REG - Halfords Group PLC - Preliminary Results: Financial Year 2015 <Origin Href="QuoteRef">HFD.L</Origin> - Part 2
16/07/2015 09:37
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objectives. In the Annual Report & 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 note 20 to the Annual Report
and Accounts. These include:
· Economic risk
· Business strategy risks
· Competitive risks
· Compliance
· Changing customer preferences
· Reliance on foreign manufacturers
· Product and service quality
· Information technology systems and infrastructure
· Dependence on key management personnel
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.
Andrew Findlay
Chief Financial Officer, 4 June 2015
CONSOLIDATED INCOME STATEMENT
For the period 53 weeks to 3 April 2015 52 weeks to 28 March 2014
BeforeNon-recurring Items Non-recurring items(note 4) Total BeforeNon-recurring Items Non-recurring items(note 4) Total
Notes £m £m £m £m £m £m
Revenue 1,025.4 - 1,025.4 939.7 - 939.7
Cost of sales (479.1) - (479.1) (435.5) - (435.5)
Gross profit 546.3 - 546.3 504.2 - 504.2
Operating expenses 2 (458.7) (0.3) (459.0) (426.4) (0.2) (426.6)
Results from operating activities 3 87.6 (0.3) 87.3 77.8 (0.2) 77.6
Finance costs 5 (3.6) - (3.6) (5.2) - (5.2)
Finance income 5 0.1 - 0.1 0.2 - 0.2
Net finance expense (3.5) - (3.5) (5.0) - (5.0)
Profit before income tax 84.1 (0.3) 83.8 72.8 (0.2) 72.6
Income tax expense 6 (17.9) (0.1) (18.0) (17.0) (0.1) (17.1)
Profit for the financial period attributable to equity shareholders 66.2 (0.4) 65.8 55.8 (0.3) 55.5
Earnings per share
Basic 8 34.1p 33.8p 28.8p 28.6p
Diluted 8 33.5p 33.3p 28.4p 28.2p
All results relate to continuing operations of the Group.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
53 weeks to 52 weeks to
3 April 2015 28 March2014
Notes £m £m
Profit for the period 65.8 55.5
Other comprehensive income
Cash flow hedges:
Fair value changes in the period 7.9 (3.0)
Transfers to inventory (1.4) 1.1
Transfers to net profit:
Cost of sales (3.4) (0.1)
Income tax on other comprehensive income 6 (1.2) 0.8
Other comprehensive income for the period, net of income tax 1.9 (1.2)
Total comprehensive income for the period attributable to equity shareholders 67.7 54.3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
3 April 2015 28 March 2014
£m £m
Assets
Non-current assets
Intangible assets 356.8 342.2
Property, plant and equipment 103.8 95.2
Deferred tax asset 4.1 4.4
Total non-current assets 464.7 441.8
Current assets
Inventories 149.3 150.2
Trade and other receivables 55.8 52.8
Derivative financial instruments 3.9 -
Cash and cash equivalents 22.4 5.3
Total current assets 231.4 208.3
Total assets 696.1 650.1
Liabilities
Current liabilities
Borrowings (22.9) (10.3)
Derivative financial instruments (0.1) (2.1)
Trade and other payables (181.4) (159.5)
Current tax liabilities (12.4) (10.4)
Provisions (10.6) (9.0)
Total current liabilities (227.4) (191.3)
Net current assets 4.0 17.0
Non-current liabilities
Borrowings (61.3) (94.6)
Accruals and deferred income - lease incentives (31.5) (28.8)
Provisions (8.2) (9.3)
Total non-current liabilities (101.0) (132.7)
Total liabilities (328.4) (324.0)
Net assets 367.7 326.1
Shareholders' equity
Share capital 2.0 2.0
Share premium 151.0 151.0
Investment in own shares (13.6) (14.3)
Other reserves 1.6 (0.3)
Retained earnings 226.7 187.7
Total equity attributable to equity holders of the Company 367.7 326.1
367.7
326.1
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
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 29 March 2013 2.0 151.0 (13.2) 0.3 0.6 158.0 298.7
Total comprehensive income for the period
Profit for the period - - - - - 55.5 55.5
Other comprehensive income
Foreign currency translationdifferences for foreign operations
Cash flow hedges: - - - - (3.0) - (3.0)
Fair value changes in the period - - - - 1.1 - 1.1
Transfers to inventory
Transfers to net profit:
Cost of sales - - - - (0.1) - (0.1)
Income tax on other comprehensive income - - - - 0.8 - 0.8
Total other comprehensive income for the period net of tax - - - - (1.2) - (1.2)
Total comprehensive income for the period - - - - (1.2) 55.5 54.3
Transactions with owners
Share options exercised - - 2.1 - - - 2.1
Share-based payment transactions - - - - - 1.0 1.0
Purchase of own shares - - (3.2) - - - (3.2)
Income tax on share-based payment transactions - - - - - 0.9 0.9
Dividends to equity holders - - - - - (27.7) (27.7)
Total transactions with owners - - (1.1) - - (25.8) (26.9)
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 - - - - - 65.8 65.8
Other comprehensive income
Cash flow hedges:
Fair value changes in the period - - - - 7.9 - 7.9
Transfers to inventory - - - - (1.4) - (1.4)
Transfers to net profit:
Cost of sales - - - - (3.4) - (3.4)
Income tax on other comprehensive income - - - - (1.2) - (1.2)
Total other comprehensive income for the period net of tax - - - - 1.9 - 1.9
Total comprehensive income for the period - - - - 1.9 65.8 67.7
Transactions with owners
Share options exercised - - 0.7 - - - 0.7
Share-based payment transactions - - - - - 1.4 1.4
Purchase of own shares - - - - - - -
Income tax on share-based payment transactions - - - - - 0.2 0.2
Dividends to equity holders - - - - - (28.4) (28.4)
Total transactions with owners - - 0.7 - - (26.8) (26.1)
Balance at 3 April 2015 2.0 151.0 (13.6) 0.3 1.3 226.7 367.7
CONSOLIDATED STATEMENT OF CASH FLOWS
53 weeks to 52 weeks to
3 April 28 March
2015 2014
Notes £m £m
Cash flows from operating activities
Profit after tax for the period before non-recurring items 66.2 55.8
Non-recurring items (0.4) (0.3)
Profit after tax for the period 65.8 55.5
Depreciation - property, plant and equipment 20.2 18.0
Impairment charge 0.7 0.4
Amortisation - intangible assets 5.5 5.3
Loss on sale of property, plant and equipment 1.7 2.1
Net finance costs 3.5 5.0
Equity-settled share based payment transactions 1.4 1.0
Fair value gains and losses on derivative financial instruments (2.0) 1.4
Income tax expense 18.0 17.1
Decrease/(increase) in inventories 0.9 (17.0)
(Increase)/decrease in trade and other receivables (3.0) 1.0
Increase in trade and other payables 27.2 10.7
Increase in provisions 0.5 6.7
Finance income received 0.1 0.2
Finance costs paid (3.2) (4.6)
Income tax paid (17.1) (35.3)
Net cash from operating activities 120.2 67.5
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (14.0) -
Purchase of intangible assets (7.5) (5.3)
Purchase of property, plant and equipment (32.1) (21.4)
Net cash used in investing activities (53.6) (26.7)
Cash flows from financing activities
Net proceeds from exercise of share options 0.7 2.1
Purchase of own shares - (3.2)
Proceeds from loans, net of transaction costs 220.2 305.7
Repayment of borrowings (254.0) (326.0)
Payment of finance lease liabilities (0.3) (0.3)
Dividends paid (28.4) (27.7)
Net cash used in financing activities (61.8) (49.4)
Net increase/(decrease) in cash and bank overdrafts 4.8 (8.6)
Cash and cash equivalents at the beginning of the period 9 (4.7) 3.9
Cash and cash equivalents at the end of the period 0.1 (4.7)
1. Basis of preparation
The consolidated financial statements of Halfords Group plc and its subsidiary
undertakings (together "the Group") 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 (IAS 39 "Financial instruments: recognition and measurement") and
share based payments (IFRS 2 "Share-based payment").
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 2015, whilst the comparative period
covered the 52 weeks to 28 March 2014.
The preparation of consolidated financial statements in conformity with
Generally Accepted Accounting Principles requires the use of accounting
estimates and management to exercise its judgement in the process of applying
the Group's accounting policies. These judgements and estimates are based on
historical experience and management's best knowledge of the amounts, events
or actions under review and the actual results may ultimately differ from
these estimates. Areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the consolidated
financial statements, are, where necessary, disclosed separately.
2. Operating expenses
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Selling and distribution costs 385.5 359.1
385.5 359.1
Administrative expenses before non-recurring items 73.2 67.3
Non-recurring administrative expenses 0.3 0.2
73.5 67.5
459.0 426.6
3. Operating profit
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Operating profit is arrived at after charging/(crediting) the following expenses/(income) as categorised by nature:
Operating lease rentals:
- plant and machinery 2.6 1.8
- property rents 91.6 90.0
- rentals receivable under operating leases (4.2) (5.0)
Landlord surrender payments (2.8) (3.4)
Loss on disposal of property, plant and equipment 1.7 2.1
Amortisation of intangible assets 5.5 5.3
Depreciation of:
- owned property, plant and equipment 19.7 17.5
- assets held under finance leases 0.5 0.5
Impairment of property, plant and equipment 0.7 0.4
Trade receivables impairment - 0.3
Staff costs 203.1 189.2
Cost of inventories consumed in cost of sales 470.2 422.2
4. Non-recurring items
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Non-recurring operating expenses:
Lease guarantee provision(a) (0.2) (0.2)
Onerous lease provision(b) (0.2) -
Impairment of Property, Plant & Equipment(c) 0.7 0.4
Non-recurring items before tax 0.3 0.2
Tax on non-recurring items (d)
Non-recurring items after tax
(a) A 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. The guarantees
were provided to landlords of properties leased by Payless DIY (now part of
Focus DIY) when both Halfords and Payless DIY were under ownership of the Ward
White Group. Focus DIY entered into administration in May 2011. In the current
year the continued settlement of the Group's guarantor obligations has
resulted in a release of £0.2m (2014: £0.2m) of the original amounts provided.
There is now no outstanding provision in relation to this issue.
(b) A 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.
(c) Impairment charge in respect of property, plant and equipment, with
regards to the Stores Fit to Shop initiative, where the carrying amount of
these assets has been deemed to exceed the recoverable amount.
(d) The tax charge of £0.1m represents a tax rate of 21% applied to
non-recurring items after adjusting for the non-deductibility of the asset
impairment charge and settlements to release Halfords from its guarantor
obligations under the leases. The prior period represents a tax charge at 23%
on all current year non-recurring items adjusted for the non-deductibility of
the asset impairment charge and settlements to release Halfords from its
guarantor obligations under the leases
5. Finance income and costs
Recognised in profit or loss for the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Finance costs:
Bank borrowings (1.3) (1.3)
Amortisation of issue costs on loans (0.6) (1.0)
Commitment and guarantee fees (0.8) (1.1)
Costs of forward foreign exchange contracts (0.2) (0.3)
Interest payable on finance leases (0.7) (0.7)
Other interest payable - (0.8)
Finance costs (3.6) (5.2)
Finance income:
Bank and similar interest 0.1 0.2
Finance income 0.1 0.2
Net finance costs (3.5) (5.0)
(3.5)
(5.0)
6. Taxation
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Current taxation
UK corporation tax charge for the period 20.9 20.1
Adjustment in respect of prior periods (1.8) (0.7)
19.1 19.4
Deferred taxation
Origination and reversal of timing differences (1.5) (1.8)
Adjustment in respect of prior periods 0.4 (0.5)
(1.1) (2.3)
Total tax charge for the period 18.0 17.1
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 2015 28 March 2014
£m £m
Profit before tax 83.8 72.6
UK corporation tax at standard rate of 21% (2014: 23%) 17.6 16.7
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief 1.3 1.5
Employee share options 0.4 (0.5)
Other disallowable expenses 0.4 0.4
Adjustment in respect of prior periods (1.4) (1.2)
Impact of overseas tax rates (0.4) (0.5)
Impact of change in tax rate on deferred tax balance 0.1 0.7
Total tax charge for the period 18.0 17.1
In this financial period, the UK corporation tax standard rate was 21% (2014:
23%).
The effective tax rate of 21.5% (2014: 23.5%) differs from the UK corporation
tax rate principally due to the non-deductibility of depreciation charged on
capital expenditure and other permanent differences arising in the period.
The tax charge on profit for the financial period was £18.0m (2014: £17.1m),
including a £0.1m charge (2014: £0.1m charge) in respect of tax on
non-recurring items, as detailed in note 4.
An income tax charge of £1.2m (2014: £0.8m credit) on other comprehensive
income relates to the movement in fair valuing forward currency contracts
outstanding at the year end. No other items within other comprehensive income
have a tax impact.
The Group engages openly and proactively with tax authorities both in the UK
and internationally, where it trades and sources products, and are considered
low risk by HM Revenue and Customs ("HMRC"). The Group is fully committed to
complying with all of its tax payment and reporting obligations throughout the
business.
In this period, the Group's contribution to the UK Exchequer from both taxes
paid and collected exceeded £149.0m (2014: £157.9m) with the main taxes
including corporation tax £16.1m (2014: £35.4m), net VAT £53.1m (2014: 49.8m),
PAYE £19.8m (2014: £17.1m), employees national insurance contributions £10.0m
(2014: £8.8m), employers national insurance contributions £13.0m (2014:
£11.2m) and business rates £37.0m (2014: £35.6m).
7. Dividends
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Equity - ordinary shares
Final for the 52 weeks to 28 March 2014 -paid 9.10p per share (2014: 9.10p) 17.7 17.6
Interim for the 53 weeks to 3 April 2015 - paid 5.50p per share(2014: 5.20p) 10.7 10.1
28.4 27.7
In addition, the directors are proposing a final dividend in respect of the
financial period ended 3 April 2015 of 11.00p per share (2014: 9.10p per
share), which will absorb an estimated £21.4m (2014: £17.7m) of shareholders'
funds. It will be paid on 28 August 2015 to shareholders who are on the
register of members on 7 August 2015.
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 2015.
The Group has also chosen to present an alternative earnings per share
measure, with profit adjusted for non-recurring items because it better
reflects the Group's underlying performance.
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
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) (4.9) (5.1)
Weighted average number of shares for calculating basic earnings per share 194.2 194.0
Weighted average number of dilutive shares 3.2 2.9
Total number of shares for calculating diluted earnings per share 197.4 196.9
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
£m £m
Basic earnings attributable to equity shareholders 65.8 55.5
Non-recurring items (see note 4):
Operating expenses 0.3 0.2
Tax on non-recurring items 0.1 0.1
Underlying earnings before non-recurring items 66.2 55.8
Earnings per share is calculated as follows:
For the period 53 weeks to 52 weeks to
3 April 2015 28 March 2014
Basic earnings per ordinary share 33.8p 28.6p
Diluted earnings per ordinary share 33.3p 28.2p
Basic earnings per ordinary share before non-recurring items 34.1p 28.8p
Diluted earnings per ordinary share before non-recurring items 33.5p 28.4p
9. Analysis of movements in the Group's net debt in the period
At 28 March 2014 Cash flow Other non-cash changes At 3 April 2015
£m £m £m £m
Cash and cash equivalents at bank and in hand (4.7) 4.8 - 0.1
Debt due after one year (84.0) 33.9 (0.6) (50.7)
Total net debt excluding finance leases (88.7) 38.7 (0.6) (50.6)
Finance leases due within one year (0.3) 0.3 (0.6) (0.6)
Finance lease due after one year (10.6) - - (10.6)
Total finance leases (10.9) 0.3 (0.6) (11.2)
Total net debt (99.6) 39.0 (1.2) (61.8)
Non-cash changes include finance costs in relation to the amortisation of
capitalised debt issue costs of £0.6m (2014: £1.0m) and changes in
classification between amounts due within and after one year.
Cash and cash equivalents at the period end consist of £22.4m (2014: £5.3m) of
liquid assets and £22.3m (2014: £10.0m) of bank overdrafts.
10. Other information
The financial information set out above does not constitute the Company's
statutory accounts for the 53 weeks ended 3 April 2015 or the 52 weeks ended
28 March 2014 but is derived from those accounts. Statutory accounts for 2014
have been delivered to the registrar of companies, and those for 2015 will be
delivered in due course. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to any matters
to which the auditors 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 in respect of the accounts for 2014 or 2015.
11. Acquisition of subsidiary
On 4th June 2014 the Group acquired 100% of the issued share capital of
Boardman Bikes Limited and Boardman International Limited for cash
consideration of £14.7m (excluding transaction costs). The two Boardman
companies retail cycles and cycle accessories under the brand name 'cBoardman'
nationally and internationally. The purpose of this acquisition was to benefit
from operating synergies. This transaction has been accounted for using the
acquisition method of accounting.
The acquisition had the following effect on the Group's assets and
liabilities:
Book value Fair value adjustment Final fair value
£m £m £m
Boardman net assets at the acquisition date
Intangible assets 0.2 (0.2) -
Inventories 0.7 - 0.7
Trade and other receivables 3.7 (0.4) 3.3
Cash 0.7 - 0.7
Trade and other payables (3.0) - (3.0)
Current tax liabilities (0.2) - (0.2)
Boardman net assets 2.1 (0.6) 1.5
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
£m
Total consideration 14.7
Less fair value of identifiable assets (1.5)
Goodwill and intangible assets 13.2
Brand name intangible 3.1
Deferred tax liability (0.6)
Goodwill 10.7
The goodwill arising on the acquisition of the Boardman business is
attributable to a) operating synergies and increased control of operations, b)
the value of immaterial other intangible assets and c) future income to be
generated from new retail customer contracts and related relationships. None
of the goodwill is expected to be deductible for income tax purposes.
The fair value adjustments relate to the best estimate of the contractual
trade receivable cash flows not expected to be collected and aligning
intangible asset policies with the Halfords Group.
The Boardman business contributed £2.4m revenue and a loss of £0.3m to the
Group's profit before tax for the period between the date of acquisition and
the balance sheet date. Retail has benefitted by £1.7m due to the change in
royalty arrangements following acquisition.
If the acquisition of the Boardman business had been completed on the first
day of the financial year, Group revenues for the period would have been £2.2m
higher and Group profit attributable to equity holders of the parent would
have been £0.1m higher (pre amortisation of intangible assets arising on
consolidation).
This information is provided by RNS
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