Halfords Group PLC (HFD)
Halfords Group PLC: Preliminary Results: Financial Year 2021
17-Jun-2021 / 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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17 June 2021
Halfords Group plc
Preliminary Results: Financial Year 2021
Strong performance driven by share gains in Motoring services, profitability improvements across the Group, and share
gains and strong demand in Cycling.
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 52 weeks to 2 April 2021 ("the period"). To aid
comparability, all numbers shown are before the impact of IFRS 16, before non-underlying items, and on a 52-week basis,
unless otherwise stated.
Overview
FY21
? Grew market share in Motoring Services and Cycling; strong growth in areas of strategic focus - Group Services, B2B
and Online; delivered significant cost efficiencies.
? Underlying Profit Before Tax of GBP96.3m, +GBP40.4m above last year.
? Strong cash generation; year-end Net Cash of GBP58.1m, including certain non-recurring benefits.
? Proposed final dividend per share of 5p.
FY22
? Building on strong foundations, we will accelerate investment in our transformation and position the business for
long term success.
? Confident in our prospects but conscious of continued COVID-19 volatility; targeting profit before tax, post-IFRS
16 adjustments, of above GBP75m and a proposed full year dividend per share of 9p.
Long term
? Confident in the long-term growth prospects of the motoring and cycling markets and our ability to compete strongly
in each.
? Significant growth opportunity in our Services and B2B businesses.
? Ambition to become the market leader in electric mobility services and support the UK's switch to a more
sustainable future.
? Progressive dividend policy.
Graham Stapleton, Chief Executive Officer, commented:
"We are delighted to have delivered a year of very strong financial and operational progress, especially in light of
the extraordinary challenges presented by the pandemic. As ever, I would like to thank our outstanding colleagues
across the business for their hard work, professionalism, and dedication.
It was a year in which Halfords' transformation into a service-led business was rapidly accelerated, and we were
particularly pleased to achieve a record revenue performance in the strategically important area of Motoring services.
We have continued to increase our scale and capacity in this area and customers can now receive our services at almost
800 fixed locations, or at home from one of our 143 mobile expert vans.
We have also continued to lead the transition to an electric vehicle future by investing in training and technology. By
the end of the current financial year, we will have trained more than 2,000 of our store and garage colleagues to
service electric cars, bikes and scooters.
Demand for our services remains strong in the new financial year, and our touring categories are currently performing
particularly well given the trend towards staycations this summer. In the longer-term, we remain confident in the
future prospects for the UK's motoring and cycling markets and our ability to compete strongly in both."
Group financial summary
FY21 FY20 FY20
(52 weeks) (53 weeks) (52 weeks) 52-week change 52-week LFL* Change
GBPm GBPm GBPm
Revenue 1,292.3 1,155.1 1,142.4 +13.1% +13.9%
Retail 1,039.8 961.0 950.6 +9.4% +14.6%
Autocentres 252.5 194.1 191.8 +31.6% +9.7%
Gross Margin 50.8% 51.1% 51.1% -34bps
Retail 48.3% 48.2% 48.2% +10bps
Autocentres 61.1% 65.4% 65.5% -440bps
Underlying EBITDA* 139.8 92.6 95.3 +46.7%
Underlying Profit Before Tax ("PBT")* 96.3 52.6 55.9 +72.3%
Net Non-Underlying Items, pre-IFRS 16 (37.3) (32.1) (32.1)
Impact of IFRS 16 5.5 (1.1) (1.1)
Profit Before Tax, after impact of IFRS 16 64.5 19.4 22.7 +184.1%
Underlying Basic Earnings per Share* 40.7p 22.9p 24.3p +67.5%
*Before IFRS 16, before non-underlying items. *Alternative
performance measures are defined and reconciled to IFRS amounts in
the glossary on page 21. The LFL change measure adjusts for the
in-year store openings and closures, and acquisitions.
Key highlights ? Autocentres, including our Halfords Mobile
Expert vans ("HME"), gained significant market share, growing 9.7%
LFL
against a backdrop of traffic more than 25% below pre-pandemic
levels. ? Strong growth in our areas of strategic focus: Group
Services growing +23%, B2B +40% and Online +110%. ? In Retail:
? LFL sales growth of +14.6% (total revenue +9.4%), with cycling
+54.1% LFL and motoring down -12.1% LFL.
? In Motoring, essential products such as 3B's ("Blades, Bulbs
and Batteries") outperformed traffic levels,
whilst touring, car cleaning and maintenance products finished
in strong growth.
? In Cycling, we refreshed over 50% of our Adult bikes,
attracting new and existing customers with our award
winning and exclusive own brand bikes.
? Strong Cycling services growth of +51%, fulfilled by our
national coverage of technicians.
? Tredz grew revenue by +66% and profit by GBP7m YoY, as we
focussed our investment on one performance cycling
brand following the closure of Cycle Republic. ? In
Autocentres:
? Total revenue growth of +31.6% (+9.7% LFL) and EBIT, before
non-underlying items and IFRS 16 adjustments, of
GBP12.7m, +89.6% higher than last year. An exceptional
performance reflecting significant market share gains.
? Strong growth of our Halfords Mobile Expert ("HME") vans
business, growing revenue by +200% and finishing the
year with 143 vans, 14 hubs and over 250 technicians, with
established hubs now profit accretive to the Group.
? Expanded our coverage of the commercial market through the
acquisition of Universal Tyres, adding 20 garages to
our fixed estate and 89 commercial vans. ? Electric mobility: ?
E-mobility sales (i.e., e-bikes, e-scooters and associated
accessories) up +94% ? By the end of FY22, more than 2,000 of our
store and garage colleagues will be trained to service electric
vehicles, bikes and scooters. ? Group gross margin declined by
-34bps, reflecting a +680bps improvement in Cycling and underlying
improvements in
the Autocentres businesses, largely offsetting the adverse mix
impact of a -12 percentage-point change in
high-margin motoring revenues as a percentage of Retail sales
and the full year mix impact of the McConechy's and
Tyres on the Drive acquisitions. ? Operating costs were tightly
controlled, increasing +5.6% before non-underlying items and IFRS
16 adjustments,
decreasing as a proportion of revenue by -3.1ppts. Costs of
operating with COVID-19 were significant, approximately
GBP33m across the Group. The Group was also eligible for
business rates relief, totalling GBP39m. ? Profit Before Tax
("PBT"), pre-IFRS 16 and before non-underlying items of GBP96.3m.
PBT after the impact of IFRS 16
and including non-underlying items of GBP64.5m, +GBP41.8m above
FY20. ? Free Cash Flow of GBP145.3m driven by strong profit
generation, lower cycling stocks due to global supply
constraints, and our actions to preserve cash throughout the
pandemic. ? Non-underlying items were GBP37.3m, the majority of
which are non-cash in the year and are mainly related to the
previously announced closure of 55 stores and garages, following
a strategic review of low-return locations.
Current trading and Outlook
We have seen positive momentum carry forward into the first 9
weeks of FY22, with demand for our motoring services strong,
cycling demand remaining elevated, and staycation products popular
in Retail motoring. The two-year LFL growth rates (vs. FY20) for
the first nine weeks of FY22 were as follows: Retail Motoring 6.6%,
Retail Cycling 42.0%, Autocentres 6.6%.
Although we expect a continuation of the volatile and
unpredictable trading seen throughout FY21, we are positive on our
prospects for FY22. In the short term, we expect the market share
gains we have made across our Autocentres business to continue,
alongside an increase in more regular and routine motoring
journeys. Within our Retail business, pent-up demand and the
restrictions on foreign travel will give rise to increased demand
for our touring and cycling products, whilst motoring products
should benefit from more normalised traffic patterns.
There are, however, external factors that add uncertainty to our
outlook. Supply challenges for Cycling products remain acute, and a
return to normal trading patterns remains highly uncertain,
particularly in H2, as the hospitality industry and international
travel potentially reopen to a greater extent. The general economic
outlook remains challenging, with consumers likely to be more
cautious and expecting greater value from their purchases. We will
address this by making a significant investment in pricing in our
Retail Motoring business. Although this may impact FY22 gross
margins, we are confident it will strengthen the business in the
medium and long term. After the strong start to the year, and in
consideration of these factors, we are targeting FY22 profit before
tax, including IFRS 16 adjustments, of above GBP75m.
In the longer term, we are confident in the outlook for the
motoring and cycling markets and our ability to compete strongly in
both. We have demonstrated the resilience and growth opportunity in
our Services and B2B businesses by gaining market share through
increasing scale and convenience alongside enhancing the overall
customer experience. We also believe that the increased adoption of
Cycling will continue, supported by Government investment and a
societal need to tackle climate change. As a business, we will
continue to drive our markets by launching more new and exclusive
products, becoming the market leader in electric mobility as the UK
switches to a sustainable future, and continuing to engage our
customers by creating a seamless digital and physical experience.
Building on the strong foundations we have created in FY21,
Halfords is well-positioned to accelerate its transformation
journey.
Capital structure and dividend
We have finished the financial year with a strong balance sheet,
ending with net cash of GBP58.1m, although some of this is
non-recurring, and will unwind as inventory levels return to
optimal levels and the timing of creditor payments normalises. This
financial strength gives us the ability to invest in our
transformation plan, positioning the business for long-term
success. Considering this opportunity, we have updated our capital
allocation priorities as follows: 1. Maintaining a prudent balance
sheet 2. Investment for growth 3. M&A, focused on Autocentres
4. Progressive dividend policy 5. Surplus cash returned to
shareholders
Our maximum Net Debt: EBITDA ratio, on a pre-IFRS 16 basis,
remains at 1.0x, or up to 1.5x on a short-term basis to fund
M&A activity. However, given the current strength of our
balance sheet and the uncertain economic environment, we will
operate with more prudent debt levels in the near-term.
With a robust and proven strategy, it is imperative we invest in
our transformation plan, which we believe will require between
GBP50m and GBP60m per year of capital expenditure in the
medium-term. Our growth plan will be complemented by acquisitions
if we are able to find attractive businesses, with the right
strategic fit and for a fair price. Our acquisition strategy will
be focussed on scaling our motoring services business, propelling
us to market leadership in aftermarket service, maintenance and
repair.
We understand the importance of the ordinary dividend to many of
our investors. Recognising this, and the strength of the current
balance sheet, we are proposing an FY21 final dividend of 5p per
share and a reinstatement of the ordinary dividend from FY22 at 9p
per share, intending this to be progressive. Should surplus cash
remain in the business that we feel we cannot deploy with good
rates of return, we will return this to shareholders in the most
appropriate way.
Enquiries
Investors & Analysts (Halfords)
Loraine Woodhouse, Chief Financial Officer
Neil Ferris, Corporate Finance Director +44 (0) 7483 360 675
Andy Lynch, Head of Investor Relations +44 (0) 1527 513 189
Media (Powerscourt) +44 (0) 20 7250 1446
Rob Greening halfords@powerscourt-group.com
Lisa Kavanagh
Jack Shelley
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 www.halfordscompany.com in due course. For further
details please contact Powerscourt on the details above.
Next trading statement
On 8 September 2021 we will report our trading update for the 20
weeks ending 20 August 2021.
Notes to Editors
www.halfords.com www.tredz.co.uk www.halfordscompany.com
Halfords is the UK's leading provider of motoring and cycling
services and products. Customers shop at 404 Halfords stores, 3
Performance Cycling stores (trading as Tredz and Giant), 374
garages (trading as Halfords Autocentres, McConechy's and
Universal) and have access to 143 mobile service vans (trading as
Halfords Mobile Expert and Tyres on the Drive) and 192 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.
Chief Executive's Statement
Operational review
I am very pleased with our performance in FY21, shown not only
in the financial results but also in the operational agility
demonstrated throughout the business to overcome the many
challenges presented last year. COVID-19 was clearly the most
significant challenge faced by any retailer, but we have also faced
Brexit, container shortages, port congestion and more recently, the
blockage of the Suez Canal. Our performance not only showcases the
resilience of our core business and the relevance of our strategy,
but also the importance of our progress in creating a more
efficient and profitable business to provide strong foundations for
future growth.
Retail
Retail revenue of GBP1,039.8m was +9.4% above last year and
+14.6% on a LFL basis. We saw a volatile and unpredictable year of
trading, with large swings in LFL performances from week to week,
and across our categories. Overall, we saw strong demand for our
Cycling products, +54.1% above last year, with our performance
cycling business Tredz performing even better at +66.3%. Motoring
was -12.1% LFL, better than traffic levels but inevitably impacted
by the lockdowns.
Retail Motoring
Retail motoring sales were down -12.1% LFL against the backdrop
of -25% fewer car journeys and low consumer confidence. As an
essential retailer we played our part in the COVID-19 response by
carrying out over 60k Services for NHS and key workers during the
height of the pandemic and over 1m essential services during full
lockdowns. We also kept innovating our products and services,
including the launch of our WeCheck app, which enables colleagues
to digitally record vehicle checks undertaken and the recommended
actions for a customer to keep their car safe. We performed well in
product categories related to staycation or car maintenance -
Touring was up +1.7%, whilst Car Cleaning (+7.4%), Body Repair
(+5.4%) and Workshop (+6.4%) all grew strongly. We launched new
products in Blades, Bulbs and Car Seats, enabling these categories
to perform stronger than the lower traffic levels would suggest,
and helping to mitigate the challenging conditions we faced in
discretionary categories, such as Dash Cams and Audio.
Retail Cycling
Cycling performed very well, +54.1% above last year, but
presented its own challenges in securing supply and predicting
demand. All mainstream product categories saw strong growth, with
Adult Mechanical bikes +113% and E-bikes +76%, while our
Performance Cycling business Tredz also saw strong revenue and
profit growth, capitalising on customer transfer from our closed
Cycle Republic business. We identified very early in the pandemic
the unprecedented levels of demand for cycling, enabling us to use
our scale and relationships to secure stock from new and existing
suppliers. We also launched a series of customer journey
enhancements, beginning online, to optimise the customer experience
at a time of high demand.
In this competitive market we continued to innovate and refresh
our exclusive ranges of own brand Carrera, Boardman and Apollo
bikes. Our bikes secured multiple awards from specialist press and
magazines throughout the year for their design, specification, and
value. Over 50% of our adult bikes were updated last year, adding
new features such as comfort saddles and puncture resistant tyres,
all following customer feedback. Supply was, and remains, a
challenge, but where necessary, we quickly adapted specifications
and componentry to mitigate bottlenecks in production and worked
with new suppliers to achieve a steady intake of bikes throughout
the year. Keeping customers updated and engaged was a key priority
and we launched a series of digital developments designed to
enhance and assist customers finding their new bike. One example
was 'Email me when in stock' or the ability to register interest in
new launches. We also introduced bookable collection slots, next
day delivery and tripled our central bike build capacity, all of
which have led to improved NPS scores and customer feedback.
With high demand and limited global supply, many customers opted
to fix their existing bike and we ensured our colleagues and
systems were ready to help. Cycling Services grew more than +50% on
last year as we offered free 32-point bike checks and took a
market-leading share of the government's 'Fix Your Bike' scheme. We
repaired and serviced over 1m bikes and were the only national
retailer offering online booking slots, an initiative launched this
year.
Retail gross margin
Despite the extreme, adverse change in motoring mix, Retail
gross margin increased by +10bps, highlighting the importance and
timeliness of our work over the last 18 months to improve the
profitability of our Cycling business. We targeted a +300bps
improvement in Cycling gross margins and through our work to
rationalise componentry, improve buying terms, and optimise
promotional effectiveness, we actually delivered a significant
+680bps increase. This improvement enabled us to offset the -12
percentage-point change in motoring revenues as a percentage of
total sales, and the corresponding impact on gross margins.
Retail operating costs
Our focus on efficiency and procurement saw Retail operating
costs increase +1.6% year-on-year. Excluding GBP24.8m of COVID-19
related costs and GBP33.1m of business rate relief, operating costs
were 3.6% higher year-on-year but decreased as a proportion of
sales by -2.2ppts.
Our achievements helped mitigate the adverse mix impact
described above, whilst also allowing investments in key strategic
initiatives such as centralising customer contact. Our Retail
business experienced the greatest disruption from COVID-19,
implementing seven different operating models in six months to
safeguard our customers and colleagues. We also employed
front-of-house roles to monitor store capacity and social
distancing, alongside significant investment in PPE. Acknowledging
the unwavering commitment of our colleagues in such difficult
circumstances, we launched almost GBP4m of initiatives during the
year, including the Frontline Colleague Support Scheme and Halfords
Here to Help Fund, alongside free flu vaccinations and wellbeing
support lines.
Over the year, we continued to work on lowering the underlying
costs within our business. As communicated at the end of FY20, we
consolidated our performance cycling business, closing all 22 Cycle
Republic stores and saving over GBP9m of annualised costs, whilst
transferring a significant share of the customer base to our
remaining Tredz business. In addition, we concluded our review of
low-returning stores and consequently closed an additional 42
retail stores, where we are confident that trade-transfer will
improve overall returns, generating an annualised cost saving of
GBP15m. We also saved over GBP7m of annualised goods not for resale
("GNFR") costs, continued to improve our sustainability credentials
through the continued roll-out of LED lighting and Building
Management Systems, and renewed 19 leases for an average -30%
reduction in rent premiums.
Autocentres
Autocentres revenue was GBP252.5m, growing 31.6% year-on-year
and +9.7% on a LFL basis. The overall growth in Autocentres
benefited from the annualisation of our FY20 acquisitions and the
continued expansion of our Halfords Mobile Expert business,
launching new vans and hubs to serve this growing and in-demand
service.
However, our Autocentres business was not immune to the impacts
of COVID-19. The reduction in traffic and MOT deferments required
us to work hard to overcome these challenges, but our LFL and
overall growth clearly demonstrate the significant increase in
market share we have secured. This has been achieved by attracting
new customers through our first Group Motoring Services marketing
campaign, the ease for customers in booking appointments on our
single Group website, and having their chosen service fulfilled
through one of our fixed locations or by mobile experts at the
customer's home or office. We further enhanced convenience for our
customers by opening on Sundays in 131 garages, increasing our
fleet of Halfords Mobile Expert vans to 143 and adding 20 garages
to our business through our acquisition of Universal Tyres. We are
confident that many of our customers will continue to use our
services as their preferred choice, having grown the NPS score to
68.8 across the year and exiting FY21 at 72.6.
Autocentres EBIT was GBP12.7m on a reported basis, pre-IFRS 16,
and GBP12.0m excluding COVID-19 related costs of GBP5.3m and
business rates relief of GBP6.0m. EBIT growth was GBP5.3m versus
FY20. This exceptional performance reflects ongoing improvements to
the customer experience and increased operational efficiency,
driven by continued enhancements to our digital operating model
('PACE'), and resulting in strong market share gains.
Areas of strategic focus
It has been a particularly strong year for our areas of
strategic focus, demonstrating the resilience and relevance of our
strategy in the face of a tough operating environment. We have seen
market share increases and sales growth as our investments gain
traction.
Group Services1
It was a very good year for Group Services, with revenues
exceeding GBP370m, a growth of +23% on last year and now accounting
for 29% of Group revenue. This was an excellent result under any
circumstance but given the backdrop of -25% fewer journeys on UK
roads, it is testament to our focus on this market. We launched
several initiatives to boost customer awareness, including our
'Road Ready' campaign, our Group Services marketing campaign and
our free 32-point bike check. We made booking our services easier
than ever by enabling customers to book on our single Group website
and we are the first national service provider to allow customers
to book timed cycle service appointments or collections online.
With heightened demand, we continued to increase our scale and
capacity, making it easier and more convenient for customers to
receive their services at one of almost 800 fixed locations, or at
home or work from one of our 143 mobile expert vans.
Online
It was also a strong year for Group Online sales, which were
GBP580m, growing +110% and accounting for 44% of Group revenue.
Lockdowns and social distancing meant that customer demand for
online and delivery channels grew dramatically. The successful
launch of our new web platform in Q4 FY20 meant we were able to
cope with a rapid +61% increase in traffic and provide a flexible
platform from which we could continually develop the site and adapt
to fast-changing customer needs. Not only did we change the focus
and main content several times across the year, but we were able to
add over 160 new customer-enhancing developments, such as guided
selling, local stock availability, new services, new locations,
bundles, recommendations, and personalisation across the Group. The
result was a 10x increase in customers viewing Autocentre content
and a conversion increase in Retail of +37%.
B2B2
Finally, B2B also delivered an excellent sales performance,
growing +40% and accounting for 17.9% of Group revenue. We saw
strong revenue growth in several areas of B2B. Our market-leading
Cycle to Work ("C2W") scheme delivered +85% revenue growth, driven
by a large increase in new clients to our scheme and increased
uptake within our existing client base, with many increasing their
employee spend limit above GBP1,000 for the first time. Our
partnerships and gift card business also grew by over 20%, through
increased reach, systems improvements allowing multi-channel
redemption, and an expansion of our bulk product offering into
fully-serviced bike fleets. The insurance replacement business
recorded an 8% improvement year on year, supported by a growth in
demand for bikes and our diversification into replacement
children's car seats. Our fleet & commercial motoring servicing
business grew by 72%, boosted by the acquisition of McConechy's,
and although Tradecard declined -6%, this performance exceeded the
consumer-facing growth rate of the most relevant product
categories. Finally, we launched a new salary sacrifice offer,
allowing employees to spread the cost of car maintenance, and
improved our C2W offer within the Republic of Ireland.
Sustainability - Environmental, Social and Governance
("ESG")
In our FY20 Annual Report, we set out our ESG strategy and
demonstrated its alignment to the Group's purpose: 'To Inspire and
Support a Lifetime of motoring and cycling'. We have since updated
our strategy, including a clear prioritisation on the topics most
important to us and our broad stakeholder base, and created a
roadmap for building the capabilities and governance processes to
drive further progress against the strategy. Our four priority
areas are shown below, further details of which will be available
in our FY21 annual report to be published in July 2021. ?
Electrification ? Net Zero ? Diversity & Inclusion ? Product,
Packaging and Waste management
Progress on strategy in FY21
'To Inspire and Support a Lifetime of motoring and cycling.'
At our preliminary results in July 2020, reflecting the
unprecedented impact and extreme uncertainty of the COVID-19
pandemic, we highlighted that we would moderate our near-term plan.
We adjusted our short-term focus to cost efficiency and cash
preservation, ensuring our colleagues are safeguarded and engaged
in the success of the business and, of particular importance,
adapting quickly to new customer trends. Our aim was to strengthen
the core of our business during FY21 in the hope that we could
return to more transformative investment in FY22 as the pandemic
situation stabilised. Our progress on the key building blocks was
as follows:
Continue to transform and build a unique and market-leading
Motoring Services offer ? Increased the scale of our Halfords
Mobile Expert offer to 143 vans, 14 hubs and over 250 technicians
to serve a
wider geographic reach. ? Acquired Universal Tyres, adding 20
garages to our fixed estate, as well as 89 vans, enabling us to
expand our
coverage of the commercial market in FY22. ? Continued to invest
in our technology:
? PACE into McConechy's
? Tyres on The Drive (ToTD) integrated into our Group
website
? WeCheck app launched in Retail stores ? Launched our first
Group motoring services campaign, contributing to increased
awareness and a +28% uplift in
consideration scores for our Services offer. ? Implemented a new
labour operating model in our Retail stores, designed to
significantly increase our scale and
capability in motoring and cycling services. We completed
consultations with over 5,500 colleagues, with 88%
ultimately retained in the business.
Enhancing our Group web platform and digital customer
experience, to create an even more differentiated and specialist
proposition ? Launched over 160 new customer enhancements to our
group website, including 'email me when in stock', guided
selling, local store stock availability, and personalisation. ?
Transferred inbound phone and digital customer-contact from all 404
retail stores to a centralised, specialist
team. With the pandemic driving contact volumes to at least four
times higher than normal, caused by accelerated
online adoption and a buoyant cycling market, this initiative
enabled a significant improvement in call answer
rates, to over 95%, improved service speed and query resolution,
and the liberation of store-based colleagues to
focus on those customers in front of them. ? With an ongoing
focus on improving the customer experience, Retail NPS improved by
+1.8 YoY and Autocentres NPS by
+3.8 YoY, a proud achievement in such a challenging year.
A focus on cost and efficiency, creating a leaner and more
profitable business ? Cycling profitability improvements of
+680bps, far exceeding the targeted +300bps. ? Sustainable working
capital improvement of GBP20m ? In line with our plans announced in
November 2019, we closed 80 low-returning stores and garages where
we were
confident of trade transfer to neighbouring locations. This
includes the exit of 22 Cycle Republic stores,
announced in FY20. ? Negotiated 19 lease renewals in Retail,
achieving an average rent reduction of -30%. ? Secured GNFR
annualised cost savings of GBP7m.
Invest in our Colleagues' welfare, engagement and development ?
Colleague safety and wellbeing was our number one priority
throughout FY21:
? We invested GBP11m in PPE and COVID-19 protocols across the
Group.
? We invested a further GBP4m in direct financial support,
including a Frontline Colleague Support Scheme and the
Halfords Here to Help fund.
? We launched a Wellbeing hub to support colleagues on a range
of issues affecting their mental and physical
health. ? We commenced our Services skills intervention,
significantly increasing our colleagues' ability to provide a
broad
range of motoring and cycling services to customers and
providing them with development opportunities to help
further their careers.
FY22 strategy focus
The last 12 months have proven the resilience of our business
and the ongoing relevance of our strategy to focus on the growth of
motoring services and B2B. Although we expect the volatile and
uncertain trading patterns to continue, the period of optimisation
we have undertaken has strengthened the core business and it is now
well-placed to withstand future challenges. Although we will
continue to optimise the business, we will now accelerate the
process of transformation that was paused during the pandemic.
By the end of FY22 we expect to see a different business
beginning to emerge, with our areas of focus next year as
follows:
Inspire ? Project Fusion remains an exciting opportunity and we
will trial between two and three towns in FY22. We think of
Fusion as 'a customer experience seamlessly, consistently, &
conveniently executed across all of our assets in a
town'. It will encompass a destination retail store, an updated
Autocentre garage, and a Halfords Mobile Expert
offer, all operating together in conjunction with centralised
customer support channels and an online and home
delivery proposition across a major town or city. Focussed
primarily on improving the customer experience and
understanding the potential of combining all Halfords services
in the most compelling way, the trial will also test
whether a reinvigorated in-store & garage design, focused
more heavily on the delivery of services, can further
stimulate sales across the Group. ? We will continue to invest
heavily in our digital proposition, whether online through the
Group web platform, or
enabling the wider transformation agenda. ? Through Project
'Peloton 2', we will significantly improve our PACs ("parts,
accessories and clothing") offering in
Cycling, through better ranging, improved merchandising, and
most importantly enabling our colleagues to provide
customers with complete solutions to their needs.
Support ? We will increase our Halfords Mobile Expert van
network to at least 200, bringing this popular service to more
parts of the UK and giving us over 80% national coverage. ? We
will increase the number of Autocentres garages, bringing us closer
to our medium-term goal of 550 in the UK and
ROI. ? We will continue to expand our B2B channel, in particular
building on the commercial business we established
through our acquisitions of McConechy's and Universal Tyres. ?
We will lead the transition to an electric future by investing in
training, technology and introducing new products
and services, positioning Halfords as the leading voice of
E-mobility. This will include a commitment to train over
2,000 Retail and Autocentres colleagues in Electric servicing in
FY22.
Lifetime ? We will launch a unique and market-leading motoring
services club, rewarding loyal customers with preferential
terms and offers. ? The additional value of customers that shop
across our Group remains an exciting and valuable opportunity.
Although
the pandemic caused normal shopping behaviours to be
interrupted, we will continue to focus on this and our digital
customer experience. ? Our focus on ESG matters will accelerate,
centred on four priority areas in which Halfords can make a
real
difference: Electrification, our Net Zero commitment, Diversity
& Inclusion, and Product, Packaging and Waste
management.
Underpinned by: ? Cost and efficiency will remain a focus and
although we do not foresee any further large-scale property
closures in
the near-term, we will retain flexibility in our estate and seek
to negotiate further rental savings. ? Our frontline colleagues
will benefit from the biggest investment in skills to-date, further
enhancing our
super-specialist expertise. By the close of H2 we will have
completed our skills intervention, resulting in our
skills base increasing from 16,000 to over 40,000, with every
colleague trained in all core services. ? We will transition to a
new Group operating and reward model, better aligned to our Group
strategy and our One
Halfords Family values.
In addition to these strategic priorities, we will continue to
optimise the business to further strengthen our foundations. As
mentioned in our Outlook statement above, one key initiative in
FY22 will be an investment in core pricing in our motoring products
business. The dramatic acceleration in online shopping and a more
challenging economic picture have brought value into sharp focus
and so we believe this is the right time to make this investment,
providing customers with greater value and providing a strong
foundation for our services business.
Graham Stapleton Chief Executive Officer, June 2021
Halfords Group Plc 1. Group Services includes revenues across
both Retail and Autocentres and includes associated products 2. B2B
includes revenues from C2W, Commercial, Fleet and product sales to
businesses in both Retail and Autocentres
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 "FY21" accounting period represents trading for the 52 weeks
to 2 April 2021 ("the financial year"). The prior period "FY20"
represents trading for the 53 weeks to 3 April 2020 ("the prior
year"). To ensure a meaningful comparison with the prior year, all
commentary, unless otherwise stated, is against the 52-week period
ended 27 March 2020 and is before non-underlying items. 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.
Group Financial Results
FY21 FY20 FY20
52-week
(52 weeks) (53 weeks) (52 weeks)
change
GBPm GBPm GBPm
Group Revenue 1,292.3 1,155.1 1,142.4 +13.1%
Group Gross Profit 656.3 589.7 584.0 +12.4%
Underlying EBIT pre-IFRS 16* 101.8 55.4 58.7 +73.4%
Underlying EBITDA pre-IFRS 16* 139.8 92.6 95.3 +46.7%
Net Finance Costs (5.5) (2.8) (2.8) +96.4%
Underlying Profit Before Tax pre-IFRS 16* 96.3 52.6 55.9 +72.3%
Net Non-Underlying Items (37.3) (32.1) (32.1) +16.2%
Impact of IFRS 16 5.5 (1.1) (1.1) -
Profit Before Tax 64.5 19.4 22.7 +184.1%
Underlying Basic Earnings per Share pre-IFRS 16* 40.7p 22.9p 24.3p +67.5%
* 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 21.
The speed with which COVID-19 hit, and the subsequent
implications, has challenged every business. Almost overnight,
demand and customer shopping behaviour changed, cashflows and
supply chains were interrupted, and the resulting operational
challenges tested everyone and everything. Although I believe the
financial strength of Halfords, and our diverse portfolio of
essential products and services, positioned us well going into the
pandemic, I am pleased that the work in the preceding 12 months was
designed for exactly this purpose; to strengthen the resilience and
performance of the business in an ever-changing retail environment.
The FY21 financial results, therefore, reflect our operational
agility in year but also the positive impact of longer-term
initiatives to improve the efficiency and profitability of our
business. We saw revenues and profits grow, gross margins improve
in our core categories and businesses, operational costs fall as a
proportion of sales, and a closing net cash position of
GBP58.1m.
The customary financial metrics undoubtably demonstrate our
strong performance but, over and above this, we also undertook
further activity in year to safeguard the Group. This included
securing GBP25m of CLBILS funding and covenant waivers on our
existing RCF at the peak of the pandemic and, more notably, the
subsequent refinancing of the Group's debt facility for the next 3
years, securing a competitive rate of borrowing on a reduced
facility size overall.
Group revenue in FY21, at GBP1,292.3m, was up 13.1%, comprised
of Retail revenues of GBP1,039.8m and Autocentres revenue of
GBP252.5m. This compared to FY20 Group revenue of GBP1,142.4m,
which saw Retail revenue of GBP950.6m and Autocentres revenue of
GBP191.8m. Group gross profit at GBP656.3m (FY20: GBP584.0m)
represented 50.8% of Group revenue (FY20: 51.1%), comprising of a
Retail gross margin up +10bps year on year at 48.3% and a decrease
in the Autocentres gross margin of 440 bps to 61.1%, reflecting the
recent acquisition of lower gross margin businesses. Although the
headline Group gross margin rate declined -34bps, this was a strong
result given the dynamics and volatility of the last twelve months
and the outcome reflects our focus on creating a more profitable
business. To context this result, it is worth highlighting three
key components within the final overall Group gross margin %.
Within Retail, we saw a significant and adverse change in mix, out
of higher margin motoring products and into lower margin cycling.
Motoring revenues were impacted by the almost continuous rhythm of
lockdowns and resultant fewer journeys. On the contrary, our
cycling performance was very strong as we worked hard to capitalise
on any opportunity within this market and offset the lost motoring
revenue. Offsetting the significant mix impact, we saw a
particularly strong margin rate improvement, reflecting almost 18
months of work to improve the profitability of our cycling
business. The overall improvement in cycling gross margin was
particularly pleasing, up almost 680bps on FY20 and, alongside a
smaller, but favourable, improvement in motoring this completely
mitigated the adverse mix effect within Retail.
The final margin impact was seen within our Autocentre Business.
The overall performance was -440bps vs FY20 but was expected as we
reported the first full year of Tyres on the Drive and McConechy's
Tyre Service Limited ("McConechy's"). As we highlighted last year,
these businesses generate a lower gross margin due to a higher
participation of tyre sales. The operating model is different, but
we see an opportunity in the medium term as we increase the
participation of higher-margin services, maintenance, and repair
within the product mix. Encouragingly, all three Autocentre
businesses saw their gross margins improve vs FY20 as we continue
to optimise and take the first steps on this journey.
Total underlying costs, pre-IFRS 16, increased to GBP554.5m
(FY20: GBP525.3m) of which Retail comprised GBP410.6m (FY20:
GBP404.3m), Autocentres GBP141.6m (FY20: GBP118.9m) and unallocated
costs GBP2.3m (FY20: GBP2.1m). 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, Tredz
and Wheelies in May 2016, McConechy's in November 2020 and The
Universal Tyre Company (Deptford) Limited ("Universal") in March
2021, which arise on consolidation of the Group. Group Underlying
EBITDA pre-IFRS 16 increased 46.7% to GBP139.8m (FY20: GBP95.3m),
whilst net finance costs pre-IFRS 16 were GBP5.5m (FY20:
GBP2.8m).
Group operating costs before non-underlying items and pre-IFRS
16 saw an increase of 5.6% but decreased as a proportion of sales
by -3.1ppts to 42.9%, demonstrating our increased efficiency. As
with revenue and gross margin, there are several movements within
this result that give context to the performance. The Group saw
over GBP33m of costs as a result of operating under COVID-19
restrictions, driven by additional payroll to manage colleague and
customer safety, personal protective equipment ('PPE') and safety
equipment, and higher fulfilment cost as customers temporarily
changed shopping behaviour. During Q1, whilst the Groups stores and
centres were partially closed, over 50% of colleagues were
furloughed. At this point we utilised government furlough schemes,
receiving GBP10.5m of support, which was later paid back in full
during Q4. We also recognised the difficult environment through
which our colleagues have worked and, as a result, invested in
supporting them financially through a series of initiatives,
including the Front-Line Bonus Scheme and a Hardship Fund,
totalling GBP4m, whilst also adjusting holiday rules to allow
colleagues to take more time off during FY22. These costs were
offset by the business rates relief of GBP39m across the Group, of
which the majority arose within the Retail business.
We continued to drive our ongoing efficiency programmes,
delivering GBP7m of GNFR (goods not for resale) cost savings,
alongside those associated with the closure of Cycle Republic,
worth a further GBP9m. We also achieved rental savings within our
Retail estate on 19 lease renewals of circa -30% worth GBP0.6m in
FY21 and continued to convert more of our stores and garages to LED
lighting, saving a further GBP0.4m. These underlying savings were
offset by the inevitable cost increases associated with the growth
of our business. The annualisation of our acquisitions, Tyres on
the Drive and McConechy's, added GBP18m, strategic investments
totalled GBP8m and the significantly skewed mix into bikes, and
their increased volumes sold during FY21 added a further GBP22m of
additional cost.
Underlying Profit Before Tax pre-IFRS 16 for the year increased
72.3% at GBP96.3m (FY20: GBP55.9m). Non-underlying items of
GBP37.3m in the year (FY20: GBP32.1m) related predominantly to the
closure of a number of stores and garages following a strategic
review, as well as costs relating to organisational restructuring.
After non-underlying items, Group Profit Before Tax was GBP59.0m
(FY20: GBP23.8m).
After non-underlying items and including IFRS 16, Group Profit
Before Tax was GBP64.5m (FY20: GBP22.7m). The impact on the Group
of IFRS 16 in the period was a GBP5.5m net increase to Group Profit
Before Tax. Further details on the impact of IFRS 16 is shown later
in this report.
Retail
FY21 FY20 FY20
52-week
(52 weeks) (53 weeks) (52 weeks)
change
GBPm GBPm GBPm
Revenue 1,039.8 961.0 950.6 +9.4%
Gross Profit 502.0 462.8 458.4 +9.5%
Gross Margin 48.3% 48.2% 48.2% +10bps
Operating Costs (410.6) (410.8) (404.3) +1.6%
Underlying EBIT pre-IFRS 16* 91.4 52.0 54.1 +68.9%
Non-underlying items (33.6) (29.5) (29.5) +13.9%
Impact of IFRS 16 14.2 (1.2) (1.2) -
EBIT post-IFRS 16 72.0 21.3 23.4 +207.7%
Underlying EBITDA pre-IFRS 16* 120.5 81.1 82.7 +45.7%
* 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 21.
Revenue for the Retail business of GBP1,039.8m reflected, on a
constant-currency basis, a like-for-like ("LFL") sales increase of
+14.6%. Total revenue in the year increased 9.4% after adjusting
for the impact of closed stores. The volatility of the trading
environment discussed earlier was most evident in our Retail
business, which made forecasting particularly difficult. Demand for
our motoring products suffered from a supressed market throughout
FY21 as lockdowns markedly reduced the number of journeys, with
customers opting to work from the safety of their homes. Motoring
like-for-like declined 12.1%, better than transport data would
suggest, but still saw weekly LFLs ranging from -75% to +20%. There
were a number of positive performances within motoring, such as our
touring products and car cleaning, but many product areas saw LFL
declines through much of the year.
Our cycling performance was much stronger, with like-for-like
growth of 54.1%, as we worked hard to source stock from new and
existing suppliers and serve the increased demand within the
market. Cycling was equally hard to predict, and although performed
very well across H1, with LFL peaks of over +100%, H2 saw more
volatility from week to week with LFL declines late in Q3 and early
Q4.
The differing category fortunes resulted in the mix of motoring
within Retail decline by almost -12ppts vs. Cycling against last
year. 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:
FY21 FY21 FY20
LFL (%) Total sales mix (%) Total sales mix (%)
Motoring -12.1 46.1 58.4
Cycling +54.1 53.9 41.6
Total +14.6 100.0 100.0
Gross profit for the Retail business, at GBP502.0m (FY20:
GBP458.4m) represented 48.3% of sales, an increase of +10bps on the
prior year (FY20: 48.2%). Underlying gross margins of cycling and
motoring improved more significantly than the headline number,
which was diluted by product mix into lower margin cycling and a
currency impact within the broader gross margin due to fluctuations
in the year end spot rate. The gross margin improvement within the
categories 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 +680bps and Motoring by +40bps vs FY20.
Retail operating costs before non-underlying items and IFRS 16
were GBP410.6m (FY20: GBP404.3m) an increase of 1.6% on FY20. The
focus on operational efficiency and procurement continued in FY21,
offsetting the impact of volume and mix, whilst simultaneously
allowing the business to invest, albeit at a reduced level, in our
strategic initiatives. Some of the highlights included centralising
all customer contact and further development of our digital
platform to enhance our customer experience including bookable bike
slots and our WeCheck App. We saw almost GBP7m of GNFR costs
removed from the Retail business through continued review of
services and tendering processes. We saw 19 lease renewals, saving
on average -30% on annual rents, and we continued to convert more
stores to LED lighting and building management systems, saving over
40% on annual converted stores utilities consumption.
Naturally, due to the size of the Retail business, a greater
proportion of the costs associated with COVID-19 were within its
costs. Of the GBP33m mentioned above, GBP25m arose in Retail,
offset by GBP33m of business rates relief.
Autocentres
FY21 FY20 FY20
52-week
(52 weeks) (53 weeks) (52 weeks)
change
GBPm GBPm GBPm
Revenue 252.5 194.1 191.8 +31.6%
Gross Profit 154.3 126.9 125.6 +22.9%
Gross Margin 61.1% 65.4% 65.5% -440bps
Operating Costs (141.6) (121.4) (118.9) +19.1%
Underlying EBIT pre-IFRS 16* 12.7 5.5 6.7 +89.6%
Non-underlying items (3.7) (2.6) (2.6) +42.3%
Impact of IFRS 16 0.8 0.1 0.1 -
EBIT post-IFRS 16 9.8 3.0 4.2 +133.3%
Underlying EBITDA pre-IFRS 16* 19.3 11.5 12.6 +53.2%
* 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 21.
Autocentres generated total revenues of GBP252.5m (FY20:
GBP191.8m), an increase of 31.6% on the prior year with a LFL
increase of 9.8%. Non-LFL revenue in the year included benefits
from the acquisitions of both Tyres on the Drive and McConechy's in
November 2020, alongside existing Autocentres that had been open
less than 12 months.
Gross profit, at GBP154.3m (FY20: GBP125.6m), represented a
gross margin of 61.1%; a decrease of 440 bps on the prior year. As
stated earlier, the decrease in gross margin % was solely a result
of annualisation of the FY20 acquisitions, which have a dilutive
effect as the operating model is quite different. These businesses
tend to be lower gross margin but also lower cost. There is an
opportunity for us to grow margin, over time, through a greater mix
into service and repair, but the gross margin will remain lower
than that of a core garage.
All businesses saw their respective gross margins improve during
FY21, with the continued development of our PACE Digital Operating
Platform supporting buying efficiency across garages, boosted
further by a slightly lower mix into tyres, which tend to be lower
margin.
Operating costs were GBP141.6m, +GBP22.7m above last year, of
which GBP18m was a result of the annualisation and growth of our
acquisitions from FY20. COVID-19 costs within Autocentres totalled
GBP5.3m, offset by GBP6.0m of relief through the Retail,
Hospitality and Leisure Grant Fund. The remaining cost increase was
the result of growth in the underlying business.
Autocentres' Underlying EBIT was GBP12.7m before IFRS 16 (FY20:
GBP6.7m) a strong performance, reflecting the continued growth and
optimisation of our LFL business, alongside the annualisation and
expansion of FY20 acquisitions. Underlying EBITDA before IFRS 16 of
GBP19.3m (FY20: GBP12.6m) was 53.2% higher than FY20.
Portfolio Management
The last 12-18 months have seen some of the most significant
changes in the Group's portfolio since the acquisition of
Autocentres over a decade ago. Within Q3 FY20 we saw the
acquisition of McConechy's Garages and Tyres on the Drive, followed
shortly by the closure of our Cycle Republic business, including 22
stores, at the close FY20. Within FY21 we have continued to grow
our services business, increasing the number of HME vans and
acquiring Universal at the end if the financial year. We also,
however, took steps to further improve the profitability and
efficiency of our business through the closure of 59 lower return
stores and garages.
The total number of fixed stores or centres within the Group
stood at 781, with a further 143 HME vans and a further 192
commercial vans supporting mobile tyre fitting within McConechy's
and Universal as at 2 April 2021. The portfolio comprised 404
stores (end of FY20: 472) and 374 Autocentres (end of FY20: 371).
Mobile locations grew by 156 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 - - -
Leases renegotiated 19 7 -
Refreshed - - -
Openings/Acquisitions - 20 159
Closed 42 17 -
Within Retail, 42 low return stores closed during the year,
largely in the final quarter. It was considered more profitable to
the Group, on analysing the anticipated sales transfer to other
channels and neighbouring stores, to close these stores and reduce
the overall cost base. Where there was term remaining on any leases
at the point of closure, provision has been made in the balance
sheet to cover occupancy costs to the point of lease expiry. A
further 22 Cycle Republic stores, along with the Boardman
Performance Centre, are also no longer part of the trading
portfolio.
The number of lease expiries, or breaks under option, increases
significantly within the next five years. Retail will see almost
half of stores experience optionality within five years, allowing
for a high degree of flexibility within the estate.
Within Autocentres, no centres were opened, but 20 locations
acquired in the year. 17 were closed, taking the total number of
Autocentre locations to 374 as at 2 April 2021 (end of FY20: 371).
No Autocentres were refreshed in the year (FY20: 14).
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. The
acquisition of Universal resulted in the purchase of 6 freehold
properties but all have been sold and leased back within the first
two periods of FY22.
Net Non-Underlying items
The following table outlines the components of the
non-underlying items recognised in the 52 weeks ended 2 April
2021:
FY21 FY20
GBPm GBPm
Organisational restructure costs (a) 5.9 2.8
Group-wide strategic review (b) - 1.0
Acquisition and investment-related fees (c) 0.6 1.9
One-off claims (d) 2.9 0.8
Closure costs (e) 27.9 25.6
Net non-underlying items pre-IFRS 16 37.3 32.1
Closure costs (e) (1.9) 1.2
Impairment of right-of-use assets (f) (0.4) 0.9
Net non-underlying items post-IFRS 16 35.0 34.2 a. In the current and prior period, separate and unrelated organisational restructuring activities were undertaken.
Current period costs comprised: ? During the year a strategic
redesign of the in-store operating model undertaken to better meet
our customers'
expectations and deliver a consistent shopping experience across
our estate. Redundancy costs of GBP5.9m were
incurred to transition to the new operating model. These costs
have materially been spent during the year.
Prior period costs comprised: ? Redundancy and transition costs
relating to roles which have been outsourced or otherwise will not
be replaced
(FY20: GBP1.4m); and ? Asset write-offs, principally resulting
from the strategic decision to re-platform the Retail and
Autocentres
websites (FY20: GBP1.4m) b. In the prior period, costs were
incurred in preparing and implementing the new Group strategy. This
included GBP0.4m
of external consultant cost and GBP0.6m of store labour costs,
point-of-sale equipment and other associated costs in
completing the cycling space re-lay across the store estate. c.
In the current and prior periods, costs were incurred in relation
to the investments in Universal, McConechy's and
Tyres on the Drive. ? In FY21, GBP0.6m relating to professional
fees in respect of the acquisition of Universal; ? Tyres on the
Drive acquisition costs comprised GBP1.0m (FY20) 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 ? GBP0.9m (FY20) relating to professional fees in
respect of the acquisition of McConechy's. d. During the prior
year, the Group incurred GBP0.2m in settling as court case. In
addition, a provision of GBP0.6m was
recognised in relation to the HMRC audit relating to the
national minimum wage. The Group has continued to work
with HMRC and external advisors during FY21 and a full data
validation exercise is underway to determine the
required Notice of Underpayment. The exercise is in progress and
based on information available to date and the
Group's assessment of a range of potential outcomes, management
has increased the provision to GBP3.4m which
represents management's best estimate of the value of
underpayments and the associated penalty charge. e. Of the closure
costs GBP28.5m represents costs associated with the closure of a
number of stores and garages
following a strategic review of the profitability of the
physical estate. The costs mostly relate to the impairment
of right-of-use assets (GBP12.2m) and tangible assets and
property costs as well as ongoing onerous commitments under
the lease agreements and other costs associated with the
property exits.
In the prior period they related to costs associated with the
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 costs mostly relate to the
impairment of right-of-use assets, as well as the impairment of
intangible and tangible assets and inventories as well as ongoing
onerous commitments under the lease agreements and other costs
associated with the property exits. GBP2.5m of these costs have
been reversed during the year as the Group continues to negotiate
lease disposals and was able to release stock provisions previously
in place (GBP1.8m). f. In light of the ongoing COVID-19 pandemic,
the Group has revised future cash flow projections for stores
and
garages. As a result, in the prior period, GBP0.9m incremental
impairment was recognised in relation to garages where
the current and anticipated future performance did not support
the carrying value of the right-of-use asset and
associated tangible assets. This charge is directly attributable
to impairment due to COVID-19 and relates
primarily to the right-of-use asset value. During the year,
GBP0.4m of this impairment has been reversed as the
stores and garages have returned to a profitable position.
Finance Expense
The net finance expense (before non-underlying items and IFRS
16) for the 52 weeks ended 2 April 2021 was GBP5.5m (FY20: GBP2.8m)
reflecting the drawdown of the Rolling Credit Facility (RCF) early
in the pandemic, alongside increased amortisation and commitment
fees relating to the new RCF, which was re-negotiated in the
period.
Taxation
The taxation charge on profit for the 52 weeks ended 2 April
2021 (before IFRS 16) was GBP10.3m (FY20: GBP2.8m), including a
GBP5.8m credit (FY20: GBP4.7m credit) in respect of non-underlying
items. The effective tax rate of 17.5% (FY20: 13.9%) differs from
the UK corporation tax rate (19%) principally due to the impact of
deferred tax on accounting for share options and adjustments in
respect of provisions held in respect of prior periods.
Earnings Per Share ("EPS")
Underlying Basic EPS before IFRS 16 was 40.7 pence and after
non-underlying items 24.7 pence (FY20: 22.9 pence and 8.9 pence
after non-underlying items), a 77.7% and 177.5% increase on the
prior year. Basic weighted-average shares in issue during the year
were 197.1m (FY20: 197.0m).
Dividend ("DPS")
In light of the COVID-19 pandemic and the impact on short-term
profitability, the Board has taken a series of measures to preserve
cash, one of which was a suspension of the dividend. After the
strong close in the final quarter of FY21, the Board has
recommended to shareholders that final dividend of 5.0p per share
should be paid (FY20: Nil per share).
IFRS 16
FY21 FY21
(52 weeks) (52 weeks) Movement
Pre-IFRS 16 Post-IFRS 16 GBPm
GBPm GBPm
Underlying EBIT 101.8 114.5 12.7
Net Finance Costs (5.5) (15.0) (9.5)
Underlying Profit Before Tax 96.3 99.5 3.2
Net Non-Underlying Items (37.3) (35.0) 2.3
Profit Before Tax 59.0 64.5 5.5
Underlying Basic Earnings per Share 40.7p 41.7p
IFRS 16 has had the effect of increasing profit by GBP5.5m. The
two main drivers for this being the increase in held over leases
which have decreased the depreciation charge in comparison to the
rental payments, and the increased aging of the lease portfolio
which has led to a lower interest charge in comparison to the
rental payments.
Capital Expenditure
Capital investment in the 52 weeks ended 2 April 2021 totalled
GBP32.5m (FY20: GBP35.8m) comprising GBP23.2m in Retail and GBP9.3m
in Autocentres. Within Retail, GBP6.0m (FY20: GBP15.9m) was
invested in stores. Additional investments in Retail infrastructure
included a GBP13.1m investment in IT systems, including the
continued development of the new Group website.
The GBP9.3m (FY20: GBP4.8m) capital expenditure in Autocentres
principally related to the replacement of garage equipment and
replacement of fixtures and fittings, rebranding of McConechy's
garages and further development of PACE, our Garage Workflow
System.
Inventories
Group inventory held as at the year-end was GBP143.9m (FY20:
GBP173.0m). Retail inventory decreased to GBP134.3m (FY20:
GBP168.0m), reflecting reduced stock levels and working capital
efficiencies. The stock levels within our cycling business were,
however, sub-optimal for much of the year and as such the inventory
reduction is flattered. Inventory levels are likely to revert to
more normal levels in FY22.
Autocentres' inventory was GBP9.6m (FY20: GBP5.0m). The existing
Autocentres business model is such that only modest levels of
inventory are held, with most parts acquired on an as-needed basis.
The increase in inventory related to the acquisition of tyre stock
within Universal.
Cashflow and Borrowings
Adjusted Operating Cash Flow was GBP186.6m (FY20: GBP109.9m).
After acquisitions, taxation, capital expenditure and net finance
costs, Free Cash Flow of GBP145.3m (FY20: GBP54.6m) was generated
in the year. Group Net Cash/(Debt) was GBP58.1m (FY20: (GBP73.2m)).
All of these numbers are pre-IFRS 16.
Within the cash flow is a working capital inflow of
approximately GBP42m. Within this was approximately GBP20m of
planned and sustainable inventory reductions in Retail and GBP36m
which we anticipate will reverse in FY22. The GBP36m is a result of
Retail inventories at year end which were GBP14m lower than optimal
due to the high cycling demand, and year end creditors worth GBP22m
which saw our normal timing differences alongside a VAT creditor
that was deferred from earlier in the year and paid early in
FY22.
Group net debt after IFRS 16 was GBP277.3m (FY20: GBP479.8m)
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 2021 Annual Report and Accounts.
These include: ? Business Strategy
-Capability and capacity to effect change
-Stakeholder support
- Value proposition
-Brand appeal and market share ? Financial
-Short, sharp interruptions in cashflows
- Sustainable business model ? Compliance
-Regulatory and compliance
-Service quality
-Cyber security ? Operational
- Colleague engagement / culture
- Skills shortage
- IT infrastructure failure
- Critical physical infrastructure failure (including supply
chain disruption)
Specific risks associated with performance include the success,
or otherwise of peak trading periods (e.g., Christmas) as well as
weather-sensitive sales, particularly within the Car Maintenance
and Cycling categories in the Retail business.
Loraine Woodhouse Chief Financial Officer 16 June 2021
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 22. 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.
FY21 FY21 FY20 FY20
Pre-IFRS 16 Post-IFRS 16 Pre-IFRS 16 Post-IFRS 16
GBPm GBPm GBPm GBPm
Cash & cash equivalents** 67.2 67.2 115.5 115.5
Borrowings - current (2.2) (63.6) (1.8) (83.4)
Borrowings - non-current (6.9) (280.9) (186.9) (511.9)
Net Debt* 58.1 (277.3) (73.2) (479.8)
*The statutory 53-week period to 3 April 2020 comprises reported
results that are non-comparable to the 52-week period reported in
the current period.
**Included within cash and cash equivalents is an amount of
GBP6.3m which is restricted and is not available to circulate
within the Group on demand.
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.
FY21 FY21 FY20 FY20
Pre-IFRS 16 Post-IFRS 16 Pre-IFRS 16 Post-IFRS 16**
GBPm GBPm GBPm GBPm
Underlying EBIT 101.8 114.5 55.4 67.2
Depreciation, amortisation & impairment 38.0 118.5 37.2 118.7
Underlying EBITDA 139.8 233.0 92.6 185.9
Non-underlying operating expenses (37.3) (35.0) (32.1) (34.2)
EBITDA 102.5 198.0 60.5 151.7
Share-based payment transactions 6.4 6.4 1.0 1.0
Loss on disposal of property, plant & equipment 1.7 1.7 2.8 2.8
Working capital movements** 43.4 49.0 48.7 38.3
Provisions movement and other** 32.6 25.7 (3.1) (0.7)
Adjusted Operating Cash Flow* 186.6 280.8 109.9 193.1
*The statutory 53-week period to 3 April 2020 comprises reported
results that are non-comparable to the 52-week period reported in
the current period.
**As restated see note 11
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.
FY21 FY21 FY20 FY20
Pre-IFRS 16 Post-IFRS 16 Pre-IFRS 16 Post-IFRS 16**
GBPm GBPm GBPm GBPm
Adjusted Operating Cash Flow** 186.6 280.8 109.9 193.1
Capital expenditure (28.0) (27.5) (34.1) (33.6)
Net finance costs (5.5) (15.5) (2.4) (13.2)
Taxation (10.8) (10.8) (16.3) (16.3)
Exchange movements 3.0 2.1 (2.5) (2.0)
Free Cash Flow* 145.3 229.1 54.6 128.0
*The statutory 53-week period to 3 April 2020 comprises reported
results that are non-comparable to the 52-week period reported in
the current period.
** As restated see note 11
Halfords Group plc?
Consolidated Income Statement?
?
??????????????????????????For the 52 weeks to 2 April 2021?
?
?
?
For the period? ? 52?weeks to?2 April 2021? ? 53 weeks to?3 April 2020?
Before? Non-underlying?? Before? Non-underlying??
? ? Non-underlying?? items? Total? ? Non-underlying? items? Total?
items? (note 4)? items? (note 4)?
? Notes? GBPm? GBPm? GBPm? ? GBPm? GBPm? GBPm?
? ? ? ? ? ? ? ? ?
Revenue? ? 1,292.3 -? 1,292.3 ? 1,155.1? -? 1,155.1?
Cost of sales? ? (636.0) -? (636.0) ? (565.4)? -? (565.4)?
? ? ? ? ? ? ?
Gross profit? ? 656.3 -? 656.3 ? 589.7? -? 589.7?
? ? ? ? ? ? ?
Operating expenses? 2? (541.8) (35.0) (576.8) ? (522.5)? (34.2)? (556.7)?
? ? ? ? ? ?
? ? ? ? ? ?
Results from
operating 3? 114.5 (35.0) 79.5 ? 67.2? (34.2)? 33.0?
activities?
? ? ? ? ? ?
Finance costs? 5? (15.0) - (15.0) ? (13.9)? -? (13.9)?
Finance income? 5? - - - ? 0.3? -? 0.3?
? ? ? ? ? ?
Net finance expense ? (15.0) - (15.0) ? (13.6)? -? (13.6)?
?
? ? ? ? ? ?
Profit before ? 99.5 (35.0) 64.5 ? 53.6? (34.2) 19.4?
income tax?
Income tax expense? 6? (17.4) 6.1 (11.3) ? (6.9)? 5.0? (1.9)?
? ? ? ? ? ?
Profit for the
financial period
attributable to ? 82.1 (28.9) 53.2 ? 46.7? (29.2)? 17.5?
equity shareholders
?
? ? ? ? ? ? ? ? ?
Earnings per share? ? ? ? ? ? ? ? ?
Basic?earnings per 8? 41.7p ? 27.1p ? 23.7p ? 8.9p
share?
Diluted?earnings 8? 40.7p ? 26.4p ? 23.3p ? 8.7p
per share
? ? ? ? ? ? ? ? ?
?
The notes on pages?28?to?35?are an integral part of these
condensed consolidated financial statements.?
Halfords Group plc?
?
Consolidated Statement of Comprehensive Income?
?
For the?52?weeks to?2 April 2021?
? ? ? ?
? ? 52?weeks to? 53 weeks to?
2 April?? 3 April
? ?
2021? 2020
? Notes? GBPm? GBPm?
Profit for the period? ? 53.2 17.5?
? ? ?
Other comprehensive income? ? ?
Cash flow hedges:? ? ?
Fair value changes in the period? ? (9.6) 7.9
Income tax on other comprehensive income? 6? 1.6 (0.7)?
Other comprehensive income for the period, net of income tax? ? (8.0) 7.2
? ? ?
Total comprehensive income for the period attributable to equity shareholders? ? 45.2 24.7
? ? ? ?
All items within the Consolidated Statement of Comprehensive
Income are classified as items that are or may be recycled to the
Income Statement.?
?
? The notes on pages 28 to 35 are an integral part of these
condensed consolidated financial statements.?
?
Halfords Group plc
Consolidated Statement of Financial Position
For the 52 weeks to 2 April 2021
2 April 3 April
2021 2020
GBPm GBPm
Assets
Non-current assets
Intangible assets 398.3 395.7
Property, plant and equipment 81.3 83.1
Right-of-use assets 282.8 349.9
Derivative financial instruments 0.1 -
Deferred tax asset 12.3 7.3
Total non-current assets 774.8 836.0
Current assets
Inventories 143.9 173.0
Trade and other receivables 86.1 53.5
Assets held for sale 6.0 -
Derivative financial instruments 0.5 8.7
Current tax assets 3.1 8.2
Cash and cash equivalents 67.2 115.5
Total current assets 306.8 358.9
Total assets 1,081.6 1,194.9
Liabilities
Current liabilities
Borrowings (0.2) (0.2)
Derivative financial instruments (5.9) (1.1)
Lease liabilities (63.4) (83.2)
Trade and other payables (270.2) (217.0)
Provisions (24.5) (9.7)
Total current liabilities (364.2) (311.2)
Net current (liabilities)/assets (57.4) 47.7
Non-current liabilities
Borrowings - (179.1)
Derivative financial instruments (0.4) -
Lease liabilities (280.9) (332.8)
Trade and other payables (3.3) (1.9)
Provisions (15.0) (4.1)
Total non-current liabilities (299.6) (517.9)
Total liabilities (663.8) (829.1)
Net assets 417.8 365.8
Shareholders' equity
Share capital 2.0 2.0
Share premium 151.0 151.0
Investment in own shares (10.0) (10.0)
Other reserves (1.8) 4.9
Retained earnings 276.6 217.9
Total equity attributable to equity holders of the Company 417.8 365.8
The notes on pages 28 to 35 are an integral part of these
condensed consolidated financial statements.
Halfords Group plc
Consolidated Statement of Changes in Shareholders' Equity?
For the?52 weeks to 2 April 2021?
? ? Attributable to the equity holders of the Company?
?
? ? ? ? Other reserves? ?
? ?
? ? ? ? ?
Share? Investment? Capital?
Share? premium? in own? redemption Hedging? Retained? Total?
? reserve?
capital? account? shares?? reserve? Earnings*? equity?
? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm?
Balance at?29 March?2019 2.0? 151.0? (10.0)? 0.3? 1.6? 264.4 409.3
Impact of adoption of IFRS 16* - - - - - (25.1) (25.1)
Balance at?30 March?2019? 2.0? 151.0? (10.0)? 0.3? 1.6? 239.4 384.2
Total comprehensive income for the period? ? ? ? ? ? ? ?
Profit for the period? -? -? -? -? -? 17.5 17.5
Other comprehensive income? ? ? ? ? ? ? ?
Cash flow hedges:? ? ? ? ? ? ? ?
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 -? -? -? -? 7.2? (3.1) 4.1
period net of tax?
Total comprehensive income for the period? -? -? -? -? 7.2? 14.4 21.6
Hedging gain and losses transferred to the -? -? -? -? (4.2)? -? (4.2)?
cost of inventory?
Transactions with owners?? ? ? ? ? ? ? ?
Share-based payment transactions? -? -? ? - -? -? 1.0? 1.0
Income tax on share-based payment -? -? -? -? -? (0.2)? (0.2)
transactions?
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 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.
The notes on pages?28 to 35 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? redemption Hedging? Retained? Total?
? reserve?
capital? account? shares?? reserve? earnings? equity?
? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm?
Closing balance at 3 April 2020 2.0 151.0? (10.0) 0.3? 4.6 217.9 365.8
? ? ? ? ? ? ? ?
Total comprehensive income for the period? ? ? ? ? ? ? ?
Profit for the period? - - - - -? 53.2 53.2
? ? ? ? ? ? ? ?
Other comprehensive income? ? ? ? ? ? ? ?
Fair value changes in the period? - - - - (9.6) - (9.6)
Income tax on other comprehensive income? - - - - 1.6 - 1.6
Total other comprehensive income for the - - - - (8.0) - (8.0)
period net of tax?
Total comprehensive income for the period? - - - - (8.0) 53.2 45.2
Other - - - - - (1.3) (1.3)
Hedging gains and losses transferred to the - - - - 1.3 - 1.3
cost of inventory?
? ? ? ? ? ? ? ?
Transactions with owners?? ? ? ? ? ? ? ?
Share options exercised? - - - - - - -
Share-based payment transactions? - - - - -? 6.4 6.4
Income tax on share-based payment - - - - -? 0.4 0.4
transactions?
Dividends to equity holders? - - - - -? - -
Total transactions with owners? - - - - -? 6.8 6.8
Balance?at?2 April 2021? 2.0 151.0 (10.0) 0.3 (2.1) 276.6 417.8
?
The notes on pages 28 to 35 are an integral part of these
condensed consolidated financial statements.
Halfords Group plc?
Consolidated statement of cash flows?
For the?52?weeks to?2 April 2021?
? ? 52?weeks to? 53 weeks to?
2 April?? 3 April
? ? 2021 2020
? (Restated)*
? Notes? GBPm? GBPm?
Cash flows from operating activities? ? ? ?
Profit after tax for the period, before non-underlying?items? ? 82.1 46.7
Non-underlying?items? ? (28.9) (29.2)
Profit after tax for the period? ? 53.2 17.5
Depreciation - property, plant and equipment ? 21.0 24.3
Impairment - property, plant and equipment 2.8 5.4
Amortisation?and impairment?of right-of-use assets? ? 81.8 83.0
Amortisation?- intangible assets? ? 12.9 11.4
Net finance costs? ? 15.0 13.6
Loss on disposal of property, plant and equipment?and intangibles? ? 1.7 2.8
Equity-settled?share-based?payment transactions? ? 6.4 1.0
Exchange movement? ? 2.1 (2.0)
Income tax expense? ? 11.3 1.9
Decrease in inventories? ? 35.0 3.9
Increase in trade and other receivables* ? (26.2) (1.0)
Increase?in trade and other payables* ? 40.2 35.4
Increase/(decrease) in provisions* ? 25.7 (0.7)
Income tax paid?? ? (10.8) (16.3)
Net cash from operating activities? ? 272.1 180.2
? ? ?
Cash flows from investing activities? ? ?
Acquisition of subsidiary, net of cash acquired? ? (11.5) (10.9)
Purchase of intangible assets? ? (11.8) (12.5)
Purchase of property, plant and equipment? ? (15.7) (21.1)
Net cash used in investing activities? (39.0) (44.5)?
? ? ?
Cash flows from financing activities? ? ?
Finance income received - 0.3
Finance costs paid (5.5) (2.2)
Repayment of loan following acquisition - (1.8)
Proceeds from loans, net of transaction costs? ? - 1,377.0
Repayment of borrowings? ? (180.0) (1,262.0)
Interest paid on lease liabilities* (10.0) (11.3)
Payment of capital element of leases* ? (85.9) (76.4)
Dividends paid?? ? - (36.6)
Net cash used in financing activities? ? (281.4) (13.0)
Net (decrease)/increase?in cash and bank overdrafts? 9? (48.3) 122.7
Cash and cash equivalents at the beginning of the period? ? 115.3 (7.4)
Cash and cash equivalents at the end of the period? 9 67.0 115.3
The notes on pages?28?to?35?are an integral part of these
condensed consolidated financial statements.?
*Adjustment to reported 3 April 2020 results. See note 11.
Halfords Group plc
Notes to the condensed consolidated financial statements
For the 52 weeks to 2 April 2021
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 2 April 2021 or 3
April 2020 but is derived from those accounts. Statutory accounts
for 2020 have been delivered to the Registrar of Companies, and
those for 2021 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 GBP0.1m.
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 52 weeks to 2 April
2021, whilst the comparative period covered the 53 weeks to 3 April
2020.
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 on a basis
consistent with those policies set out in our audited financial
statements for the period ended 3 April 2020 other than for the
adoption of the COVID-19 Related Rent Concessions (Amendments to
IFRS 16) which did not have a material effect. 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
There have been no new or amended standards effective in the
period which has had a material impact on the consolidated
financial information.
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? ? 52?weeks to? 53 weeks to?
2 April?? 3 April
? ?
2021? 2020
? ? GBPm? GBPm?
? ? ? ?
Selling and distribution costs? ? 422.9 436.0?
? ? 422.9 436.0?
Administrative expenses, before non-underlying?items? ? 118.9 86.5
Non-underlying?administrative expenses? ? 35.0 34.2?
? ? 153.9 120.7?
? ? 576.8 556.7?
3. Operating profit
For the period 52 weeks 53 weeks
to to
2 April 3 April
2020
2021
GBPm GBPm
Operating profit is arrived at after charging/(crediting) the following expenses/
(incomes) as categorised by nature:
Expenses relating to leases of low-value assets, excluding short-term leases of low 0.7 0.6
value assets
Expenses relating to short term leases 5.6 2.5
Rentals receivable under operating leases (2.7) (3.0)
Landlord surrender premiums 0.1 (0.6)
Loss on disposal of property, plant and equipment and intangibles 1.7 2.8
Amortisation of intangible assets 12.9 11.4
Amortisation of right-of-use assets 69.6 73.6
Depreciation and impairment of:
- owned property, plant and equipment 21.0 24.3
Impairment of:
- owned property, plant and equipment 2.8 5.4
- impairment of right-of-use assets 12.2 9.4
Trade receivables impairment 0.1 0.2
Staff costs 299.6 256.2
Cost of inventories consumed in cost of sales 629.1 563.8
4. Non-underlying items
For the period 52 weeks to 53 weeks to
2 April 3 April
2021 2020
GBPm GBPm
Non-underlying operating expenses:
Organisational restructure costs (a) 5.9 2.8
Group-wide strategic review (b) - 1.0
Closure costs (c) 26.0 26.8
Acquisition and investment related fees (d) 0.6 1.9
One-off claims (e) 2.9 0.8
Impairment of right-of-use assets (f) (0.4) 0.9
Non-underlying items before tax 35.0 34.2
Tax on non-underlying items (g) (6.1) (5.0)
Non-underlying items after tax 28.9 29.2
a. In the current and prior period separate and unrelated organisational restructuring activities were undertaken.
Current period costs comprised: ? Costs relating to a strategic
redesign of our instore operating model undertaken to better meet
our customers'
expectations and deliver a consistent shopping experience across
our estate. Redundancy costs of GBP5.9m were
incurred to transition to the new operating model. These costs
have materially been spent during the year.
Prior period costs comprised: ? Redundancy and transition costs
of GBP1.4m relating to roles which have been outsourced or
otherwise will not be
replaced; and ? GBP1.4m of asset write-offs, principally
resulting from the strategic decision to re-platform the Retail
and
Autocentres websites.
(b) In the prior periods costs were incurred in preparing and
implementing the new Group strategy. ? GBP0.4m of external
consultant costs; and GBP0.6m of store labour costs, point of sale
equipment and other associated
costs in completing the cycling space relay across the store
estate.
(c)?? Of the closure costs GBP28.5m represents costs associated
with the closure of a number of stores and garages following a
strategic review of the profitability of the physical estate. The
costs mostly relate to the impairment of right-of-use assets
(GBP12.2m), tangible assets and property costs as well as ongoing
onerous commitments under the lease agreements and other costs
associated with the property exits.
Closure costs in the prior period represented costs associated
with the 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 costs
mostly relate to the impairment of right-of-use assets, intangible
assets, tangible assets and inventories. GBP2.5m of these costs
have been reversed during the year as the Group continues to
negotiate lease disposals and was able to release stock provisions
previously in place (GBP1.8m).
(d)???In the current and prior period costs were incurred in
relation to the investments in Universal Tyre Services, McConechy's
Tyre Services and Tyres on the Drive. ? In FY21, GBP0.6m relating
to professional fees in respect of the acquisition of Universal
Tyre Services; ? Tyres on the Drive acquisition costs comprised of
GBP1m 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 ? GBP0.9m relating to professional fees in respect of the
acquisition of McConechy's Tyre Services.
(e) During the prior year, the Group incurred GBP0.2m in
settling a court case. In addition, a provision of GBP0.6m was
created in relation to the HMRC audit relating to the national
minimum wage. The audit has progressed during FY21 and as a result
the provision has been increased by GBP2.9m. This represents
management's best estimate of the repayment and fine payable as a
result of national minimum wage breaches.
(f) In light of the ongoing COVID-19 pandemic, the Group has
revised future cash flow projections for stores and garages. As a
result, GBP0.9m incremental impairment has been recognised in
relation to garages where the current and anticipated future
performance did not support the carrying value of the right-of-use
asset and associated tangible assets. This charge is directly
attributable to impairment due to COVID-19 and relates primarily to
the right-of-use asset value. During the year, GBP0.4m of this
impairment has been reversed as the stores and garages have
returned to a profitable position.
(g) The tax credit of GBP6.1m represents a tax rate of 17.4%
applied to non-underlying items. The prior period represents a tax
credit at 14.6% applied to non-underlying items. 5. Finance income
and costs
Recognised in profit or loss for the period 52 weeks 53 weeks
to to
2 April 3 April
2021 2020
GBPm GBPm
Finance costs:
Bank borrowings (2.5) (1.6)
Amortisation of issue costs on loans (1.1) (0.4)
Commitment and guarantee fees (1.1) (0.6)
Other interest payable (0.3) -
Interest payable on lease liabilities (10.0) (11.3)
Finance costs (15.0) (13.9)
Finance income:
Bank and similar interest - 0.3
Finance income - 0.3
Net finance costs (15.0) (13.6)
6. Taxation
For the period 52 weeks to 53 weeks to
2 April 3 April
2021 2020
GBPm GBPm
Current taxation
UK corporation tax charge for the period 16.9 5.4
Adjustment in respect of prior periods (1.0) (0.5)
15.9 4.9
Deferred taxation
Origination and reversal of temporary differences (4.7) (1.5)
Adjustment in respect of prior periods 0.1 (1.5)
(4.6) (3.0)
Total tax charge for the period 11.3 1.9
The tax charge is reconciled with the standard rate of UK
corporation tax as follows:
For the period 52 weeks to 53 weeks to
2 April 3 April
2021 2020
GBPm GBPm
Profit before tax 64.5 19.4
UK corporation tax at standard rate of 19% (2020: 19%) 12.3 3.7
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief 0.9 0.5
Employee share options (1.3) -
Other disallowable expenses 0.6 0.8
Adjustment in respect of prior periods (0.9) (1.9)
Impact of overseas tax rates (0.3) (0.3)
Impact of change in tax rate on deferred tax balance - (0.9)
Total tax charge for the period 11.3 1.9
The March 2021 Budget announced a further increase to the main
rate of corporation tax to 25% from 1 April 2023. This rate has not
been substantively enacted at the balance sheet date, as result
deferred tax balances as at 2 April 2021 continue to be measured at
19%. If all of the deferred tax was to reverse at the amended rate
the impact to the closing deferred tax position would be to
increase the deferred tax asset by GBP3.9m.
The effective tax rate of 17.5% (2020: 9.7%) is lower than the
UK corporation tax rate principally due to the impact of deferred
tax on accounting for share options and adjustments in respect of
provisions held in respect of prior periods.
The tax charge for the period was GBP11.3m (2020: GBP1.9m),
including a GBP6.1m credit (2020: GBP5.0m 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 GBP170m (2020: GBP208.0m) with the main
taxes including corporation tax of GBP10.8m (2020: GBP16.3m), net
VAT of GBP97.4m (2020: GBP101.4m), employment taxes of GBP61.2m
(2020: GBP54.3m) and business rates of GBP0.9m (2020: GBP36.3m). 7.
Dividends
For the period 52 weeks to 53 weeks to
2 April 3 April
2021 2020
GBPm GBPm
Equity - ordinary shares
Final for the 53 weeks to 3 April 2020 - (52 weeks to 29 March 2019: 12.39p) - 24.4
Interim for the 52 weeks to 2 April 2021 - (53 weeks to 3 April 2020: 6.18p) - 12.2
- 36.6
In addition, the Directors are proposing a final dividend of
5.0p per share (2020: GBPnil) in respect of the financial period
ended 2 April 2021. 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 52
weeks to 2 April 2021.
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 52 weeks to 53 weeks to
2 April 3 April
2021 2020
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) (2.0) (2.1)
Weighted average number of shares for calculating basic earnings per share 197.1 197.0
Weighted average number of dilutive shares 4.9 3.3
Total number of shares for calculating diluted earnings per share 202.0 200.3
52 weeks to 53 weeks to
2 April 3 April
For the period
2021 2020
GBPm GBPm
Basic earnings attributable to equity shareholders 53.2 17.5
Non-underlying items (see note 4):
Operating expenses 35.0 34.2
Tax on non-underlying items (6.1) (5.0)
Underlying earnings before non-underlying items 82.1 46.7
For the period
52 weeks to 53 weeks to
2 April 3 April
2021 2020
Basic earnings per ordinary share 27.1p 8.9p
Diluted earnings per ordinary share 26.4p 8.7p
Basic underlying earnings per ordinary share 41.7p 23.7p
Diluted underlying earnings per ordinary share 40.7p 23.3p
9. Analysis of movements in Group's net debt in the period
At 3 April At 2 April
Cash flow Other non-cash changes
2020 2021
GBPm GBPm GBPm GBPm
Cash and cash equivalents at bank and in hand 115.3 (48.3) - 67.0
Debt due after one year (179.1) 180.0 (0.9) -
Total net debt excluding leases (63.8) 131.7 (0.9) 67.0
Current lease liabilities (83.2) 95.9 (76.1) (63.4)
Non-current lease liabilities (332.8) - 51.9 (280.9)
Total lease liabilities (416.0) 95.9 (24.2) (344.3)
Total net debt (479.8) 227.6 (25.1) (277.3)
Non-cash changes include finance costs in relation to the
amortisation of capitalised debt issue costs of GBP1.1m (2020:
GBP0.4m), additions of new leases, modifications to leases and
foreign exchange movements and changes in classification between
amounts due within and after one year.
Cash and cash equivalents at the period end consist of GBP67.2m
(2020: GBP115.5m) of liquid assets and GBP0.2m (2020: GBP0.2m) 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. i. Amounts recognised in the consolidated statement of
financial position
Right-of-Use Assets
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
At 3 April 2020 344.0 5.9 349.9
Additions on acquisition of subsidiary 2.7 - 2.7
Additions to right-of-use assets 12.5 0.6 13.1
Amortisation charge for the year (66.1) (3.5) (69.6)
Effect of modification of lease 5.8 - 5.8
Derecognition of right-of-use assets (6.8) (0.1) (6.9)
Impairment (12.2) - (12.2)
At 2 April 2021 279.9 2.9 282.8
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
At 30 March 2019 388.5 7.8 396.3
Reclassification from intangibles 2.4 - 2.4
Additions on acquisition of subsidiary 11.1 0.3 11.4
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 GBPm
GBPm
GBPm
At 3 April 2020 409.8 6.2 416.0
Additions on acquisition of subsidiary 2.7 - 2.7
Additions to lease liabilities 12.6 0.5 13.1
Interest expense 9.8 0.2 10.0
Effect of modification to lease 5.9 - 5.9
Lease payments (92.7) (3.2) (95.9)
Disposals to lease liabilities (6.8) - (6.8)
Foreign exchange movements (0.7) - (0.7)
At 2 April 2021 340.6 3.7 344.3
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
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
52 weeks to 53 weeks to
2 April 3 April
Lease liabilities
2021 2020
GBPm GBPm
Maturity analysis - contractual undiscounted cash flows
Less than one year 71.2 92.9
Between one and two years 68.8 76.5
Between two and three years 64.4 65.1
Between three and four years 55.1 60.4
Between four and five years 43.2 51.5
Between five and six years 28.4 41.9
Between six and seven years 19.3 27.3
Between seven and eight years 12.1 18.2
Between eight and nine years 5.3 11.1
Between nine and ten years 3.5 4.3
After ten years 3.5 5.9
Total contractual cash flows 374.8 455.2 ii. Amounts recognised in the consolidated income statement
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
52 weeks ended 2 April 2021
Amortisation charge on right-of-use assets 66.1 3.5 69.6
Interest on lease liabilities 9.8 0.2 10.0
Expenses relating to short-term leases 5.6 - 5.6
Expenses relating to leases of low-value assets, excluding short-term leases of - 0.7 0.7
low-value assets
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
Expenses relating to short-term leases 2.5 - 2.5
Expenses relating to leases of low-value assets, excluding short-term leases of - 0.6 0.6
low-value assets iii. Amounts recognised in the consolidated statement of cash flows
The total cash outflow for leases for the period ended 2 April
2021 was GBP95.9m (2020: GBP87.7m). 11. Prior period adjustment
Following refinements to Halfords IFRS 16 reporting process, the
consolidated statement of cash flows for the 53 weeks to 3 April
2020 was adjusted to reduce the cash outflow for capital payments
on leases (in financing activities) by GBP11.3m and to reduce the
working capital movements across other payables, receivables and
provisions (in operating activities) by the same amount to exclude
from these line items amounts that had been eliminated from the
balance sheet for IFRS 16 reporting purposes and should have
similarly been eliminated in the operating cash flow
reconciliation. These adjustments have had no impact on the
reported profit or net assets of the Group.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00B012TP20
Category Code: FR
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
Sequence No.: 111760
EQS News ID: 1208888
End of Announcement EQS News Service
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