Halfords Group PLC (HFD) Halfords Group PLC: Acquisition of
National 01-Dec-2021 / 16:35 GMT/BST Dissemination of a Regulatory
Announcement that contains inside information according to
REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The
issuer is solely responsible for the content of this
announcement.
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THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN
OFFER OF SECURITIES IN ANY JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF REGULATION (EU) NO 596/2014 AS IT FORMS PART OF UK
DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT
2018
For immediate release
1 December 2021
Halfords Group PLC
("Halfords" or the "Company" and together with its subsidiaries,
the "Group")
Acquisition of National
Halfords secures position as the UK's largest vehicle service,
maintenance and repair business
Introduction
Halfords, the UK's largest provider of Motoring and Cycling
products and services, today announces that it has signed a sale
and purchase agreement (the "SPA") to purchase the entire issued
share capital of Axle Group Holdings Ltd ("National") (the
"Acquisition") on a cash free, debt free basis, for total
consideration of GBP62 million (the "Consideration"), subject to
adjustment for normalised working capital. The Consideration will
be paid in cash on the date of completion, which is expected to be
9 December 2021. A further investment of c.GBP17 million will be
made post acquisition on associated capital expenditure and c.GBP2
million on integration costs.
National is a well-established business in the tyre and
automotive servicing, maintenance and repair ("SMR") market,
operating under the following brands: National Tyres and Autocare
("NTA"), Viking Wholesale Tyres ("Viking") and Tyre Shopper. On
completion of the Acquisition, National will be integrated into
Halfords' Autocentres business.
The directors of the Company (the "Directors") believe that the
Acquisition is both strategically and financially compelling,
delivering on Halfords' objective of evolving into a business more
heavily weighted towards Motoring Services.
Highlights of the Acquisition include:
-- the Acquisition accelerates Halfords' Motoring Services
strategy surpassing its current target of 550garages and 200
consumer vans;
-- post-completion, Halfords will have approximately 604
garages, 234 consumer vans and 190 commercial vans.Including retail
stores this will mean a combined total of over 1,400 fixed or
mobile Motoring Services locations;
-- the Acquisition means the majority of UK motorists will be
within a 20-minute drive of a Halfords garage;
-- supports progress towards Halfords' new target of 800+
garages, 300+ consumer vans and 500+ commercialvans and further
enhances the Group's commercial and business-to-business ("B2B")
offering;
-- post-Acquisition, Motoring revenue is expected to represent
more than 70% of the Group's revenue(calculated on a pro-forma
basis), an increase from 67% (in H1 of FY22), and Services revenue
is expected torepresent more than 40% of the Group's revenue
(calculated on a pro-forma basis), up from 33% (in H1 of
FY22)1;
-- the Acquisition presents significant synergy opportunities -
expected to deliver incremental EBITDA2 ofc.GBP18 million per annum
by year 5, with a third of that expected to be achieved in year
1;
-- the Consideration is expected to be broadly equivalent to the
'per site' cost of an organic roll-outalternative;
-- the Acquisition is financially compelling, and is expected to
deliver2,3:? Return on Investment ("ROI") greater than the
Company's weighted average cost of capital ("WACC") inthe first
full financial year (FY23); ? Single digit EPS accretion in the
first full financial year (FY23) and double digit EPS accretion
inFY24; and ? ROI at maturity4 expected to be more than 20% with an
expected project internal rate of return("IRR") greater than
30%.
The Company intends to part-fund the Acquisition and maintain
balance sheet flexibility for future opportunities by undertaking a
non-pre-emptive placing, together with a management subscription
and retail offer, to raise up to c.GBP64 million, that will be the
subject of separate announcements today.
Graham Stapleton, Chief Executive Officer of Halfords,
commented:
"This acquisition helps cement our position as the UK's largest
vehicle service, maintenance and repair business. It will also see
us deliver on our established strategy of evolving Halfords to
become a Motoring Services focused business, with Motoring revenue
set to represent more than 70% of our pro-forma revenue following
the acquisition.
National has a high quality, UK-wide network of garages and
mobile tyre fitting vans, and 1,400 highly skilled colleagues,
providing a complementary fit with Halfords' existing operations.
Post-acquisition, Halfords will have over 1,400 fixed or mobile
Motoring Services locations, servicing a broad range of vehicles
and delivering 7.5 million motoring jobs a year. This increased
scale will bring the majority of UK-mainland motorists within a
20-minute drive of a Halfords garage, with even more vans available
to provide mobile services at their home or work.
Given our recent track record of successfully acquiring and
integrating businesses, and the potential we see to further grow
our Motoring Services business in other areas of the country, I am
very excited about our future growth prospects, and I look forward
to welcoming the new teams to the business."
National overview
National is a well-established business in the tyre and
automotive SMR market. It employs c.1,400 people and operates under
three brands:
-- NTA operates 239 tyre and SMR garages and 60 mobile tyre
fitting vans, providing national coverage acrossGreat Britain.
Tyres, which are predominantly sourced through Viking, represent
over 80% of its sales mix withc.1.3 million tyres fitted per annum.
MOT and service represent c.5% of NTA's sales mix. Headquartered
inStockport, NTA has approximately 1,200 FTE across its garage
estate (equivalent to c.4-5 FTEs per garage) alongwith a database
of 1.1 million customers. NTA's central support people costs
(across all the National brands) isc.GBP7m per annum.
-- Viking is a wholesaler of tyres and related consumables to
B2B customers, including NTA. Headquartered inGlasgow, Viking has 8
warehouses5 strategically located close to the motorway
network.
-- Tyre Shopper is a UK based online tyre retailer, where users
purchase tyres online and have them fittedat NTA centres or
remotely using the mobile fitting service. Currently, 'online'
represents just under a third ofNational's sales mix.
National's garage network is structurally similar to Halfords'
Autocentres business and adds further complementary capabilities in
the tyre market with Viking and Tyre Shopper. National's CEO, Tony
Neill will also join the Group post-Acquisition.
In the COVID-19 impacted year to 31 December 2020, National
generated GBP157.7 million revenue and delivered GBP3.0 million
EBITDA2. The Company estimates that National's base case year 1
EBITDA2, assuming the tyre market returns to normal but margin
headwinds and cost inflation are sustained, is c.GBP5.9 million
pre-synergies.
Acquisition rationale
The Directors believe that the Acquisition will expedite
Halfords' strategic growth plans in Motoring Services:
-- National builds on Halfords' existing capability - Halfords
is already the largest vehicle 'Service,Maintenance and Repair'
business in the UK, having grown share through a superior operating
model and bettercustomer service. This Acquisition will build on an
existing position of strength.
-- National helps exceed the target of 550 garages - Halfords
previously communicated a medium-term ambitionto grow the garage
estate to 550 and the number of consumer facing mobile vans to 200.
The Acquisition will seeHalfords comfortably exceed these targets
and, given that the market opportunity remains significant,
supportsprogress towards Halfords' new target of 800+ garages, 300+
consumer vans and 500+ commercial vans.
-- National can be successfully integrated - Halfords has
acquired and integrated three similar businessesin the past two
years, McConechy's, Tyres on the Drive and Universal, and is
confident that it will be able tosuccessfully integrate National
and extract significant synergies.
-- National contributes towards growing the Services business -
Halfords' strategy to grow its MotoringServices business is not
only focussed on scaling the physical estate. Other key
initiatives, such as ProjectFusion, Loyalty and Cross-Shop are
important drivers of demand into Autocentres. Additionally, the
increase infixed and mobile servicing locations will allow Halfords
to offer its customers greater convenience; for consumers,through
reducing the distance from their home to a garage and, for B2B
customers, offering a more convenient,national network and the
ability to partner with just one services provider, rather than
many.
-- Add to a more consistent, higher quality revenue stream - The
Motoring Services business is moreresilient to economic volatility,
has more repeat business and yields higher returns on capital.
Post-completion, Halfords will have approximately 604 garages,
234 consumer vans, 190 commercial van and 8 warehouses.
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