Halfords Group PLC (HFD)
Interim Results: Financial Year 2021
18-Nov-2020 / 07:00 GMT/BST
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18 November 2020
Halfords Group plc
Interim Results: Financial Year 2021
Strong financial results, underpinned by operational agility and strategic investments
Further investment in electric vehicle servicing: by April, each of Halfords' garages
will have at least one electric car technician, with electric bike and scooter
servicers in every store
Halfords Group plc ("Halfords" or the "Group"), the UK's leading provider of Motoring
and Cycling products and services, today announces its interim results for the 26 weeks
to 2 October 2020 ("the period").
Key highlights
· A very strong H1, with Group revenue growth of +9.6% and profit before tax of
GBP56.0m2. All product areas and businesses returned to growth towards the end of the
first half.
· Strong progress against our strategic priorities, including Group Services growth
of +16.6%, significant Cycling profitability improvements, Online sales growth of
+148%, and B2B growth of +37%.
· Recruitment programme underway to fill a wide range of service-oriented roles
across stores, Autocentres and Halfords Mobile Expert vans; also investing
significantly in training across motoring and cycling services.
· Investment in customer service saw key satisfaction metrics improve materially over
the course of H1, ending the first half ahead of last year.
· Launched over GBP4m of initiatives to support our colleagues in light of the
challenges arising from the pandemic, including a Frontline Colleague Scheme and
Halfords Here to Help Fund.
· Outlook for H2 remains uncertain given the seasonality of our business and the
ongoing impact of Covid-19.
Graham Stapleton, Chief Executive Officer, commented:
"We are very pleased to have achieved such a strong first half performance against the
backdrop of one of the most challenging trading environments in recent history. It is a
great testament to the strength and adaptability of our business, as well as to the
professionalism, hard work and dedication of our colleagues.
We have worked hard to capitalise on the cycling market tailwinds by sourcing more
stock from existing and new suppliers, as well as launching new products and brands to
serve the high level of demand for our cycling products and services. Despite the
headwinds we have seen in motoring, with UK traffic 30% lower than pre-Covid-19 levels
and the impact of the MOT deferment, our 'Road Ready' campaign and the investments we
have made in our motoring services business have enabled us to increase market share
and grow the business in Q2.
As a sign of our confidence in the long-term prospects of our motoring business, and in
order to meet the growing demand for our services in this area, we are in the process
of recruiting to fill a wide range of service-oriented roles across our stores,
Autocentres and fleet of Halfords Mobile Expert vans. We are also making a substantial
investment in further training for existing colleagues, including in the rapidly
growing area of electric vehicle servicing as we work to fill the skills gap that
exists in the UK. We will be training 100 more electric car technicians next year,
bringing the total to 470. In addition, we will be growing the number of e-bike and
e-scooter servicers in our stores from 400 to over 1,800. This means that, by April,
each of Halfords' garages will have at least one electric car technician, with electric
bike and scooter servicers in every store.
As an essential retailer and service provider, we are proud to be able to help keep the
UK moving during these exceptionally challenging and uncertain times."
Group financial summary
H1 FY21 H1 FY20 Change Like-for-like
GBPm GBPm Revenue ("LFL")
Revenue 638.9 582.7 +9.6% +6.7%
Retail 524.2 500.0 +4.8% +8.1%
Autocentres 114.7 82.7 +38.7% -2.0%
Gross Margin 49.4% 50.1% -63bps
Retail 47.0% 47.0% -1bps
Autocentres 60.6% 68.6% -797bps
Underlying 76.9 44.9 +71.3%
EBITDA pre
IFRS-16
Underlying 56.0 25.9 +116.2%
Profit Before
Tax (PBT) pre
IFRS 16
Net -0.6 -2.7
Non-Underlyin
g Items,
pre-IFRS 16
Impact of 0.0 4.3
IFRS 16
Profit Before 55.4 27.5 +101.5%
Tax, after
impact of
IFRS 16
Underlying 23.0p 10.4p +121.2%
Basic
Earnings per
Share pre
IFRS 16
Underlying 23.0p 12.2p +88.5%
Basic
Earnings per
Share post
IFRS 16
1) Group LFL before adjusting for extended returns provision was +8.1% and Retail LFL
was +9.9%
2) Underlying profit before tax and before adjustments for IFRS16
Financial highlights
· Group revenue was +9.6% and +6.7%1 on a LFL basis. Growth accelerated quickly
through Q1, before stabilising in Q2 at double-digit levels of LFL growth.
· Underlying profit before tax2 ("PBT") of GBP56.0m, GBP30.1m above last year. PBT after
adopting IFRS 16 and underlying items of GBP55.4m.
· Gross margin of 49.4% was -63bps below last year, but in Q2 was +270bps above last
year, reflecting cycling profitability improvements and a strengthening motoring
services business.
· Operating costs were GBP7.8m, 2.9% lower than last year. Efficiency programmes,
business rates relief and furlough income were partly offset by the increased costs
of trading under Covid-19, and the impact of our prior year acquisitions.
· Liquidity remains strong, with net cash of GBP97.8m, GBP160.4m better than the same
date last year reflecting the trading performance, lower cycling stock levels and
strong cash management.
· In Retail:
· Revenue growth over H1 was +4.8% and +8.1% on a LFL basis.
· Cycling revenue growth remained strong through H1, finishing +54.4% LFL, with all
categories in growth, most notably e-mobility +184% and Cycle Services +24%.
· Our performance cycling business, Tredz, performed very well, up +69% LFL and
EBIT +GBP5.2m above last year, indicating strong retention of customers from Cycle
Republic.
· Motoring revenue growth was -23.7% LFL, but +3.1% in Q2 as we saw an improving
trend as lockdown eased and journeys increased.
· In Autocentres:
· Total revenue growth including acquisitions was +38.7% for H1 with sales
accelerating quickly from June. Exceptional demand for our Halfords Mobile Expert
vans continues, with record levels of jobs.
· A +78% year-on-year increase in hybrid cars seen through the garages and,
similarly, a +10% increase in more premium brands serviced.
Strategic highlights
Although the pandemic has potentially driven some permanent changes in customer
behaviour, our vision remains the same; to Inspire and Support a Lifetime of motoring
and cycling. This will see Halfords evolve into a consumer and B2B services-focussed
business, with a greater emphasis on motoring, generating higher and more sustainable
financial returns.
In our FY20 preliminary results on 7 July, we laid out our strategic priorities for
FY21. Despite the ongoing disruption caused by the pandemic, we have made strong
progress. Most notably during the first half, we have:
· Continued to build and transform a market-leading Motoring Services offer, adding
30 new Mobile Expert Vans, bringing the total to 105, integrating Tyres on the Drive
into our Group Web Platform and implementing 'PACE', our digital operating model for
garages, into all McConechy's outlets.
· Further enhanced our Group web platform and digital customer experience with the
launch of our WeCheck app, a digitally-led customer journey designed to encourage
Group-wide cross-shop, the integration of McConechy's into our single Group website
for bookings, and a series of enhancements to the customer journey online.
· Delivered a significant improvement in Cycling profitability through better buying
terms, component rationalisation and more effective promotions. We remain on track to
deliver +300bps of gross margin improvement by year end.
· Saved nearly GBP8m in underlying costs in the first half, with a specific focus on
reducing operational cost through better procurement. Within the estate, 33 sites
have closed (including 22 Cycle Republic stores), and we remain on track to exit up
to 10% of our property estate (c.80 sites) during the full year, as announced in
July.
Encouraged by the progress we have made, and by our strong financial results in the
first half, we plan to increase our strategic investment in the second half, setting us
up well for FY22.
Further detail on strategic progress is given in the Chief Executive's statement below.
Recruitment and training
Recruitment
In line with our ongoing strategic focus on higher margin services across motoring,
cycling, and B2B, we have a recruitment programme underway to fill a wide-range of
service-oriented roles across stores, Autocentres and Halfords Mobile Expert vans. The
new roles include specialist service-oriented roles across our stores, as well as a
number of current vacancies in our Autocentres - mainly for MOT testers, but also
managers, technicians, customer services and driver roles. We will also be recruiting
new mobile roles to support our expanding Halfords Mobile Expert van fleet.
Training and the electric skills gap
In addition, we will be investing GBP1.4m in training over 6,000 store colleagues in
motoring and cycling services skills. This means that every single store colleague will
be trained to carry out varying levels of bike and car checks and repairs, which will
significantly improve our services capacity. The upskilling programme will result in
our employee skills base more than doubling from 17,000 skills to 40,000.
In our Autocentres, we are giving more of our T2 level technicians MOT-tester training
in order to meet the current high level of demand.
Halfords has been ahead of the curve since 2016 by training our colleagues for an
electrified future. However, we estimate that the UK motor industry needs to double the
number of EV technicians it is training each year to ensure the UK is able to service
and repair the estimated 11 million electric vehicles that will be on the roads by
2030. Without a significant increase in training the UK risks an electric skills gap.
Halfords is playing its part by training 100 more technicians next year, bringing the
total to 470. In addition, we will be growing the number of e-bike and e-scooter
servicers from 400 to over 1,800. This means that, by April, each of Halfords' garages
will have at least one electric car technician, with electric bike and scooter
servicers in every store.
Supporting our colleagues
During the period, we launched over GBP4m of initiatives to support our colleagues, all
of whom have worked tirelessly to help keep the country moving. These included a GBP1.5m
Here to Help Fund for use by Halfords colleagues and their families who may be
struggling financially as a result of the ongoing impact of Covid-19. In addition, the
Group also set up a Frontline Colleague Support Fund to reward the extraordinary
resilience, dedication and professionalism of our frontline colleagues during the
hugely challenging lockdown period. The scheme ran for 12 weeks and ultimately reached
a total of GBP2.3m, which was then allocated across all eligible colleagues.
Current trading
Subsequent to the Government's announcement on 31 October 2020 that the country would
be entering another period of lockdown, we have reviewed our operating procedures to
ensure they are compliant with the new guidelines and protect the health and safety of
our colleagues and customers. As an essential retailer and services provider, all of
our sites will remain open in our current formats, whereby customers may enter our
stores and garages but with limits on customer density. We will continue to ensure our
colleagues are equipped with the right PPE to serve customers safely.
Trading for the first five weeks of H2, to 5 November 2020, continued to be relatively
strong, with good growth and increased market share in cycling, alongside resilience in
our motoring products and services businesses. Since the 5th of November we have seen
some impact on trading as the second national lockdown came into force. Cycling has
continued to grow; we saw an immediate upturn in our Mobile Expert business; and we
have seen another shift towards our digital and home delivery channels. However, sales
of motoring products have been impacted, with Government data showing car traffic last
week at 70% of pre-Covid-19 levels. Unlike the previous lockdown, we have been able to
plan and mitigate against some of this risk early.
Outlook
We continue to have great confidence in the medium-term opportunity for our motoring
products and services business as illustrated by the investment in recruitment and
training that we are currently making in this area. We also believe that its resilient
performance in H1 gives a clear indication of its potential once the pandemic has
subsided. However, we remain cautious on the impact that national and local lockdowns
may have on our H2 performance, with fewer vehicles likely to be on the road.
In Cycling, we expect good levels of demand to continue, notwithstanding the normal
seasonal decline as we enter the winter months of H2.
Given the latest national lockdown announced by the Government and the inherent
uncertainty in the current trading environment, including the outcome of Brexit
negotiations, we do not believe it appropriate to provide profit guidance for FY21. We
are well placed to address potential headwinds we may face and capitalise on tailwinds
as they arise, and our balance sheet and liquidity position remain very strong. This
gives us a solid platform to build on and we therefore remain confident in the future
growth prospects for Halfords.
We will next update the market on 14 January 2021, providing an update on trading
during the peak festive season.
Enquiries
Investors & Analysts (Halfords)
Loraine Woodhouse, Chief
Financial Officer
Neil Ferris, Corporate Finance +44 (0) 7483 360 675
Director
neil.ferris@halfords.co.uk
Andy Lynch, Head of Investor +44 (0) 1527 513189
Relations
andrew.lynch@halfords.co.uk
Media (Powerscourt) +44 (0) 20 7250 1446
Rob Greening halfords@powerscourt-group.com
Lisa Kavanagh
Results presentation
A webcast for analysts and investors will be held today, starting at 9.00am UK time.
Attendance is by invitation only. A copy of the presentation and a transcript of the
call will be available at www.halfordscompany.com in due course. For further details
please contact Powerscourt on the details above.
Notes to Editors
www.halfords.com www.halfordscompany.com [1] www.tredz.co.uk [2]
Halfords is the UK's leading provider of motoring and cycling products and services.
Customers shop at 440 Halfords stores, 3 Performance Cycling stores (trading as Tredz
and Giant), 367 garages (trading as Halfords Autocentres and McConechy's) and have
access to 105 mobile service vans (trading as Halfords Mobile Expert and Tyres on the
Drive). Customers can also shop at halfords.com and tredz.co.uk for pick up at their
local store or direct home delivery, as well as booking garage services online at
halfords.com.
Cautionary statement
This report contains certain forward-looking statements with respect to the financial
condition, results of operations, and businesses of Halfords Group plc. These
statements and forecasts involve risk, uncertainty and assumptions because they relate
to events and depend upon circumstances that will occur in the future. There are a
number of factors that could cause actual results or developments to differ materially
from those expressed or implied by these forward-looking statements. These
forward-looking statements are made only as at the date of this announcement. Nothing
in this announcement should be construed as a profit forecast. Except as required by
law, Halfords Group plc has no obligation to update the forward-looking statements or
to correct any inaccuracies therein
Chief Executive's Statement
Strategic update
Although the pandemic has potentially changed customer behaviour permanently, our
vision remains the same; to Inspire and Support a Lifetime of motoring and cycling. In
November last year we set out our ambition to evolve into a consumer and B2B
services-focussed business, with a greater emphasis on motoring, generating higher and
more sustainable financial returns.
In our preliminary results on 7 July, we laid out our strategic priorities for FY21.
Despite the disruption felt across H1, we have made strong progress against our
objectives:
Continue to transform and build a market-leading Motoring Services offer
· Added 30 new Mobile Expert Vans, bringing the total to 105, to serve the
exceptional demand for this service. We remain on track to deliver over 125 vans by
year-end.
· The number of Mobile Expert Technicians increased to over 150, and the number of
hubs increased from 8 to 10, allowing a broader geographical reach.
· We have now fully integrated Tyres on the Drive to our Group web platform, meaning
all services are now accessible from one website and benefiting from the high levels
of retail web traffic.
· Almost 100 garages now opening on Sundays to help meet elevated customer demand.
· 'PACE', our digital operating model for garages, was implemented in all McConechy's
garages by the end of Q2, enabling them to reap the customer and operational benefits
of the system.
Enhancing our Group web platform and digital customer experience, to create an even
more differentiated and specialist proposition
· Launched our WeCheck app, providing a digitally-led customer journey that
strengthens our ability to drive cross shop across the Group.
· McConechy's sites are now integrated on our single Group website, meaning that
customers can book at all of the Group's 367 garage locations.
· Introduced customer journey enhancements such as 'email me when back in stock' and
'frequently bought with'. These developments ensured customers were engaged
throughout their purchase and helped drive one additional item to 20% of baskets
online, with an increase in conversion of +1ppts.
Increase the profitability of our cycling business
· Cycling profitability is on track to deliver +300bps of gross margin improvement on
last year, driven by more favourable buying terms, component rationalisation and more
effective promotions.
· Although the high cycling sales have pushed average working capital levels below
those considered optimal, we will end this year with purposefully lower underlying
average inventories through range rationalisation and reduced lead times.
Cost and Efficiency
· Our underlying costs have been well controlled, reducing by nearly GBP8m, reflecting
a continued focus on procurement and the execution of efficiency programmes such as
'We Operate 4 Less'.
· At our FY20 prelims in July we announced that we would close up to 10% of our
property estate (c.80 sites) in FY21, including the 33 sites that have already closed
(which includes 22 Cycle Republic stores). The review of our portfolio is on track
and we will provide a further update later this financial year.
Operational Review
Despite the challenges presented by Covid-19, our business has performed strongly
throughout the first half. Deemed an essential retailer, Halfords continued to trade
through the early stages of lockdown, having to adapt quickly to almost instantaneous
changes in customer behaviour, new social distancing rules and unprecedented shifts in
product demand. A combination of our ongoing investment and our operational agility
allowed us to capitalise on any potential tailwinds in the market.
Retail
Our Retail business saw sales of GBP524.2m, +4.8% on the same period last year. This was
a strong performance in the context of a hugely challenging backdrop, with
unprecedented demand for our cycling products offsetting a decline in motoring products
in Q1.
Cycling
Cycling sales were +44.6% above last year and +54.4% on a LFL basis, with all product
categories in growth, notably e-mobility +184%. We identified early the unprecedented
level of demand for our products and services and worked hard to secure more stock from
existing suppliers, as well as sourcing new brands and products from new suppliers and
different countries. We brought three new e-bike brands to Halfords and sourced new
innertubes and pumps in under four weeks. In total we refreshed 54% of our own brand
adult bikes during the first half. These included our new range of own brand Carrera
bikes with many new and innovative features, including puncture protect tyres and
memory foam saddles, coupled with technical advances such as new frame geometry and
gearing. We also launched our new Boardman range including a limited-edition carbon
bike for GBP1,000 which clearly resonated with customers looking for performance and
value, selling out in a matter of hours. As we closed Cycle Republic, Boardman bikes
launched in Tredz for the first time, and the exceptional sales performance indicates
high levels of retention in our performance cycling customers.
Although stock has been limited at times, we have managed to keep a steady flow of
bikes and accessories available to customers. With such a fluid stock position, we were
able to utilise our new Group online platform and update customers throughout the
period, increasing touchpoints and enhancing the overall customer journey. We emailed
over 150k customers to let them know when stock was arriving, or products launching, to
ensure that they received their chosen product as soon as possible. As a result, we
attracted and retained more customers than ever, growing our market share though H1.
Motoring
Motoring sales saw a more challenging first half with sales -23.7% LFL . Again, the
overall number hides widely varying performances across the product categories which
continued through to the end of the half. During the initial lockdown, all product
categories were significantly below last year with sales of less discretionary products
performing better, albeit still materially below last year. As lockdown eased and car
journeys increased, our unique fitting proposition drove strong demand for our 3Bs
(batteries, blades and bulbs), growing +11.6% in Q2. Staycation products, such as roof
bars and boxes, grew +28.6% over the same period as customers chose to holiday within
the UK. Although car journeys remain below last year, we have seen more categories
return to growth in Q2 including child seats and car maintenance. These have been aided
by new range launches in each, including award winning car cleaning accessories, new
hand tools, the launch of our own brand, i-Size child safety range, and our own brand
silicon wiper blades. It is clear, however, that customers remain cautious over the
longer term, with demand for big-ticket discretionary items continuing to be subdued.
Retail Gross Margin
Retail gross margin was 47.0%, in line with last year, which was a significant
achievement given the change in mix we have seen between our motoring and cycling
businesses. Q2 performed significantly ahead of this, +340bps above last year, with the
mix effects continuing, but less extreme as demand for our motoring products and
services improved. The overall result reflected progress towards our targeted increase
in cycling profitability, driven by more favourable buying terms, component
rationalisation and more effective promotions.
Retail Operating Costs
Retail operating costs were well managed and declined 9.5% year-on-year before the
impact of IFRS-16 (Retail costs declined -8.8% post IFRS-16). Again, the overall number
disguises significant movements beneath, including ongoing efficiency savings, business
rates relief and furlough income, offset by increased costs of trading under Covid-19
including our investments to support colleagues. Our procurement programme saved over
GBP5m on an annualised basis as we targeted the underlying cost of business, in line with
our strategy. Business rates relief and furlough income totalled GBP24.5m, but these
benefits were partially offset by increased costs of operating under Covid-19 which, to
date, amount to GBP11.4m in our retail business. This includes PPE, additional store
payroll, digital fulfilment costs and over GBP2.4m of initiatives launched to support
colleagues including a Frontline Colleague Support Fund and the Here to Help Fund.
Autocentres
Total revenue for Autocentres was GBP114.7m, +38.7% above last year, with our
acquisitions of McConechy's and Tyres on the Drive contributing significantly.
Underlying LFL sales were -2%, but as lockdown eased and customer journeys increased,
the period from June saw a distinct improvement. LFL sales growth in Q2 was +16%, with
total sales growth in excess of +60%.
Against an uncertain and challenging backdrop, we launched a media campaign to drive
awareness of our integrated motoring services offer, which drove a 40% uplift in
consideration scores. We also leveraged our new Group web platform to attract Retail
customers to our Autocentres offering, with car servicing having a prime location on
our homepage. Finally, we reaped the customer and operational benefits of upgrading our
digital operating model ('PACE') towards the end of FY20, rolling this out to our
McConechy's garages in Q2.
A notable highlight was the demand for our Halfords Mobile Expert proposition, which
remained high throughout the period, with record job numbers and sales over the summer
as the benefits of convenience and safety resonated with customers. We continued to
invest in our Mobile Expert proposition, increasing the scale and geographic reach of
this service.
We saw emerging trends in the types of cars entering our garages, including a +10%
increase in premium brands and +78% growth in hybrid cars. It's clear that our
convenient proposition, value and trusted brand is attracting new customers to
Autocentres, and our ability to invest in the training and technology required to
service hybrid and electric cars, potentially prohibitive to smaller independent
garages, will ensure we continue to capture this growing market.
Group Services
Group services revenue, which comprises fitting and repair services and the associated
product, grew 16.6% over H1, accounting for 24% of Group revenue. Although the motoring
services aspect to the offer was subdued during Q1, it quickly recovered in Q2, +43%
year-on-year as customers prepared cars for a return to the road, supported by our
premium WeCheck 'Road Ready' campaign. Cycling services performed ahead of this, +51.6%
in Q2 and +22.3% over the half. Sales were boosted by our free 32-point bike check
which attracted new customers to Halfords, and the government's Fix Your Bike Voucher
Scheme, of which we have taken a market-leading share. Services remain core to our
strategy, and we have continued to invest in this area, increasing scale and capacity
whilst working hard to enhance the customer journey.
Online
The timing of the launch of our Group web platform coincided with the most significant
shift in customer shopping habits we have ever seen. In the earlier periods of Q1,
almost all customer journeys began online resulting in sales growth of over 200% in Q1
and 148.2% over H1. Although the levels seen in Q1 have since moderated somewhat,
Online continues to form a much larger part of Group sales and is of increasing
importance as a touchpoint with customers.
We have continued to invest in our platform over H1, focussed on optimising and
enhancing the customer journey. Examples include 'email me when back in stock' to
inform customers when stock arrived in our distribution centres, the ability to
register interest when new products launched or 'frequently bought with' suggestions on
popular products. These enhancements have resulted in additional items added to almost
20% of baskets and conversion growing by +1%. We also enhanced customer self-service
options in response to very high levels of online demand, such as order checking and
chatbots.
Towards the end of H1, our entire portfolio of services and products was accessible
from one homepage. This meant the high volume of retail traffic had access to MOTs and
services, bookable at all 367 Autocentres and McConechy's locations, or our fleet of
105 Mobile Expert vans.
B2B
Our B2B business had a very strong H1, seeing growth of +37%, despite the challenging
backdrop. B2B sales accounted for over 16% of group sales as we saw our C2W business
grow over 70% and our Fleet business +160%. Both channels outperformed their respective
core product categories, highlighting our success in this area.
Graham Stapleton
Chief Executive Officer, 17 November 2020
Chief Financial Officer's Report
Halfords Group plc ("the Group" or "Group")
Reportable Segments
Halfords Group operates through two reportable business segments:
· Retail, operating in both the UK and Republic of Ireland; and
· Autocentres, operating solely in the UK.
All references to Retail represent the consolidation of the Halfords ("Halfords
Retail") and Cycle Republic businesses, Boardman Bikes Limited and Boardman
International Limited (together, "Boardman Bikes"), and Performance Cycling Limited
(together, "Tredz and Wheelies") trading entities. All references to Group represent
the consolidation of the Retail and Autocentres segments.
The "H1 FY21" accounting period represents trading for the 26 weeks to 2 October 2020
("the period"). The comparative period "H1 FY20" represents trading for the 26 weeks to
27 September 2019 ("the prior period"). The impact of IFRS 16 is shown in the table
below and further details of this impact are provided later within this report.
Group Financial Results
***********************
H1 FY21 H1 FY20 Change
GBPm GBPm (%)
Group Revenue 638.9 582.7 +9.6%
Group Gross Profit pre-IFRS 315.8 291.7 +8.3%
16*
Underlying EBIT pre-IFRS 59.0 27.1 +117.7%
16*
Underlying EBITDA pre-IFRS 76.9 44.9 +71.3%
16*
Net Finance Costs pre-IFRS (3.0) (1.2) +150.0%
16*
Underlying Profit Before 56.0 25.9 +116.2%
Tax pre-IFRS 16*
Net non-underlying items (0.6) (2.7) -77.8%
Impact of IFRS 16 0.0 4.3 -
Profit Before Tax 55.4 27.5 +101.5%
Underlying Basic Earnings 23.0p 10.4p +121.2%
per Share pre-IFRS 16*
Underlying Basic Earnings 23.0p 12.2p +88.5%
per Share post-IFRS 16*
* This report includes Alternative Performance Measures (APMs) which we believe provide
readers with important additional information on the Group. A glossary of terms and
reconciliation to IFRS amounts is shown on page 19.
Group revenue in H1 FY21, at GBP638.9m, was up 9.6% and comprised Retail revenue of
GBP524.2m and Autocentres revenue of GBP114.7m. This compared to H1 FY20 Group revenue of
GBP582.7m, which comprised Retail revenue of GBP500.0m and Autocentres revenue of GBP82.7m.
Group gross profit at GBP315.8m (H1 FY20: GBP291.7m) represented 49.4% of Group revenue (H1
FY20: 50.1%), reflecting a stable Retail gross margin of 47.0% and a decrease in the
Autocentres gross margin of -797 bps to 60.6%. The latter was driven by the
acquisitions of McConechy's and Tyres on the Drive, with both businesses more
orientated to lower margin tyre sales. Despite the challenging backdrop, the underlying
Autocentre gross margin was strong, +67bps ahead of last year.
Total operating costs before non-underlying items and IFRS 16 were nearly 3% below last
year at GBP256.8m (H1 FY20: GBP264.6m) of which Retail comprised GBP190.1m (H1 FY20:
GBP210.0m), Autocentres GBP65.4m (H1 FY20: GBP53.5m) and unallocated costs GBP1.3m (H1 FY20:
GBP1.1m). Unallocated costs represent amortisation charges in respect of intangible
assets acquired through business combinations, namely the acquisition of Autocentres in
February 2010, Boardman Bikes in June 2014, Tredz and Wheelies in May 2016 and
McConechy's in November 2019, which arise on consolidation of the Group.
Group Underlying EBITDA pre-IFRS 16 increased 71.3% to GBP76.9m (H1 FY20: GBP44.9m), whilst
net finance costs pre-IFRS 16 were GBP3.0m (H1 FY20: GBP1.2m).
Underlying Profit Before Tax pre-IFRS 16 for the period was up 116.2% at GBP56.0m (H1
FY20: GBP25.9m). Non-underlying items of GBP0.6m in the period (H1 FY20: GBP2.7m) related to
organisational restructure costs and closure costs.
After non-underlying items and including IFRS 16, Group Profit Before Tax was GBP55.4m
(H1 FY20: GBP27.5m). There was no net profit impact on the Group of IFRS 16 in the
period.
Retail
H1 FY21 H1 FY20 Change
GBPm GBPm (%)
Revenue 524.2 500.0 +4.8%
Gross Profit 246.3 235.0 +4.8%
Gross Margin 47.0% 47.0% -1bps
Operating Costs (190.1) (210.0) -9.5%
Underlying EBIT pre-IFRS 16* 56.2 25.0 124.8%
Non-underlying items (0.3) (2.5) -88.0%
Impact of IFRS 16 4.2 8.9 -52.8%
EBIT post-IFRS 16 60.1 31.4 +91.4%
Underlying EBITDA pre-IFRS 16* 69.8 38.9 +79.4%
* This report includes Alternative Performance Measures (APMs) which we believe provide
readers with important additional information on the Group. A glossary of terms and
reconciliation to IFRS amounts is shown on page 19.
Revenue for the Retail business of GBP524.2m reflected, on a constant-currency basis, a
like-for-like (LFL) sales increase of +8.1%.
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 FY21 H1 FY21 H1 FY20
LFL (%) Total sales mix (%) Total sales mix (%)
Motoring -23.7 42.5 57.5
Cycling +54.4 57.5 42.5
Total +8.1 100.0 100.0
Gross profit for the Retail business at GBP246.3m (H1 FY20: GBP235.0m) represented 47.0% of
sales, static on the prior year (H1 FY20: 47.0%). This reflected several factors
including favourable buying terms, component rationalisation and more effective
promotions within cycling.
The table below shows the average exchange rate reflected in cost of sales, along with
the year-on-year movement.
FY20 full year FY21 full year
(estimated)
$ $
Average USD: GBP rate reflected in $1.33 $1.29
cost of sales
Year-on-year movement in rate $0.01 ($0.04)
Retail operating costs before non-underlying items and IFRS 16 reduced by 9.5% to
GBP190.1m (H1 FY20: GBP210.0m, post IFRS 16 operating costs were GBP183.5m (H1 FY20:
GBP201.1m)). This reflected tight control of the underlying cost base as well as the
benefit of Business rates relief and furlough income from the Government. This was
partially offset by additional costs relating to PPE, additional colleagues and
fulfilment costs.
Autocentres
H1 FY21 H1 FY20 Change
GBPm GBPm (%)
Revenue 114.7 82.7 +38.7%
Gross Profit 69.5 56.7 +22.6%
Gross Margin 60.6% 68.6% -797 bps
Operating Costs (65.4) (53.5) +22.2%
Underlying EBIT pre- IFRS 16* 4.1 3.2 +28.1%
Non-underlying items (0.3) (0.2) +50.0%
Impact of IFRS 16 0.6 0.8 -25.0%
EBIT post- IFRS 16 4.4 3.8 +15.8%
Underlying EBITDA pre- IFRS 16* 7.1 6.0 +18.3%
* This report includes Alternative Performance Measures (APMs) which we believe provide
readers with important additional information on the Group. A glossary of terms and
reconciliation to IFRS amounts is shown on page 19.
Autocentres generated total revenues of GBP114.7m (H1 FY20: GBP82.7m), an increase of 38.7%
on the prior period with a LFL decrease of 2.0%.
The decrease in revenues from the existing centres reflected like-for-like declines in
sales of standalone MOTs, brakes and tyres, offset by growths in combined service and
MOTs, servicing and battery sales.
Gross profit at GBP69.5m (H1 FY20: GBP56.7m) represented a gross margin of 60.6%; a
decrease of 797 bps on the prior period, reflecting the prior year acquisitions, both
of which are more heavily weighted towards lower margin tyre business. The underlying
Autocentre gross margin was strong, reflecting the continued focus on the operating
model via technology enabled efficiency programmes and growth in higher margin revenue
streams.
Autocentres' Underlying EBITDA pre-IFRS 16 of GBP7.1m (H1 FY20: GBP6.0m), was 18.3% higher
than H1 FY20, and Underlying EBIT pre- IFRS 16 was GBP0.9m higher than H1 FY20 at GBP4.1m
(H1 FY20: GBP3.2m).
Portfolio Management
The Retail store portfolio at 2 October 2020 comprised 443 stores (end of H1 FY20: 474;
end of FY20: 472). No new Autocentres were opened, and four were closed in the period,
making the total number of Autocentre locations 367 as at 2 October 2020 (end of H1
FY20: 317; end of FY20: 371).The following table outlines the changes in the Retail
store portfolio over the 26-week period:
Retail Centres Vans
Relocations - - -
Leases re-negotiated 5 - -
Rightsized - - -
Openings - - 30
Closed 29 4 -
Net Non-Underlying items
The following table outlines the components of the non-underlying items recognised in
the period:
H1 FY21 H1 FY20
GBPm GBPm
Organisational restructure costs 0.9 1.2
Group-wide strategic review - 0.8
Closure costs* (0.5) -
Provision for expected settlement of an ongoing - 0.7
legal case
Net non-underlying items 0.4 2.7
*GBP0.2m relates to post-IFRS 16 costs, pre-IFRS 16 the balance is GBP0.6m.
In the current and prior period separate and unrelated organisational restructuring
activities were undertaken.
Current period costs comprised:
· Redundancy and transition costs of GBP0.9m relating to roles which have been
outsourced or otherwise will not be replaced (H1 FY20: GBP0.6m)
· In the prior period there were GBP0.6m of asset write-offs, principally resulting
from the strategic decision to re-platform the Retail and Autocentres websites.
During the current period Cycle Republic closure costs of GBP0.5m, which were provided
for at year-end, were released.
Costs of GBP0.8m were incurred in the prior period in relation to the costs of preparing
and implementing the new Group strategy, which comprised the following:
· GBP0.2m of external consultant costs
· GBP0.6m of store labour costs, point of sale equipment and other associated costs in
completing the cycling space relay across the store estate
During the prior period a GBP0.7m provision was created for expected costs of settling an
ongoing legal case which has since been settled at an amount below what was provided
for with the remainder being released. The nature and expected size of the settlement
is outside the normal experience of the Group.
Finance Expense
The net finance expense (before non-underlying items and IFRS 16) for the period was
higher year-on-year at GBP3.0m (H1 FY20: GBP1.2m) reflecting amortised costs associated
with securing covenant amendments and CLBILS borrowing, alongside the cost of drawing
down the full facility at the outset of the Covid-19 pandemic.
Taxation
The taxation charge on profit for the financial period was GBP10.4m (H1 FY20: GBP5.6m). The
effective tax rate before non-underlying items of 18.9% (H1 FY20: 20.2%) differs from
the UK corporation tax rate (19%) principally due to an increase in the tax rate due to
non-deductible amortisation being offset by movements on deferred tax balances in the
current and prior periods.
The full year FY21 effective tax rate is expected to be c.19%.
Earnings Per Share ("EPS")
Underlying Basic EPS before IFRS 16 was 23.0 pence and after non-underlying items 22.8
pence (H1 FY20: 10.4 pence, 9.3 pence after non-underlying items), a 121.2% and 145.2%
increase on the prior period. Underlying Basic EPS post IFRS 16 was 23.0 pence and
after non-underlying items 22.8 pence (H1 FY20: 11.1 pence after non-underlying items).
Basic weighted-average shares in issue during the period were 197.0m (H1 FY20: 197.0m).
Dividend ("DPS")
The Board have not proposed an interim dividend in respect of the period to 2 October
2020 (H1 FY20: 6.18 pence).
Capital Expenditure
Capital investment in the period totalled GBP11.2m (H1 FY20: GBP16.6m) comprising GBP10.0m in
Retail and GBP1.2m in Autocentres.
Within Retail, GBP1.7m (H1 FY20: GBP9.2m) was invested in stores, the majority of which
related to LED lighting being installed across the whole Retail estate. The most
significant investment in Retail, however, reflected a GBP7.4m investment in IT systems,
covering the ongoing development and enhancement of the new website. The balance of
GBP0.9m was invested in other smaller support centre upgrades/projects, and a small
amount within Tredz & Wheelies.
The GBP1.2m (H1 FY20: GBP1.9m) capital expenditure in Autocentres principally related to
the purchase of Halfords Mobile Expert vans and replacement of fixtures and fittings.
On a cash basis, total capital expenditure in the period was GBP11.9m (H1 FY20: GBP16.0m).
Inventories
Group inventory held as at the period end was GBP146.0m (H1 FY20: GBP188.5m). Retail
inventory decreased to GBP140.8m (H1 FY20: GBP187.2m), reflecting the incredibly strong
sales in Cycling, alongside continued working capital efficiencies.
Autocentres' inventory was GBP5.2m (H1 FY20: GBP1.3m). The Autocentres business model is
such that only modest levels of inventory are held within the centres, with most parts
being acquired on an as-needed basis. The increase from the prior year is due to the
addition of McConechy's tyre inventory.
Cashflow and Borrowings
Adjusted Operating Cash Flow during the period, was GBP186.0m (H1 FY20: GBP74.7m). After
acquisitions, taxation, capital expenditure and net finance costs, Free Cash Flow of
GBP169.2m (H1 FY20: GBP44.2m*) was generated in the period. Group net cash on a comparable
basis was GBP97.8m (H1 FY19: net debt of GBP62.6m*), with the Net Debt: Underlying EBITDA
ratio at -1.3:1. All these numbers are pre-IFRS 16.
Group net debt post-IFRS 16 was GBP271.6m (H1 FY20: GBP477.5m*).
*after adjusting for post period end payment run
Brexit and impact of movements in foreign currency exchange rates
As we have previously explained, the decision of the UK to leave the European Union
("Brexit") gives rise to significant uncertainty as a result of the impact on the wider
UK economy. We have previously set out the main areas in which we considered Brexit was
likely to impact the Group. We reaffirm and update our assessment of these below:
· The Group is an AEO accredited business which helps smooth the imports process.
However, work is ongoing with our customs and duty management partners to finalise
the process for imports and exports to our Irish shops.
· Impact on exchange rates. The Group buys a significant proportion of its goods in
US dollars; between $250m and $300m a year. As previously guided, the majority of our
US dollar sourcing is for cycling products.
· Prolonged uncertainty over exit terms and continued weakness in Sterling could lead
to a slowdown in the UK economy and consequent loss of consumer confidence, impacting
trading conditions for the Group. However, Halfords has strong positions in
fragmented Motoring and Cycling markets, and a service-led offer that differentiates
us from our competitors, physical and online. Much of our sales are in needs-based
categories that are more resilient to macroeconomic cycles and our discretionary
categories, such as cycling, camping and travel solutions, could benefit from an
increase in the number of people choosing to stay at home rather than holidaying
abroad; a trend that we observed in 2009.
Covid-19 and impact to Financial Statements
We have great confidence in the medium-term opportunity for our motoring products and
services business, but we remain cautious on the impact that national and local
lockdowns may have on our near-term performance with fewer vehicles likely to be on the
road. Regardless of what may lie ahead, Halfords' status as an essential retailer means
we will continue to provide essential products and services to the UK, and we are well
placed to address any headwinds or capitalise on tailwinds as they arise. We have
proven our operational agility against the many challenges of H1, and our balance sheet
and liquidity position remain strong.
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 balance of the financial year are described in
the Strategic Report on page 68 of the 2020 Annual Report and Accounts, and all are
considered relevant to the H1 FY21 reporting. These include:
· Business Strategy
· Capability and capacity to effect significant levels of business change
· Stakeholder support and confidence in strategy
· Sustainable business model
· Product, Service Quality and Brand Reputation
· Brand appeal and market share
· Service Quality
· Critical physical infrastructure failure (including supply chain disruption)
· Information Technology Systems and Infrastructure
· Cyber and data security
· IT Infrastructure failure
· People
· Skills shortage
· Staff engagement / culture
· Economic, Environmental and Political
· Covid-19
· Change in government policy or regulation
· Brexit
Specific risks associated with performance, alongside Covid-19, mentioned above,
include Christmas trading as well as weather-sensitive sales, particularly within the
Car Maintenance and Cycling categories in the Retail business.
Loraine Woodhouse
Chief Financial Officer, 17 November 2020
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 focuses on are as follows. All numbers are shown pre-IFRS
16 (on an IAS 17 basis) to enable comparability with the prior periods performance:
1) Like-for-like ("LFL") sales represent revenues from stores, centres and websites
that have been trading for at least a year (but excluding prior year sales of stores
and centres closed during the year) at constant foreign exchange rates.
2) Underlying EBIT 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 number of shares in
issue.
5) Net Debt is current and non-current borrowings less cash and cash equivalents,
both in-hand and at bank, as shown in the Consolidated Statement of Financial
Position, as reconciled below:
H1 FY21 H1 FY21 H1 FY20 H1 FY20
Pre-IFRS Post-IFRS Pre-IFRS Post-IFRS
16 16 16 16**
GBPm GBPm GBPm GBPm
Cash and cash 109.6 109.6 20.5 20.5
equivalents
Borrowings - (2.3) (73.9) (17.8) (90.6)
current
Borrowings - (9.5) (307.3) (35.3) (377.4)
non-current
Net Debt 97.8 (271.6) (32.6) (447.5)
Post period end - - (30.0) (30.0)
payment run*
Comparable Net 97.8 (271.6) (62.6) (477.5)
Debt
*owing to the timing of the period end (27 September 2019) certain creditor and payroll
payments related to September were not transacted until after the period close on
Monday 30 September 2019
**as restated see note 19
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 (excluding post period end payment run
adjustment), as reconciled below:
H1 FY21 H1 FY21 H1 FY20 H1 FY20
Pre-IFRS Post-IFRS Pre-IFRS Post-IFRS
16 16 16 16
GBPm GBPm GBPm GBPm
Underlying 59.0 63.7 27.1 36.8
EBIT
Depreciation 17.9 51.8 17.8 54.0
and
Amortisation
Underlying 76.9 115.5 44.9 90.8
EBITDA
Non-underlying operating (0.6) (0.4) (2.7) (2.7)
expenses
EBITDA 76.3 115.1 42.2 88.1
Share-based payment 1.6 1.6 1.1 1.1
transactions
Loss on disposal of 0.1 0.1 1.6 1.6
property, plant &
equipment
Working capital movements 98.1 33.5
(excluding post period
end payment run
adjustment - GBP30.0m H1
FY20) 97.3 33.5
Provisions movement & 9.9 17.1 (3.7) (3.7)
other
Adjusted Operating Cash 186.0 231.2 74.7 120.6
Flow
8) Free Cash Flow is defined as Adjusted Operating Cash Flow (as defined above) less
capital expenditure, net finance costs, taxation and exchange movements; as
reconciled below:
H1 FY21 H1 FY21 H1 FY20 H1 FY20
Pre-IFRS Post-IFRS Pre-IFRS Post-IFRS
16 16 16 16
GBPm GBPm GBPm GBPm
Adjusted 186.0 231.2 74.7 120.6
Operatin
g Cash
Flow
Capital (11.9) (11.9) (16.0) (16.0)
expenditure
Net finance (2.8) (7.7) (1.0) (1.0)
costs
Taxation (3.0) (3.0) (12.5) (12.5)
Exchange 0.9 1.5 (1.0) (1.0)
movements
Free Cash Flow 169.2 210.1 44.2 90.1
Halfords Group plc
Condensed consolidated income statement
For the 26 weeks to 2 October 2020
26 weeks to 26 weeks to 53 weeks to
2 October 27 September 3 April
2020 2019 2020
Unaudited Unaudited
Notes GBPm GBPm GBPm
Revenue 7 638.9 582.7 1,155.1
Cost of sales (323.1) (291.0) (565.4)
Gross profit 315.8 291.7 589.7
Operating expenses (252.5) (257.6) (556.7)
Operating profit 63.7 36.8 67.2
before
non-underlying items
Non-underlying 8 (0.4) (2.7) (34.2)
operating
expenditure
Results from 63.3 34.1 33.0
operating activities
Finance costs 9 (7.9) (6.6) (13.9)
Finance income 9 - - 0.3
Net finance costs (7.9) (6.6) (13.6)
Profit before tax 55.8 30.2 53.6
and non-underlying
items
Non-underlying 8 (0.4) (2.7) (34.2)
operating
expenditure
Profit before tax 55.4 27.5 19.4
Tax on underlying 10 (10.5) (6.1) (6.9)
items
Tax on 8 0.1 0.5 5.0
non-underlying items
Profit for the 45.0 21.9 17.5
period attributable
to equity
shareholders
Earnings per share
Basic earnings per 13 22.8p 11.1p 8.9p
share
Diluted earnings per 13 22.4p 11.1p 8.7p
share
Basic underlying 13 23.0p 12.2p 23.7p
earnings per share
Diluted underlying 13 22.6p 12.2p 23.3p
earnings per share
No final dividend was made for the 53 weeks to 3 April 2020 (2019: 12.39 pence per
share). The directors have not proposed an interim dividend in respect of the 26 weeks
to 2 October 2020 (2019: 6.18 pence per share).
The notes on pages 26 to 37 are an integral part of these condensed consolidated
interim financial statements.
Halfords Group plc
Condensed consolidated statement of comprehensive income
For the 26 weeks to 2 October 2020
26 weeks to 26 weeks to 53 weeks to
2 October 27 September 3 April
2020 2019 2020
Unaudited Unaudited
GBPm GBPm GBPm
Profit for the period 45.0 21.9 17.5
Other comprehensive income
Cash flow hedges: fair (3.8) 4.7 7.9
value changes in the
period
Income tax on other 0.8 - (0.7)
comprehensive income
Other comprehensive income (3.0) 4.7 7.2
for the period,
net of tax
Total comprehensive income 42.0 26.6 24.7
for the period
attributable to equity
shareholders
All items within the Consolidated Statement of Comprehensive Income are classified as
items that are or may be recycled to the consolidated income statement
The notes on pages 26 to 37 are an integral part of these condensed consolidated
interim financial statements.
Halfords Group plc
Condensed consolidated statement of financial position
As at 2 October 2020
As at As at As at
2 October
27 September 3 April
2020 2019 2020
Unaudited Unaudited
Notes GBPm GBPm GBPm
Assets
Non-current
assets
Intangible assets 14 393.4 386.1 395.7
Property, plant 14 79.1 89.7 83.1
and equipment
Right-of-use 14 319.2 370.0 349.9
assets
Deferred tax 8.0 8.5 7.3
asset*
Total non-current 799.7 854.3 836.0
assets
Current assets
Inventories 146.0 188.5 173.0
Trade and other 62.5 48.8 53.5
receivables
Derivative 2.0 6.9 8.7
financial
instruments
Current tax - 1.8 8.2
assets
Cash and cash 15 109.6 20.5 115.5
equivalents
Total current 320.1 266.5 358.9
assets
Total assets 1,119.8 1,120.8 1,194.9
Liabilities
Current
liabilities
Borrowings 15 (0.2) (16.3) (0.2)
Derivative (1.4) (0.9) (1.1)
financial
instruments
Lease (73.7) (74.3) (83.2)
liabilities*
Trade and other (295.5) (251.6) (217.0)
payables
Current tax (0.1) - -
liabilities
Provisions (22.5) (7.8) (9.7)
Total current (393.4) (350.9) (311.2)
liabilities
Net current (73.3) (84.4) 47.7
liabilities/asset
s
Non-current
liabilities
Borrowings 15 (2.2) (26.9) (179.1)
Lease liabilities (305.1) (350.5) (332.8)
Trade and other (2.3) (3.6) (1.9)
payables
Provisions (8.4) (4.4) (4.1)
Total non-current (318.0) (385.4) (517.9)
liabilities
Total liabilities (711.4) (736.3) (829.1)
Net assets 408.4 384.5 365.8
Shareholders'
equity
Share capital 16 2.0 2.0 2.0
Share premium 16 151.0 151.0 151.0
account
Investment in own (10.0) (10.0) (10.0)
shares
Other reserves 1.6 3.6 4.9
Retained earnings 263.8 237.9 217.9
Total equity 408.4 384.5 365.8
attributable to
equity holders of
the Company
The notes on pages 26 to 37 are an integral part of these condensed consolidated
interim financial statements.
* Adjustment to the lease liability reported in the September 2019 interim results. See
note 19.
Halfords Group plc
Condensed consolidated statement of changes in equity
For the 26 weeks to 2 October 2020
For the period ended 2 October 2020 (Unaudited)
Attributable to the equity holders of the
Company
Other reserves
Share Investment Capital
Share premium in own redemption Hedging Retained Total
reserve reserve
capital account shares earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Closing 2.0 151.0 (10.0) 0.3 4.6 217.9 365.8
balance
at 3
April
2020
Total
comprehensiv
e income for
the period
Profit for - - - - - 45.0 45.0
the period
Other
comprehensiv
e income
Cash flow - - - - (3.8) - (3.8)
hedges: fair
value
changes in
the period
Income tax - - - - 0.8 - 0.8
on other
comprehensiv
e income
Total other - - - - (3.0) - (3.0)
comprehensiv
e income for
the period
net of tax
Total - - - - (3.0) 45.0 42.0
comprehensiv
e income for
the period
Other - - - - - (0.7) (0.7)
Hedging - - - - (0.3) - (0.3)
gains and
losses and
costs of
hedging
transferred
to the cost
of inventory
Transactions
with owners
Share-based - - - - - 1.6 1.6
payment
transactions
Total - - - - - 1.6 1.6
transactions
with owners
Balance at 2 2.0 151.0 (10.0) 0.3 1.3 263.8 408.4
October 2020
The notes on pages 26 to 37 are an integral part of these condensed consolidated
interim financial statements.
Halfords Group plc
Condensed consolidated statement of changes in equity (continued)
For the 26 weeks to 2 October 2020
For the period ended 27 September 2019 (Unaudited)
Attributable to the equity holders of the
Company
Other reserves
Share Investment Capital
Share premium in own redemption Hedging Retained Total
reserve
capital account shares reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Closing 2.0 151.0 (10.0) 0.3 1.6 264.4 409.3
balance at
29 March
2019
Adjustment - - - - - (27.0) (27.0)
on initial
application
of IFRS 16*
Opening 2.0 151.0 (10.0) 0.3 1.6 237.4 382.3
balance at
30 March
2019 (as
previously
stated)
Prior period - - - - - 1.9 1.9
opening
lease
liability
adjustment**
Opening 2.0 151.0 (10.0) 0.3 1.6 239.3 384.2
balance at
30 March
2019 (as
re-stated)
Total
comprehensiv
e income for
the period
Profit for - - - - - 21.9 21.9
the period
Other
comprehensiv
e income
Cash flow - - - - 4.7 - 4.7
hedges: fair
value
changes in
the period
Total other - - - - 4.7 - 4.7
comprehensiv
e income for
the period
net of tax
Total - - - - 4.7 21.9 26.6
comprehensiv
e income for
the period
Hedging - - - - (3.0) - (3.0)
gains and
losses and
costs of
hedging
transferred
to the cost
of inventory
Transactions
with owners
Share - - - - - - -
options
exercised
Share-based - - - - - 1.1 1.1
payment
transactions
Dividends to - - - - - (24.4) (24.4)
equity
holders
Total - - - - - (23.3) (23.3)
transactions
with owners
Balance at 2.0 151.0 (10.0) 0.3 3.3 237.9 384.5
27 September
2019
*The Group initially applied IFRS 16 at 30 March 2019, using the modified retrospective
approach. Under this approach, comparative information was not restated and the
cumulative effect of applying IFRS 16 was recognised in Retained earnings at the date
of initial application.
**Adjustment to the lease liability reported in the September 2019 interim results. See
note 19.
The notes on pages 26 to 37 are an integral part of these condensed consolidated
interim financial statements.
Halfords Group plc
Condensed consolidated statement of cash flows
For the 26 weeks to 2 October 2020
26 weeks to 26 weeks to 53 weeks to
2 October 27 September 3 April
2020 2019 2020
Unaudited Unaudited
Notes GBPm GBPm GBPm
Cash flows from
operating activities
Profit after tax for 45.3 24.1 46.7
the period before
non-underlying items
Non-underlying items 8 (0.3) (2.2) (29.2)
Profit after tax for 45.0 21.9 17.5
the period
Depreciation - 10.7 11.9 24.3
property, plant and
equipment
Impairment - - - 5.4
property, plant and
equipment
Amortisation of 34.6 36.2 83.0
right-of-use assets
Amortisation - 6.5 5.9 11.4
intangible assets
Net finance costs 7.9 6.6 13.6
Loss on disposal of 0.1 1.6 2.8
property, plant and
equipment and
intangibles
Equity-settled 1.6 1.1 1.0
share-based payment
transactions
Exchange movement 1.5 (1.0) (2.0)
Income tax expense 10.4 5.6 1.9
Decrease/(increase) 27.0 (14.8) 3.9
in inventories
(Increase)/decrease (9.0) 10.3 (1.0)
in trade and other
receivables*
Increase in trade and 79.3 50.2 35.4
other payables*
Increase/(decrease) 17.1 (2.3) (0.7)
in provisions*
Corporation tax paid (3.0) (12.5) (16.3)
Net cash from 229.7 120.7 180.2
operating activities
Cash flows from
investing activities
Acquisition of - - (10.9)
subsidiary, net of
cash acquired
Purchase of (4.3) (4.8) (12.5)
intangible assets
Purchase of property, (7.6) (11.2) (21.1)
plant and equipment
Net cash used in (11.9) (16.0) (44.5)
investing activities
Cash flows from
financing activities
Finance income - - 0.3
received
Finance costs paid (7.7) (6.4) (13.5)
Payment of loan - - (1.8)
following acquisition
Proceeds from loans, 3.0 446.0 1,377.0
net of transaction
costs
Repayment of (180.0) (483.0) (1,262.0)
borrowings
Payment of capital (39.0) (25.3) (76.4)
element of leases*
Dividends paid 12 - (24.4) (36.6)
Net cash used in (223.7) (93.1) (13.0)
financing activities
Net 15 (5.9) 11.6 122.7
(decrease)/increase
in cash and bank
overdrafts
Cash and cash 15 115.3 (7.4) (7.4)
equivalents at the
beginning of the
period
Cash and cash 15 109.4 4.2 115.3
equivalents at the
end of the period
The notes on pages 26 to 37 are an integral part of these condensed consolidated
interim financial statements.
*Adjustment to reported April 2020 full year results. See note 19.
Halfords Group plc
Notes to the condensed consolidated interim financial statements
For the 26 weeks to 2 October 2020
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 limited liability 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 17 November 2020.
2) Statement of compliance
These condensed consolidated interim financial statements for the 26 weeks to 2 October
2020 have been prepared in accordance with IAS 34 'Interim financial reporting' as
endorsed by the European Union. They do not include all of the information required for
full annual financial statements and should be read in conjunction with the 2020 Annual
Report and Accounts, which have been prepared in accordance with IFRSs as adopted by
the European Union.
The comparative figures for the financial period ended 3 April 2020 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 66 to 78 of our Annual Report and
Accounts for the 53 weeks to 3 April 2020, which are available on our website
www.halfordscompany.com. These are also detailed in the CFO report on page 17.
4) Significant accounting policies
Going Concern
In light of the current economic uncertainty caused by the Covid-19 pandemic, the
directors have reviewed the current financial performance and liquidity of the business
and assessed its resilience through a series of scenarios. Further details of the
assessment are provided on pages 66 to 79 of our Annual Report and Accounts for the 53
weeks to 3 April 2020, which are available on our website www.halfordscompany.com. The
directors have further reviewed these scenarios against the current performance of the
business during H1 by updating the model for actual trading, which shows Halfords have
outperformed against original scenarios.
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 for a period of at
least 12 months from the date of approval of these financial statements.
In light of the latest lockdown announced by the government, Halfords have considered
the effect on the viability model scenarios. The model anticipated uncertainty and this
was built into the impact within the H2 forecast. Therefore, Halfords do not expect any
material changes to this forecast as a result of the lockdown. Halfords are keeping a
close eye on trading against forecast in this period and have no material concerns at
present.
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 2020 Annual Reports and Accounts, which are published on the
Halfords Group website, www.halfordscompany.com [1]. The changes to accounting policies
outlined below are also expected to be reflected in the Group's consolidated financial
statements as at and for the year ending 2 April 2021.
The accounting policies adopted in the preparation of the interim financial statements
are the same as those set out in the Group's annual financial statements for the 53
weeks ended 3 April 2020 except for the new policy to account for rates relief and
furlough income received under the Government's Coronavirus Job Retention Scheme as set
out below.
Government Support
Support payments are recognised only when there is reasonable assurance that the Group
will comply with the conditions attached to them and that the monies will be received.
Support payments receivable as compensation for expenses already incurred are
recognised in profit or loss within operating costs, in the period in which they become
receivable. During the period support and other payments received equated to GBP32.6m in
relation to business rates relief, furlough support and related salary savings.
5) Estimates and judgements
In preparing these condensed consolidated interim financial statements the directors
have given specific consideration to events including the impact of the Covid-19
pandemic. 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 53 week period
ended 3 April 2020 and the 26 weeks ended 27 September 2019, apart from the estimate
for the sales returns provision which has been updated to reflect the extension of the
returns period from 30 days to 90 days in light of Covid-19 restrictions. The provision
uses the average returns rate against 100% of sales for first 30 days, 75% for 30-60
days and 50% for 60-90 days.
6) Operating segments
The Group has two reportable segments, Retail and Car Servicing, which are the Group's
strategic business units. Car Servicing became a reporting segment of the Group as a
result of the acquisition of Nationwide Autocentres on 17 February 2010. McConechy's
was acquired during H2 FY20 and this has been incorporated into the Car Servicing
reporting segment. 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 through retail stores and online platforms. The operations
of the Car Servicing reporting segment comprise car servicing and repair performed from
Autocentres.
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 that are reviewed by the Executive Directors. These internal reports
are prepared in accordance with IFRS accounting policies (pre IFRS 16) consistent with
these Group Financial Statements.
All material operations of the reportable segments are carried out in the UK and all
material non-current assets are located 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.
Income statement Retail Car Servicing GBPm 26 weeks to
GBPm 2 October 2020
Total Unaudited
GBPm
Revenue 524.2 114.7 638.9
Segment result before 56.2 4.1 60.3
non-underlying items pre
IFRS 16
Non-underlying items (0.3) (0.3) (0.6)
Segment result pre IFRS 55.9 3.8 59.7
16
Unallocated expenses1 (1.3)
Operating profit pre 58.4
IFRS 16
IFRS 16 4.9
Net financing expense (7.9)
Profit before tax 55.4
Taxation (10.4)
Profit after tax 45.0
Income statement Retail Car Servicing GBPm 26 weeks to 27
September 2019
GBPm
Total Unaudited
GBPm
Revenue 500.0 82.7 582.7
Segment result before 25.0 3.2 28.2
non-underlying items pre
IFRS 16
Non-underlying items (2.5) (0.2) (2.7)
Segment result pre IFRS 22.5 3.0 25.5
16
Unallocated expenses1 (1.1)
Operating profit pre 24.4
IFRS 16
IFRS 16 9.7
Net financing expense (6.6)
Profit before tax 27.5
Taxation (5.6)
Profit after tax 21.9
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 GBP1.3m in respect of assets acquired through business
combinations (2019: GBP1.1m).
Income statement Retail Car Servicing GBPm 53 weeks to
GBPm 3 April
2020
Total
GBPm
Revenue 961.0 194.1 1,155.1
Segment result before 52.0 5.5 57.5
non-underlying items pre
IFRS 16
Non-underlying items (29.5) (2.6) (32.1)
Segment result pre IFRS 16 22.5 2.9 25.4
Unallocated expenses1 (2.1)
Operating profit pre IFRS 16 23.3
IFRS 16 9.7
Net financing expense (13.6)
Profit before tax 19.4
Taxation (1.9)
Profit after tax 17.5
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 GBP2.1m in respect of assets acquired through business
combinations (2019: GBP2.1m).
Other segment Retail Car 26 weeks to
items: Servicing
GBPm
GBPm 2 October 2020
Total Unaudited
GBPm
Capital expenditure 9.3 1.9 11.2
Depreciation 8.1 2.6 10.7
expense
Amortisation of 29.0 5.6 34.6
right-of-use asset
Amortisation 4.8 0.5 5.3
expense
Other segment items: Retail Car Servicing 26 weeks to
GBPm
GBPm 27 September
2019
Total Unaudited
GBPm
Capital expenditure 14.7 1.9 16.6
Depreciation expense 9.6 2.3 11.9
Amortisation of 32.0 4.2 36.2
right-of-use asset
Amortisation expense 4.4 0.5 4.9
Other segment items: Retail Car Servicing GBPm 53 weeks to
GBPm 3 April
2020
Total
GBPm
Capital expenditure 28.8 18.0 46.8
Depreciation and 25.0 4.7 29.7
impairment expense
Impairment of right-of-use 8.5 0.9 9.4
asset
Amortisation of 63.7 9.9 73.6
right-of-use asset
Amortisation expense 8.5 0.8 9.3
There have been no significant transactions between segments in the 26 weeks ended 2
October 2020 (2019: GBPnil).
7) Revenue
A) Revenue streams and location
The Group's operations and main revenue streams are those described in the last annual
financial statements. The Group's revenue is derived from contracts with customers.
Revenue split by the Group's operating segments are shown in Note 6.
All revenue is recognised in the United Kingdom and Republic of Ireland.
B) Seasonality of operations
In general, the Group's results are not seasonal with revenue in the first half broadly
similar to that of the second, however sales of certain products tend to fluctuate by
season. For example, sales of children's cycles peak in the Christmas season and sales
of adult cycles tend to peak in the summer.
8) Non-underlying items
26 weeks to 26 weeks to 53 weeks to
2 October 27 September 2019 3 April
2020 2020
Unaudited Unaudited
GBPm GBPm GBPm
Non-underlying
operating expenses:
0.9 1.2 2.8
Organisational
restructure costs (a)
Group-wide strategic - 0.8 1.0
review (b)
Provision for - 0.7 0.8
expected settlement
of an ongoing legal
case (c)
Closure costs (d) (0.5) - 26.8
Impairment of - - 0.9
right-of-use asset
(e)
Acquisition and - - 1.9
investment-related
fees (f)
Non-underlying items 0.4 2.7 34.2
before tax
Tax on non-underlying (0.1) (0.5) (5.0)
items (g)
Non-underlying items 0.3 2.2 29.2
after tax
Non-underlying items are those items that are unusual because of their size, nature
(one-off, non-trading costs) or incidence. The Group's 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 the current and prior periods separate and unrelated organisational
restructuring activities were undertaken.
Current period costs comprised:
· Redundancy and transition costs of GBP0.9m relating to roles which have been
outsourced or otherwise will not be replaced (H1 FY20: GBP0.6m, FY20 full year: GBP1.4m).
This is part of a wider strategic initiative.
· In the prior period asset write-offs principally resulting from the strategic
decision to re-platform the Retail and Autocentres websites. (H1 FY21 GBPnil, H1 HY20
GBP0.6m, FY20 full year: GBP1.4m)
b) In the prior period costs were incurred in preparing and implementing the new
Group strategy.
Prior period costs comprised:
· External consultant costs (H1 FY20: GBP0.2m, FY20 full year: GBP0.4m).
· Store labour costs, point of sale equipment and other associated costs in
completing the cycling space relay across the store estate (H1 FY20: GBP0.6m, FY20 full
year: GBP0.6m).
c) During the prior period a provision was created for expected costs of settling an
ongoing court case which was then settled during the second half of the period. The
size and nature of the settlement is outside the normal experience of the Group.
d) Closure costs represent costs associated with the closure of the operations of
Cycle Republic and the Boardman Performance Centre ("Cycle Republic") following a
strategic review of the Group's cycling businesses. The provision in the prior year
mostly relates to the impairment of right-of-use assets, intangible assets, tangible
assets and inventories (FY20: GBP26.8m). In the current period, the balance relates to
the release of some of these provisions HY20: GBP0.5m.
e) In light of the ongoing Covid-19 pandemic, the Group revised future cash flow
projections for stores and garages. As a result, in the prior year, GBP0.9m (FY20)
incremental impairment has been recognised in relation to garages where the current
and anticipated future performance does not support the carrying value of the
right-of-use asset and associated tangible assets. This change is directly
attributable incremental impairment due to Covid-19 and relates primarily to the
right-of-use asset value.
f) In the prior year costs were incurred in relation to the investment in McConechy's
Tyre Services and Tyres on the Drive. Tyres on the Drive acquisition costs comprise
of GBP1m principally relating to the costs of dual running Halfords Mobile Expert and
Tyres on the Drive, as well as the write-off of the receivables balance due from
Tyres on the Drive related to Halfords Mobile Expert prior to acquisition and GBP0.9m
relating to professional fees in respect of the acquisition of McConechy's Tyre
Services.
g) The tax credit in H1 FY21 represents a tax rate of 19.0% applied to non-underlying
items (H1 FY20: 19.0%, FY20 full year: 14.6%).
9) Net Finance Costs
26 weeks to 26 weeks to 53 weeks to
2 October 2020 27 September 3 April
2019
2020
Unaudited Unaudited
GBPm GBPm GBPm
Finance costs:
Bank borrowings (2.0) (0.4)) (1.6)
Amortisation of (0.2) (0.2)) (0.4)
issue costs on
loans
Commitment and (0.5) (0.3)) (0.6)
guarantee fees
Interest payable on (5.2) (5.7)) (11.3)
lease liabilities
Finance costs (7.9) (6.6)) (13.9)
Finance income:
Bank and similar - - 0.3
interest
Finance income - - 0.3
Net finance costs (7.9) (6.6) (13.6)
10) Income tax expense
Income tax expense is recognised based on management's 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 effective tax rate before non-underlying items for the 26 weeks to 2 October 2020
is 18.9% (H1 2020: 20.2%). The effective tax rate is higher than the UK corporation tax
rate principally due to an increase in the tax rate due to non-deductible amortisation
being offset by movements on deferred tax balances in the current and prior periods.
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.
2 October
2020
Fair FVOCI - Amortised Other Total
Value - equity cost financial
hedging instrum liabiliti
instrum ents es
ents carrying
GBPm amount
GBPm GBPm
GBPm
GBPm
Financial
assets
measured at
fair value
Forward 2.0 - - - 2.0
exchange
contracts
used for
hedging
Equity - - - - -
investments
2.0 - - - 2.0
Financial
assets not
measured at
fair value
Trade and - - 41.1 - 41.1
other
receivables*
Cash and - - 109.6 - 109.6
cash
equivalents
- - 150.7 - 150.7
Financial
liabilities
measured at
fair value
Forward (1.4) - - - (1.4)
exchange
contracts
used for
hedging
(1.4) - - - (1.4)
Financial
liabilities
not measured
at fair
value
Borrowings - - - (2.4) (2.4)
Lease - - - (378.7) (378.7)
liabilities
Trade and - - - (161.7) (161.7)
other
payables**
- - - (542.8) (542.8)
*Prepayments and accrued income of GBP21.4m are not included as a financial asset.
** Other taxation and social security payables of GBP51.4m, deferred income of GBPnil,
accruals of GBP64.5m and other payables of GBP18.1m are not included as a financial
liability.
27 September
2019
Fair FVOCI - Amortised Other Total
Value - equity carrying
hedging instrume amount
instrum nts
ents cost financial
liabilities
GBPm
GBPm
GBPm GBPm
GBPm
Financial
assets
measured at
fair value
Forward 6.9 - - - 6.9
exchange
contracts
used for
hedging
Equity - - - - -
investments
6.9 - - - 6.9
Financial
assets not
measured at
fair value
Trade and - - 34.4 - 34.4
other
receivables*
Cash and cash - - 20.5 - 20.5
equivalents
- - 54.9 - 54.9
Financial
liabilities
measured at
fair value
Forward (0.9) - - - (0.9)
exchange
contracts
used for
hedging
(0.9) - - - (0.9)
Financial
liabilities
not measured
at fair value
Borrowings - - - (43.2) (43.2)
Lease - - - (427.1) (427.1)
liabilities
Trade and - - - (176.5) (176.5)
other
payables**
- - - (646.8) (646.8)
*Prepayments and accrued income of GBP14.4m are not included as a financial asset.
** Other taxation and social security payables of GBP26.6m, deferred income of GBPnil,
accruals of GBP39.0m and other payables of GBP13.1m 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
payables and lease obligations, the carrying amount because of
short-term deposits and the short
borrowings maturity of these instruments,
using an interest rate of 7.1%
for long-term
lease obligations.
Long-term borrowings The fair value of bank loans
and other loans approximates to
the carrying value reported 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.
Forward currency contracts The fair value is determined
using the market 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 GBP0.1m.
12) Dividends
The Directors did not pay a final dividend in respect of the financial period ended 3
April 2020.
The Directors are not proposing an interim dividend for the 26 weeks to 2 October 2020
(2019: 6.18 pence per share).
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 2 October
2020.
26 weeks to 26 weeks to 53 weeks to
2 October 2020 27 September 2019 3 April
2020
Unaudited Unaudited
Number Number Number
m m m
Weighted average 199.1 199.1 199.1
number of shares
in issue
Less: shares held (2.1) (2.1)) (2.1)
by the Employee
Benefit Trust
Weighted average 197.0 197.0 197.0
number of shares
for calculating
basic earnings per
share
Weighted average 3.6 0.7 3.3
number of dilutive
share options
Weighted number of 200.6 197.7 200.3
shares for
calculating
diluted earnings
per share
26 weeks to 26 weeks to 53 weeks to
2 October 2020 27 September 3 April
2019
2020
Unaudited Unaudited
GBPm GBPm GBPm
Earnings 45.0 21.9 17.5
attributable to
equity shareholders
Non-underlying
items:
Operating expenses 0.4 2.7 34.2
Tax charge on (0.1) (0.5)) (5.0)
non-underlying items
Underlying earnings 45.3 24.1 46.7
before
non-underlying items
Basic earnings per 22.8p 11.1p 8.9p
share
Diluted earnings per 22.4p 11.1p 8.7p
share
Basic underlying 23.0p 12.2p 23.7p
earnings per share
Diluted underlying 22.6p 12.2p 23.3p
earnings per share
The alternative measure of earnings per share is provided because 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 Right-of-use
Intangible assets
Assets
Unaudited
Unaudited
GBPm GBPm
Net book 484.7 390.0
value at 29
March 2019
Additions 16.6 10.0
Disposals (1.4) (0.1)
Transfer of (6.3) 6.3
finance
leases
Depreciation (17.8) (36.2)
,
amortisation
and
impairment
Net book 475.8 370.0
value at 27
September
2019
Tangible and Right-of-use
Intangible assets
Assets
Unaudited
Unaudited
GBPm GBPm
Net book 478.8 349.9
value at 3
April 2020
Additions 11.2 7.0
Disposals (0.2) (3.1)
Depreciation (17.3) (34.6)
,
amortisation
and
impairment
Net book 472.5 319.2
value at 2
October 2020
15) Analysis of Movements in the Group's Net Debt in the Period
Cash flow Other non-cash At
changes
At 2 October 2020
3 April
2020 Unaudited Unaudited Unaudited
GBPm GBPm GBPm GBPm
Cash in hand and 115.3 (5.9) - 109.4
at bank
Debt due after (179.1) 177.0 (0.1) (2.2)
one year
Total net debt (63.8) 171.1 (0.1) 107.2
excluding leases
Current lease (83.2) 39.0 (29.5) (73.7)
liabilities
Non-current (332.8) - 27.7 (305.1)
lease
liabilities
Total lease (416.0) 39.0 (1.8) (378.8)
liabilities
Total net debt (479.8) 210.1 (1.9) (271.6)
Non-cash changes comprise finance costs in relation to the amortisation of capitalised
debt issue costs of GBP0.2m (H1 FY20: GBP0.1m), and movements in leases. Cash and cash
equivalents at the period end consist of GBP104.5m (H1 FY20: GBP15.4m) of liquid assets,
GBP5.1m (H1 FY20: GBP5.1m) of cash held in Trust and GBP0.2m (H1 FY20: GBP16.3m) of bank
overdrafts.
At Cash flow Other At
non-cash
changes
29 March 27 September
2019
2019 Unaudited Unaudited Unaudited
GBPm GBPm GBPm GBPm
Cash in hand and (7.4) 11.6 - 4.2
at bank
Debt due after (63.8) 37.0 (0.1) (26.9)
one year
Total net debt (71.2) 48.6 (0.1) (22.7)
excluding leases
Current lease (1.3) 25.3 (98.3) (74.3)
liabilities*
Non-current (9.3) - (341.2) (350.5)
lease
liabilities
Total lease (10.6) 25.3 (439.5) (424.8)
liabilities
Total net debt (81.8) 73.9 (439.6) (447.5)
*Adjustment to the lease liability reported in the September 2019 interim results. See
note 19.
16) Share Capital
Number of shares Share Share
m capital premium
GBPm account
GBPm
As at 29 March 2019 and 27 199.1 2.0 151.0
September 2019
Number of shares Share Share
m capital premium
GBPm account
GBPm
As at 3 April 2020 and 2 199.1 2.0 151.0
October 2020
During the 26 weeks to 2 October 2020 and 27 September 2019, there were no movements in
company share capital. The shares held in treasury are used to meet options under the
Company's share options schemes.
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 2 October 2020 amounted to GBP1.5m.
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 132 to 140 of the Group 2020 Annual Report and Accounts.
During the period no share options (H1 FY20: 984,783) were granted to directors in
relation to the Performance Share Plan ("PSP") and no share options (H1 FY20: 818) were
granted in relation to the Deferred Bonus Plan ("DBP").
19) Prior Period Adjustment
As a result of further work in preparing the annual report for the 53 weeks to 3 April
2020 and advancements in Halfords' IFRS 16 software, a correction has been made to the
original IFRS 16 transition adjustment to reflect payments made to landlords
immediately prior to the transition date. This resulted in a GBP2.3m reduction to the
opening lease liability, and a GBP0.4m reduction to the deferred tax asset as at 30 March
2019 for the period ended 27 September 2019. This adjustment was correctly reflected in
the annual report for the 53 weeks to 3 April 2020.
Following refinements to Halfords IFRS reporting process, the consolidated statement of
cash flows for the 53 weeks to 3 April 2020 was adjusted to reduce the cash outflow for
capital payments on leases (in financing activities) by GBP11.3m and to reduce the
working capital movements across other payables, receivables and provisions (in
operating activities) by the same amount to exclude from these line items amounts that
had been eliminated from the balance sheet for IFRS 16 reporting purposes and should
have similarly been eliminated in the operating cash flow reconciliation. These
adjustments have had no impact on the reported profit or net assets of the Group.
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 by the EU;
· 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
Loraine Woodhouse, Chief Financial Officer
17 November 2020
Halfords Group plc
Independent review report to Halfords Group plc
For the 26 weeks to 2 October 2020
Introduction
We have been engaged by the Company to review the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 2 October 2020 which
comprises the condensed consolidated income statement, the condensed consolidated
statement of comprehensive income, the condensed consolidated statement of financial
position, the condensed consolidated statement of equity, the condensed consolidated
statement of cashflows and the related notes.
We have read the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the
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.
As disclosed in note 2, the annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements
(UK and Ireland) 2410, "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that
the condensed set of financial statements in the half-yearly financial report for the
26 weeks ended 2 October 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, as adopted by the European Union, and the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist
the Company in meeting its responsibilities in respect of half-yearly financial
reporting in accordance with 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
17 November 2020
BDO LLP is a limited liability partnership registered in England and Wales (with
registered number OC305127).
ISIN: GB00B012TP20
Category Code: IR
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
Sequence No.: 88040
EQS News ID: 1148879
End of Announcement EQS News Service
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(END) Dow Jones Newswires
November 18, 2020 02:00 ET (07:00 GMT)
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