prior year with a LFL increase of 1.4%.
Non-LFL revenue in the year included benefits from the acquisitions of both Tyres on the Drive and McConechy's Tyre Services in November
2019, alongside existing Autocentres that have been open less than 12 months.
Gross profit at £125.6m (FY19: £109.7m) represented a gross margin of 65.5%; a decrease of 250 bps on the prior year. As stated earlier,
the decrease in gross margin % was solely a result of the acquisitions, which will have a dilutive effect before we migrate the product mix
to servicing and repair in the future. The underlying business saw its GP% improve significantly by +180bps, with the continued development
of our PACE Digital Operating Platform aiding buying efficiency across garages alongside a marginally lower mix into tyres, which tend to
be lower margin. The benefits of later phases of PACE also began to be felt in Q4 with the digital operating platform improving resource
allocation to jobs.
Autocentres' Underlying EBITDA before IFRS 16 of £12.6m (FY19: £11.1m) was 13.5% higher than FY19. Underlying EBIT before IFRS 16 was £1.2m
(21.8%) higher than FY19 at £6.7m (FY19: £5.5m).
Portfolio Management
The total number of fixed stores or centres within the Group stood at 843, with a further 75 mobile locations. The portfolio of fixed
locations as at 3 April 2020 comprised 472 stores (end of FY19: 477) and 371 Autocentres (end of FY19: 317). Mobile locations grew by 67
vans, increasing coverage of the most in-demand regions within the UK.
The following table outlines the changes in the portfolio over the year:
Retail Centres Vans
Relocations 3 1 -
Leases re-negotiated 20 8 -
Refreshed - 14 -
Openings/Acquisitions - 57 67
Closed 4 4 -
Within Retail, the focus in year continued to be on re-laying stores to optimise the space allocated to key growth categories, including
E-mobility. Four retail stores closed on the natural expiration of their leases as it was considered more profitable to the Group on
consideration of the anticipated sales transfer to other channels and neighbouring stores. Although nearly all of our Retail stores
continue to trade profitably, the number of lease expiries or breaks under option increases significantly within the next five years.
Retail will see two-thirds of stores experience optionality within five years, allowing for a high degree of flexibility within the
estate.
Within Autocentres, one centre was opened and 57 locations acquired in the year. Four were closed, taking the total number of Autocentre
locations to 371 as at 3 April 2020 (end of FY19: 317). Fourteen Autocentres were refreshed in the year (FY19: 8).
With the exception of eight long leasehold and two freehold properties within Autocentres, the Group's operating sites are occupied under
operating leases, the majority of which are on standard lease terms, typically with a five to 15-year term at inception and with an average
lease length of under six years.
Net Non-Underlying items
The following table outlines the components of the non-underlying items recognised in the 53 weeks ended 3 April 2020:
FY20 FY19
£m £m
Organisational restructure costs (a) 2.8 6.8
Group-wide strategic review (b) 1.0 2.4
One-off royalty income (c) - (1.6)
Acquisition and investment-related fees (d) 1.9 0.2
One-off claims (e) 0.8 -
Closure costs (f) 25.6 -
Net non-underlying items pre IFRS 16 32.1 7.8
Closure costs (f) 1.2 -
Impairment of right-of-use assets (g) 0.9 -
Net non-underlying items post IFRS 16 34.2 7.8
a. In the current and prior period, separate and unrelated organisational restructuring activities were undertaken.
Current period costs comprised:
• Redundancy and transition costs of £1.4m relating to roles which have been outsourced or otherwise will not be replaced (FY19: £1.5m);
and
• £1.4m of asset write-offs, principally resulting from the strategic decision to re-platform the Retail and Autocentres websites (FY19:
£5.3m)
b. In the current and prior periods, costs were incurred in preparing and implementing the new Group strategy.
• £0.4m of external consultant costs (FY19: £2.0m); and
• £0.6m of store labour costs, point-of-sale equipment and other associated costs in completing the cycling space re-lay across the store
estate (FY19: £nil).
Prior period costs also included £0.4m of warehouse and distribution costs in order to align our network with the new strategy.
c. A one-off royalty income was received in the prior period in relation to the use of a software license.
d. In the current and prior periods, costs were incurred in relation to the investment in McConechy's Tyre Services and Tyres on the
Drive. Tyres on the Drive acquisition costs comprise £1m principally relating to the costs of dual running Halfords Mobile Expert and
Tyres on the Drive, as well as the write-off of the receivables balance due from Tyres on the Drive; and
• £0.9m relating to professional fees in respect of the acquisition of McConechy's Tyre Services
• £0.2m of costs were incurred in the prior period in relation to the investment in Tyres on the Drive and costs relating to a potential
acquisition which did not progress.
e. During the year, a provision was created for expected costs of settling an ongoing court case, which was then settled during the second
half of the period. In addition, a provision of £0.6m has been recognised in relation to the audit by HMRC relating to the national
minimum wage.
f. Closure costs represent costs associated with the proposed closure of the operations of Cycle Republic and the Boardman Performance
Centre ("Cycle Republic") following a strategic review of the Group's cycling businesses. The provision mostly relates to the
impairment of right-of-use assets, as well as the impairment of intangible and tangible assets and inventories.
g. In light of the ongoing COVID-19 pandemic, the Group has revised future cash flow projections for stores and garages. As a result,
£0.9m incremental impairment has been recognised in relation to garages where the current and anticipated future performance does not
support the carrying value of the right-of-use asset and associated tangible assets. This charge is directly attributable incremental
impairment due to COVID-19 and relates primarily to the right-of-use asset value.
Finance Expense
The net finance expense (before non-underlying items and IFRS 16) for the 53 weeks ended 3 April 2020 was £2.8m (FY19: £3.4m) reflecting
lower average levels of net debt throughout the year.
Taxation
The taxation charge on profit for the 53 weeks ended 3 April 2020 (before IFRS 16) was £2.8m (FY19: £9.1m), including a £4.7m credit (FY19:
£1.4m credit) in respect of non-underlying items. The effective tax rate of 13.9% (FY19: 17.8%) differs from the UK corporation tax rate
(19%) principally due to the impact of overseas tax rates, adjustments in respect of prior periods now closed with HM Revenue and Customs
and the impact of the rate change in deferred tax recognised in the balance sheet.
Earnings Per Share ("EPS")
Underlying Basic EPS before IFRS 16 was 22.9 pence and after non-underlying items 8.9 pence (FY19: 24.5 pence and 21.2 pence after
non-underlying items), a 6.5% and 58.0% decrease on the prior year. Basic weighted-average shares in issue during the year were 197.0m
(FY19: 197.1m).
Dividend ("DPS")
In light of the COVID-19 pandemic and the likely impact on short-term profitability, the Board has taken a series of measures to preserve
cash, one of which is a suspension of the dividend. The final dividend payment is therefore nil, taking the full year ordinary dividend to
6.18 pence (FY19: 18.57p per share).
Capital Expenditure
Capital investment in the 53 weeks ended 3 April 2020 totalled £35.8m (FY19: £31.0m) comprising £31.0m in Retail and £4.8m in Autocentres.
Within Retail, £15.9m (FY19: £11.4m) was invested in stores, including store relocations, space optimisation and a building management
system across one third of the estate to reduce energy consumption. Additional investments in Retail infrastructure included a £9.7m
investment in IT systems, including development of a new Group website.
The £4.8m (FY19: £4.7m) capital expenditure in Autocentres principally related to the replacement of garage equipment and replacement of
fixtures and fittings alongside the development of PACE, our Garage Workflow System.
Inventories
Group inventory held as at the year-end was £173.0m (FY19: £173.7m). Retail inventory decreased to £168.0m (FY19: £172.3m), reflecting
reduced stock levels and working capital efficiencies.
Autocentres' inventory was £5.0m (FY19: £1.4m). The existing Autocentres business model is such that only modest levels of inventory are
held, with most parts being acquired on an as-needed basis. The increase in inventory related to the acquisition of McConechy's Tyre
Services Limited who typically hold low levels of tyres.
Cashflow and Borrowings
Adjusted Operating Cash Flow was £109.9m (FY19: £88.5m). After acquisitions, taxation, capital expenditure and net finance costs, Free Cash
Flow of £54.6m (FY19: £42.7m) was generated in the year. Group Net Debt was £73.2m (FY19: £81.8m), with the Underlying EBITDA ratio at
0.8:1. All these numbers are pre IFRS 16.
Adoption of IFRS 16 "Leases"
The Group has initially applied IFRS 16 "Leases" as at 30 March 2019. A right-of-use asset and a lease liability is included on the
Consolidated Statement of Financial Position, and depreciation and interest has been charged to the Consolidated Income Statement instead
of existing rental charges and operating expenses.
Discount rates ranging between 0.76% and 3.94% have been applied based on UK Government Gilt rates of an appropriate duration and adjusted
by an indicative credit premium.
The Group has adopted the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative
effect of applying IFRS 16 is recognised in retained earnings at the date of initial application.
A summary of the impact on the Group income statement and balance sheet for the 53 weeks ended 3 April 2020 is as follows:
FY20 FY19
Impact on the Consolidated Income Statement:
£m £m
Operating costs:
Rent 85.8 -
Depreciation (72.6) -
Foreign exchange and impairment (1.4)
Net impact on Operating costs 11.8 -
Finance costs (interest) (10.8) -
Net impact on underlying Profit Before Tax 1.0 -
Non-underlying costs (2.1)
Net impact on Profit Before Tax (1.1)
The £11.8m net impact on Operating costs is comprised of £10.9m for Retail and £0.9m for Autocentres as shown above.
FY20 FY19
Impact on the Consolidated Balance Sheet:
£m £m
Right-of-use asset 349.9 -
Lease liability (416.0) -
Retained earnings 25.1 -
Brexit and impact of movements in foreign currency exchange rates
As we have previously explained, the decision of the UK to leave the European Union ("Brexit") presents significant uncertainties to the
Group as a result of the impact on the wider UK economy. We have previously set out the main areas in which we considered Brexit was likely
to impact the Group. We reaffirm and update our assessment of these below:
• Impact on exchange rates. The Group buys a significant proportion of its goods in US dollars; between $250m and $300m a year. As
previously guided, the majority of our US dollar sourcing is for cycling products.
• Prolonged uncertainty over exit terms and continued weakness in Sterling could lead to a slowdown in the UK economy, and consequent
loss of consumer confidence, impacting trading conditions for the Group. However, Halfords has strong positions in fragmented Motoring
and Cycling markets, and a service-led offer that differentiates us from our competitors, physical and online. Much of our sales are in
needs-based categories that are more resilient to macroeconomic cycles and our discretionary categories, such as cycling, camping and
travel solutions, could benefit from an increase in the number of people choosing to stay at home rather than holidaying abroad; a
trend that we observed in 2009.
Principal Risks and Uncertainties
The Board considers the assessment of risk assessment and the identification of mitigating actions and internal control to be fundamental
to achieving Halfords' strategic corporate objectives. In the Annual Report and Accounts, the Board sets out what it considers to be the
principal commercial and financial risks to achieving the Group's objectives. The main areas of potential risk and uncertainty in the
balance of the financial year are described in the Strategic Report of the 2020 Annual Report and Accounts. These include:
• Business Strategy
-Capability and capacity to effect significant levels of business change
-Stakeholder support and confidence in strategy
-Brands appeal and market share
- Value proposition
• Financial
-Brexit
-Sustainable business model
• Operational
- COVID-19
- IT infrastructure failure
-Skills shortage
-Staff engagement / culture
- Critical physical infrastructure failure (including supply chain disruption)
• Compliance
-Regulatory and compliance
-Service Quality
-Cyber and data security
Specific risks associated with performance include Christmas trading as well as weather-sensitive sales, particularly within the Car
Maintenance and Cycling categories in the Retail business.
Loraine Woodhouse
Chief Financial Officer
7 July 2020
Glossary of Alternative Performance Measures
In the reporting of financial information, the Directors have adopted various Alternative Performance Measures ("APMs"), previously termed
as 'Non-GAAP measures'. APMs should be considered in addition to IFRS measurements, of which some are shown on page 15 . The Directors
believe that these APMs assist in providing useful information on the underlying performance of the Group, enhance the comparability of
information between reporting periods, and are used internally by the Directors to measure the Group's performance.
The key APMs that the Group focuses on are as follows. All numbers are shown pre-IFRS 16 (on an IAS 17 basis) to enable comparability with
the prior period performance:
1.Like-for-like ("LFL") sales represent revenues from stores, centres and websites that have been trading for at least a year (but
excluding prior year sales of stores and centres closed during the year) at constant foreign exchange rates.
2.Underlying EBIT is results from operating activities before non-underlying items. Underlying EBITDA further removes Depreciation and
Amortisation.
3.Underlying Profit Before Tax is Profit before income tax and non-underlying items as shown in the Group Income Statement.
4.Underlying Earnings Per Share is Profit after income tax before non-underlying items as shown in the Group Income Statement, divided by
the number of shares in issue.
5.Net Debt is current and non-current borrowings less cash and cash equivalents, both in-hand and at bank, as shown in the Consolidated
Statement of Financial Position.
FY20 FY20
FY19
Pre IFRS 16 Post IFRS 16
£m
£m £m
Cash & cash equivalents 115.5 115.5 9.8
Borrowings - current (1.8) (83.4) (18.5)
Borrowings - non-current (186.9) (511.9) (73.1)
Net Debt* (73.2) (479.8) (81.8)
*The statutory 53-week period to 3 April 2020 comprises reported results that are non-comparable to the 52-week period reported in the
previous period.
6.Net Debt to Underlying EBITDA ratio is represented by the ratio of Net Debt to Underlying EBITDA (both of which are defined above).
7.Adjusted Operating Cash Flow is defined as EBITDA plus share-based payment transactions and loss on disposal of property, plant and
equipment, less working capital movements and movement in provisions; as reconciled below.
FY20 FY20
FY19
Pre IFRS 16 Post IFRS 16
£m
£m £m
Underlying EBIT 55.4 67.2 62.2
Depreciation, amortisation & impairment 37.2 118.7 36.0
Underlying EBITDA 92.6 185.9 98.2
Non-underlying operating expenses (32.1) (34.2) (7.8)
EBITDA 60.5 151.7 90.4
Share-based payment transactions 1.0 1.0 0.3
Loss on disposal of property, plant & equipment 2.8 2.8 5.5
Working capital movements 48.7 52.0 (10.4)
Provisions movement and other (3.1) (3.1) 2.7
Adjusted Operating Cash Flow* 109.9 204.4 88.5
*The statutory 53-week period to 3 April 2020 comprises reported results that are non-comparable to the 52-week period reported in the
previous period.
8.Free Cash Flow is defined as Adjusted Operating Cash Flow (as defined above) less capital expenditure, net finance costs, taxation,
exchange movement and arrangement fees on loans; as reconciled below.
FY20 FY20
FY19
Pre IFRS 16 Post IFRS 16
£m
£m £m
Adjusted Operating Cash Flow 109.9 204.4 88.5
Capital expenditure (34.1) (33.6) (29.4)
Net finance costs (2.4) (13.2) (3.1)
Taxation (16.3) (16.3) (12.7)
Exchange movements (2.5) (2.0) (0.3)
Arrangement fees on loans - - (0.3)
Free Cash Flow* 54.6 139.3 42.7
*The statutory 53-week period to 3 April 2020 comprises reported results that are non-comparable to the 52-week period reported in the
previous period.
Halfords Group plc
Consolidated Income Statement
For the 53 weeks to 3 April 2020
For the period 53 weeks to 3 April 2020 52 weeks to 29 March 2019
Before Non-underlying Before Non-underlying
Non-underlying items Total Non-underlying items Total
items (note 4) items (note 4)
Notes £m £m £m £m £m £m
Revenue 1,155.1 - 1,155.1 1,138.6 - 1,138.6
Cost of sales (565.4) - (565.4) (559.6) - (559.6)
Gross profit 589.7 - 589.7 579.0 - 579.0
Operating expenses 2 (522.5) (34.2) (556.7) (516.8) (7.8) (524.6)
Results from operating activities 3 67.2 (34.2) 33.0 62.2 (7.8) 54.4
Finance costs 5 (13.9) - (13.9) (3.4) - (3.4)
Finance income 5 0.3 - 0.3 - - -
Net finance expense (13.6) - (13.6) (3.4) - (3.4)
Profit before income tax 53.6 (34.2) 19.4 58.8 (7.8) 51.0
Income tax expense 6 (6.9) 5.0 (1.9) (10.5) 1.4 (9.1)
Profit for the financial period
attributable to equity 46.7 (29.2) 17.5 48.3 (6.4) 41.9
shareholders
Earnings per share
Basic earnings per share pre/post 8 22.9p/23.7p 8.9p/8.9p 24.5p 21.2p
IFRS 16
Diluted earnings per share pre/post 8 22.5p/23.3p 8.8p/8.7p 24.2p 21.0p
IFRS 16
The notes on pages 25 to 33 are an integral part of these condensed consolidated financial statements.
*The Group has initially applied IFRS 16 at 30 March 2019, using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial
application (see Note 1).
Halfords Group plc
Consolidated Statement of Comprehensive Income
For the 53 weeks to 3 April 2020
53 weeks to 52 weeks to
3 April 29 March
2020 2019
Notes £m £m
Profit for the period 17.5 41.9
Other comprehensive income
Cash flow hedges:
Fair value changes in the period 7.9 7.4
Change in fair value of investment - (8.1)
Income tax on other comprehensive income 6 (0.7) -
Other comprehensive income for the period, net of income tax 7.2 (0.7)
Total comprehensive income for the period attributable to equity shareholders 24.7 41.2
All items within the Consolidated Statement of Comprehensive Income are classified as items that are or may be recycled to the Income
Statement.
*The Group has initially applied IFRS 16 at 30 March 2019, using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the date of initial
application (see Note 1).
The notes on pages 25 to 33 are an integral part of these condensed consolidated financial statements.
Halfords Group plc
Consolidated Statement of Financial Position
For the 53 weeks to 3 April 2020
29 March 30 March
3 April
2019 2018
2020
(Restated)# (Restated)#
£m £m £m
Assets
Non-current assets
Intangible assets 395.7 387.4 393.9
Property, plant and equipment 83.1 97.3 101.3
Right-of-use assets 349.9 - -
Deferred tax asset 7.3 - -
Investments - - 8.1
Total non-current assets 836.0 484.7 503.3
Current assets
Inventories# 173.0 173.7 183.8
Trade and other receivables 53.5 59.1 56.0
Derivative financial instruments 8.7 3.2 0.3
Current tax assets 8.2 - -
Cash and cash equivalents 115.5 9.8 27.0
Total current assets 358.9 245.8 267.1
Total assets 1,194.9 730.5 770.4
Liabilities
Current liabilities
Borrowings (0.2) (18.5) (20.8)
Derivative financial instruments (1.1) (1.4) (5.4)
Lease liabilities (83.2) - -
Trade and other payables (217.0) (176.4) (187.0)
Current tax liabilities - (3.3) (3.3)
Provisions (9.7) (15.1) (11.9)
Total current liabilities (311.2) (214.7) (228.4)
Net current assets 47.7 31.1 38.7
Non-current liabilities
Borrowings (179.1) (73.1) (94.0)
Lease liabilities (332.8) - -
Trade and other payables (1.9) (28.1) (31.2)
Deferred tax liability - (0.1) (2.7)
Provisions (4.1) (5.2) (3.9)
Total non-current liabilities (517.9) (106.5) (131.8)
Total liabilities (829.1) (321.2) (360.2)
Net assets 365.8 409.3 410.2
Shareholders' equity
Share capital 2.0 2.0 2.0
Share premium 151.0 151.0 151.0
Investment in own shares (10.0) (10.0) (9.4)
Other reserves 4.9 1.9 (2.9)
Retained earnings 217.9 264.4 269.5
Total equity attributable to equity holders of the Company 365.8 409.3 410.2
*The Group has initially applied IFRS 16 at 30 March 2019, using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of applying IFRS 16 is recognised in Retained earnings at the date of initial
application (see Note 1).
# See Note 11
The notes on pages 25 to 33 are an integral part of these condensed consolidated financial statements.
Halfords Group plc
Consolidated Statement of Changes in Shareholders' Equity
For the 53 weeks to 3 April 2020
Attributable to the equity holders of the Company
Other reserves
Share Investment Capital
Share premium in own Hedging Retained Total
redemption reserve
capital account shares reserve earnings equity
£m £m £m £m £m £m £m
Balance at 30 March 2018 2.0 151.0 (9.4) 0.3 (3.2) 281.2 421.9
Prior year adjustment - - - - - (11.7) (11.7)
Balance at 30 March 2018 (restated) 2.0 151.0 (9.4) 0.3 (3.2) 269.5 410.2
Impact of adoption of IFRS 15 - - - - - (3.3) (3.3)
Adjusted balance at 30 March 2018 2.0 151.0 (9.4) 0.3 (3.2) 266.2 406.9
Total comprehensive income for the period
Profit for the period - - - - - 41.9 41.9
Other comprehensive income
Cash flow hedges:
Fair value changes in the period - - - - 7.4 - 7.4
Changes in fair value of investment - - - - - (8.1) (8.1)
Income tax on other comprehensive income - - - - - - -
Total other comprehensive income for the period net of - - - - 7.4 (8.1) (0.7)
tax
Total comprehensive income for the period - - - - 7.4 33.8 41.2
Hedging gain and losses and costs of hedging - - - - (2.6) - (2.6)
transferred to the cost of inventory
Transactions with owners
Own shares acquired
Share options exercised - - (1.0) - - - (1.0)
Share-based payment transactions - - 0.4 - - - 0.4
Income tax on share-based payment transactions - - - - - 0.3 0.3
Dividends to equity holders - - - - - (35.9) (35.9)
Total transactions with owners - - (0.6) - - (35.6) (36.2)
Balance at 29 March 2019 2.0 151.0 (10.0) 0.3 1.6 264.4 409.3
The notes on pages 25 to 33 are an integral part of these condensed consolidated financial statements.
Halfords Group plc
Consolidated Statement of Changes in Shareholders' Equity (continued)
Attributable to the equity holders of the Company
Other reserves
Share Investment Capital
Share premium in own Hedging Retained Total
redemption reserve
capital account shares reserve earnings equity
£m £m £m £m £m £m £m
Closing balance at 29 March 2019 (restated) 2.0 151.0 (10.3) 0.3 1.6 264.4 409.3
Adjustment on initial application of IFRS 16 - - - - - (25.1) (25.1)
Adjusted balance at 29 March 2019 2.0 151.0 (10.0) 0.3 1.6 239.3 384.2
Total comprehensive income for the period
Profit for the period - - - - - 17.5 17.5
Other comprehensive income
Fair value changes in the period - - - - 7.9 (2.3) 5.6
Income tax on other comprehensive income - - - - (0.7) (0.8) (1.5)
Total other comprehensive income for the period net of - - - - 7.2 (3.1) 4.1
tax
Total comprehensive income for the period - - - - 7.2 14.4 21.6
Hedging gains and losses and costs of hedging - - - - (4.2) - (4.2)
transferred to the cost of inventory
Transactions with owners
Share options exercised
Share-based payment transactions - - - - - 1.0 1.0
Income tax on share-based payment transactions - - - - - (0.2) (0.2)
Dividends to equity holders - - - - - (36.6) (36.6)
Total transactions with owners - - - - - (35.8) (35.8)
Balance at 3 April 2020 2.0 151.0 (10.0) 0.3 4.6 217.9 365.8
*The Group has initially applied IFRS 16 at 30 March 2019, using the modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of applying IFRS 16 is recognised in retained earnings at the date of initial
application (see Note 1).
** See Note 11
The notes on pages 25 to 33 are an integral part of these condensed consolidated financial statements.
Halfords Group plc
Consolidated statement of cash flows
For the 53 weeks to 3 April 2020
53 weeks to 52 weeks to
3 April 29 March
2020 2019
Notes £m £m
Cash flows from operating activities
Profit after tax for the period, before non-underlying items 46.7 48.3
Non-underlying items (29.2) (6.4)
Profit after tax for the period 17.5 41.9
Depreciation - property, plant and equipment 24.3 23.0
Impairment - property, plant and equipment 5.4 -
Amortisation and impairment of right-of-use assets 83.0 -
Amortisation - intangible assets 11.4 13.0
Net finance costs 13.6 3.4
Loss on disposal of property, plant and equipment and intangibles 2.8 5.5
Equity-settled share-based payment transactions 1.0 0.3
Exchange movement (2.0) (0.3)
Income tax expense 1.9 9.1
Decrease in inventories 3.9 11.9
Decrease/(increase) in trade and other receivables 3.7 (3.1)
Increase/(decrease) in trade and other payables 44.4 (19.2)
(Decrease)/increase in provisions (3.1) 2.7
Income tax paid (16.3) (12.7)
Net cash from operating activities 191.5 75.5
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (10.9) -
Purchase of investment - (0.5)
Purchase of intangible assets (12.5) (11.0)
Purchase of property, plant and equipment (21.1) (18.4)
Net cash used in investing activities (44.5) (29.9)
Cash flows from financing activities
Net proceeds from share options and purchase of own shares - (0.6)
Finance income received 0.3 -
Finance costs paid (13.5) (3.1)
Repayment of loan following acquisition (1.8) -
Proceeds from loans, net of transaction costs 1,377.0 1,138.7
Repayment of borrowings (1,262.0) (1,159.0)
Payment of capital element of leases (2019: payments made on finance leases) (87.7) (0.6)
Dividends paid (36.6) (35.9)
Net cash used in financing activities (24.3) (60.5)
Net increase/(decrease) in cash and bank overdrafts 9 122.7 (14.9)
Cash and cash equivalents at the beginning of the period (7.4) 7.5
Cash and cash equivalents at the end of the period 9 115.3 (7.4)
The notes on pages 25 to 33 are an integral part of these condensed consolidated financial statements.
Halfords Group plc
Notes to the condensed consolidated financial statements
For the 53 weeks to 3 April 2020
1. General information and basis of preparation
The financial information set out below does not constitute the Group's statutory accounts for the periods ended 3 April 2020 or 29 March
2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies, and those for 2020
will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The financial statements are presented in millions of UK pounds, rounded to the nearest £0.1m.
The accounts of the Group are prepared for the period up to the Friday closest to 31 March each year. Consequently, the financial
statements for the current period cover the 53 weeks to 3 April 2020, whilst the comparative period covered the 52 weeks to 29 March 2019.
The consolidated financial statements of Halfords Group plc and its subsidiary undertakings, together "the Group", have been prepared in
accordance with International Financial Reporting Standards ("IFRSs") and IFRS Interpretations Committee ("IFRS IC") Interpretations as
adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial
statements are prepared on a going concern basis and under the historical cost convention, except where adopted IFRSs require an
alternative treatment. The principal variations relate to financial instruments (IFRS 9 "Financial instruments"), share-based payments
(IFRS 2 "Share-based payment" and leases (IFRS 16 "Leases").
Adoption of new and revised standards
Other than IFRS 16, there are no new or amended standards effective in the period which has had a material impact on the consolidated
financial information.
IFRS 16 "Leases"
IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised
right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease
payments. Lessor accounting remains similar to previous accounting policies.
a. Transition Method and Practical Expedients Utilised
The Group has applied IFRS 16 using the modified retrospective transition approach, with recognition of transitional adjustments on the
date of initial application (30 March 2019), without restatement of comparative figures.
Previously, the Group determined at the inception of a contract whether an arrangement was or contained a lease under IFRIC 4 Determining
Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a
lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a
period of time in exchange for consideration.
On transition to IFRS 16, the Group elected to apply the practical expedient allowing the standard to be applied only to contracts that
were previously identified as leases under IAS17 and IFRIC 4. Therefore, the definition of a lease under IFRS 16 has been applied only to
contracts entered into or changed on or after 30 March 2019.
IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. In applying
IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
• Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
• The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application;
• Reliance on previous assessments on whether leases are onerous;
• Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining
as of the date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred
substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for
most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets.
The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
At the commencement date of property leases the Group determines the lease term to be the full term of the lease, assuming that any option
to break or extend the lease is unlikely to be exercised. Leases are regularly reviewed and will be revalued if it becomes likely that a
break clause or option to extend the lease is exercised.
b. Right-of-use assets
The Group recognises a right-of-use asset at the lease commencement date. The right-of-use assets are measured at either:
• Their carrying amount as if IFRS 16 has been applied since the commencement date, discounted using the lessee's incremental borrowing
rate at the date of initial application - the Group applied this approach to the majority of the Retail property portfolio; or
• An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments - the Group applied this
approach to all other leases.
Subsequent to measurement right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the
remaining economic life of the asset if this is judged to be shorter.
c. Lease liabilities
The lease liabilities are measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing
rate as at 30 March 2019. The Group's incremental borrowing rate is the rate at which a similar borrowing could be obtained from an
independent creditor under comparable terms and conditions. Judgement is required to determine an approximation, calculates based on UK
Government Gilt rates of an appropriate duration and adjusted by an indicative credit premium and a lease specific adjustment. The range of
rates applied was 0.76% to 3.77%.
Subsequently, the lease liability is increased by the interest cost on the lease liability and decreased by the lease payment made. It is
remeasured if there is a modification, a change in lease term or a changed in the fixed lease payments.
d. Impacts on the financial statements
The group leases many assets including properties, cars and other equipment.
As a lessee, the Group previously classified leases as operating lease or finance lease based on its assessment of whether the lease
transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease
liabilities for most leases, except for short-term leases and leases of low-value assets.
i. Statement of Consolidated Financial Position
The impact on the Statement of Financial Position on transition is summarised below:
30 March
2019
£m
Right-of-use assets 389.1
Property, plant and equipment (7.2)
Lease liabilities (456.8)
Deferred tax asset 6.2
Prepayments (13.0)
Accruals (39.0)
Retained earnings 25.1
The table below shows a reconciliation from the total operating lease commitment as disclosed at 30 March 2019 to the total lease
liabilities recognised in the accounts immediately after transition:
30 March
2019
£m
Operating lease commitment at 29 March 2019 as disclosed in the Group's consolidated financial statements 507.6
Discounted using the incremental borrowing rate at 30 March 2019 (61.5)
Recognition exemption for lease of low-value assets/short-term leases 0.1
Finance lease liabilities recognised at 29 March 2019 under IAS 17 10.6
Total lease liabilities recognised at 30 March 2019 456.8
The Group presents right-of-use assets separately in the consolidated balance sheet.
The carrying amounts of right-of-use assets are as below:
Property, Plant and Equipment
£m
Balance at 30 March 2019 396.3
Balance at 3 April 2020 349.9
ii. Consolidated Income Statement
The Group has recognised depreciation and interest costs in respect of leases that were previously classified as operating leases in the
income statement for the period, rather than rental charges. During the period ended 3 April 2020, the Group recognised £72.6m of
additional depreciation charges and £10.8m of additional interest costs in respect of these leases.
iii. Reserves
Where the Group has chosen to implement IFRS 16 using the modified transition approach, whereby the initial right-of-use asset values were
equal to the present value of the remaining lease payments there is no impact on reserves at the date of transition.
Where the cumulative approach has been adopted the mismatch between the liability and asset value at transition is taken to reserves. The
Group has taken £25.1m to reserves at the start of the period.
New standards and interpretations not yet adopted
All other standards and related adoptions which have been published but not yet adopted are not expected to have a material impact on the
consolidated results or financial position of the Group. A full listing will be provided in the statutory accounts.
2. Operating expenses
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Selling and distribution costs 436.0 424.3
436.0 424.3
Administrative expenses, before non-underlying items 86.5 92.5
Non-underlying administrative expenses 34.2 7.8
120.7 100.3
556.7 524.6
3. Operating profit
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Operating profit is arrived at after charging/(crediting) the following expenses/(incomes) as categorised by
nature:
Operating lease rentals:
- plant and machinery 0.6 3.8
- property rents 2.5 93.1
- rentals receivable under operating leases (3.0) (3.1)
Landlord surrender premiums (0.6) (1.3)
Loss on disposal of property, plant and equipment and intangibles 2.8 5.5
Amortisation of intangible assets 11.4 13.0
Amortisation of right-of-use assets 73.6 -
Depreciation and impairment of:
- owned property, plant and equipment 24.3 22.3
- assets held under finance leases - 1.0
Impairment of:
- owned property, plant and equipment - (0.3)
- impairment of right-of-use assets 9.4 -
Trade receivables impairment 0.2 0.1
Staff costs 256.2 239.4
Cost of inventories consumed in cost of sales 563.8 554.2
4. Non-underlying items
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Non-underlying operating expenses:
Organisational restructure costs (a) 2.8 6.8
Group-wide strategic review (b) 1.0 2.4
Closure costs (c) 26.8 -
Acquisition and investment related fees (d) 1.9 0.2
One-off claims (e) 0.8 -
Impairment of right-of-use assets (f) 0.9 -
One-off royalty income (g) - (1.6)
Non-underlying items before tax 34.2 4.57.8
Tax on non-underlying items (h) (5.0) (1.4)
Non-underlying items after tax 29.2 6.4
a. In the current and prior period separate and unrelated organisational restructuring activities were undertaken.
Current period costs comprised:
• Redundancy and transition costs of £1.4m relating to roles which have been outsourced or otherwise will not be replaced (FY19: £1.5m);
and
• £1.4m of asset write-offs, principally resulting from the strategic decision to re-platform the Retail and Autocentres websites (FY19:
£5.3m).
(b) In the current and prior periods costs were incurred in preparing and implementing the new Group strategy.
• £0.4m of external consultant costs (FY19: £2.0m); and
• £0.6m of store labour costs, point of sale equipment and other associated costs in completing the cycling space relay across the
store estate (FY19: £nil).
Prior period costs also included £0.4m of warehouse and distribution costs in order to align our network with the new strategy.
(c) Closure costs represent costs associated with the proposed closure of the operations of Cycle Republic and the Boardman Performance
Centre ("Cycle Republic") following a strategic review of the Group's cycling businesses. The provision mostly relates to the impairment
of right-of-use assets, intangible and tangible assets and inventories.
(d) In the current and prior periods costs were incurred in relation to the investment in McConechy's Tyre Services and Tyres on the
Drive.
• Tyres on the Drive acquisition costs comprise of £1m principally relating to the costs of dual running Halfords Mobile Expert and Tyres
on the Drive, as well as the write off of the receivables balance due from Tyres on the Drive related to Halfords Mobile Expert prior
to acquisition; and
• £0.9m relating to professional fees in respect of the acquisition of McConechy's Tyre Services.
£0.2m of costs were incurred in the prior period in relation to the investment in Tyres on the Drive and costs relating to a potential
acquisition which did not progress.
(e) During the year, a provision was created for expected costs of settling an ongoing court case, which was then settled during the
second half of the period. In addition, a provision of £0.6m has been recognised in relation to the audit by HMRC relating to the national
minimum wage.
(f) In light of the ongoing COVID-19 pandemic, the Group has revised future cash flow projections for stores and garages. As a result,
£0.9m incremental impairment has been recognised in relation to garages where the current and anticipated future performance does not
support the carrying value of the right-of-use asset and associated tangible assets. This charge is directly attributable incremental
impairment due to COVID-19 and relates primarily to the right-of-use asset value.
(g) A one-off royalty income was received in the current period in relation to the use of a software licence.
(h) The tax credit of £5.0m represents a tax rate of 14.6% applied to non-underlying items. The prior period represents a tax credit at
18.0% applied to non-underlying items.
5. Finance income and costs
Recognised in profit or loss for the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Finance costs:
Bank borrowings (1.6) (1.6)
Amortisation of issue costs on loans (0.4) (0.4)
Commitment and guarantee fees (0.6) (0.6)
Interest payable on lease liabilities (11.3) (0.8)
Finance costs (13.9) (3.4)
Finance income:
Bank and similar interest 0.3 -
Finance income 0.3 -
Net finance costs (13.6) (3.4)
6. Taxation
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Current taxation
UK corporation tax charge for the period 5.4 11.5
Adjustment in respect of prior periods (0.5) 0.2
4.9 11.7
Deferred taxation
Origination and reversal of temporary differences (1.5) (1.4)
Adjustment in respect of prior periods (1.5) (1.2)
(3.0) (2.6)
Total tax charge for the period 1.9 9.1
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Profit before tax 19.4 51.0
UK corporation tax at standard rate of 19% (2019: 19%) 3.7 9.7
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief 0.5 0.5
Other disallowable expenses 0.8 0.1
Adjustment in respect of prior periods (1.9) (1.0)
Impact of overseas tax rates (0.3) (0.2)
Impact of change in tax rate on deferred tax balance (0.9) -
Total tax charge for the period 1.9 9.1
The tax rate was due to reduce from 19% to 17% from 1 April 2020, following changes substantively enacted on 6 September 2016. In
the March 2019 Budget, it was announced that the corporation tax rate would remain at 19% from 1 April 2020. This was substantively
enacted on 17 March 2020.
The deferred tax asset at 3 April 2020 has been calculated based on the rate of 19% substantively enacted at the balance sheet date.
The effective tax rate of 9.7% (2019: 17.8%) is lower than the UK corporation tax rate principally due to the non-deductibility of
depreciation charged on capital expenditure and non-deductible amortisation of intangible assets and adjustment in respect of prior
periods.
The tax charge for the period was £1.9m (2019: £9.1m), including a £5.0m credit (2019: £1.4m credit) in respect of tax on
non-underlying items.
The Group engages openly and proactively with tax authorities both in the UK and internationally, where it trades and sources products, and
is considered low risk by HM Revenue & Customs ("HMRC"). The Company is fully committed to complying with all of its tax payment and
reporting obligations.
In this period, the Group's contribution from both taxes paid and collected exceeded £208.0m (2019: £172.0m) with the main taxes including
corporation tax of £16.3m (2019: £12.7m), net VAT of £101.4m (2019: £72.2m), employment taxes of £54.3m (2019: £48.2m) and business rates
of £36.3m (2019: £39.8m).
7. Dividends
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
£m £m
Equity - ordinary shares
Final for the 52 weeks to 29 March 2019 - paid 12.39p per share (2019: 12.03p) 24.4 23.7
Interim for the 53 weeks to 3 April 2020 - paid 6.18p per share (2019: 6.18p) 12.2 12.2
36.6 35.9
In addition, the Directors are not proposing a final dividend (2019: £24.4m at 12.39p per share) in respect of the financial period ended 3
April 2020.
8. Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period. The weighted average number of shares excludes shares held by an Employee Benefit Trust and
has been adjusted for the issue/purchase of shares during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market
price of the Company's ordinary shares during the 53 weeks to 3 April 2020.
The Group has also chosen to present an alternative earnings per share measure, underlying earnings per share, with profit adjusted for
non-underlying items because it better reflects the Group's underlying performance.
For the period 53 weeks to 52 weeks to
3 April 29 March
2020 2019
Number of shares Number of shares
m m
Weighted average number of shares in issue 199.1 199.1
Less: shares held by the Employee Benefit Trust (weighted average) (2.1) (2.0)
Weighted average number of shares for calculating basic earnings per share 197.0 197.1
Weighted average number of dilutive shares 3.3 2.1
Total number of shares for calculating diluted earnings per share 200.3 199.2
53 weeks to 52 weeks to
53 weeks to
3 April 29 March
For the period 3 April 2020 (pre IFRS 16)
2020 2019
£m
£m £m
Basic earnings attributable to equity shareholders 17.5 17.6 41.9
Non-underlying items (see note 4):
Operating expenses 34.2 32.1 7.8
Tax on non-underlying items (5.0) (4.7) (1.4)
Underlying earnings before non-underlying items 46.7 45.0 48.3
For the period
53 weeks to 3 April 52 weeks to 29 March
53 weeks to 3 April 2020 (pre IFRS 16)
2020 2019
Basic earnings per ordinary share 8.9p 8.9p 21.2p
Diluted earnings per ordinary share 8.7p 8.8p 21.0p
Basic underlying earnings per ordinary share 23.7p 22.9p 24.5p
Diluted underlying earnings per ordinary share 23.3p 22.5p 24.2p
9. Analysis of movements in Group's net debt in the period
At 29 March Recognised on adoption of At 3 April
Cash flow Other non-cash changes
2019 IFRS 16 2020
£m £m £m £m
£m
Cash and cash equivalents at bank and in hand (7.4) 122.7 - 115.3
-
Debt due after one year (63.8) (115.0) - (0.3) (179.1)
Total net debt excluding leases (71.2) 7.7 - (0.3) (63.8)
Current lease liabilities (1.3) 87.7 (79.4) (90.2) (83.2)
Non-current lease liabilities (9.3) - (377.4) 53.9 (332.8)
Total lease liabilities (10.6) 87.7 (36.3) (416.0)
(456.8)
Total net debt (81.8) 95.4 (36.6) (479.8)
(456.8)
Non-cash changes include finance costs in relation to the amortisation of capitalised debt issue costs of £0.4m (2019: £0.6m) and changes
in classification between amounts due within and after one year.
Cash and cash equivalents at the period end consist of £115.5m (2019: £9.8m) of liquid assets and £0.2m (2019: £17.2m) of bank overdrafts.
10. Leases
All leases where the Group is a lessee are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a term of 12 months or less.
IFRS 16 "Leases" was adopted on 30 March 2019 without restatement of comparative figures. For an explanation of the transitional
requirements that were applied as at 30 March 2019, see note 1.
i. Amounts recognised in the consolidated statement of financial position
Right-of-Use Assets
Land and Equipment
Total
buildings £m
£m
£m
At 30 March 2019 388.5 7.8 396.3
Additions on acquisition of subsidiary 11.1 0.3 11.4
Reclassification from intangible assets 2.4 - 2.4
Additions to right-of-use assets 10.0 1.9 11.9
Amortisation charge for the year (70.2) (3.4) (73.6)
Effect of modification of lease 11.6 - 11.6
Derecognition of right-of-use assets - (0.7) (0.7)
Impairment (9.4) - (9.4)
At 3 April 2020 344.0 5.9 349.9
Lease Liabilities
Land and Equipment
Total
buildings £m
£m
£m
At 30 March 2019* 448.6 8.2 456.8
Additions on acquisition of subsidiary 11.0 0.2 11.2
Additions to lease liabilities 10.5 1.8 12.3
Interest expense 11.1 0.2 11.3
Effect of modification to lease 11.7 - 11.7
Lease payments (83.8) (4.2) (88.0)
Foreign exchange movements 0.7 - 0.7
At 3 April 2020 409.8 6.2 416.0
* In the previous year, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as 'finance
leases' under IAS 17, "Leases". The assets were presented in property, plant and equipment and the liabilities as part of the Group's
borrowings. For adjustments recognised on adoption of IFRS 16 on 30 March 2019, please refer to note 1.
3 April
Lease liabilities 2020
£m
Maturity analysis - contractual undiscounted cash flows
Less than one year 92.9
Between one and two years 76.6
Between two and five years 177.0
After five years 108.7
Total contractual cash flows 455.2
ii. Amounts recognised in the consolidated income statement
Land and Equipment
Total
buildings £m
£m
£m
53 weeks ended 3 April 2020
Amortisation charge on right-of-use assets 70.2 3.4 73.6
Interest on lease liabilities 11.1 0.2 11.3
Income from sub-leasing right-of-use assets presented in 'other revenue'
Expenses relating to short-term leases 2.5 - 2.5
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets - 0.6 0.6
52 weeks ended 29 March 2019
Lease expense 93.1 3.8 96.9
Sub-lease income presented in 'other revenue' (3.1) - (3.1)
iii. Amounts recognised in the consolidated statement of cash flows
The total cash outflow for leases for the period ended 3 April 2020 was £87.7m.
11. Inventories
Following a review of inventory costing during the period, the Group concluded that the historic inclusion of certain distribution centre
costs within the cost of inventories and the treatment of such distribution centre costs as an operating expense rather than a cost of sale
was not in line with the Group's accounting policy.
In the consolidated statement of financial position, inventories at 29 March 2019 and 30 March 2018 are stated after adjusting for this
amount, and consequently retained earnings and net assets have been reduced by £11.7m. In correcting this misapplication, there is no
impact on reported gross profit, operating expenses or other items in the consolidated income statement or i the consolidated statement of
cash flows for the current or comparative periods.
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ISIN: GB00B012TP20
Category Code: ACS
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 74071
EQS News ID: 1087507
End of Announcement EQS News Service
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