REG-Halfords Group PLC Halfords Group PLC: Current trading and COVID-19 update

HalfordsAnnouncement

25/03/2020 07:05

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   Halfords Group PLC (HFD)
   Halfords Group PLC: Current trading and COVID-19 update

   25-March-2020 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   25                   March                    2020                        
                                                                    

                                        

                              Halfords Group plc 

                          ("Halfords" or "The Group")

                                        

                      Current trading and COVID-19 update

    

   Halfords is  providing an  update  today on  the  impact of  the  COVID-19
   pandemic on its business, along with the measures it is taking to actively
   manage the risks to its customers and colleagues. Each day we are learning
   more about the  effects of  the pandemic  as well  as evolving  government
   interventions. We are  modelling a  range of scenarios  to understand  the
   potential impact on sales, profit and cashflow and to support decisions on
   mitigating actions. Whilst we are confident that the post-pandemic  future
   of the business remains strong, trading in  the near term is likely to  be
   severely impacted.

    

   Supporting our customers and colleagues

   The health and  safety of  our customers  and colleagues  remains our  top
   priority and we are committed to supporting them and our wider communities
   at such a  difficult time.  As the  UK's largest  independent provider  of
   motoring and  cycling services,  we  have an  essential  role to  play  in
   keeping the UK moving. Each month, we  carry out more than a quarter of  a
   million motoring  jobs in  our retail  stores, over  100,000 jobs  in  our
   garages and  approximately  12,500  motoring jobs  at  people's  homes  or
   workplaces using our fleet of mobile vans. Every month we see over  50,000
   vehicles with serious safety defects  and a further 100,000 vehicles  with
   issues requiring attention.  Many key  workers rely  on us  to keep  their
   motor fleet  running,  including  the Ministry  of  Defence,  the  British
   Transport Police and several large  UK utility companies. Alongside  this,
   we carry out over  200,000 bike builds, services  and repairs every  month
   and over  40% of  the Government  backed Cycle2Work  scheme in  the UK  is
   delivered through our Retail business. Halfords is uniquely positioned  to
   keep the  UK's cars  and bikes  on the  road and  safe to  drive or  ride,
   providing vital  support  to  emergency  workers,  fleet  operations,  key
   workers and the general population  as they travel for essential  supplies
   and, where required, attend places of work.

    

   We are committed to playing our part, but only if we can ensure the health
   and safety of our colleagues and customers, and we are able to comply with
   government policy. We have been designated by the Government as a provider
   of essential services and so we have the legal flexibility to remain  open
   across the  entire  business.  As it  currently  stands,  our  Autocentres
   garages and  Mobile vans  are  open and,  within  Retail, we  are  working
   through a plan to provide partial store coverage from later this week.  We
   will continue to take orders online on both Halfords.com and  Tredz.co.uk,
   offering either a home delivery service or Click and Collect once branches
   are reopened.

    

   Current trading

   Recent trading has  been in  line with  expectations, and,  in fact,  very
   strong in  the last  couple of  weeks,  but delivery  of the  FY20  profit
   outturn is dependent on  sales performance in the  final two weeks of  the
   financial year. Post the Government's  latest announcement on measures  to
   protect the public, we are working  through our operational plans. We  are
   seeking to  strike  a balance  between  providing essential  motoring  and
   cycling services  to the  UK public  alongside guaranteeing  the  personal
   safety of  our  customers  and colleagues.  Given  the  latest  Government
   guidance we  believe there  is  a high  likelihood  that sales  will  drop
   sharply  and,  if  so,  that  the   shortfall  will  have  an  impact   on
   profitability, such that FY20 underlying  profit before tax, on a  52-week
   and pre-IFRS16 basis, could be at the lower end of, or slightly below, the
   current guidance range of £50-55m. 

    

   At this  early  stage in  the  pandemic, it  is  not possible  to  provide
   meaningful guidance on earnings in FY21. Our focus now is on taking  every
   step necessary to secure future value for colleagues and shareholders.

    

   Financing

   The Group has access  to substantial liquidity  through a £180m  revolving
   credit facility  (RCF)  and  a  £20m overdraft  facility,  provided  by  a
   syndicate of major banks, expiring in  September 2022. We have drawn  down
   on the RCF in full  and now have approximately  £118m of cash on  deposit.
   Total liquidity is therefore £138m, including the overdraft facility.  The
   Group continues to expect that  it will satisfy its covenant  requirements
   at the FY20 year-end. We are in active dialogue with our existing  lending
   syndicate to provide  additional flexibility to  support Halfords  through
   this period of uncertainty.

    

   Outlook and mitigating actions

   Despite an improvement in recent sales performance, we expect that volumes
   could now see a material reduction. We have modelled a range of disruption
   scenarios, with our  median scenario assuming  significant sales  declines
   for the three-month period  from April to June,  followed by weakness  for
   the remaining nine months.  Over the course of  the full year, this  would
   result in a sales decline of 25% (c. £300m) with the most material  impact
   being seen in the first quarter of the new financial year.

    

   In response,  the  Board is  taking  a  series of  immediate  measures  to
   preserve cash, including, but not limited to:

    

     • Suspension  of  the   dividend,  resulting   in  a   cash  saving   of
       approximately £24m in FY21.
     • As announced by the UK Government, business rate relief for the  whole
       of FY21.  This currently  applies to  the retail  estate only,  saving
       approximately £26m per year.
     • Negotiations  with  landlords  regarding  rent  relief,  including  an
       immediate switch to monthly payments from quarterly.
     • Where stores and garages are closed, we will access Government support
       on salary payments.
     • Reduced purchases  of goods  not for  resale (GNFR),  including  lower
       marketing spend.
     • Postponing capital commitments:  Our capital  spend for  FY21 will  be
       well below current guidance of £40-60m. We are currently planning  for
       capital spend in FY21  to be in  the range of  £10-15m, but this  will
       remain under review as the situation evolves.
     • Optimising working capital, including changes to the timing and amount
       of stock purchases.
     • Deferral of VAT payments to March 2021.

    

   Based on the  median sales  scenario, and  the measures  we have  outlined
   above, we  are confident  that we  can operate  within our  existing  debt
   facilities throughout FY21.

   Given the  rapidly  changing  situation,  there is  no  certainty  on  the
   severity or duration  of the  impact on  the business  and so  we are  not
   providing formal profit guidance  for FY21 at this  time.  The Group  will
   continue to consider its funding options on an ongoing basis.

   Halfords is a resilient business with a healthy balance sheet, substantial
   liquidity and strong  cash flow.  The  Group has  a core role  to play  in
   providing essential motoring and cycling  services to the nation, at  this
   critical time but also more  generally. We have an experienced  management
   team and the capability  to adapt and respond  quickly to changing  market
   conditions. The Board remains  confident in the  strategy over the  longer
   term and believes the  Group will be well  positioned to benefit from  the
   normalisation in trade.

    

   We will update the market as events evolve.

    

   Graham Stapleton, CEO said:

    

   "In such difficult times the health and safety of our colleagues and
   customers remains our top priority and we continue to take all appropriate
   action in line with government advice. Halfords has an essential role to
   play in keeping the country moving, providing vital support to emergency
   workers, fleet operations, key workers and the general population as they
   travel for essential supplies and, where required, attend places of work.

    

   While significant uncertainty exists on the impact of COVID-19, we are
   taking immediate and significant measures to contain our costs and protect
   our financial position. We have a strong balance sheet, with significant
   liquidity headroom and low levels of financial debt.

    

   This is an unprecedented challenge for all of us, but I am confident that
   the actions we are taking to successfully navigate the current situation
   will put the business in a position of strength, enabling us, over the
   medium term, to refocus on our strategic transformation.

    

   Finally, I would like to thank all our fantastic colleagues and customers
   for their incredible support during this challenging period."

    

   Enquiries

   Investors & Analysts (Halfords) 

   Loraine Woodhouse, Chief Financial Officer  

   Neil Ferris, Corporate Finance
   Director                                                +44 (0) 7483
   360675                                                    

    

   Media (Powerscourt) +44 (0) 20 7250 1446

   Rob Greening halfords@powerscourt-group.com

   Lisa Kavanagh

    

   Notes to Editors

    

   www.halfords.com                           
     1 www.halfordscompany.com             
    2 www.halfordsautocentres.com     

    3 www.cyclerepublic.com               
     4 www.boardmanbikes.com                       
     5 www.tredz.co.uk           

    

   Halfords is the UK's leading provider of motoring and cycling services and
   products. Customers shop  at 446 Halfords  stores, 26 Performance  Cycling
   stores (trading as Cycle Republic, Tredz, Boardman and Giant), 369 garages
   (trading as Halfords  Autocentres) and  have access to  75 mobile  service
   vans (trading  as Halfords  Mobile  Expert). Customers  can also  shop  at
   halfords.com, cyclerepublic.com and tredz.co.uk for pick up at their local
   store or direct home delivery, as  well as booking garage services  online
   at halfordsautocentres.com.

    

   Cautionary Statement

    

   This report contains  certain forward-looking statements  with respect  to
   the financial condition, results of operations, and businesses of Halfords
   Group plc.  These statements and  forecasts involve risk, uncertainty  and
   assumptions because they  relate to events  and depend upon  circumstances
   that will occur in the future.  There  are a number of factors that  could
   cause actual  results  or developments  to  differ materially  from  those
   expressed  or   implied  by   these  forward-looking   statements.   These
   forward-looking  statements  are  made  only  as  at  the  date  of   this
   announcement. Nothing in this announcement should be construed as a profit
   forecast.  Except as required by law, Halfords Group plc has no obligation
   to update the  forward-looking statements or  to correct any  inaccuracies
   therein.

    

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   ISIN:           GB00B012TP20
   Category Code:  UPD
   TIDM:           HFD
   LEI Code:       54930086FKBWWJIOBI79
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   54402
   EQS News ID:    1006019


    
   End of Announcement EQS News Service

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