REG-Halfords Group PLC Halfords Group PLC: Q3 Trading Update: Financial Year 2023

HalfordsAnnouncement

12/01/2023 07:15

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   Halfords Group PLC (HFD)
   Halfords Group PLC: Q3 Trading Update: Financial Year 2023

   12-Jan-2023 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement that contains inside
   information in accordance with the Market Abuse Regulation (MAR),
   transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   12 January 2023

                               Halfords Group plc

                     Q3 Trading Update: Financial Year 2023

   Halfords Group plc (“Halfords” or the “Group”), the UK’s leading  provider
   of Motoring  and Cycling  services and  products, today  announces its  Q3
   Trading update for the 13 weeks to 30 December 2022 (“the period”).

   To provide a better understanding  of underlying performance, all  numbers
   unless otherwise stated are against FY20, that is, on a three-year  basis.
   The disruption from COVID-19 to both FY21 and FY22 means that  comparators
   against these years are more difficult to interpret. All numbers are on  a
   post-IFRS 16  basis  and  before non-underlying  items,  unless  otherwise
   stated.

   Q3 FY23

     • Group revenue grew +38.3% and +12.6% LFL vs FY20 (+21.7%, +4.6% LFL vs
       FY22) reflecting strong sales in Motoring and needs-based  categories,
       but overall revenues were impacted by softer than expected cycling and
       tyre markets:

     ◦ Services representing 50.3%  of Group  revenue, and B2B  28.2% with  a
       strong Commercial Fleet performance growing +138% year-on-year.
     ◦ Macro-economic headwinds continue to  impact the cycling and  consumer
       tyre markets although we gained share across all our measured  markets
       including Cycling, Motoring and Tyres.

     • Autocentres  seeing  higher  proportion  of  sales  in  lower   margin
       categories, impacted  by the  current nationwide  shortage of  skilled
       labour. This has had an effect on overall profitability.
     • Over 1.2m members  within the  Motoring Loyalty  Club, exceeding  full
       year targets,  and  interest in  our  Avayler software  as  a  service
       business continues to be strong.
     • Focus on cost  reduction delivering  over £20m full  year savings  and
       exceeding full year target by +33%.
     • Group inventories and cashflow controlled well, with Retail  inventory
       volumes lower than last year.
     • Year end Net Debt : EBITDA (including IFRS 16 lease debt) forecast  to
       be within our previously guided range of 1.8x to 2.3x including M&A.

   FY23 outlook

   The Group continues to  deliver strong revenue  growth against prior  year
   and  three-year   comparisons,  demonstrating   the  resilience   of   our
   strategically important Services  and B2B  businesses, and  the growth  in
   market share achieved across both Retail Motoring and Cycling.

   However, as mentioned above, the  labour market remains very  challenging,
   and we  have been  unable to  recruit enough  skilled technicians  in  our
   Autocentres business  which we  now  expect will  limit growth  of  higher
   margin sales during the  important upcoming Q4 MOT  peak. In addition,  we
   have also seen weakness  in the consumer tyre  market continue for  longer
   than initially anticipated and expect a deeper decline in demand for  more
   discretionary high-ticket items in Retail than previously forecast.

   As a result of these revisions to  our forecast, we are reducing our  FY23
   underlying profit before tax (“PBT”) guidance to £50m to £60m.

   Longer-term outlook

   As we look to FY24, it remains particularly difficult forecasting with any
   certainty.

   We expect  the  resilience  and  strength  of  our  growing  services  and
   needs-based products business to continue,  underpinned by the success  of
   our Motoring Loyalty Club,  Avayler and B2B business.  We also expect  the
   consumer tyre market to  recover through the course  of the year, and  our
   actions taken  on recruitment  of skilled  labour to  unlock the  capacity
   constraints  on  higher  margin  revenue  opportunities.  Consumers  will,
   however, continue to  face inflation,  and we  therefore do  not expect  a
   significant short-term recovery in high ticket, discretionary spending.

   As  indicated  at   our  Interim  results   in  November,  we   anticipate
   year-on-year cost inflation in wages, energy and currency, however we will
   partially offset these pressures  through realising reductions in  freight
   and product costs,  whilst simultaneously  continuing to  reduce our  cost
   base.

   We remain confident in the longer-term outlook and believe the business is
   well positioned to  capitalise on  the strong  platform we  have built  as
   market conditions improve.

   At a Capital Markets Day on 30  March 2023 we will outline in more  detail
   our expectations for FY24 and beyond.

    

   Graham Stapleton, Chief Executive Officer, commented:

   “We have seen strong revenue growth in what are exceptionally  challenging
   circumstances, and we have continued to grow our market share whilst  also
   tightly managing our costs, inventories and cashflows. Consumer demand for
   our services  and  needs-based  categories,  which  now  account  for  the
   majority of our revenue, continues to grow, and our Motoring Loyalty  Club
   is  exceeding  expectations  as  customers  recognise  the  value  of  its
   unrivalled discounts and offers.

   With unprecedented  demand  in  our Motoring  Services  business,  we  are
   particularly impacted by the nationwide skills shortage, with  recruitment
   proving to be extremely challenging in  the current labour market. We  are
   continuing to  take  a  range  of  actions in  order  to  fill  1,000  new
   automotive  technician   roles,  which   include   our  new   Later   Life
   Apprenticeship programme, as well as a focus on attracting more women  and
   young   people    from   disadvantaged    backgrounds   into    automotive
   apprenticeships. We  are confident  that we  can offer  unrivalled  career
   progression for automotive  technicians, and  that this will  allow us  to
   attract and retain  talented individuals,  thereby enabling  us to  better
   service the demand through FY24.”

    

   Group revenue summary

                              Q3                             H1
                3-Year vs. FY20 1-Year vs. FY22 3-Year vs. FY20  1-Year vs.
                                                                    FY22
                    Growth          Growth          Growth
                                                                   Growth
                 Total    LFL    Total    LFL    Total    LFL   Total   LFL
   Halfords      +38.3%  +12.6% +21.7%   +4.6%   +31.4%  +13.3% +10.2% -1.5%
   Group
   Autocentres  +227.8%  +41.1% +74.1%  +14.6%  +220.7%  +30.0% +69.9% +14.3%
   Retail        -0.1%   +7.6%   +1.9%   +1.8%   +0.1%   +10.4% -7.1%  -6.0%
   Motoring      +7.9%   +13.0%  +9.5%   +9.7%   +3.7%   +10.2% -2.4%  -1.5%
   Cycling       -10.5%  -0.1%   -8.5%   -8.6%   -4.4%   +8.6%  -11.8% -12.5%

    

    

   Autocentres

     • Autocentres revenues +41.1%  LFL vs FY20  and +14.6% LFL  vs FY22  but
       overall gross margin impacted by lower service, maintenance and repair
       sales due to technician capacity being lower than anticipated in  this
       area.
     • Recruitment  drive  of   1,000  technicians   continues  but   remains
       challenging with the  nationwide shortage of  skilled labour.  Further
       actions are being taken, but we  now expect to have fewer  technicians
       in place than previously anticipated for our Q4 MOT peak.
     • The consumer  tyre market  remains materially  (-13%) below  pre-Covid
       levels  as  customers   defer  high  ticket   spends,  impacting   the
       performance of National Tyres. Having previously expected this  market
       to show recovery in Q4, we  now expect the recovery during the  course
       of FY24.
     • Lodge Tyre trading in-line with expectations following acquisition  in
       October 2022.
     • Demand for Halfords Mobile Expert very strong, up +32% LFL vs FY22.

    

   Retail

     • Overall Retail revenues +7.6% LFL vs FY20 and +1.8% LFL vs FY22.
     • Retail  NPS   +3.6ppts  year-on-year,   driven  by   improvements   in
       availability and our value proposition.
     • Performance divide between Motoring (+13.0%  LFL vs FY20) and  Cycling
       (-0.1% LFL vs  FY20) reflects the  needs-based and more  discretionary
       product split across the categories.

     • Motoring:

          ◦ Revenue growth ahead of H1 as the less discretionary nature of
            spend is demonstrated.
          ◦ Increased market share in core categories following our strategic
            price investments including batteries, bulbs, wiper blades and
            oils.
          ◦ Maintenance and Parts performance very strong across seasonal
            categories as well as core, non-winter related products, despite
            average weather across the period being mild.
          ◦ High ticket products, in particular technology, contracting
            against both FY20 and FY22, albeit this is a small category
            within Retail motoring.

     • Cycling:

          ◦ Overall revenues outperforming the market, however the market
            remains -20% down year on year year to date.
          ◦ Kid’s bikes performed well due to the stronger year-on-year
            availability and Christmas gifting demand with revenues +4.6% vs
            FY22.
          ◦ Adult bikes performed weaker than expected down -12.0% vs FY22,
            reflecting the impact of weaker consumer backdrop relative to H1,
            and the more discretionary, higher ticket nature of the category.
          ◦ Cycle2Work continues to show resilience against economic
            backdrop, growing +20.1% vs FY22.

    

   Capital Markets Day

   Halfords is today announcing a Capital Markets Day on 30 March 2023.

   Graham Stapleton and members of the senior management team will present
   the Group’s vision alongside the strategic and financial ambition over the
   next phase of its transformation. The event will showcase the planned
   evolution of our Services and B2B business, our loyalty platform and
   Avayler, and how the Group operating margin will evolve over the medium to
   long term through continued investment in high margin, high returning
   initiatives. The day will be a mix of presentations as well as physical
   site tours.

   Enquiries

   Investors & Analysts (Halfords) 

   Jo Hartley, Chief Financial Officer 

   Richard Guest, Corporate Finance Director  

   Andy Lynch, Head of Investor Relations +44 (0) 7483 457
   415                                                   

    

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

   Rob Greening halfords@powerscourt-group.com

   Nick Hayns

   Elizabeth Kittle

    

   Results presentation

   A conference call for analysts will be held today, starting at 09:00am  UK
   time. Attendance is by  invitation only. A copy  of the 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 15 June 2023 we will  report our Preliminary Results for the  financial
   year ending 31 March 2023.

    

   Notes to Editors

   www.halfords.com                                       2 www.tredz.co.uk  
    3 www.halfordscompany.com                     

    

   Halfords is the UK's leading provider of motoring and cycling services and
   products. Customers shop  at 396  Halfords stores,  3 Performance  Cycling
   stores (trading  as Tredz  and Giant),  634 garages  (trading as  Halfords
   Autocentres, McConechy’s, Universal, National  Tyres and Lodge Tyres)  and
   have access to 268 mobile service vans (trading as Halfords Mobile Expert,
   Tyres on the Drive  and National) and 433  Commercial vans. Customers  can
   also shop at halfords.com and tredz.co.uk for pick up at their local store
   or direct home  delivery, as  well as  booking garage  services online  at
   halfords.com.

    

   Cautionary statement

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

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   ISIN:           GB00B012TP20
   Category Code:  QRT
   TIDM:           HFD
   LEI Code:       54930086FKBWWJIOBI79
   OAM Categories: 2.2. Inside information
   Sequence No.:   215099
   EQS News ID:    1533117


    
   End of Announcement EQS News Service

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