REG - Halfords Group PLC - Half Yearly Report <Origin Href="QuoteRef">HFD.L</Origin> - Part 2
06/11/2014 08:42
- Part 2: For the preceding part double click ID:nRSF2849Wa
Cost of sales - - - - 1.7 - 1.7
Tax on other comprehensive income - - - - 0.9 - 0.9
Total other comprehensive income for the period net of tax - - - - (1.7) 34.1 32.4
Transactions with owners, recorded directly in equity
Share options exercised - - 0.9 - - - 0.9
Share-based payment transactions - - - - - 0.2 0.2
Purchase of own shares - - (3.2) - - - (3.2)
Tax on share-based payment transactions - - - - - (0.1) (0.1)
Dividends to equity holders - - - - - (17.6) (17.6)
Total transactions with owners - - (2.3) - - (17.5) (19.8)
Balance at 27 September 2013 2.0 151.0 (15.5) 0.3 (1.1) 174.6 311.3
311.3
HALFORDS GROUP PLC
Condensed consolidated statement of changes in equity (continued)
For the 26 weeks to 26 September 2014
For the period ended 26 September 2014 (Unaudited)
Attributable to the equity holders of the Company
Other reserves
Share Investment Capital
Sharecapital premiumaccount in ownshares redemption reserve Hedgingreserve Retainedearnings Totalequity
£m £m £m £m £m £m £m
Balance at 28 March 2014 2.0 151.0 (14.3) 0.3 (0.6) 187.7 326.1
Total comprehensive income for the period
Profit for the period - - - - - 39.2 39.2
Other comprehensive income
Cash flow hedges:
Fair value changes in the period - - - - 1.9 - 1.9
Transfers to inventory - - - - 1.4 - 1.4
Transfers to net profit:
Cost of sales - - - - (0.7) - (0.7)
Tax on other comprehensive income - - - - (0.8) - (0.8)
Total other comprehensive income for the period net of tax - - - - 1.8 39.2 41.0
Transactions with owners, recorded directly in equity
Share options exercised - - 0.2 - - - 0.2
Share-based payment transactions - - - - - 1.1 1.1
Purchase of own shares - - - - - - -
Tax on share-based payment transactions - - - - - (0.1) (0.1)
Dividends to equity holders - - - - - (17.7) (17.7)
Total transactions with owners - - 0.2 - - (16.7) (16.5)
Balance at 26 September 2014 2.0 151.0 (14.1) 0.3 1.2 210.2 350.6
350.6
HALFORDS GROUP PLC
Condensed consolidated statement of cash flows
For the 26 weeks to 26 September 2014
26 weeks to 26 weeks to 52 weeks to
26 September 27 September 28 March
2014 2013 2014
Unaudited Unaudited
Notes £m £m £m
Cash flows from operating activities
Profit after tax for the period before non-recurring items 39.0 34.1 55.8
Non-recurring items 0.2 - (0.3)
Profit after tax for the period 39.2 34.1 55.5
Depreciation - property, plant and equipment 9.8 8.9 18.0
Impairment charge - - 0.4
Amortisation - intangible assets 2.6 2.9 5.3
Net finance costs 1.8 3.2 5.0
Loss on disposal of property, plant and equipment 0.5 0.9 2.1
Equity settled share based payment transactions 1.1 0.2 1.0
Fair value loss/(gain) on derivative financial instruments (0.8) 1.7 1.4
Corporation tax expense 10.4 10.5 17.1
(Increase)/decrease in inventories 1.3 (7.1) (17.0)
Increase in trade and other receivables (10.7) (5.6) 1.0
Increase in trade and other payables 30.0 44.2 10.7
(Decrease)/increase in provisions 0.3 (0.1) 6.7
Finance income received 0.1 0.1 0.2
Finance costs paid (1.7) (1.8) (4.6)
Corporation tax paid (7.4) (7.0) (35.3)
Net cash from operating activities 76.5 85.1 67.5
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (14.0) - -
Purchase of intangible assets (4.1) (1.6) (5.3)
Purchase of property, plant and equipment (11.2) (9.7) (21.4)
Net cash used in investing activities (29.3) (11.3) (26.7)
Cash flows from financing activities
Net proceeds from issue of ordinary shares 0.2 0.9 2.1
Purchase of own shares - (3.2) (3.2)
Proceeds from loans, net of transaction costs 91.0 95.7 305.7
Repayment of borrowings (143.0) (177.0) (326.0)
Payment of finance lease liabilities (0.3) (0.2) (0.3)
Dividends paid to shareholders 10 (17.7) (17.6) (27.7)
Net cash used in financing activities (69.8) (101.4) (49.4)
Net decrease in cash and bank overdrafts 13 (22.6) (27.6) (8.6)
Cash and cash equivalents at the beginning of the period 13 (4.7) 3.9 3.9
Cash and cash equivalents at the end of the period 13 (27.3) (23.7) (4.7)
(4.7)
HALFORDS GROUP PLC
Notes to the condensed consolidated interim financial statements (continued)
For the 26 weeks to 26 September 2014
1. General information
The condensed consolidated interim financial statements of Halfords Group plc
(the "Company") comprise the Company together with its subsidiary undertakings
(the "Group").
The Company is a limited liability company incorporated, domiciled and
registered in England and Wales. Its registered office is Icknield Street
Drive, Washford West, Redditch, Worcestershire, B98 0DE.
The Company is listed on the London Stock Exchange.
These condensed consolidated interim financial statements were approved by the
Board of Directors on 5 November 2014.
2. Basis of preparation
These condensed consolidated interim financial statements for the 26 weeks to
26 September 2014 have been prepared in accordance with IAS 34 'Interim
financial reporting' as endorsed by the European Union. They do not include
all of the information required for full annual financial statements, and
should be read in conjunction with the 2014 Annual Report and Accounts, which
have been prepared in accordance with IFRSs as adopted by the European Union.
The comparative figures for the financial period ended 28 March 2014 are not
the Group's statutory accounts for that financial period. Those accounts have
been reported on by the Group's auditors and delivered to the registrar of
companies. The report of the auditor was (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.
3. Risks and uncertainties
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group's performance in the remaining 26 weeks of
the financial year remain the same as those stated on pages 64 to 67 of our
Annual Report and Accounts for the 52 weeks to 28 March 2014, which are
available on our website www.halfordscompany.com.
The main areas of potential risk and uncertainty facing the business for the
remainder of the financial year are those identified below:
Economic and market conditions
The economy is a major influence on consumer spending. Trends in employment,
inflation, taxation, consumer debt levels and interest rates impact consumer
expenditure in discretionary areas.
The Group constantly seeks to enhance its position as store of first choice in
each of the markets that it serves. Halfords continues to invest in both its
existing estate to ensure that it remains contemporary and in constant product
innovation to meet customer needs. In addition, the Group's market-leading
Wefit proposition provides a range of services at a lower cost to our
customers than that provided by competitors.
Whilst many of the products that Halfords sell are non-discretionary in their
nature and predicting future trends is difficult, Halfords reflects the latest
independently sourced estimates in its internal plans.
Competition
The retail industry is highly competitive and dynamic. The Group competes
with a wide variety of retailers of varying sizes and faces competition from
UK retailers, in both stores and on-line, as well as international operators.
Failure to compete with competitors on areas including price, product range,
quality and service could have an adverse effect on the Group's financial
results.
We aim to have a broad appeal in price, range and store format in a way that
allows us to compete in different markets and to use service as a point of
differentiation in each market segment. We have an established training
infrastructure to ensure that our colleagues receive ongoing product and
service training. We track performance against a broad range of measures that
customers tell us are critical to their shopping experience, and monitor
customer perceptions of ourselves to ensure we can respond quickly if
required.
The Company adopts a granular approach to its wide-ranging cost control
activities to ensure that significant opportunities for operational cost
management are complimented by a culture of cost awareness.
4. Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed consolidated interim financial statements have been
prepared by applying the accounting policies and presentation that were
applied in the preparation of the 2014 Annual Reports and Accounts, which are
published on the Halfords Group website, www.halfordscompany.com.
The Directors consider that the Group has adequate resources to remain in
operation for the foreseeable future and have therefore continued to adopt the
going concern basis in preparing the condensed consolidated interim financial
statements. The Group's forecasts and projections, taking into account
reasonably possible changes in trading performance, show that the Group has
adequate resources to continue in operational existence for the foreseeable
future.
Several new standards and amendments apply for the first time in 2014.
However, there are none that would be expected to have a material impact on
the Group. The nature and impact of each new standard/amendment is described
below:
· IFRS 10 'Consolidated financial statements' replaces the guidance of
control and consolidation in IAS 27 and SIC 32: Consolidation - special
purpose entities. The core principle that a consolidated entity presents a
parent and its subsidiaries as if they were a single entity remains unchanged,
as do the mechanics of the consolidation.
· IFRS 11 'Joint arrangements' requires joint arrangements to be
accounted for as a joint operation or as a joint venture depending on the
rights and obligations of each party to the arrangement. Proportionate
consolidation for joint ventures will be eliminated and equity accounting will
be mandatory.
· IFRS 12: 'Disclosure of interests in other entities' requires enhanced
disclosures of the nature, risks and financial effects associated with the
Group's interests in subsidiaries, associates, joint arrangements and
unconsolidated structures entities.
There are no other new standards, amendments to existing standards or
interpretations that are not yet effective that would be expected to have a
material impact on the Group.
5. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from those estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
applied to the consolidated financial statements as at and for the 52 week
period ended 28 March 2014 and the 26 weeks ended 27 September 2013.
6. Operating segments
The Group has two reportable segments, Retail and Car Servicing, which are the
Group's strategic business units. Car Servicing became a reporting segment of
the Group as a result of the acquisition of Nationwide Autocentres on 17
February 2010. The strategic business units offer different products and
services, and are managed separately because they require different
operational, technological and marketing strategies.
The operations of the Retail reporting segment comprise the retailing of
automotive, leisure and cycling products through retail stores. As of the 4
June 2014 the Retail business acquired two companies, Boardman Bikes Limited
and Boardman International Limited. The operation of these companies includes
the sale of cycles and cycling accessories and forms part of the Retail
segment and does not form a new segment for the purposes of reporting. The
operations of the Car Servicing reporting segment comprise car servicing and
repair performed from Autocentres.
The Chief Operating Decision Maker is the Executive Directors. Internal
management reports for each of the segments are reviewed by the Executive
Directors on a monthly basis. Key measures used to evaluate performance are
Revenue and Operating Profit. Management believe that these measures are the
most relevant in evaluating the performance of the segment and for making
resource allocation decisions.
The following summary describes the operations in each of the Group's
reportable segments. Performance is measured based on segment operating
profit, as included in the management reports that are reviewed by the
Executive Directors. These internal reports are prepared in accordance with
IFRS accounting policies consistent with these Group Financial Statements.
All material operations of the reportable segments are carried out in the UK
and all material non-current assets are located in the UK. The Group's
revenue is driven by the consolidation of individual small value transactions
and as a result Group revenue is not reliant on a major customer or group of
customers. All revenue is from external customers.
Income statement RetailUnaudited£m Car ServicingUnaudited£m 26 weeks to26 September2014TotalUnaudited£m 26 weeks to 27 September 2013TotalUnaudited£m
Revenue 451.9 72.2 524.1 490.6
Segment result before non-recurring items 50.2 1.6 51.8 48.6
Non-recurring items 0.2 - 0.2 -
Segment result 50.4 1.6 52.0 48.6
Unallocated expenses1 (0.6) (0.8)
Operating profit 51.4 47.8
Net financing expense (1.8) (3.2)
Profit before tax 49.6 44.6
Tax (10.4) (10.5)
Profit after tax 39.2 34.1
1 Unallocated expenses have been disclosed to reflect the format of the
internal management reports reviewed by the Chief Operating Decision maker and
include an amortisation charge of (£0.6m) in respect of assets acquired
through business combinations (2013: (£0.8m)).
Income statement Retail£m Car Servicing £m 52 weeks to 28 March 2014Total£m
Revenue 803.1 136.6 939.7
Segment result before non-recurring items 75.2 4.3 79.5
Non-recurring items (0.2) - (0.2)
Segment result 75.0 4.3 79.3
Unallocated expenses1 (1.7)
Operating profit 77.6
Net financing expense (5.0)
Profit before tax 72.6
Taxation (17.1)
Profit after tax 55.5
55.5
1 Unallocated expenses have been disclosed to reflect the format of the
internal management reports reviewed by the Chief Operating Decision maker and
include an amortisation charge of (£1.7m) in respect of assets acquired
through business combinations (2013: (£1.8m)).
Other segment items: RetailUnaudited£m Car Servicing Unaudited £m 26 weeks to 26 September 2014TotalUnaudited£m 26 weeks to 27 September 2013TotalUnaudited£m
Capital expenditure 11.3 1.2 12.5 14.2
Depreciation expense 8.0 1.8 9.8 8.9
Amortisation expense 2.0 - 2.0 2.1
2.0
-
2.0
2.1
Other segment items: Retail£m Car Servicing £m 52 weeks to 28 March 2014Total£m
Capital expenditure 24.4 6.0 30.4
Depreciation expense 14.8 3.2 18.0
Impairment expense 0.4 - 0.4
Amortisation expense 3.6 - 3.6
3.6
Transactions between segments are conducted on an arm's length basis. There
are no material unallocated corporate expenses in the current or prior
periods.
7. Non-recurring items
26 weeks to 26 weeks to 52 weeks to
27 September 27 September 28 March
2014 2013 2014
Unaudited Unaudited
£m £m £m
Non-recurring operating expenses:
Lease guarantee provision1 - - (0.2)
Onerous lease provision2 (0.2) - -
Impairment of Property, Plant and Equipment3 - - 0.4
Non-recurring items before tax (0.2) - 0.2
Tax on non-recurring items 0.1 - 0.1
Non-recurring (income)/expense after tax (0.1) - 0.3
1A non-recurring expense of £7.5m was incurred in 2011. This expense related
to the creation of a provision for the potential liabilities arising from
lease guarantees provided by Halfords prior to July 1989. In prior years the
settlement of these obligations has resulted in a partial release of the
original amounts provided. There have been no further settlements in the
current period.
2A charge incurred in prior periods relating to stores where the present value
of expected future cash flows is deemed to be insufficient to cover the lower
of cost of exit or value-in-use. The release in the current year is reflective
of a finalised deal to exit one of these stores, the cost of which is less
than the provision being maintained.
3Impairment charge in respect of property, plant and equipment where the
carrying amount of these assets has been deemed to exceed the recoverable
amount.
8. Net Finance Costs
26 weeks to 26 weeks to 52 weeks to
26 September 27 September 28 March
2014 2013 2014
Unaudited Unaudited
£m £m £m
Finance costs:
Bank borrowings (0.7) (0.6) (1.3)
Amortisation of issue costs on loans (0.3) (0.7) (1.0)
Commitment and guarantee fees (0.4) (0.7) (1.1)
Cost of forward foreign exchange contracts (0.1) (0.1) (0.3)
Interest payable on finance leases (0.4) (0.4) (0.7)
Other interest payable - (0.8) (0.8)
Finance costs (1.9) (3.3) (5.2)
Finance income:
Bank and similar income 0.1 0.1 0.2
Finance income 0.1 0.1 0.2
Net finance costs (1.8) (3.2) (5.0)
(1.8)
(3.2)
(5.0)
Other interest payable in the prior periods included £0.8m relating to
interest on tax amounts due to HMRC.
9. Income tax expense
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period.
The effective tax rate before non-recurring items for the 26 weeks to 26
September 2014 is 21.0% (HY14: 23.6%). The net effects of non-deductible
depreciation charged on capital expenditure, overseas tax rates, other
permanent differences and prior year adjustments offset one another entirely
causing the effective tax rate to be in line with the UK corporation tax rate
(21%).
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1
April 2012) and to 23% (effective 1 April 2013) were substantively enacted on
26 March 2012 and 3 July 2012 respectively. Further reductions to 21%
(effective from 1 April 2014) and 20% (effective from 1 April 2015) were
substantively enacted on 2 July 2013. This will reduce the company's future
current tax charge accordingly. The deferred tax asset at 26 September 2014
has been calculated based on the rate of 20% substantively enacted at the
balance sheet date. It has not yet been possible to quantify the full
anticipated effect of the announced further rate reduction.
10. Dividends
During the period the Group paid a final dividend of 9.10 pence per share in
respect of the 52 weeks to 28 March 2014 (2013: 9.10 pence per share), which
absorbed £17.7m of shareholders' funds (2013: £17.6m).
The directors have approved an interim dividend of 5.50 pence per share for
the 26 weeks to 26 September 2014 (2013: 5.20 pence per share), which is
expected to be £10.7m (2013: £10.1m) and will be paid on 23 January 2015 to
those shareholders on the share register at the close of business on 19
December 2014.
11. Earnings Per Share
Basic earnings per share is calculated by dividing the earnings 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 the Employee Benefit Trust and has been adjusted for the
issue/repurchase 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 26 weeks to 26 September 2014.
26 weeks to 26 weeks to 52 weeks to
26 September 27 September 28 March
2014 2013 2014
Unaudited Unaudited
Number Number Number
m m m
Weighted average number of shares in issue 199.1 199.1 199.1
Less: shares held by the Employee Benefit Trust (5.0) (5.2) (5.1)
Weighted average number of shares for calculating basic earnings per share 194.1 193.9 194.0
Weighted average number of dilutive share options 4.0 3.0 2.9
Total number of shares for calculating diluted earnings per share 198.1 196.9 196.9
26 weeks to 26 weeks to 52 weeks to
26 September 27 September 28 March
2014 2013 2014
Unaudited Unaudited
£m £m £m
Basic earnings attributable to equity shareholders 39.2 34.1 55.5
Non-recurring items:
Operating (income)/expenses (0.2) - 0.2
Tax charge on non-recurring items 0.1 - 0.1
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