REG-Halfords Group PLC Halfords Group PLC: Interim Results: Financial Year 2024
29/11/2023 07:15
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Halfords Group PLC (HFD)
Halfords Group PLC: Interim Results: Financial Year 2024
29-Nov-2023 / 07:00 GMT/BST
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29 November 2023
Halfords Group plc
Interim Results: Financial Year 2024
Strong H1 performance driven by substantial revenue and profit growth through
increased market share, optimisation of our Autocentres business, and
delivery of targeted cost savings.
Halfords Group plc (“Halfords” or the “Group”), the UK’s leading provider of
Motoring and Cycling services and products, today announces its interim
results for the 26 weeks to 29 September 2023 (“the period”).
Group Financial Summary
FY24 FY23* FY24 vs
£m % Change
H1 H1 FY23
Revenue 873.5 767.1 106.4 13.9%
Retail 516.6 500.5 16.1 3.2%
Autocentres 356.9 266.6 90.3 33.9%
Gross Margin 47.8% 49.9% (210bps)
Retail 45.8% 49.1% (330bps)
Autocentres 50.6% 51.2% (60bps)
Underlying EBITDA 90.9 81.4 9.5 11.7%
Underlying Profit Before Tax (“PBT”) 21.3 18.4 2.9 15.8%
Profit Before Tax 19.3 18.7 0.6 3.3%
Underlying Basic Earnings per Share 7.6p 6.7p 0.9p 13.4%
*H1 FY23 PBT restated to reflect adjustments relating to FX accounting and
Cost of Goods Sold. As a result PBT for H1 FY23 has reduced by £10.6m from
£29.3m to £18.7m, this has also affected EPS as disclosed in note 20. For
further detail see page 11 of Chief Financial Officer’s report.
See page 20 for glossary of alternative performance measures.
Overview
• Strong revenue growth, up 13.9%, with like-for-like (‘LFL’) sales growth
of 8.3% achieved despite challenging macro environment.
• Market share gains in all categories, ahead or in line with expectations.
• Varying performance across underlying markets:
◦ Needs-based categories, such as retail motoring and motoring
services, in strong growth and in line with expectations.
◦ Discretionary markets such as Cycling, challenging and below
expectations due to well documented consumer environment.
• Continued strong growth of over 37% in B2B, now representing nearly a
third of Group revenue.
• Autocentres delivering strong sales growth and profitability (with total
sales up 33.9%, LFL up 18.0% and EBIT of £10.9m, up +£14.1m) as acquired
businesses are optimised and garage utilisation improves.
• Gross margin % declined 210bps*, the majority of which is the impact of
weaker Sterling hedges versus the US Dollar in Retail.
• Significant cost-saving programme on track to deliver £30m in the current
year; savings being delivered earlier than expected.
• Avayler (SaaS business): Landmark investment and 15-year commercial
contract entered into with Bridgestone. **
• Underlying Profit before tax (PBT) of £21.3m, up 15.8%*.
*H1 FY23 PBT restated to reflect adjustments relating to FX accounting and
Cost of Goods Sold. For further detail see page 11 of Chief Financial
Officer’s report.
**Commercial agreement with Bridgestone closed post the period end, on 1
November 2023.
Current trading and Outlook
Our B2B businesses and needs-based categories are continuing to show very
strong growth. However, trading patterns have been volatile across the first
half of the year, and in the last couple of months we have seen some market
softening in our discretionary big-ticket categories, which has been
reflected in slower LFL sales growth.
We continue to expect FY24 profit delivery to be second half weighted as
inflationary headwinds annualise, coupled with the delivery of the balance of
FY24 targeted cost and efficiency savings of £30m. It does, however, remain
challenging to predict whether the recent trends in discretionary categories
will continue. Assuming trading conditions on average reflect what we have
seen in the year to date, we believe FY24 Underlying PBT will now fall within
a narrower range of £48m to £53m.
We continue to believe that our strategic investments provide a strong
platform for growth, validated by our market share gains in this period.
Looking beyond FY24, assuming markets recover in line with projections, we
remain confident in our mid-term target of £90m-£110m Underlying PBT, as
outlined at the Capital Markets Day in April 2023.
Graham Stapleton, Chief Executive Officer:
"Despite the challenging and volatile trading environment and slower than
expected recovery in some of our markets, we have made a good start to the
year, with substantial sales and profit growth, and increased market share
across the business. At the same time, we supported our customers through the
ongoing cost of living crisis by delivering great value – when they need it
most.
In the face of continuing economic uncertainty, we remain fully focused on
optimising every element of the business, and I’m particularly pleased with
the very strong performance of Autocentres, where we are delivering
significantly improved returns. In light of this, we are accelerating capital
investment in the garage services operating model and customer experience in
ten towns in the balance of this financial year.
It goes without saying that we simply could not deliver this performance
without the hard work and dedication of our fantastic colleagues across the
business. I am immensely grateful for their continued support through these
very challenging times.”
Enquiries
Investors & Analysts (Halfords)
Jo Hartley, Chief Financial Officer
Andrew Smith, Interim Group Financial Controller
Louise Richardson, Interim Head of Investor Relations +44
(0)7483457415
Media (Powerscourt) +44 (0) 20 7250 1446
Rob Greening halfords@powerscourt-group.com
Nick Hayns
Elizabeth Kittle
Results presentation
A live webcast followed by a live Q&A call for analysts and investors will be
held today, starting at 09:00am UK time. Attendance is by invitation only. A
copy of the transcript of the call will be available at
1 www.halfordscompany.com in due course. For further information please
contact Powerscourt using the details above.
Next trading statement
On 25 January 2024 we will report our Q3 Trading Update for the period ending
29 December 2023.
Summary detail
Group revenue summary (fig.1)
Year on Year Growth
Total LFL
Halfords Group 13.9% 8.3%
Autocentres 33.9% 18.0%
Retail 3.2% 4.1%
Motoring 7.9% 8.2%
Cycling (3.1%) (2.8%)
Market Volume and Share (fig.2)
Consumer Motoring
Market Volume and Share Retail Motoring Cycling Servicing
Tyres
Market Volume
Growth forecast in FY241 +0.5% -1.0% +2.6% Broadly flat
Market Volume Movement Sept. +0.9% -5.8% -0.2% +3.5%
H1 FY24 vs FY231
Market Share (volume)
Share expectation in FY243 +0.6ppts +0.7ppts +0.2ppts +0.2ppts
Sept. share movement H1 FY24 +3.8ppts +1.8% +0.4ppts +0.2ppts
vs FY232
1Sources: Market Volume data: Retail Motoring, GFK; Cycling, Bicycling
Association; Consumer Tyres, GFK; Motor Servicing – MOT data from DVSA: for 6
months to end September 2023. Growth forecast provided by these third-party
data providers.
2Sources: Market share data: Retail Motoring, GFK; Cycling, Bicycling
Association; Consumer Tyres, GFK; Motor Servicing – MOT data from DVLA: for 6
months to end September 2023.
3 Halfords internal market share targets.
Notes to Editors
www.halfords.com 2 www.tredz.co.uk
3 www.halfordscompany.com
Halfords is the UK's leading provider of motoring and cycling services and
products. Customers shop at 386 Halfords stores, 3 Performance Cycling stores
(trading as Tredz and Giant), 645 garages (trading as Halfords Autocentres,
McConechy’s, Universal, National Tyres and Lodge Tyre) and have access to 266
mobile service vans (trading as Halfords Mobile Expert, Tyres on the Drive
and National) and 554 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 also 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
The first half of FY24 has been a period of further strategic progress and
resilient financial performance, despite the ongoing volatile economic
backdrop. We continue to focus on what we can control: growing our market
share across all product categories in the period; optimising our strategic
investments in our more resilient, needs-based, Service and B2B businesses;
and delivering cost and efficiency savings of £16.6m in the period. Our
market share performance demonstrates our ability to attract new customers to
Halfords, but we also continue to work hard to keep existing customers within
the Group, by deepening relationships through greater value and understanding
of their needs through our loyalty club. Despite significant headwinds from
inflation, unseasonal weather conditions and slower than expected market
growth, we have delivered £21.3m Underlying profit before tax (PBT).
I am particularly proud of the progress we have made in the following areas
in the first half of the year:
1. Our strong sales performance despite the slower than expected market
growth in both the Cycling and Tyre markets: we have grown market share
across all categories and are ahead of our year-one strategic targets in
Motoring Retail, Cycling and Tyres, helping to drive Group total sales
growth of 13.9% and LFL revenue growth of +8.3%. New market leading
initiatives such as our 60-minute ‘Click & Collect’ service for car parts
and innovative ‘Buy now, pay later’ financing options support this strong
performance, while our Motoring Loyalty Club goes from strength to
strength, now with almost 3m members.
2. The strategic investment we have made in recent years is returning, with
our Autocentres business delivering an uplift in Underlying EBIT of
£14.1m in the first half to £10.9m, surpassing EBIT for the whole of
FY23. Our focus on improving utilisation in our garages, together with
new initiatives such as dynamic pricing on MOT and Tyre services, is
delivering both incremental revenue and higher returns.
3. Our strategically important Services business continues to grow and now
accounts for almost 50% of revenue, whilst B2B accounts for 30%. Our
enlarged Commercial Fleet Services business has delivered significant
growth in the period following the acquisition of Lodge Tyre last year,
winning new contracts and delivering revenue and cost synergies ahead of
expectations.
4. Operationally we have delivered cost and efficiency savings of £16.6m in
the first half, faster than we had previously anticipated – and we are
comfortably on track to deliver the target of £30m for the full year. We
have also made good progress in both the retention and recruitment of
colleagues within our Autocentres business. Colleague turnover has
improved every single month this year and is currently at the lowest
level for 19 months.
I am also delighted that Avayler, our SaaS business which helps customers
drive operational efficiency within their garages services, has secured a
significant 15-year commercial agreement with Bridgestone, a leading global
mobility company. The length and scale of this contract is a significant
endorsement for the Avayler platform, with Bridgestone also making a
strategic investment, taking a 5% equity stake, as announced on 1 November,
demonstrating their confidence in the future growth prospects of Avayler.
This contract adds significant scale to our existing business and underpins
our growth projections as outlined at the Capital Markets Day, earlier this
year.
Our strategic transformation over the past few years has created a more
resilient, needs-based, consumer and B2B services-focused business, with a
greater emphasis on motoring, helping to deliver our robust financial
performance despite the headwinds described above. The importance of this
strategy is all the more clear given the continuing volatile macro-economic
conditions in both the UK and global economies coupled with continuing low
levels of consumer confidence.
Group revenue
Our H1 revenue performance demonstrates our growing resilience, delivering
strong LFL and total revenue growth across the Group. Group LFL revenues were
up 8.3% year-on-year, despite challenging markets, weak consumer confidence
and unfavourable weather conditions during the summer. We saw particularly
strong performances in our more resilient, needs-based categories and Service
and B2B businesses whilst consumers were less willing to spend on more
discretionary, higher ticket products. Pleasingly, we have grown market share
across all categories and are ahead of our year-one targets, with the
strongest performance in Motoring products where we have grown market share
by 3.8ppts year-on-year, well ahead of our target.
Autocentres
Our Autocentres business performed very strongly over the period, despite a
weaker than anticipated Tyre market, with strong like-for-like revenue growth
of 18.0%. This has driven strong growth in demand for both services (+12.3%)
and tyres (+29.0%) versus a market decline of 0.2ppts in the Tyre market.
In our consumer garages business, revenue growth has been driven by a number
of factors including: Our Motoring Loyalty Club, with around 40% of our MOT
work now coming from club members; attractive promotional offers on leading
tyre brands; and the launch of our innovative ‘Buy now pay later’ finance
option which provides greater choice to the customer, enabling them to spread
the cost of maintaining their cars during the cost-of-living crisis. We also
continue to focus on improving utilisation rates in our garages, delivering
strong growth, up over 7% year-on-year in the last few months, where we are
optimising capacity across our garage network.
On the commercial side, we have seen particularly strong growth in our
enlarged and market-leading Commercial Fleet Services business which grew
sales by over 150%, in part benefiting from the acquisition of Lodge Tyre in
October 2022. With near national coverage, we are attracting new customers
with nationwide requirements who are able to access a network of 554
commercial vans and 100 commercial garages.
Retail Motoring
Retail saw a resilient performance in Motoring, with LFL sales up 8.2%
year-on-year, against market growth of 0.9%. We saw strong growth across
needs-based categories including maintenance, parts, bulbs, blades and
batteries (3Bs), offset by lower demand for discretionary categories.
We increased market share in our measured* categories with overall share up
3.8ppts year-on-year, well ahead of our year-one target of +0.6ppts. This
performance was underpinned by strategic price investment that has seen
strong volume growth, partially offsetting lower sales of more discretionary,
higher ticket items such as technology and touring.
*As measured by GFK volume share
Retail Cycling
Our Cycling business has also performed ahead of the market with LFL sales
down 2.8% versus a 5.8% decline in the market (well below market assumption
of -1.0%). Our volume market share grew +1.8ppts, ahead of our year-one
target of +0.7ppts.
Given the more discretionary nature of this category coupled with the
unfavourable weather conditions over the summer, Cycling continues to
underperform our other product categories. However, our B2B Cycle2Work
(‘C2W’) business has proven to be very resilient, with sales up 15.0%
year-on-year. This strong performance is due in part to the development of
our new B2B platform that targets the SME market, increasing our B2B customer
participation and improving the overall performance of C2W. We have also seen
further growth in our customer base and grown market share, and we remain the
UK’s largest Cycle to Work Provider.
Encouragingly, Tredz, our predominantly online, high-performance cycling
business, has delivered double digit LFL sales growth, growing market share
at a time of significant consolidation within the Cycling market. During the
period we have launched a new website enhancing the customer experience and
improving our online conversion rate. It is also pleasing to see our strong
customer support and delivery experience recognised with a Trustpilot score
of 4.6, ahead of our main competitors, whilst brand awareness has increased
by 30% in H1.
Strategic review
Growing our Service and B2B businesses:
Avayler growth and investment stake
Our SaaS business “Avayler”, has secured a landmark commercial agreement with
Bridgestone, to roll out Avayler software products across their US operations
- potentially over 2,000 garages. The 15-year commercial agreement adds
significant scale to our existing SaaS business in the US, growing the
recurring revenue stream and underpinning our business growth projections set
out at our Capital Markets Day in April 2023. Across their combined
operations, our three Avayler partners in the US operate from around 100,000
locations, whilst Mobivia operates from around 2,000 garages across Europe.
In addition to this contract win, Avayler has also received a significant
endorsement for its software platform, with Bridgestone taking a 5% equity
stake for a $3m (£2.5m) investment, as announced on 1 November. This
investment is prior to any annual recurring revenue from Bridgestone and
demonstrates the significant growth potential for the platform.
With our fourth major contract secured, momentum is building and we have a
strong pipeline of further customer acquisition targets in place.
Leveraging growth in our Commercial Fleet Services (‘CFS’) business
In October 2022, we made a further strategic investment with the acquisition
of Lodge Tyre, both supporting our strategic priority to grow Motoring and
B2B services and complementing our existing commercial fleet services
business, establishing Halfords as the UK’s commercial tyre services market
leader.
Our enlarged CFS business is generating positive interest from fleet
customers, with national coverage a major factor behind the recent award of
a 5-year contract with Yodel, who operate one of the largest commercial
vehicles fleets in the UK, with over 1,700 vehicles.
Together with our tyre manufacturer partners, we have a strong pipeline of
target fleet tyre service customers and are already working with the likes of
DHL, DPD, Evri and Kuehne & Nagel. We also provide services for many local
councils, with recent contract wins including Dudley, Coventry, Liverpool and
Cheshire West councils, together with West Midlands Fire Service, Shropshire
Fire and Rescue and the Ministry of Defence.
We are continuing to leverage the integration of our combined CFS business
(Lodge, Universal and McConechy’s), with revenue and cost synergies running
ahead of expectations.
Growing market share:
Motoring Loyalty Club
Our Halfords Motoring Loyalty Club, the first of its kind in the UK, has now
been running for over 18 months and we are delighted with the performance to
date. We comfortably exceeded our targets for the first year of operation,
and we have continued to see further strong growth in the first half.
Encouragingly, having entered its second year, our Motoring Loyalty club is
seeing renewal rates on membership ahead of expectations.
We now have 2.9 million members (up 1.2 million year-to-date), with over
200,000 of those being subscription members, representing our highest mix of
‘premium’ members since launch. 40% of new members this year are completely
new to Halfords, demonstrating our ability to attract new customers.
Significantly, 81% of members have not previously used Halfords for their
MOTs while 72% have not visited one of our garages for other servicing
requirements, which should support further growth in these areas in the
second half of this year and beyond.
As a result of the club, a growing proportion of our MOT work is from club
members, accounting for c.40% of Autocentre MOTs in H1, with members cross
shopping more than 5x the rate of non-members.
This month we have also launched new capability within our retail stores,
enabling customers to sign up for the ‘Premium’ subscription membership
in-store at the till, where previously they could only do so online. Already
we are seeing a significant pick up in the ‘premium’ mix, with store
colleagues able to support customers through the sign-up process.
We remain very excited about the opportunities that this customer proposition
brings us and see it as a key platform for future growth, with further
investment planned in the second half of the year.
Growing our market leading extended car parts proposition
Earlier in the year we entered the £1billion wider specialist car parts
market, with the aim of providing customers with access to thousands of car
parts, with next day delivery to home or store. We have further enhanced the
customer proposition with the launch of our 60-minute ‘Click & Collect’
service in July providing both greater convenience and service for our
customers, with the service already available in over 70% of stores.
Alongside our innovative Motoring Loyalty Club, our extended ranges are
attracting new customers to Halfords, with 24% of car parts customers new to
our Retail business whilst Motoring Loyalty Club members are accounting for
30% of revenue for car parts.
Operating review
H1 FY24 has proved to be yet another challenging operating environment. With
interest rates at a 15-year high and an ongoing cost-of-living crisis,
consumer confidence remains low, and this is translating into slower than
expected recovery in some of our markets, particularly in the more
discretionary high-ticket product categories. As a business, we continue to
concentrate our efforts on what we can control, with a laser focus on costs
whilst actively managing inflationary headwinds. At the same time, we have
also invested in price to drive market share and implement dynamic pricing in
our services business.
Group gross margin % declined 210 bps* in H1 FY24, driven primarily by the
impact of weaker Sterling hedges versus the US Dollar, product cost inflation
in the Retail business and the dilutive impact of lower margin tyres becoming
a greater proportion of revenue following the acquisition of Lodge Tyre in
October 2022. These impacts were partly mitigated in absolute terms by our
goods-for-resale better buying programme and targeted price increases.
*H1 FY23 PBT restated to reflect adjustments relating to FX accounting and an
understatement of Cost of Goods Sold. For further detail see page 11 of Chief
Financial Officer’s report.
Group operating costs have been well managed in the period, rising by only
8.6% versus the 13.9% increase in Group revenue. This performance largely
reflects the successful delivery of our cost and efficiency programme which
is comfortably on track to deliver £30m of savings in FY24, with £16.6m
delivered in H1. Highlights include: procurement savings through retendering
of contracts, renegotiating improved rates on freight and energy, the benefit
of better buying driving product cost reductions, and property related
savings through rental reductions on lease renewals and store closures. These
savings are helping to mitigate the expected £30m of inflationary headwinds
for FY24, with £20.1m impacting H1. Looking ahead, we are reviewing further
structural opportunities to improve our Autocentres supply chain, which could
deliver additional efficiencies.
We are also focused on improving utilisation within our garage businesses,
making good progress in the first half. Notably, we have seen the
utilisation rate improve in every single month year-to-date. The
implementation of dynamic pricing is also driving improvements, with online
customers looking for value incentivised to book services at garages where we
have greater availability.
We are making good progress in terms of labour retention and recruitment in
our Autocentres business. We continue to recruit new technicians and have
recently launched new initiatives to support colleagues through their
induction period, which should result in further improvements in retention
over the second half of the year. On the recruitment side, we have increased
the recruiting resource, enabling us to both speed up the recruitment process
and increase the number of job offers each week, and we are also working with
new agencies to ensure a strong pipeline of candidates. Looking forward we
are also planning to substantially expand our Apprenticeship programme.
Capital structure and dividend
Our capital allocation priorities remain unchanged:
1. Maintaining a prudent balance sheet
2. Investment for growth
3. M&A, focused on Autocentres
4. Dividend covered by 1.5x-2.5x Underlying profit after tax
5. Surplus cash returned to shareholders
As noted below, we ended the period with net debt of £47.0m (H1 FY23: Net
Cash £32.3m) (pre IFRS 16 lease debt); with a Net Debt: EBITDA ratio (post
IFRS 16) of 2.0x (H1 FY23: 1.9x) which is within our target range of 1.8x
pre-M&A or 2.3x post.
As set out at our Capital Markets Day in April 2023, average capital
expenditure is expected to be in the range of £50-60m p.a. in the mid-term,
assuming no material acquisitions. This represents approximately 3% of
revenues. We expect FY24 capex to be at the lower end of this range.
We understand the importance of the ordinary dividend to many of our
investors. We have declared an FY24 interim dividend of 3p (2023: Interim
dividend 3p) per share to be paid on 19 January 2024 with the corresponding
ex-dividend date of 14 December 2023 and the record date of 15 December 2023.
Summary
We’ve had a good first half of the year, delivering both strong revenue and
profit performance despite poor summer weather coupled with both the Cycling
and Tyre markets underperforming. We’ve seen particularly strong performances
in our more resilient, needs-based categories and Service and B2B businesses
whilst consumers were less willing to spend on more discretionary, higher
ticket products.
We’ve continued to focus on what we can control: growing market share;
delivering cost and efficiency savings; and optimising our strategic
investments, with a significant uplift in both revenue and profit in our
Autocentres business.
Avayler has won a significant contract with Bridgestone, which not only adds
material scale to the Avayler platfom but also represents a major endorsement
for this business.
Whilst the market backdrop remains volatile and challenging to predict, we
are well positioned to take advantage when markets recover, and I believe we
have many exciting opportunities ahead.
Graham Stapleton
Chief Executive Officer, Halfords Group plc
28 November 2023
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 primarily in the UK.
All references to Retail represent the consolidation of the Halfords
(“Halfords Retail”) and Performance Cycling Limited (together, “Tredz and
Wheelies”) trading entities. All references to Autocentres represent the
consolidation of the Halfords Autocentres, McConechy’s, The Universal Tyre
Company (Deptford) Limited (“Universal”), Axle Group Holdings Ltd (“National
Tyre”), Avayler Holdings Limited and LTC Trading Holdings (“Lodge Tyre”)
trading entities. All references to Group represent the consolidation of the
Retail and Autocentres segments.
The “H1 FY24” reporting period represents trading for the 26 weeks to 29
September 2023 (“the period”). The comparative period “H1 FY23” represents
trading for the 26 weeks to 30 September 2022 (“the prior period”).
All numbers shown are on a post IFRS16 basis, unless otherwise stated.
Group Financial Results
H1 FY24 H1 FY23* Change
£m £m 24 vs 23
Group Revenue 873.5 767.1 13.9%
Group Gross Profit 417.3 382.5 9.1%
Gross Margin 47.8% 49.9% (210bps)
Group EBIT 27.6 23.8 16.0%
Underlying EBITDA 90.9 81.4 11.7%
Finance Costs (6.3) (5.4) 16.7%
Underlying Profit Before Tax 21.3 18.4 15.8%
Net non-underlying items (2.0) 0.3 N/A
Profit Before Tax 19.3 18.7 3.2%
Basic Earnings per Share, before non-underlying 7.6p 6.7p 13.4%
items
*H1 FY23 results restated. See below
See page 20 for glossary of alternative performance measures.
Prior Period Adjustments to PBT in H1 FY23
The results for the 26 weeks to 30 September 2022 have been restated to
reflect adjustments which decrease the stated profit before tax by £10.6m and
result in certain reclassifications within the statement of financial
position and statement of cash flows. The adjustments have no cash impact.
A £5.4m charge has been reflected relating to the correction of the
accounting treatment of cash flow hedges under IFRS 9 and the valuation of
inventory under IAS 21 at the HY23 Balance sheet date. As this adjustment
fully reverses in the second half of FY23, there is no impact on FY23
reported results.
A further £5.2m increase to cost of sales and the correction to balances on
the balance sheet has arisen from a) the correction of accounting for a new
tyre wholesale and distribution arrangement and (b) the correction of errors
identified in the goods received not invoiced (“GRNI”) reconciliation process
at 30 September 2022. This adjustment has no cash effect but impacts
Inventories, Trade and other receivables, and Trade and other payables within
the Statement of Financial Position. There was a smaller charge in relation
to this of £2.1m in the second half of FY23, and therefore the impact on FY23
results was a reduction to profit before tax of £7.3m.
We are confident these adjustments fully correct the results for the 26 weeks
to 30 September 2022 and that the appropriate process and controls
remediations have been put in place such that we do not expect any further
adjustments going forward. We also note that these movements have no impact
on our FY24 guidance or the mid-term targeted growth projections, as set out
at our Capital Markets Day in April 2023.
The impact of the above adjustments on the FY23 interim results are shown in
the table below:
H1 FY23 H1 FY23
As originally Supplier Foreign Restated
reported arrangements exchange
£m £m £m £m
Revenue 765.7 1.4 - 767.1
Retail 500.5 - - 500.5
Autocentres 265.2 1.4 - 266.6
Gross Profit 393.1 (5.2) (5.4) 382.5
Retail 251.3 - (5.4) 245.9
Autocentres 141.8 (5.2) - 136.6
Gross Margin 51.3% 49.9%
Retail 50.2% 49.1%
Autocentres 53.5% 51.2%
EBIT before non-underlying items 34.4 (5.2) (5.4) 23.8
Underlying Profit Before Tax 29.0 (5.2) (5.4) 18.4
Profit after tax 23.1 (4.2) (4.2) 14.7
Cash flow hedges:
Fair value changes in the period 9.0 - 1.1 10.1
Income tax on Other (0.9) - (0.2) (1.1)
comprehensive income
Other comprehensive income 8.1 - 0.9 9.0
Total comprehensive income 31.2 (4.2) (3.3) 23.7
Group Financial Results
Group revenue in H1 FY24, at £873.5m, is up +13.9% year-on-year, and up 8.3%
on a LFL basis. This comprised Retail revenue of £516.6m and Autocentres
revenue of £356.9m. Group gross profit at £417.3m (H1 FY23: £382.5m)
represented 47.8% of Group revenue (H1 FY23: 49.9%). The growth in gross
profit of £34.8m, +9.1%, was driven by Autocentres performance. This is a
result of strong growth in the LFL business and the acquisition of Lodge,
which completed in October 2022.
Gross margin % has decreased, -210bps vs FY23, with Retail -330bps and
Autocentres -60bps. The decline in Retail gross margin primarily reflects
foreign exchange headwinds in relation to the weakening of Sterling hedges
versus the US dollar, plus investment in price within our Retail Motoring
business. Autocentres has seen gross margin decline in H1 as a result of the
acquisition of Lodge Tyre in October 2022 which has increased the mix of
revenue towards lower margin tyres.
Total operating costs before non-underlying items were 8.6% higher than H1
FY23 at £389.7m of which Retail comprised £217.3m (H1 FY23: £216.5m),
Autocentres £169.5m (H1 FY23: £139.8m) and unallocated costs £2.9m (H1 FY23:
£2.4m). Underlying costs of the business were well controlled given the
inflationary environment with operating costs as a percentage of sales
falling by -220bps year-on-year. This included the annualisation of Lodge
Tyre which was acquired in October 2022 adding approximately £14m of costs
through H1.
Unallocated costs of £2.9m (H1 FY23: £2.4m) represent amortisation charges in
respect of intangible assets acquired through business combinations, which
arise on consolidation of the Group. The increase in the current period from
H1 FY23 is due to the impact of the acquisition of Lodge Tyre in October
2022.
The overall EBIT performance of the Group increased by £3.8m vs H1 FY23,
driven by the strong performance in Autocentres. Group Underlying EBITDA
increased 11.7% from H1 FY23 to £90.9m (H1 FY23: £81.4), whilst finance costs
were £6.3m (H1 FY23: £5.4m).
Underlying Profit Before Tax for the period was up 15.8% in H1 FY23 at £21.3m
(H1 FY23: £18.4m). The non-underlying charge of £2.0m in the period (H1 FY23:
credit £0.3m) relates principally to adjustments to store and autocentre
closure cost provisions and organisational restructure costs, offset by the
release of provisions for closure costs in prior years. After non-underlying
items, Group Profit Before Tax was £19.3m (H1 FY23: £18.7m).
Retail
H1 FY24 H1 FY23* Change
£m £m 24 vs 23
Revenue 516.6 500.5 3.2%
Gross Profit 236.8 245.9 (3.7%)
Gross Margin 45.8% 49.1% (330bps)
Operating Costs (217.3) (216.5) 0.4%
EBIT before non-underlying items 19.6 29.4 (33.3%)
Non-underlying items (1.1) 1.7 N/A
EBIT 18.5 31.1 (40.5%)
Underlying EBITDA 59.8 69.3 (13.7%)
*H1 FY23 results restated. See note 20 in the Condensed Consolidated Interim
Financial Statements
Revenue for the Retail business of £516.6m reflected, on a constant-currency
basis, a one-year like-for-like (LFL) sales increase of 4.1%.
Please refer to the Retail Operational Review in the Chief Executive’s
Statement for further commentary on the trading performance in the period.
Like-for-like revenues and total sales revenue mix for the Retail business
are split by category below:
H1 FY24 vs FY23 H1 FY24 H1 FY23
LFL (%) Total sales mix (%) Total sales mix (%)
Motoring 8.2 62.8 60.2
Cycling (2.8) 37.2 39.8
Retail 4.1
Gross profit for the Retail business at £236.8m (H1 FY23: £245.9m)
represented 45.8% of sales. The 330 bps year-on-year decrease in gross margin
% is largely driven by inflationary cost pressures, particularly the impact
of hedged foreign exchange rates, which is detailed below. Continued
investment in price and promotion to provide value for customers also
suppressed margin in the period, partially offset by the benefits of our
better buying program.
The table below shows the average exchange rate reflected in cost of sales.
The Group hedges its US dollar cashflows 12 -18 months in advance and
therefore the average exchange rate reflected in cost of sales in the period
reflects the prevailing hedged rates at this time.
H1 FY24 H1 FY23
Average GBP: USD rate reflected in cost of sales 1.26 1.33
A £0.1m charge (H1 FY23: £4.5m credit) has been recognised in the period
relating to derivative financial instruments that do not qualify for hedge
accounting under the rules of IFRS 9 in the context of the Group’s policy to
hedge its inventory purchases. The charge has been recognised at fair value
through the income statement. A £1.2m credit (H1 FY23*: £10.1m) has also been
recognised through Other Comprehensive Income relating to the increase in
fair value of derivative financial instruments for which hedge accounting has
been applied.
Retail operating costs before non-underlying items were broadly flat,
increasing by just 0.3% against H1 FY23 to £217.3m (H1 FY23: £216.5m). This
reflects tight cost control across all areas and the delivery of cost and
efficiency savings, most notably in marketing, and has driven a reduction in
the cost to sales ratio of 120 bps.
*H1 FY23 results restated. See note 20 in the Condensed Consolidated Interim
Financial Statements
Autocentres
H1 FY24 H1 FY23* Change
£m £m 24 vs 23
Revenue 356.9 266.6 33.9%
Gross Profit 180.5 136.6 32.1%
Gross Margin 50.6% 51.2% (60bps)
Operating Costs (169.5) (139.8) 21.2%
EBIT before non-underlying items 10.9 (3.2) N/A
Non-underlying items (0.9) (1.4) N/A
EBIT 10.0 (4.6) N/A
Underlying EBITDA 31.1 12.5 149.2%
*H1 FY23 results restated. See note 20 in the Condensed Consolidated Interim
Financial Statements
Autocentres generated total revenues of £356.9m (H1 FY23: £266.6m), an
increase of 33.9%, with a LFL increase of 18.0%.
The increase in total revenue from FY23 was driven by the acquisition of
Lodge Tyre, but the underlying Autocentre business also performed strongly on
a like-for-like basis with growth in all categories, particularly servicing,
maintenance and repairs and tyres.
Gross profit at £180.5m (H1 FY23: £136.6m) represented a gross margin of
50.6%, a decrease from the 51.2% gross margin in H1 FY23, reflecting the
impact of lower margin tyres becoming a greater proportion of revenue
following the acquisition of Lodge Tyre in October 2022, which made up c15%
of sales in H1.
Autocentre Underlying EBIT of £10.9m was £14.1m higher versus H1 FY23.
Autocentres operating costs increased by £29.7m (+21.2%) primarily driven by
the acquired Lodge business, totalling c.£14m, with the remaining variance
driven by an increase in wages and salaries due to increased headcount,
primarily in technicians and costs to support the growth in the business.
The cost to sales ratio improved by 490 bps to 47.5%, showing the benefit of
leveraging the fixed cost base.
Portfolio Management
The Retail store portfolio as at 29 September 2023 comprised 392 stores (end
of H1 FY23: 397; end of FY23: 393). No new Retail stores were opened and one
was closed during the period.
The Autocentres portfolio as at 29 September 2023 comprised 589 locations
(304 Halfords Autocentres, 41 McConechy’s, 230 National Garages & 14 HME
hubs). At the end of H1 FY23 there were 593 locations and at the end of FY23,
643.
As at 29 September 2023 there are a total of 746 vans in operation, 198 of
which are Halfords Mobile Expert, 118 McConechy’s, 90 Universal, 272 Lodge
and 68 National. At the end of H1 FY23 there were 482 vans across the Group,
with 746 at the end of FY23 following the acquisition of Lodge Tyre.
The following table outlines the changes in the Retail and Autocentres store
portfolio over the 26-week period:
Retail Autocentres
Relocations - 2
Leases re-negotiated 20 23
Openings - 5
Closed 1 2
Net Non-Underlying items
The following table outlines the components of the non-underlying items
recognised in the period:
H1 FY24 H1 FY23
£m £m
Organisational restructure costs 1.9 0.5
Closure costs (1.2) (2.8)
Acquisition and investment related fees 0.3 1.6
Replacement of warehouse management system 0.7 0.4
Other 0.3 -
Net non-underlying items charge/(credit) 2.0 (0.3)
In the period organisational restructure costs of £1.9m were incurred
relating to the integration of the central functions of the National Tyres
business and other restructuring activities. £1.0m of this related to
redundancy costs, along with £0.9m of other costs relating to restructuring
activity.
During FY20 and FY21 the group completed a strategic review of the
profitability of the physical estate and subsequently closed a number of
stores and garages. Assets were impaired and costs associated with the
ongoing onerous commitments under the lease agreements and other costs
associated with the property exits were provided for accordingly. In the
current period, a credit of £1.2m (HY23: £2.8m) relates to the release of
some of these provisions as the group continues to negotiate lease disposals
and review provisions held. These will continue to unwind as property exits
are negotiated with landlords and tenants. This may result in further
amounts being released to the income statement due to the significant
estimation uncertainty over the timing of exits and the final negotiated
settlements.
Acquisition and investment related costs of £0.3m (HY23: £1.6m) in the period
comprise professional fees and acquisition costs incurred in relation to the
acquisitions of National Tyres and the Lodge Tyre Company.
Costs relating to the replacement of the Warehouse Management system were
incurred during the current period and in FY23.
Finance Cost
The finance cost for the period was higher year-on-year at £6.3m (H1 FY23:
£5.4m), as a result of an increase in the level of bank interest, reflecting
the current economic conditions and higher interest rate environment. Finance
costs pre IFRS 16 have increased compared to the prior year to £2.0m (H1
FY23: £1.3m).
Taxation
The taxation charge on profit for the period was £4.7m (H1 FY23: £4.0m),
including a £0.1m credit (H1 FY23: £0.2m charge) in respect of non-underlying
items. The effective tax rate of 24.6% (H1 FY23: 20.7%) differs from the UK
corporation tax rate (25%) principally due to adjustments in relation to
prior periods and the impact of lower overseas tax rates in comparison to the
increased UK statutory rate of 25%.
The full year FY24 effective tax rate is expected to be around 24.8% which is
lower than the statutory rate due in part to adjustments relating to prior
periods and the impact of lower overseas tax rates.
Earnings Per Share (“EPS”)
Underlying Basic EPS was 7.6 pence (H1 FY23: 6.7p) and after non-underlying
items 6.7 pence (H1 FY23: 6.8 pence after non-underlying items). Basic
weighted-average shares in issue during the period were 217.5m (H1 FY23:
217.2m). The increase in the basic weighted-average shares in issue during
the period from H1 FY23 is due to the reduction in the weighted-average
number of shares held by the Employee Benefit Trust.
Dividend
The Board have declared an interim dividend of 3p per share in respect of the
period to 29 September 2023 (H1 FY22: 3p). The interim dividend will be paid
on 19 January 2024 to shareholders who are on the register of members, with
an ex-dividend date of 14 December 2023 and a record date of 15 December
2023.
Capital Expenditure
Capital expenditure in the period totalled £18.7m (H1 FY23: £20.0m).
Retail capital expenditure was £7.6m, of which £5.0m related to IT
infrastructure and e commerce, mainly focused on the development of our
Loyalty offering and the continued development of the Group’s websites. £1.9m
was invested in stores, with the majority of the remaining balance related to
software investment in Tredz & Wheelies.
Autocentres capital expenditure was £11.1m of which £5.2m related to IT
software expenditure on the development of Avayler and PACE, the Garage
Workflow System. Expenditure on property in the period was £2.3m, with £1.4m
on new vehicles and £2.2m related to asset replacement.
H1 FY23 capital expenditure was £20m. Of this, £14.1m was spent in Retail,
with £6.5m related to various business system improvements, £1.0m invested in
store maintenance, £2.2m spent on IT systems and £1m invested within Tredz &
Wheelies relating to software. The remaining £5.9m was spent in Autocentres,
with £1.6m spent on IT software, £2.5m on asset replacement and £1m on
support centre costs. Within the H1 FY23 spend, £1.7m was attributable to the
integration of National Tyres.
Inventories
Group inventory held at the period end was £262.9m (H1 FY23: £248.0m). The
FY23 year-end balance was £256.2m and as such the H1 FY24 stock balance
represents a £6.7m increase on the year end position. This has been driven by
product inflation and investment in Autocentres to support growth.
Retail inventory decreased to £188.8m (H1 FY23: £193.7m, FY23: £204.7m). This
reduction demonstrates good progress in our plans to reduce our overall stock
levels in retail by the end of the financial year. Tredz and Wheelies stock
value was £13.3m (H1 FY23: £13.2m, FY23: £12.6m).
Autocentres’ inventory was £60.9m (H1 FY23: £41.1m, FY23 £53.1m). The
increase of £19.8m since last year is driven by the acquisition of Lodge
Tyres (£9.3m) and investment to support the strong revenue growth.
Cashflow and Borrowings
Adjusted Operating Cash Flow during the period, was £64.3m (H1 FY23: £74.7m).
After acquisitions, taxation, capital expenditure, net finance costs, and
lease payments, Free Cash outflow of £19.2m (H1 FY23: £0.1m outflow) was
generated in the period. The decrease in Free Cash Flow of £19.1m from H1
FY23 is primarily due to the working capital movements from H1 FY23.
Group net debt, including IFRS 16 lease debt, was £372.3m at the balance
sheet date (H1 FY23: £336.0m, YE FY23 348.7m) consisting of £16.2m of cash,
£(10.9)m bank overdrafts, £(49.4)m the Group’s revolving credit facility,
£(2.9m) of other borrowings and £(325.3)m of Lease Liabilities. The increase
in the Group’s net debt from FY23 year-end of £23.6m relates to a decrease of
£21.6m in Lease Liabilities, £26.9m cash outflow, £0.6m of other non-cash
movements, and a £17.7m drawdown on the Group’s revolving credit facility and
other borrowings.
Principal Risks and Uncertainties
The Board considers risk assessment, identification of mitigating actions and
internal control to be fundamental to achieving Halfords’ strategic corporate
objectives. In the Annual Report & Accounts the Board sets out what it
considers to be the principal commercial and financial risks to achieving the
Group’s objectives. The main areas of potential risk and uncertainty in the
financial year are described in the Strategic Report on page 76 of the
Halfords Group plc Annual Report and Accounts for the period ending 31 March
2023 and all are considered relevant to the H1 FY24 reporting. These include:
• Business Strategy
◦ Capability and capacity to effect change
◦ Stakeholder support and confidence in strategy
◦ Value proposition
◦ Brand appeal and market share
◦ Climate change & electrification
• Financial
◦ Sustainable business model
• Compliance
◦ Regulatory and compliance
◦ Service quality
◦ Cyber security
• Operational
◦ Colleague engagement/culture
◦ Skills shortage
◦ IT infrastructure failure
◦ Disruption to end to end supply chain
Jo Hartley
Chief Financial Officer
28 November 2023
Glossary of Alternative Performance Measures
In the reporting of financial information, the Directors have adopted various
Alternative Performance Measures (“APMs”). APMs should be considered in
addition to IFRS measurements, of which some are shown on Page 1. 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, not necessarily comparable to
other entities APMs.
The key APMs that the Group uses are as follows:
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 equates to results from operating activities before
non-underlying items, as shown in the Group Income Statement. 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 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.
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, as reconciled below:
H1 FY24 H1 FY23*
£m £m
Cash and cash equivalents 16.2 78.0
Borrowings – current (13.8) (11.5)
Borrowings – non-current (49.4) (34.2)
Lease liabilities – current (71.9) (75.2)
Lease liabilities – non-current (253.4) (293.1)
Net Debt (372.3) (336.0)
*Restated see note 20 for further details
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 movements in provisions, as
reconciled below:
H1 FY24 H1 FY23*
£m £m
Underlying EBIT 27.6 23.8
Depreciation and Amortisation 63.3 57.6
Underlying EBITDA 90.9 81.4
Non-underlying operating (expenses)/ income (2.0) 0.3
EBITDA 88.9 81.7
Share-based payment transactions 2.5 0.4
(Gain)/Loss on disposal of property, plant & equipment (0.6) 0.5
Working capital movements (24.9) (5.6)
Provisions movement (1.6) (2.3)
Adjusted Operating Cash Flow 64.3 74.7
*Restated see note 20 for further details
8. Free Cash Flow is defined as Adjusted Operating Cash Flow (as defined
above) less capital expenditure, net finance costs, taxation, exchange
movements, and capital lease payments; as reconciled below:
H1 FY24 H1 FY23*
£m £m
Adjusted Operating Cash Flow 64.3 74.7
Capital expenditure (22.4) (25.5)
Net finance costs (5.8) (5.0)
Taxation (14.5) (5.9)
Exchange movements (1.8) (4.2)
Supplier financing 2.2 4.7
Payment of Capital element of Leases (41.2) (38.9)
Free Cash Flow (19.2) (0.1)
*Restated see note 20 for further details
Halfords Group plc
Condensed consolidated income statement
For the 26 weeks to 29 September 2023
26 weeks to 26 weeks to 52 weeks to
29 September 30 September 31 March
2023 2022 2023
Restated* Restated*
Unaudited
Unaudited
Notes £m £m £m
Revenue 7 873.5 767.1 1,591.8
Cost of sales (456.2) (384.6) (816.6)
Gross profit 417.3 382.5 775.2
Operating expenses (389.7) (358.7) (718.9)
Operating profit before 27.6 23.8 56.3
non-underlying items
Net non-underlying operating 8 (2.0) 0.3 (8.0)
(expense) / income
Results from operating activities 25.6 24.1 48.3
Finance costs 9 (6.3) (5.4) (12.1)
Profit before tax and 21.3 18.4 44.2
non-underlying items
Net non-underlying operating 8 (2.0) 0.3 (8.0)
(expense) / income
Profit before tax 19.3 18.7 36.2
Tax on underlying items 10 (4.8) (3.8) (9.2)
Tax on non-underlying items 8 0.1 (0.2) 1.1
Profit for the period
attributable to equity 14.6 14.7 28.1
shareholders
Earnings per share
Basic earnings per share 13 6.7p 6.8p 12.9p
Diluted earnings per share 13 6.4p 6.6p 12.4p
Basic underlying earnings per 13 7.6p 6.7p 16.1p
share
Diluted underlying earnings per 13 7.3p 6.5p 15.4p
share
* Please refer to Note 20 for further details
Condensed consolidated statement of comprehensive income
For the 26 weeks to 29 September 2023
26 weeks to 26 weeks to 52 weeks to
31 March
29 September 2023 30 September 2022
2023
Restated* Restated*
Unaudited
Unaudited
£m £m £m
Profit for the period 14.6 14.7 28.1
Other comprehensive income
Cash Flow hedges: fair value 1.2 10.1 2.7
changes in the period
Income tax on other (0.7) (1.1) 1.1
comprehensive income
Other comprehensive income
for the period, 0.5 9.0 3.8
net of tax
Total comprehensive income
for the period
15.1 23.7 31.9
attributable to equity
shareholders
* Please refer to Note 20 for further details
All items within the Condensed consolidated statement of comprehensive income
are classified as items that are or may be recycled to the consolidated
income statement.
The notes on pages 27 to 40 are an integral part of these condensed
consolidated interim financial statements.
Condensed consolidated statement of financial position
As at 29 September 2023
As at As at As at
29 September 30 September 31 March
2023 2022
2023
Restated*
Restated*
Unaudited Unaudited
Notes £m £m £m
Assets
Non-current assets
Intangible assets 14 481.6 444.7 482.0
Property, plant and equipment 14 92.8 97.9 97.8
Right-of-use assets 14 294.5 329.8 312.6
Derivative financial instruments 0.3 0.7 -
Deferred tax asset 9.0 13.1 10.9
Total non-current assets 878.2 886.2 903.3
Current assets
Inventories 262.9 248.0 256.2
Trade and other receivables 162.5 118.2 144.6
Derivative financial instruments 1.4 15.7 1.1
Current tax assets 7.5 1.8 -
Cash and cash equivalents 15 16.2 78.0 41.9
Total current assets 450.5 461.7 443.8
Total assets 1,328.7 1,347.9 1,347.1
Liabilities
Current liabilities
Borrowings 15 (13.8) (11.5) (9.7)
Lease liabilities (71.9) (75.2) (77.6)
Derivative financial instruments (1.3) (0.1) (3.7)
Trade and other payables (360.0) (350.8) (362.3)
Current tax liabilities - - (3.6)
Provisions (13.4) (20.3) (11.2)
Total current liabilities (460.4) (457.9) (468.1)
Net current (liabilities)assets (9.9) 3.8 (24.3)
Non-current liabilities
Borrowings 15 (49.4) (34.2) (34.0)
Lease liabilities (253.4) (293.1) (269.3)
Derivative financial instruments - (0.1) (0.5)
Trade and other payables (3.9) (3.7) (3.5)
Provisions (11.0) (4.3) (14.8)
Total non-current liabilities (317.7) (335.4) (322.1)
Total liabilities (778.1) (793.3) (790.2)
Net assets 550.6 554.6 556.9
Shareholders’ equity
Share capital 16 2.2 2.2 2.2
Share premium 16 212.4 212.4 212.4
Investment in own shares (22.9) (13.1) (12.7)
Other reserves 0.9 5.5 (1.1)
Retained earnings 358.0 347.6 356.1
Total equity attributable to equity 550.6 554.6 556.9
holders of the Company
* Please refer to Note 20 for further details
Condensed consolidated statement of changes in equity
For the 26 weeks to 29 September 2023 (Unaudited)
Attributable to the equity holders of the Company
Other reserves
Share Share Investment Capital Hedging Retained Total
capital premium in own redemption reserve earnings
account shares reserve equity
£m £m £m £m £m £m £m
Balance at 31 2.2 212.4 (12.7) 0.3 (1.4) 356.1 556.9
March 2023
Total
comprehensive
income for the
period
Profit for the - - - - - 14.6 14.6
period
Other
comprehensive
income
Cash flow
hedges:
Fair value
changes in - - - - 1.2 - 1.2
the
period
Income tax on
other - - - - (0.7) - (0.7)
comprehensive
income
Total other
comprehensive
income for the - - - - 0.5 - 0.5
period net of
tax
Total
comprehensive - - - - 0.5 14.6 15.1
income for the
period
Hedging gains
and losses and
costs of
hedging - - - - 1.5 - 1.5
transferred to
the cost of
inventory
Transactions
with owners
Acquisition of - - (10.3) - - - (10.3)
Treasury shares
Share options - - 0.1 - - - 0.1
exercised
Share-based
payment - - - - - 2.5 2.5
transactions
Income tax on
share-based - - - - - - -
payment
transactions
Dividends to - - - - - (15.2) (15.2)
equity holders
Total
transactions - - (10.2) - - (12.7) (22.9)
with owners
Balance at 29 2.2 212.4 (22.9) 0.3 0.6 358.0 550.6
Sept 2023
Condensed consolidated statement of changes in equity (continued)
For the 26 weeks to 30 September 2022 (Unaudited)
Restated*
Attributable to the equity holders of the Company
Other reserves
Share Share Investment Capital Hedging Retained Total
capital premium in own redemption reserve* earnings*
account shares reserve equity
£m £m £m £m £m £m £m
Balance at 1 2.2 212.4 (11.6) 0.3 1.7 346.0 551.0
April 2022
Total
comprehensive
income for
the period
Profit for - - - - - 14.7 14.7
the period
Other
comprehensive
income
Cash flow
hedges:
Fair value
changes in - - - - 10.1 - 10.1
the period
Income tax on
other - - - - (1.1) - (1.1)
comprehensive
income
Total other
comprehensive
income for - - - - 9.0 - 9.0
the period
net of tax
Total
comprehensive - - - - 9.0 14.7 23.7
income for
the period
Hedging gains
and losses
and costs of
hedging - - - - (5.5) - (5.5)
transferred
to the cost
of inventory
Transactions
with owners
Acquisition
of Treasury - (1.5) - - - (1.5)
shares
Share options - - - - - - -
exercised
Share-based
payment - - - - - 0.4 0.4
transactions
Income tax on
share-based - - - - - (0.5) (0.5)
payment
transactions
Dividends to
equity - - - - - (13.0) (13.0)
holders
Total
transactions - - (1.5) - - (13.1) (14.6)
with owners
Balance at 30 2.2 212.4 (13.1) 0.3 5.2 347.6 554.6
Sept 2022
* Please refer to Note 20 for further details
Condensed consolidated statement of cash flows
For the 26 weeks to 29 September 2023
26 weeks to 26 weeks to 52 weeks to
29 September 30 September 31 March
2023 2022
2023
Restated*
Unaudited Restated*
Unaudited
Notes £m £m £m
Cash Flows from operating
activities
Profit after tax for the period 16.5 14.6 35.0
before non-underlying items
Non-underlying items 8 (1.9) 0.1 (6.9)
Profit after tax for the period 14.6 14.7 28.1
Depreciation – property, plant 13.6 10.2 28.1
and equipment
Impairment – property, plant and - 0.6 1.2
equipment
Amortisation of right-of-use 39.5 37.4 75.2
assets
Amortisation – intangible assets 10.2 9.4 17.9
Net finance costs 6.3 5.4 12.1
Loss on disposal of property,
plant and equipment and 0.2 1.2 1.7
intangibles
Gain on disposal of leases (0.8) (0.7) (0.4)
Equity-settled share-based 2.5 0.4 2.4
payment transactions
Exchange movement (1.8) (4.2) (8.0)
Income tax expense 4.7 4.0 8.1
Increase in inventories (7.1) (22.2) (12.7)
Increase in trade and other (20.1) (26.7) (32.2)
receivables
Increase in trade and other 2.3 43.3 39.3
payables
Decrease in provisions (1.6) (2.3) (1.3)
Corporation tax paid (14.5) (5.9) (4.7)
Net cash from operating 48.0 64.6 154.8
activities
Cash Flows from investing
activities
Acquisition of subsidiary, net of - - (32.6)
cash acquired
Purchase of intangible assets (8.4) (10.9) (25.4)
Purchase of property, plant and (14.0) (14.6) (29.0)
equipment
Net cash used in investing (22.4) (25.5) (87.0)
activities
Cash Flows from financing
activities
Repurchase of treasury shares (10.3) (1.5) (1.5)
Proceeds from share options 0.1 - 0.4
exercised
Finance costs paid (1.5) (0.7) (2.5)
Proceeds from borrowings 375.7 35.0 337.0
Repayments of borrowings (358.0) - (302.0)
Repayment of loan - - (1.7)
Transaction costs from borrowings - - (1.8)
Interest paid on lease (4.3) (4.3) (8.8)
liabilities
Payment of capital element of (41.2) (38.9) (80.5)
leases
Payments relating to supplier (25.0) (2.8) (23.5)
financing
Receipts relating to supplier 27.2 7.5 22.7
financing
Dividends paid 12 (15.2) (13.0) (19.5)
Net cash used in financing (52.5) (18.7) (81.7)
activities
Net (decrease)/increase in cash 15 (26.9) 20.4 (13.9)
and bank overdrafts
Cash and cash equivalents at the 15 32.2 46.1 46.1
beginning of the period
Cash and cash equivalents at the 15 5.3 66.5 32.2
end of the period
* Please refer to Note 20 for further details
Bank overdrafts are included within Cash and cash equivalents above, see note
15 for further details.
The notes on pages 27 to 40 are an integral part of these condensed
consolidated interim financial statements.
Notes to the condensed consolidated interim financial statements
For the 26 weeks to 29 September 2023
1. General information
The condensed consolidated interim financial statements of Halfords Group plc
(the “Company”) comprise the Company together with its subsidiary
undertakings (the “Group”).
The Company is a public limited company incorporated, domiciled and
registered in England and Wales. Its registered office is Icknield Street
Drive, Washford West, Redditch, Worcestershire, B98 0DE.
The Company is listed on the London Stock Exchange.
These condensed consolidated interim financial statements were approved by
the Board of Directors on 28 November 2023.
2. Statement of compliance
These condensed consolidated interim financial statements for the 26 weeks to
29 September 2023 have been prepared in accordance with IAS 34 ‘Interim
financial reporting’ as adopted for use in the UK. They do not include all
the information required for full annual financial statements and should be
read in conjunction with the Annual Report and Accounts for the period ended
31 March 2023, which have been prepared in accordance with UK adopted
international accounting standards.
The comparative figures for the financial period ended 31 March 2023 are not
the Group’s statutory accounts for that financial period. Those accounts have
been reported on by the Group’s auditors and delivered to the registrar of
companies. The report of the auditor was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
3. Risks and uncertainties
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group’s performance in the remaining 26 weeks
of the financial year remain the same as those stated on pages 76 to 81 of
the Annual Report and Accounts for the period ended 31 March 2023, which are
available at website www.halfordscompany.com. These are also detailed in the
Chief Financial Officer’s Statement on page 72.
4. Material accounting policies
Going Concern
The directors have reviewed the current financial performance, liquidity and
forecasts of the business. Further details of the assessment are provided on
pages 82 to 83 of the Annual Report and Accounts for the period ended 31
March 2023, which are available at www.halfordscompany.com. The directors
have updated the financial forecasts to reflect the actual performance of the
business during the period covered by these interim condensed consolidated
financial statements and a more challenging economic environment in the UK.
Stress tests have been performed on these forecasts and no issues have been
raised.
Having reviewed current performance and forecasts, the Directors consider
that the Group has adequate resources to remain in operation for the
foreseeable future and have therefore continued to adopt the going concern
basis in preparing the condensed consolidated interim financial statements.
The Group’s forecasts and projections, taking into account reasonably
possible changes in trading performance, show that the Group has adequate
resources to continue in operational existence and are compliant with all
covenants for a period of at least 12 months from the date of approval of
these condensed consolidated interim financial statements.
Accounting Policies
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed consolidated interim financial statements have been
prepared by applying the accounting policies and presentation that were
applied in the preparation of the Annual Report and Accounts for the period
ended 31 March 2023, which are published on the Halfords Group website,
4 www.halfordscompany.com.
The accounting policies adopted in the preparation of the interim financial
statements are the same as those set out in the Group’s Annual Report and
Accounts for the period ended 31 March 2023. There has also been no change in
the accounting policies requiring disclosure within the Group’s financial
statements upon application of the amendments to IAS 1 and IFRS Practice
Statement 2 – Disclosure of Accounting Policies in the current period.
5. Estimates and judgements
The significant judgements made by management in applying the Group’s
accounting policies and the key sources of estimation uncertainty were the
same as those applied to the consolidated financial statements as at and for
the 52-week period ended 31 March 2023 and the 26 weeks ended 30 September
2022.
6. Operating segments
The Group has two reportable segments, Retail and Autocentres, which are the
Group’s strategic business units. Autocentres became a reporting segment of
the Group as a result of the acquisition of Nationwide Autocentres on 17
February 2010. The strategic business units offer different products and
services, and are managed separately because they require different
operational, technological and marketing strategies.
The operations of the Retail reporting segment comprise the retailing of
automotive, leisure and cycling products and services through retail stores
and online platforms. The operations of the Autocentres reporting segment
comprise car servicing and repair performed from Autocentres, commercial
vehicles, mobile customer vans through Halfords Mobile Expert and software as
a service provisions.
The Chief Operating Decision Maker is the Executive Directors. Internal
management reports for each of the segments are reviewed by the Executive
Directors on a monthly basis. Key measures used to evaluate performance are
Revenue and Operating Profit. Management believe that these measures are the
most relevant in evaluating the performance of the segment and for making
resource allocation decisions.
The following summary describes the operations in each of the Group’s
reportable segments. Performance is measured based on segment operating
profit, as included in the management reports reviewed by the Executive
Directors. The segmental reporting disclosures are prepared in accordance
with IFRS accounting policies.
All material operations of the reportable segments are carried out in the UK
and all material non-current assets are in the UK. The Group’s revenue is
driven by the consolidation of individual small value transactions and as a
result Group revenue is not reliant on a major customer or group of
customers. All revenue is from external customers.
26 weeks to
29 September 2023
Retail Autocentres
Income statement Total
£m £m
Unaudited
£m
Revenue 516.6 356.9 873.5
Segment result before non-underlying 19.6 10.9 30.5
items
Non-underlying items (1.1) (0.9) (2.0)
Segment result 18.5 10.0 28.5
Unallocated expenses1 (2.9)
Operating profit 25.6
Net financing expense (6.3)
Profit before tax 19.3
Taxation (4.7)
Profit after tax 14.6
26 weeks to
Retail Autocentres 30 September 2022
Income statement Restated* Restated* Total
£m £m Restated* Unaudited
£m
Revenue 500.5 266.6 767.1
Segment result before 29.4 (3.2) 26.2
non-underlying items
Non-underlying items 1.7 (1.4) 0.3
Segment result 31.1 (4.6) 26.5
Unallocated expenses1 (2.4)
Operating profit 24.1
Net financing expense (5.4)
Profit before tax 18.7
Taxation (4.0)
Profit after tax 14.7
* Please refer to Note 20 for further details
52 weeks to
Retail Autocentres 31 March 2023
Income statement Restated* Total
£m £m Restated*
£m
Revenue 977.9 613.9 1,591.8
Segment result before non-underlying items 58.6 3.1 61.7
Non-underlying items (0.7) (7.3) (8.0)
Segment result 57.9 (4.2) 53.7
Unallocated expenses1 (5.4)
Operating profit 48.3
Net financing expense (12.1)
Profit before tax 36.2
Taxation (8.1)
Profit after tax 28.1
1 Unallocated expenses have been disclosed to reflect the format of the
internal management reports reviewed by the Chief Operating Decision maker
and include an amortisation charge of £2.9m in respect of assets acquired
through business combinations (H1 2023: £2.4m, FY 2023: £5.4m).
* Please refer to Note 20 for further details
26 weeks to
29 September 2023
Retail Autocentres
Other segment items: Total
£m £m
Unaudited
£m
Capital expenditure 18.9 18.8 37.7
Depreciation and impairment 7.4 5.9 13.3
expense
Impairment of right-of-use asset - - -
Amortisation of right-of-use asset 26.4 12.5 38.9
Amortisation expense 6.4 1.8 8.2
26 weeks to
30 September 2022
Retail Autocentres
Other segment items: Total
£m £m
Unaudited
£m
Capital expenditure 14.1 5.9 20.0
Depreciation expense 8.0 2.8 10.8
Amortisation of right-of-use asset 26.7 11.2 37.9
Impairment of right-of-use asset (0.8) 0.3 (0.5)
Amortisation expense 6.0 1.4 7.4
52 weeks to
31 March
Retail Autocentres
Other segment items: 2023
£m £m
Total
£m
Capital expenditure 26.6 21.5 48.1
Depreciation and impairment 17.2 12.1 29.3
expense
Impairment of right-of-use asset (2.3) - (2.3)
Amortisation of right-of-use asset 53.0 24.5 77.5
Amortisation expense 15.5 2.4 17.9
There have been no significant transactions between segments in the 26 weeks
ended 29 September 2023 (2022: £nil).
7. Revenue
A. Revenue streams and location
The Group’s operations and main revenue streams are those described in the
Annual Reports and Accounts for the period ended 31 March 2023. The Group’s
revenue is derived from transactions with customers.
The Revenue split by the Group’s operating segments is shown in Note 6.
All significant revenue is recognised in the United Kingdom and Republic of
Ireland.
B. Seasonality of operations
At the Group level, revenue is not materially seasonal, however, there is
some underlying seasonality in certain categories. For example, sales of
adult cycles tend to peak in the spring and summer months whilst sales of
children’s cycles peak in the festive season. Conversely, MOT activity is
weighted towards the second half of the year whilst motoring products also
tend to exhibit stronger demand in the winter months. Motoring products and
services typically generate higher profits than cycling, as a result the
Group’s profit is expected to be weighted towards the second half.
8. Non-underlying items
26 weeks to 26 weeks to 52 weeks to
29 September 30 September 31 March
2023 2022 2023
Unaudited Unaudited
£m £m £m
Non-underlying operating expenses:
Organisational restructure costs (a) 1.9 0.5 6.3
Closure costs (b) (1.2) (2.8) (0.2)
Acquisition costs (c) 0.3 1.6 1.9
Replacement of warehouse management 0.7 0.4 -
system (d)
Other 0.3 - -
Non-underlying items before tax 2.0 (0.3) 8.0
Tax on non-underlying items (e) (0.1) 0.2 (1.1)
Non-underlying items after tax 1.9 (0.1) 6.9
Non-underlying items are those items that are unusual because of their size,
nature (one-off, non-trading costs) or incidence. Management considers that
these items should be separately identified within their relevant income
statement category to enable a full understanding of the Group’s results.
a. In FY23, the group undertook a restructure of the support centre. The
second phase of this restructure continued in H1 of FY24 including the
integration of support roles and financial systems relating to the
National Tyres business, restructuring costs associated with the
separation of Avayler as a legal entity, and costs relating to a revision
to procurement processes.
The costs in relation to the restructuring are: redundancy costs £1.0m (FY23:
6.3m), finance system integration costs £0.2m (FY23: 1.2m), procurement
processes £0.4m (FY23: nil) and Avayler separation £0.3m (FY23: nil).
b. Closure costs 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 provision mostly relates to the impairment of
right-of-use assets, tangible assets and property costs. Following a
review in the current period, £1.2m (FY23: £0.2m) was deemed to be no
longer required and was released to the income statement.
c. Fees incurred in relation to the acquisition of Lodge Tyre Company £0.3m
(FY23: £1.9m).
d. During the current and prior period, management incurred costs as a
result of the replacement of the Warehouse Management System.
e. The tax charge in H1 FY24 represents a tax rate of 2.3% applied to
non-underlying items (H1 FY23: 62.9%).
9. Finance Costs
26 weeks to 26 weeks to 52 weeks
to
29 September 30 September 31 March
2023 2022
2023
Unaudited Unaudited
£m £m £m
Finance costs:
Bank borrowings (0.8) - (1.4)
Amortisation of issue (0.6) (0.4) (0.8)
costs on loans
Commitment and guarantee (0.6) (0.7) (1.1)
fees
Interest payable on lease (4.3) (4.3) (8.8)
liabilities
Finance costs (6.3) (5.4) (12.1)
10. Income tax expense
Income tax expense is recognised based on the best estimate of the weighted
average annual income tax rate expected for the full financial year, applied
to the pre-tax income of the interim period.
The taxation charge on profit for the financial period was £4.7m (H1 FY23:
£4.0m), including a £0.1m credit (H1 FY23: £0.2m charge) in respect of
non-underlying items. The effective tax rate of 24.6% (H1 FY23: 20.7%)
differs from the UK corporation tax rate (25%) principally due to adjustments
in prior periods and the impact of lower overseas tax rates in comparison to
the increased UK statutory rate of 25%.
The corporation tax rate increased from 19% to 25%, effective from 1 April
2023. The deferred tax asset in the period has been calculated based on the
headline rate of 25%.
For further detail on the tax effect prior period adjustments, please refer
to Note 20.
11. Financial Instruments and Related Disclosures
Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial
assets and liabilities, including their levels in the fair value hierarchy.
It does not include fair value information for financial assets and financial
liabilities not measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Fair Value – Amortised Total
hedging Other financial
29 September 2023 Unaudited instruments cost liabilities carrying
amount
£m £m £m
£m
Financial assets measured at
fair value
Derivative financial 1.6 - - 1.6
instruments used for hedging
1.6 - - 1.6
Financial assets not
measured at fair value
Trade and other receivables* - 102.8 - 102.8
Cash and cash equivalents - 16.2 - 16.2
- 119.0 - 119.0
Financial liabilities
measured at fair value
Derivative financial (1.4) - - (1.4)
instruments used for hedging
(1.4) - - (1.4)
Financial liabilities not
measured at fair value
Borrowings - - (63.2) (63.2)
Lease liabilities - - (325.3) (325.3)
Trade and other payables** - - (316.5) (316.5)
- - (705.0) (705.0)
*Prepayments of £12.1m and accrued income of £47.6m are not included as a
financial asset.
** Other taxation and social security payables of £20.8m, deferred income of
£10.3m and other payables of £16.3m are not included as a financial
liability.
Fair Value – Amortised Other Total
30 September 2022 Unaudited hedging carrying
Restated* instruments cost financial amount
liabilities
£m £m £m
£m
Financial assets measured at fair
value
Derivative financial instruments 16.4 - - 16.4
used for hedging
16.4 - - 16.4
Financial assets not measured at
fair value
Trade and other receivables** - 91.2 - 91.2
Cash and cash equivalents - 78.0 - 78.0
- 169.2 - 169.2
Financial liabilities measured at
fair value
Derivative financial instruments (0.2) - - (0.2)
used for hedging
(0.2) - - (0.2)
Financial liabilities not
measured at fair value
Borrowings - - (45.7) (45.7)
Lease liabilities - - (368.4) (368.4)
Trade and other payables*** - - (302.3) (302.3)
- - (716.4) (716.4)
* Please refer to Note 20 for further details
** Prepayments and accrued income of £27m are not deducted as a financial
asset.
*** Other taxation and social security payables of £21.3m, deferred income
£9.2m and other payables of £21.7m are not included as a financial liability.
Fair Value – Amortised Other Total
hedging carrying
31 March 2023 Restated* instruments cost financial amount
liabilities
£m £m £m
£m
Financial assets measured at fair
value
Derivative financial instruments 1.1 - - 1.1
used for hedging
1.1 - - 1.1
Financial assets not measured at
fair value
Trade and other receivables** - 94.7 - 94.7
Cash and cash equivalents - 41.9 - 41.9
- 136.6 - 136.6
Financial liabilities measured at
fair value
Derivative financial instruments (4.2) - - (4.2)
used for hedging
(4.2) - - (4.2)
Financial liabilities not
measured at fair value
Borrowings - - (43.7) (43.7)
Lease liabilities - - (346.9) (346.9)
Trade and other payables*** - - (225.4) (225.4)
- - (616.0) (616.0)
* Please refer to Note 20 for further details
** Prepayments of £16.7m and accrued income of £33.2m are not included as a
financial asset.
*** Other taxation and social security payables of £34.1m, deferred income
and accruals of £79.3m and other payables of £16.2m are not included as a
financial liability.
Measurement of fair values
The fair values of each class of financial assets and liabilities is the
carrying amount, based on the following assumptions:
Trade receivables, trade The fair value approximates to the carrying
payables and lease obligations, amount because of the short
short-term deposits and maturity of these instruments.
borrowings
The fair value of bank loans and other loans
approximates to the carrying value reported
Long-term borrowings in the statement of financial position as the
majority are floating rate where payments are
reset to market rates at intervals of less
than one year.
The fair value is determined using the market
Forward currency contracts forward rates at the reporting
date and the outright contract rate.
Financial instruments carried at fair value are required to be measured by
reference to the following levels:
• Level 1: quoted prices in active markets for identical assets or
liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as prices)
or indirectly (i.e., derived from prices); and
• Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
All financial instruments carried at fair value have been measured by a Level
2 valuation method. There have been no changes to classifications in the
current or prior period.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from
customers.
The Group does not have any individually significant customers and so no
significant concentration of credit risk. The majority of the Group’s sales
are paid in cash at point of sale which further limits the Group’s exposure.
The Group’s exposure to credit risk is influenced mainly by the individual
characteristics of each customer. The Board of Directors has established a
credit policy under which each new customer is analysed individually for
creditworthiness before the Group’s standard payment terms and conditions are
offered. The Group limits its exposure to credit risk from trade receivables
by establishing a maximum payment period of one month for customers. All
trade receivables are based in the United Kingdom.
The Group has taken into account the historic credit losses incurred on trade
receivables and adjusted it for forward looking estimates. The movement in
the allowance for impairment in respect of trade receivables during the
period was £0.4m (2023: £0.3m).
12. Dividends
The Directors paid a final dividend of 7 pence per share on 15 September 2023
in respect of the financial period ended 31 March 2023 (FY22: 6p per share).
The Directors have declared an interim dividend for the 26 weeks to 29
September 2023 of 3 pence per share (2023: 3p per share). The interim
dividend will be paid on 19 January 2024 to shareholders who are on the
register of members, with an ex-dividend date of 14 December 2023 and a
record date of 15 December 2023.
13. Earnings Per Share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period. The weighted average number of shares excludes
shares held by the Employee Benefit Trust and has been adjusted for the
issue/repurchase of shares during the period.
For diluted earnings per share the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. These represent share options granted to employees where the
exercise price is less than the average market price of the Company’s
ordinary shares during the 26 weeks to 29 September 2023.
26 weeks to 26 weeks to 52 weeks
to
29 September 30 September 31 March
2023 2022
2023
Unaudited Unaudited
Number Number Number
m m m
Weighted average number of 218.9 218.9 218.9
shares in issue
Less: shares held by the (1.4) (1.7) (1.5)
Employee Benefit Trust
Weighted average number of
shares for calculating 217.5 217.2 217.4
basic earnings per share
Weighted average number of 9.4 7.0 10.0
dilutive share options
Weighted number of shares
for calculating diluted 226.9 224.2 227.4
earnings per share
26 weeks to 26 weeks to 52 weeks to
29 September 30 September 31 March
2023 2022
2023
Unaudited Restated* Unaudited Restated*
£m £m £m
Earnings attributable 14.6 14.7 28.1
to equity shareholders
Non-underlying items:
Operating expenses 2.0 (0.3) 8.0
Tax income on (0.1) 0.2 (1.1)
non-underlying items
Underlying earnings
before non-underlying 16.5 14.6 35.0
items
Basic earnings per 6.7p 6.8p 12.9p
share
Diluted earnings per 6.4p 6.6p 12.4p
share
Basic underlying 7.6p 6.7p 16.1p
earnings per share
Diluted underlying 7.3p 6.5p 15.4p
earnings per share
* Please refer to Note 20 for further details
The alternative measure of earnings per share is provided as it reflects the
Group’s underlying performance by excluding the effect of non-underlying
items.
14. Capital Expenditure – Tangible, Intangible & Right-of-Use Assets
Tangible and Intangible Right-of-use
Assets
assets
Unaudited
Unaudited
£m £m
Net book value at 31 March 2023 579.8 312.6
Additions 18.6 19.0
Disposals (0.2) (1.2)
Effect of modification of lease - 3.6
Depreciation, amortisation and (23.8) (39.5)
impairment
Net book value at 29 September 2023 574.4 294.5
Tangible and Intangible Right-of-use
Assets
assets
Unaudited
Unaudited
£m £m
Net book value at 1 April 2022 544.1 350.2
Additions 20.0 14.8
Disposals (1.3) -
Effect of modification of lease - 2.2
Depreciation, amortisation and (20.2) (37.4)
impairment
Net book value at 30 September 2022 542.6 329.8
15. Analysis of Movements in the Group’s Net Debt in the Period
At
Other non-cash
At Cash Flow changes 29 September
2023
31 March
2023 Unaudited Unaudited Unaudited
£m £m £m £m
Cash and cash equivalents 41.9 (25.7) - 16.2
Bank Overdrafts (9.7) (1.2) - (10.9)
Cash and cash equivalents
(condensed consolidated 32.2 (26.9) - 5.3
statement of cash flows)
Debt due in less than one year - (2.7) (0.2) (2.9)
Debt due after one year (34.0) (15.0) (0.4) (49.4)
Total net debt excluding (1.8) (44.6) (0.6) (47.0)
leases
Current lease liabilities (77.6) 45.5 (39.8) (71.9)
Non-current lease liabilities (269.3) - 15.9 (253.4)
Total lease liabilities (346.9) 45.5 (23.9) (325.3)
Total net debt (348.7) 0.9 (24.5) (372.3)
Non-cash changes comprise finance costs in relation to the amortisation of
capitalised debt issue costs of £0.6m (H1 FY23: £0.8m), and movements in
leases.
Cash and cash equivalents at the period end consist of £15.0m (H1 FY23:
£75.1m) of liquid assets, £1.2m (H1 FY23: £2.9m) of cash held in Trust and
£10.9m (H1 FY23: £11.5m) of bank overdrafts.
Cashflow movements in debt relate to the drawdown of funds from the Groups’
revolving credit facility and payments in relation to lease liabilities.
At
Other non-cash
At Cash Flow changes 30 September
2022
1 April
2022 Unaudited Unaudited Unaudited
Restated* Restated* Restated*
£m £m £m £m
Cash and cash equivalents 46.3 31.7 - 78.0
Bank Overdrafts (0.2) (11.3) - (11.5)
Cash and cash equivalents
(condensed consolidated 46.1 20.4 - 66.5
statement of cash flows)
Debt due in less than one year* - - - -
Debt due after one year* - (35.0) 0.8 (34.2)
Total net debt excluding leases 46.1 (14.6) 0.8 32.3
Current lease liabilities (74.5) 43.2 (43.9) (75.2)
Non-current lease liabilities (316.5) - 23.4 (293.1)
Total lease liabilities (391.0) 43.2 (20.5) (368.3)
Total net debt (344.9) 28.6 (19.7) (336.0)
* Please refer to Note 20 for further details
Non-cash changes comprise finance costs in relation to the amortisation of
capitalised debt issue costs of £0.8m (H1 FY22: £0.4m), and movements in
leases.
Cash and cash equivalents at the period end consist of £75.1m (H1 FY22:
£86.0m) of liquid assets, £2.9m (H1 FY22: £5.1m) of cash held in Trust and
£11.5m (H1 FY22: £0.1m) of bank overdrafts.
Cashflow movements in debt relate to the drawdown of funds from the Groups’
revolving credit facility to fund the acquisition of LTC Trading Holdings
Limited.
The above tables exclude amounts relating to a supplier financing arrangement
which commenced during the period ended 31 March 2023. At 1 April 2022 the
balance due was nil, at 30 September 2022 £4.7m was due to the third party,
at 31 March 2023 £0.7m was receivable from the third party, and at 29
September 2023 £2.2m was receivable from the third party. There were no
non-cash changes in relation to these amounts.
16. Share Capital
Share Share premium
Number of shares
capital account
m
£m £m
As at 31 March 2023 and 29 September 218.9 2.2 212.4
2023
During the 26 weeks to 29 September 2023 and 30 September 2022, there were no
movements in company share capital.
17. Contingent liability
The Group’s banking arrangements include the facility for the bank to provide
a number of guarantees in respect of liabilities owed by the Group during the
course of its trading. In the event of any amount being immediately payable
under the guarantee, the bank has the right to recover the sum in full from
the Group. The total amount of guarantees in place at 29 September 2023
amounted to nil (2023: £0.4m).
Where right of set off is included within the Group’s banking arrangements,
credit balances may be offset against the indebtedness of other Group
companies.
18. Related Party Transactions
The key management personnel of the Group comprise the Executive and
Non-Executive Directors and the Halfords Limited and Halfords Autocentres
management boards. The details of the remuneration, long-term incentive
plans, shareholdings and share option entitlements of individual Directors
are included in the Directors’ Remuneration Report on pages 128 to 152 of the
Group Annual Report and Accounts for the period ended 31 March 2023.
During the period no share options (H1 FY23: none) were granted to directors
in relation to the Performance Share Plan (“PSP”) and no share options (H1
FY23: none) were granted in relation to the Deferred Bonus Plan (“DBP”).
19. Post Balance Sheet Events
On 1 November 2023, a 5% minority stake of Avayler Trading Limited
(“Avayler”) was sold by Avayler Holdings Limited to Bridgestone Americas,
Inc. (“Bridgestone”) for consideration of $3m. As part of the share purchase
agreement Bridgestone have the right to compel Avayler Holdings Limited to
repurchase Bridgestone’s shares in Avayler should certain conditions be met.
Alongside the sale a commercial agreement was entered for Bridgestone to
become an ongoing client of Avayler. This agreement is for an initial term of
15 years with certain break rights included.
20. Prior Period Adjustments
The results for the 26 weeks to 30 September 2022 have been restated to
reflect adjustments which reduce the previously reported profit before tax by
£10.6m (profit after tax by £8.4m) and results in certain reclassifications
within the condensed consolidated statement of financial position and
condensed consolidated statement of cash flows. The adjustments have no cash
impact.
1. Foreign exchange and hedge accounting for inventory purchased in US
dollars
A £5.4m increase to cost of sales and a decrease to inventory has been
adjusted relating to the correction of errors in the accounting treatment of
cash flow hedges under IFRS 9 and the valuation of inventory under IAS 21 at
the HY23 Balance sheet date. As this adjustment fully reverses in the second
half of FY23, there is no impact on FY23 full year reported profits.
a. Inventory purchased in US dollars was translated incorrectly for the 26
weeks to 30 September 2022. To correct for this error in the financial
statements Inventory has been reduced by £3.2m within the Condensed
consolidated statement of financial position as at 30 September 2022,
with a corresponding increase in Cost of sales of the same amount within
the Condensed consolidated income statement for the 26 weeks to 30
September 2022.
b. The timing and treatment of the hedge accounting basis adjustment to the
Inventory valuation for the 26 weeks to 30 September 2022 was incorrect.
To correct for this error in the Condensed consolidated statement of
financial position at 30 September 2022 Inventory has been reduced by
£3.6m and the Cash Flow hedge reserve by £1.4m. The Condensed
consolidated income statement for the 26 weeks to 30 September 2022 has
been corrected by increasing Cost of sales for the period by £2.2m.
2. Classification of revolving credit facility
The condensed consolidated statement of financial position as at 30 September
2022 has been restated to reflect a reclassification of the revolving credit
facility. This follows a further review of the agreement by the directors
during H2 2023 which confirmed that there is an unconditional right to defer
settlement of the liability for over 12 months. As a result £34.2m has been
reclassified from current liabilities to non-current liabilities as at 30
September 2022. This adjustment has no impact on reported profit before tax,
net assets or the condensed consolidated cash flow statement. The
consolidated statement of financial position as at 31 March 2023 was
correctly reported.
3. Supplier arrangements and period end cut-off
A £5.2m increase to cost of sales and correction to balances within the
Statement of Financial Position has been adjusted relating to: (a) the
correction of accounting for a new tyre wholesale and distribution
arrangement and (b) the correction of errors identified in the goods received
not invoiced (“GRNI”) reconciliation process at 30 September 2022.
a. On 1 April 2022, Halfords entered into a new arrangement with a
third-party logistics provider for wholesale tyre purchasing and
distribution services. Under this arrangement Halfords purchases tyres in
bulk from manufacturers which are delivered to warehouses owned by the
third-party logistics provider prior to being distributed to Halfords’
Autocentres. This is a complex arrangement and whilst the previous
accounting correctly recognised the inventory on the balance sheet, to
reflect that title remains with Halfords, the previous accounting did not
recognise the correct entries and disclosures on the statement of
financial position to reflect that the invoicing mechanism with the third
party is akin to a supplier financing arrangement. To correct for the
error within the Condensed consolidated statement of financial position
as at 30 September 2022, Inventories have been decreased by £0.5m, Trade
and other receivables by £11.5m, and Trade and other payables by £12.0m.
In addition, the gross supplier financing receipts of £2.8m and payments
of £7.5m are now disclosed as financing in the statement of cash flows
and a net receivable of £4.7m under the supplier financing arrangement is
disclosed in the net debt note. This adjustment does not have an impact
on reported profits. The arrangement was correctly accounted for at 31
March 2023 and was not in place at 1 April 2022. As part of the
arrangement, title of £1.4m of inventory was transferred from Halfords to
the third-party distributor during the period, resulting in the
recognition of a sale of £1.4m and a corresponding entry to cost of
sales.
b. The arrangement in point (a) above, together with the scale of growth in
the autocentres business and increased intercompany transactions between
the enlarged Group, created significant reconciliation complexity during
FY23. As a result of this increased complexity, errors were identified in
the GRNI reconciliations at 30 September 2022 and 31 March 2023. Halfords
has performed a full investigation and as a result, under-accruals to
GRNI have been identified. To correct for the error to the Condensed
consolidated statement of financial position as at 30 September 2022,
Trade and other payables have been increased by £12.4m and Trade and
other receivables by £7.2m. Cost of sales has been increased by £5.2m
within the Condensed consolidated income statement for the 26 weeks to 30
September 2022. The Tax charge for the period has also been reduced by
£1.0m as a result of this adjustment. A further correction is required to
the Condensed consolidated statement of financial position as at 31 March
2023, with Trade and other payables increased by £7.3m. In addition to
the £5.2m increase to cost of sales in the 26 weeks to 30 September 2022,
an additional £2.1m increase to cost of sales has been processed for the
period 1 October 2022 to 31 March 2023. The Tax charge for the year ended
31 March 2023 has been reduced by a total of £1.4m as a result of this
adjustment.
4. Classification of Merchant and Consumer Finance Fees
During the preparation of the FY24 interim results, inconsistencies were
identified in the classification of merchant fees across the group within the
FY23 Financial Statements. As a result, merchant fees of £2.8m were
incorrectly included within Operating expenses instead of Cost of sales.
In addition, further inconsistencies were identified in the measurement of
revenue when financing companies provide consumer credit to Halford's
customers. Revenue and Cost of sales were overstated by £1.7m within the FY23
Financial Statements, being the difference between retail selling prices and
the amounts received from the financing companies.
To correct for these errors in the Condensed Consolidated Income Statement
for the 52 weeks to 31 March 2023, Revenue has been reduced by £1.7m, Cost of
Sales has been increased by £1.1m and Operating expenses have been reduced by
£2.8m. There has been no impact on profit after tax nor on net assets.
The total impact of the above prior period adjustments on the interim results
for the 26 weeks to 30 September 2022 are as follows:
26 weeks to
26 weeks to
30
30 September 1. Foreign 3. Supplier September
exchange arrangements
Consolidated Income 2022 2022
Statement
As originally Restated
reported £m £m
£m
£m
Revenue 765.7 - 1.4 767.1
Cost of Sales (372.6) (5.4) (6.6) (384.6)
Gross Profit 393.1 (5.4) (5.2) 382.5
Profit Before Tax 29.3 (5.4) (5.2) 18.7
Tax on underlying items (6.0) 1.2 1.0 (3.8)
Profit for the period
attributable to equity 23.1 (4.2) (4.2) 14.7
shareholders
26 weeks to
26 weeks to
30
30 September 1. Foreign 3. Supplier September
exchange arrangements
Consolidated Statement of 2022 2022
Comprehensive Income
As originally Restated
reported £m £m
£m
£m
Profit for the period 23.1 (4.2) (4.2) 14.7
Cash flow hedges:
Fair value changes in the 9.0 1.1 - 10.1
period
Income tax on Other (0.9) (0.2) - (1.1)
comprehensive income
Other comprehensive income 8.1 0.9 - 9.0
for the period
Total comprehensive income 31.2 (3.3) (4.2) 23.7
for the period
As at As at
30 1. 3. Supplier 30
September Foreign 2. RCF arrangements September
Consolidated Statement of 2022 exchange 2022
Financial Position
As Restated
originally £m £m
reported £m
£m £m
Deferred tax asset 13.2 (0.1) - - 13.1
Total non-current assets 886.3 (0.1) - - 886.2
Inventories 255.3 (6.8) - (0.5) 248.0
Trade and other receivables 122.4 - - (4.2) 118.2
Current tax asset - 0.8 - 1.0 1.8
Total current assets 471.4 (6.0) - (3.7) 461.7
Total assets 1,357.7 (6.1) - (3.7) 1,347.9
Borrowings (45.7) - 34.2 - (11.5)
Trade and other payables (350.3) - - (0.5) (350.8)
Current tax liabilities (0.3) 0.3 - - -
Total current liabilities (491.9) 0.3 34.2 (0.5) (457.9)
Net current (20.5) (5.7) 34.2 (4.2) 3.8
(liabilities)/assets
Borrowings - - (34.2) - (34.2)
Total liabilities (793.1) 0.3 - (0.5) (793.3)
Net Assets 564.6 (5.8) - (4.2) 554.6
Other reserves 7.1 (1.6) - - 5.5
Retained earnings 356.0 (4.2) - (4.2) 347.6
Total Equity 564.6 (5.8) - (4.2) 554.6
26 weeks to
26 weeks to
30
30 September 1. Foreign 3. Supplier September
exchange arrangements
Consolidated Statement of 2022 2022
Changes in Equity
As originally Restated
reported £m £m
£m
£m
Profit for the period 23.1 (4.2) (4.2) 14.7
Cash flow hedges:
Fair value changes in the 9.0 1.1 - 10.1
period
Income tax on Other (0.9) (0.2) - (1.1)
comprehensive income
Total other comprehensive
income for the period net 8.1 0.9 - 9.0
of tax
Total comprehensive income 31.2 (3.3) (4.2) 23.7
for the period
Hedging gains and losses
and costs of hedging (3.0) (2.5) (5.5)
transferred to the cost of
inventory
Balance at 30 September 564.6 (5.8) (4.2) 554.6
2022
26 weeks to
26 weeks to
30
30 September 1. Foreign 3. Supplier September
exchange arrangements
Consolidated Statement of 2022 2022
Cash Flows
As originally Restated
reported £m £m
£m
£m
Profit after tax for the 23.1 (4.2) (4.2) 14.7
period
Exchange Movement (9.6) 5.4 - (4.2)
Income Tax Expense 6.2 (1.2) (1.0) 4.0
Increase in inventories (22.7) - 0.5 (22.2)
Increase in trade and (30.9) - 4.2 (26.7)
other receivables
Increase in trade and 47.5 - (4.2) 43.3
other payables
Net cash from operating 69.3 - (4.7) 64.6
activities
Payments relating to - - (2.8) (2.8)
supplier financing
Receipts relating to - - 7.5 7.5
supplier financing
Net cash from financing (23.4) - 4.7 (18.7)
activities
26 weeks to 26 weeks to
30 September 30 September
Earnings Per Share
2022 2022
As originally reported Restated
Basic earnings per ordinary share 10.6p 6.8p
Diluted earnings per ordinary share 10.3p 6.6p
Basic earnings per ordinary share 10.6p 6.7p
before non-underlying items
Diluted earnings per ordinary share 10.3p 6.5p
before non-underlying items
The total impact of the above prior period adjustments on the results for the
52 weeks to 31 March 2023 are as follows:
52 weeks to 31 52 weeks to
March 31 March
3. Supplier 4. Merchant
2023 arrangements Fees 2023
Consolidated Income
Statement As originally Restated
reported
£m £m
£m
£m
Revenue 1,593.5 - (1.7) 1,591.8
Cost of Sales (808.2) (7.3) (1.1) (816.6)
Gross Profit 785.3 (7.3) (2.8) 775.2
Operating expenses (721.7) - 2.8 (718.9)
Profit Before Tax 43.5 (7.3) - 36.2
Tax on underlying items (10.6) 1.4 - (9.2)
Profit for the period
attributable to equity 34.0 (5.9) - 28.1
shareholders
52 weeks to 31 52 weeks to
March 31 March
3. Supplier 4. Merchant
2023 arrangements Fees 2023
Consolidated Statement of
Financial Position As originally Restated
reported
£m £m
£m
£m
Trade and other payables (355.0) (7.3) - (362.3)
Current tax liabilities (5.0) 1.4 - (3.6)
Total current liabilities (462.2) (5.9) - (468.1)
Net current liabilities (18.4) (5.9) - (24.3)
Total liabilities (784.3) (5.9) - (790.2)
Net Assets 562.8 (5.9) - 556.9
Retained earnings 362.0 (5.9) - 356.1
Total Equity 562.8 (5.9) - 556.9
52 weeks to 31 52 weeks to
March 31 March
3. Supplier 4. Merchant
2023 arrangements Fees 2023
Consolidated Statement of
Cash Flows As originally Restated
reported
£m £m
£m
£m
Profit after tax for the 34.0 (5.9) - 28.1
period
Income Tax Expense 9.5 (1.4) - 8.1
Increase in trade and 32.0 7.3 - 39.3
other payables
Net cash from operating 154.8 - - 154.8
activities
52 weeks to 31 March 52 weeks to 31
March
Earnings Per Share 2023
2023
As originally
reported Restated
Basic earnings per ordinary share 15.6p 12.9p
Diluted earnings per ordinary share 15.0p 12.4p
Basic earnings per ordinary share before 18.8p 16.1p
non-underlying items
Diluted earnings per ordinary share 18.0p 15.4p
before non-underlying items
Responsibility statement of the Directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK;
• the interim management report includes a fair review of the information
required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties
for the remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position
or performance of the entity during that period; and any changes in the
related party transactions described in the last annual report that could
do so.
By order of the Board
Jo Hartley, Chief Financial Officer
28 November 2023
Halfords Group plc
Independent review report to Halfords Group plc
For the 26 weeks to 29 September 2023
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated financial statements in the
half-yearly financial report for the 26 weeks ended 29 September 2023 are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom’s Financial Conduct Authority.
We have been engaged by the company to review the condensed consolidated
financial statements in the half-yearly financial report for the 26 weeks
ended 29 September 2023 which comprise the condensed consolidated income
statement, the condensed consolidated statement of comprehensive income, the
condensed consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed consolidated
statement of cashflows and the related notes.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, “Review of Interim Financial Information Performed by
the Independent Auditor of the Entity” (“ISRE (UK) 2410”). A review of
interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards.
The condensed consolidated financial statements included in this half-yearly
financial report have been prepared in accordance with UK adopted
International Accounting Standard 34, “Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance
with ISRE (UK) 2410, however future events or conditions may cause the group
to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom’s Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed consolidated financial statements in
the half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement
to assist the Company in meeting the requirements of the Disclosure Guidance
and Transparency Rules of the United Kingdom’s Financial Conduct Authority
and for no other purpose. No person is entitled to rely on this report
unless such a person is a person entitled to rely upon this report by virtue
of and for the purpose of our terms of engagement or has been expressly
authorised to do so by our prior written consent. Save as above, we do not
accept responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
28 November 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
═════════════════════════════════════════════════════════════════════════════
Dissemination of a Regulatory Announcement that contains inside information
in accordance with the Market Abuse Regulation (MAR), transmitted by EQS
Group.
The issuer is solely responsible for the content of this announcement.
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ISIN: GB00B012TP20
Category Code: IR
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
Sequence No.: 287848
EQS News ID: 1783885
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