Halfords Group PLC (HFD) Halfords Group PLC: Preliminary
Results: Financial Year 2022 16-Jun-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS
Group. The issuer is solely responsible for the content of this
announcement.
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16 June 2022
Halfords Group plc
Preliminary Results: Financial Year 2022
Strong performance vs pre-pandemic demonstrates significant
transformation to the underlying business.
Ongoing focus on non-discretionary motoring services will help
mitigate some macroeconomic headwinds.
Halfords Group plc ("Halfords" or the "Group"), the UK's leading
provider of Motoring and Cycling products and services, today
announces its Preliminary results for the 52 weeks to 1 April 2022
("the period").
To provide a better understanding of underlying performance,
comparisons of sales, profit and debt will primarily be made
relative to FY20, that is, on a two-year basis, unless otherwise
stated. The disruption to last year (FY21) from COVID-19 means that
one-year comparators are more difficult to interpret but are
provided within the tables below. All numbers shown are on a
post-IFRS 16 basis and before non-underlying items, unless
otherwise stated.
FY22 Overview
-- Strong revenue growth of +19.9% vs. FY20 (+6.0% vs FY21),
growing market share in Retail Motoring andAutocentres, with
revenues +6.5% and +91.9% respectively. Cycling growth of +2.7%
despite supply chain disruptionduring the period.
-- Strong performances in areas of strategic focus are a clear
demonstration of our growing resilience:Group Services1 grew +79%,
online +77% and B2B2 +62% vs FY20.
-- The Group made three further acquisitions during FY22, the
largest of which being Axle Group (referred toas "National"),
making Halfords the largest Motoring Service provider in the UK
with over 70% of revenues nowcoming from Motoring, and almost 40%
from Services.
-- Underlying Profit Before Tax of GBP89.8m, +GBP32.9m (+57.8%)
vs. FY20 and -GBP9.7m (-9.7%) vs FY21. (note:includes business
rates relief of GBP11m (FY22), GBP39.1m (FY21) and nil (FY20)).
-- Period ended with cash of GBP46.1m but overall Net debt of
GBP344.9m after IFRS16 lease debt.
-- Proposed final dividend per share of 6p.
-- Record Net Promoter Score ("NPS") results of 68.4, +6.1 YoY,
despite the disruption caused by thepandemic.
Graham Stapleton, Chief Executive Officer, commented:
"The strength and resilience of this performance is a great
illustration of Halfords' transformation over the past two years.
Our strategic shift towards motoring services has delivered higher,
more predictable and more sustainable returns, and our acquisitions
of both National and Iverson Tyres during the year mean that we are
now the UK's largest motoring service provider. Motoring now
represents over 70% of Halfords' total revenue, and the fact that
our products and services in this category tend to be needs-based
rather than discretionary will help us to navigate our way through
the well-documented macroeconomic uncertainty that we are currently
seeing. We are determined to do everything that we can to help our
customers during the current cost of living crisis through
initiatives such as our recently launched Motoring Loyalty Club and
our second hand bike exchange.
We are continuing to play a key role in helping consumers to
choose electric forms of transport and are constantly investing in
the training and upskilling of our technicians in this critically
important area. Sales of e-bikes, e-scooters and accessories were
up 74% on two years ago, and servicing for electric cars in our
garages was up 140% year-on-year. We have also rolled-out free
electric bike trials to encourage customers to make the switch and
are the first mainstream retailer to offer an end-to-end EV
charging solution for the home.
While rising inflation and declining consumer confidence will
naturally present short-term challenges for any customer-facing
business like ours, we remain confident in Halfords' long-term
growth prospects due to our service-led strategy and the enduring
strength of our brand, people, products and services."
Group financial summary**
FY22 FY20*** Var FY21
Var FY20 Var FY21 Var FY21
FY20
% GBPm %
GBPm GBPm GBPm GBPm
Revenue 1,369.6 1,142.4 227.2 +19.9% 1,292.3 77.3 +6.0%
Retail 1,001.6 950.6 51.0 +5.4% 1,039.8 -38.2 -3.7%
Autocentres 368.0 191.8 176.2 +91.9% 252.5 115.5 +45.7%
Gross Margin 721.7 584.0 137.7 +23.6% 656.3 65.4 +10.0%
Retail 510.7 458.4 52.3 +11.4% 502.0 8.70 +1.7%
Autocentres 211.0 125.6 85.4 +68.0% 154.3 56.7 +36.7%
Underlying EBITDA* 207.1 188.6 18.5 +9.8% 233.0 -25.9 -11.1%
Underlying Profit Before Tax ("PBT")* 89.8 56.9 32.9 +57.8% 99.5 -9.7 -9.7%
Profit Before Tax 96.6 22.7 73.9 +325.6% 64.5 32.1 +49.8%
Underlying Basic Earnings per Share* 35.5p 25.4p 11.8 +39.8% 41.7p -6.2 -14.9%
Group revenue summary
Total Revenue LFL Revenue Total Revenue LFL Revenue
Vs FY20 % Vs FY20 % vs FY21 % Vs FY21 %
Retail Motoring 6.5% 12.5% 22.7% 26.5%
Retail Cycling 2.7% 18.0% -27.2% -25.0%
Retail Total 5.4% 15.2% -3.7% -0.6%
Autocentres 91.9% 23.4% 45.7% 12.6%
Group 19.9% 16.7% 6.0% 2.0%
* Before non-underlying items.
** Alternative performance measures are defined and reconciled
to IFRS amounts in the glossary on page 24. The LFL change measure
adjusts for the in-year site openings and closures, and
acquisitions.
*** FY20 numbers are presented on a 52-week basis.
Financial highlights
-- Group revenue against FY21 up +6.0% and +2.0% LFL. Our
Motoring business in Retail and Autocentres hasshown strong growth.
Cycling sales stepped back in the context of strong comparators and
supply disruption.
-- In Retail: two-year comparisons show: ? Retail Motoring
revenue growth of +6.5% driven by +4ppts market share gains in core
categories throughH2, underpinned by our investments in pricing and
value. ? Retail Cycling revenue growth of +2.7% despite Kids and
Mainstream bikes seeing a tougher H2 withdisruption to
availability. Our award-winning own brand Premium and E-bikes
continued to perform well. ? Electric mobility revenue (i.e.,
e-bikes, e-scooters and associated accessories) was up +74%.
-- In Autocentres:? Autocentres LFL growth of +23.4% driven by
continued improvements in efficiency as we utilise ourAvayler
software. ? Demand for our Halfords Mobile Expert ("HME") vans
proposition remains strong, growing +44% vs FY21as we grew our
fleet to 253 vans, 14 hubs and over 230 technicians. ? Accelerating
growth in demand for electric vehicle servicing, with the number of
EVs being brought toour garages increasing 140% year-on-year.
-- Group gross margin improved by +157bps over two years
(+191bps vs FY21), driven partly by our cyclinginitiatives, and
partly by an increasing mix into higher margin Autocentres
trade.
-- Operating costs increased +21% versus FY20 and held broadly
flat as a proportion of revenue.
-- Operating cashflow remains strong at GBP131.8m but below last
year as working capital normalised.
-- Non-underlying items totalled a credit of GBP6.8m, primarily
a result of closed store provisions beingrevised as the Group
continues to negotiate lease disposals. 1. Group Services includes
revenues across both Retail and Autocentres and includes the
revenue fromservices provided (e.g., car service, cycling repair,
dash cam fit etc) along with any associated products sold inthe
same transaction. 2. B2B includes revenues from Cycle to Work,
Commercial, Fleet and product sales to businesses in bothRetail and
Autocentres
FY23 Outlook
Over the last three years, we have built a larger and stronger
services business, focused more heavily on motoring. As a result,
the Group has a much higher 'needs-based' revenue stream, improving
our resilience in the current macro-economic climate. However, this
transformation journey is not complete and therefore we are not
immune to the external challenges, with reduced demand,
particularly for more discretionary, higher ticket items, and
significant cost inflation impacting our financial performance.
Forecasting FY23 with any degree of certainty this early in the
year is particularly challenging. Based on what we see today, we
expect FY23 underlying PBT to be within the range of GBP65m to
GBP75m, but we acknowledge the uncertainty that this year is likely
to bring.
Whilst the macro-environment presents a challenging short-term
outlook for many businesses, it reaffirms our longer-term strategy.
This year, we will continue to invest to improve our customer
proposition, particularly in a year where overall value will be
critical, whilst simultaneously remaining agile in our operations
and carefully managing our cost base. We believe we are
well-positioned, given our market leadership position in both
motoring and cycling, and our strong balance sheet, to emerge from
this challenging trading environment in a relatively stronger
position.
Enquiries
Investors & Analysts (Halfords)
Loraine Woodhouse, Chief Financial Officer (to 16th June
2022)
Jo Hartley, Chief Financial Officer (from 16th June 2022)
Richard Guest, Corporate Finance Director
Andy Lynch, Head of Investor Relations +44 (0) 7483 457 415
Media (Powerscourt) +44 (0) 20 7250 1446
Rob Greening halfords@powerscourt-group.com
Nick Hayns
Results presentation
A results presentation and conference call for analysts and
investors will be held today, starting at 09:00am UK time.
Attendance is by invitation only. A copy of the presentation and a
transcript of the call will be available at www.halfordscompany.com
in due course. For further details please contact Powerscourt on
the details above.
Next trading statement
On 7 September 2022 we will report our 20-week trading update
for the period ending 19 August 2022.
Notes to Editors
www.halfords.com www.tredz.co.uk www.halfordscompany.com
Halfords is the UK's leading provider of motoring and cycling
services and products. Customers shop at 400 Halfords stores, 3
Performance Cycling stores (trading as Tredz and Giant), 606
garages (trading as Halfords Autocentres, McConechy's, Universal
and National Tyres) and have access to 253 mobile service vans
(trading as Halfords Mobile Expert, Tyres on the Drive and
National) and 192 Commercial vans. Customers can also shop at
halfords.com and tredz.co.uk for pick up at their local store or
direct home delivery, as well as booking garage services online at
halfords.com.
Cautionary statement
This report contains certain forward-looking statements with
respect to the financial condition, results of operations, and
businesses of Halfords Group plc. These statements and forecasts
involve risk, uncertainty and assumptions because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements. These forward-looking
statements are made only as at the date of this announcement.
Nothing in this announcement should be construed as a profit
forecast. Except as required by law, Halfords Group plc has no
obligation to update the forward-looking statements or to correct
any inaccuracies therein.
Chief Executive's Statement
The Group delivered a good performance through the second half
of FY22, resulting in both resilient financial results and record
levels of customer satisfaction across the full year. The
performance is a clear reflection of the progress we are making
against our strategy, and the transformation in the business since
FY20. Compared to FY20, Group revenues grew +19.9% as we increased
market share in our motoring business and increased our scale
through acquisitions. Underlying PBT of GBP89.8m, grew GBP32.9m
ahead of FY20 and -GBP9.7m below FY21 as we continued to create a
more profitable business.
Our strategy continues to be centred around becoming a consumer
and B2B Services-focused business, with a greater emphasis on
Motoring, generating higher and more sustainable returns. During
FY22 we made two further Motoring Services acquisitions (National
and Iverson Tyres), making us the UK's largest Motoring Service
provider. Over 70% of Group revenues are now derived from Motoring
and with Services revenues now GBP0.5bn, and B2B revenues at
GBP0.3bn, we have an increasingly resilient, needs-based
foundation.
For the remainder of this commentary, we will draw comparisons
vs FY20 unless otherwise stated as we feel this is a more helpful
reflection of our performance due to the COVID-19 disruption seen
in FY21.
Revenue
Group revenues were GBP1,370m, with both Retail and Autocentres
delivering strong growth over two years. This is despite another
year of COVID-19 disruption with the lockdowns and stay at home
guidance of April and November. The scale and increased customer
awareness of our Autocentres is particularly pleasing, as is the
recovery of our Retail Motoring business, which has come back
stronger than pre-pandemic. Both businesses have improved customer
experience and convenience as a result of our investment over the
last two years.
Retail Motoring
Revenues grew +6.5% over two years, with the overall performance
in the second half of the year broadly in line with H1. This is a
very strong result and reflects the unique and deepening
super-specialism of our Retail offer. No other retailer in our
product categories in the UK has the convenience and breadth of
offer and our strategic price investments during the second half of
the year will underpin future growth.
We saw strong performances across the less discretionary and
specialist side of the business, with growth in many of our core
categories, as we refreshed ranges and bought new products to
market. Although less seasonal, our staycation products including
cycle carriers and roof boxes continued to perform very well
through H2.
Finally, we have also seen strong performance on child travel,
growing well over two years. We stock popular brands, as well as
bringing exclusive high quality own brand products to market,
offering choice and value to customers. The strength of our product
offer is coupled with being able to provide specific vehicle
fitment advice, as well as expert fitting at any one of our Retail
stores across the country.
Retail Cycling
As we noted at our interims, Cycling had an exceptional FY21,
benefitting from the unprecedented demand that COVID-19 lockdowns
generated. Sales this year, whilst strong, have seen more
volatility, constrained in part by wider supply chain disruption,
industry specific production bottlenecks and some signs later in
the year that demand began to be impacted as inflation and the cost
of living concerns grew. After the significant volumes of FY21,
availability inevitably started the year lower than we would have
liked, and with demand high for our exclusive own brand premium
ranges of mechanical bikes, the true sales potential of this
category was rarely tested. These ranges were subject to
significant COVID-19 disruption, having the effect of closing both
component and production factories on separate occasions. Other
ranges were also marred by disruption, with our peak period for
kids bikes in December impacted by last minute sea freight delays
which affected consumer confidence over certainty of delivery, as
well as customers deterred from shopping to avoid further COVID-19
lockdowns over Christmas. Availability fared better on our E-bikes,
although again, certain bestselling own brand lines were
constrained by availability. We remain confident on the longer-term
outlook for bikes as government infrastructure and climate needs
necessitate greener modes of transport.
Autocentres
Our Autocentres business, operating in markets less exposed to
demand and supply volatility, continues to be a key area of
strategic focus. Total revenues have almost doubled to GBP368m
since FY20, driven by both our acquisitions, but also our targeted
initiatives to attract new customers to the underlying business and
our ability to increase productivity. With vehicle traffic
remaining marginally below pre-pandemic levels across the year, the
23.4% LFL growth of our business is clear evidence of the
increasing market share we have achieved through our best-in-class
customer experience.
In our interim results, we noted that the profitability of the
Autocentres business had been impacted by a shift in the MOT season
to the second half of the year, driven by the Government's
extension of MOT due-dates during COVID-19. As we anticipated, the
second half was far stronger, and therefore the full year
performance saw very strong EBIT performance of GBP14.4m, partly
driven by revenue growth and partly by the optimisation of our
business through our "Avayler" platform.
Areas of strategic focus
The scale of change in the business during FY22 has been
significant and is best evidenced through the performance in our
areas of strategic focus - namely Group Services, B2B and
online.
Group Services1
Group revenue from services was GBP531m, growing 79% since FY20.
This is the most transformational change we have made to our
business, and, despite the rapid growth, we still see a significant
future opportunity in this market.
Our Halfords Mobile Expert van business, discussed in our FY22
strategic review, has been particularly successful and resilient
through the pandemic, providing customers with an integrated,
convenient and unique "on the drive" or "at work" offer.
We have also made three acquisitions in FY22 - National Tyres,
Iverson Tyres, and havebike - taking our acquisitions total to six
since October 2019. Five have been centred around Motoring
Services, and havebike, our latest addition in March 2022, offers
mobile Cycling Service solutions from hubs in London and
Birmingham. This is an exciting addition to our Cycling Service
proposition and complements the national coverage provided by our
400 Retail stores. The scale we have created in Motoring Services
allows us to leverage our training and technology through over
1,400 fixed and mobile locations. We offer unrivalled on-demand
services, including the convenience of our mobile service as well
as more complex solutions at over 600 garages.
Our Services growth is underpinned by our technology and
training. Whether this is optimising capacity through Avayler, our
"WeCheck" platform in Retail stores, or having over 2,000 service
technicians trained in E-mobility and a skills base of almost
40,000 in Retail, our position is unique and unrivalled within the
UK.
B2B2
Our B2B business is an equally exciting opportunity and we are
pleased with the progress we have made through FY22. B2B revenue,
at nearly GBP300m, grew by +60% versus FY20. We continue to focus
on our market leading Cycle 2 Work ("C2W") scheme, underpinned by
our award-winning ranges of exclusive own brand bikes. The tax
relief customers can obtain by purchasing through these schemes
will, we believe, play an important role as consumers navigate
through the cost-of-living crisis.
Our Commercial Tyre business also provides an exciting
opportunity for the future. This side of our business provides
service and repairs to fleets, agricultural vehicles or lorries and
has grown by +180% since FY20. This has been achieved by our
strategic acquisitions of McConechy's Tyre Services and Universal
Tyres, the latter acquired in March 2021. The combination of these
two businesses took us a step closer towards achieving national
coverage, which allows us to win larger contracts to support
businesses seeking a single partner across the UK. Despite this
growth, we still see further areas of opportunity where we have
"white spots" across the UK, and we continue to look to close these
gaps in the future. By doing so, we will take the next step to
achieving full and unrivalled UK coverage in the Commercial Tyre
market.
In July 2021, we entered the Software as a Service ("SaaS")
market through our Avayler platform. Avayler brings together the
complementary motoring services platforms that Halfords has either
built or acquired over recent years, and packages them up in such a
way that external clients can plug in to individual components, a
collection of modules, or the entire platform. As an operator
ourselves, this has given us the ability to demonstrate tangible
proof points to prospective clients and, as a result, we are
already supporting American Tire Distribution Inc. and Tirebuyer in
the US. Avayler is a particularly exciting venture for Halfords as
it aligns perfectly with our strategy of building more resilient,
recurring, B2B revenue streams.
Online
Online has played a pivotal role in our success over the last
two years. Our website re-platform at the end of FY20 brought
together three individual websites, enabling customers to see the
full breadth and scope of our offer in one place. This has provided
powerful synergies that have included increasing Halfords Retail
customers' awareness of Autocentres and facilitating cross shop
through the ability to bundle cross-Group products and services
into one basket.
The new web platform has also delivered tactical improvements to
the customer shopping experience. Since launch, we have invested in
optimising the customer journey by making hundreds of developments,
through a mindset of continuous improvement. During a period of
fast changing consumer behaviour and supply chain challenges, these
developments have ensured that products and service solutions are
simpler to navigate for our customers. Whether this has been to
support new customers into staycation products through guided
selling, or finding a bike through our dynamic stock finder, each
development has compounded to transform the customer
experience.
Operational Review
Halfords won't be alone in reporting that the operating
environment remained challenging for all retailers across the UK in
FY22 and, whilst we anticipated an improvement through the last six
months of trading, just as one challenge ended, the next one
emerged. It has therefore been more critical than ever that we have
continued to focus on keeping colleagues and customers safe,
improving efficiency across the Group, and identifying cost
reductions where possible.
Supply Chain
The global supply chain has been particularly challenging over
the last two years, meaning moving anything around the globe with
any degree of certainty has been difficult. Whilst there were
general signs of improvement towards the end of H1, the reliability
of freight remained poor. There have also been specific pockets of
industry supply challenges with bike componentry suffering through
COVID-19 factory closures. These factors meant it was often very
difficult to accurately understand demand due to the unstable stock
availability presented to customers. As noted earlier, Premium
bikes were most exposed to these problems throughout FY22, but
problems extended to kids bikes during periods of particularly high
seasonal demand, for example, Christmas, where late disruption
resulted in inconsistent availability from week-to-week.
Integration of our Acquisitions
As we started FY22, we had already completed three acquisitions
in 18 months (McConechy's, Tyres on the Drive and Universal Tyres)
and as we noted during our last update, one of our biggest
programmes this year was to efficiently integrate Universal Tyres.
Our acquisitions are crucial to growing our scale and convenience
to customers, but it is only when they are fully integrated and
using our Avayler platform that their true potential begins to
crystallise. It was particularly pleasing therefore, that we were
able to integrate Universal Tyres in less than half the time it
took to integrate McConechy's - a truly fantastic achievement and
testament to the hard work and professionalism of our teams. With
three further acquisitions in the second half of FY22 (Iverson
Tyres, National Tyres and havebike), our integration experience
will ensure the valuable synergies of these deals are realised as
soon as possible and help to grow the business in the future. Our
integration of National Tyres, the most significant of these
acquisitions, is discussed in more detail in the strategic
highlights section later in this update.
Environmental, Social and Governance ("ESG")
We continue to make good progress on our ESG agenda, and it
remains a core part of our strategy whilst simultaneously providing
a valuable commercial opportunity. We have identified four priority
areas in Electrification, Net Zero, Diversity & Inclusion, and
Product, Packaging and Waste Management. Over the course of FY22 we
have made progress against all four including:
-- In Electrification:? We have rolled-out free Electric Bike
trials across our Retail store estate to encourage customers
toswitch to clean transport solutions. ? We achieved our target of
training over 2,000 colleagues across Retail and Autocentres, to
deliverElectric Services in Scooters, Bikes and Cars. ? We have
created a unique partnership with BOXT to become the first
mainstream retailer to offerend-to-end charging solutions for
homes, aiding the switch to electric.
-- In Net Zero:? During H2, our Science-based targets for carbon
reduction were approved by the SBTi ("Science BasedTargets
Initiative"). ? 75% of Halfords' physical estate is powered by
electricity from renewable sources, helping to reducecarbon
emissions in our own operations by 25% This moves us significantly
closer to achieving our science-basedtarget for Scope 1 and 2
emissions, which is aligned to the ambitious 1.5 degree
pathway.
-- In Product, Packaging and Waste Management:? Our primary
plastic packaging was reduced even further in H2, falling by 17% -
equivalent to 279tonnes.
-- In Diversity & Inclusion:? We Launched four Colleague
Network Groups giving a voice to all colleagues to discuss
Diversity &Inclusion across the Group. ? We ran Diversity &
Inclusion Masterclasses with our Senior Leadership Team.
Halfords hold an influential position in seeking to drive
sustainability in both the motoring and cycling industries. In
particular we believe that the breadth of our electric products and
services offer will play a critical role in supporting the UK to
adopt electric forms of personal transport.
Colleagues and the Labour Market
Our colleagues have always been our most important asset. With
almost 40% of revenue now service related, this has never been more
relevant than it is today. It is their expertise that has resulted
in an astonishing 8m service jobs carried out this year, helping to
keep customers moving when they need it most. Investing in our
colleagues is one of the best investments we can make, providing
them with best-in-class training and technology, whilst also
supporting them financially and mentally through difficult times.
We know that highly engaged colleagues result in high customer
satisfaction, and our NPS scores during FY22 are testament to
this.
This year, we completed our biggest training programme to date,
which involved training our Retail colleagues in the full suite of
customer services on offer. By doing this, our colleagues are now
trained in twice as many skills as they were a year ago, meaning
our on-demand fitting offer is more convenient for customers,
reducing wait times and getting customers back moving quickly.
During H1 the labour market was particularly challenging, driven
by high demand and short supply with self-isolation from COVID-19
often having an adverse impact on the availability of technicians.
The labour market has remained difficult through the second half of
FY22, and we believe it has suppressed our growth, with our
capacity constrained by the supply of available technicians to our
Autocentres and HME businesses.
Finally, to underpin our service offering, we also implemented a
new store operating model in Retail which has resulted in more
customer facing service technicians. Combined with our training
investments, this means our Retail stores have more capacity to
service customers in periods of high demand.
Strategic Progress
As we noted earlier, the success of FY22 has been a result of
strong progress against a clear and consistent vision and our
results clearly demonstrate the strong and accelerating transition
we are making to "Evolve into a consumer and B2B services-focused
business, with a greater emphasis on motoring, generating higher
and more sustainable financial returns."
Inspire our customers with a differentiated, super-specialist
offer
Our Inspire pillar is centred around transforming the customer
experience by investing in both our digital and physical
infrastructure, whilst simultaneously providing customers with
access to new products and services in our core markets. Some of
the key areas of progress this year have been:
Fusion
Halfords Fusion town experience is our project to transform the
customer experience, investing in both the physical and digital
estate. Fusion brings together all of our shopping and services
locations across a town, leveraging all our customer touchpoints,
and creating an end-to-end experience that provides a full solution
to every customer.
A Fusion town incorporates a new format destination retail
store, an updated Autocentres garage and an extended Halfords
Mobile Expert offer - all operating in conjunction with an online
and home delivery proposition across a single location. This
results in our stores, garages and vans truly working as one, with
no perceived transition for the customer when moving from one
customer proposition to another.
Our two trial towns in Halifax and Colchester have delivered
some very encouraging results. The ability for colleagues to book
customers into any Halfords service has driven a step-change in the
number of customers shopping across more than one of our
propositions. Our on-demand WeCheck services, delivered by our
highly skilled Retail colleagues from the Halifax store car park,
now refer c.20% of our Halifax garage's sales per week. These
referrals have driven significant revenue to our garages, initiated
from a Retail transaction, reducing the need for us to acquire
customers through traditional marketing channels. Our Halifax
garage is now ranked within the top three performing garages in our
estate, having been 214th out of 300 pre-Fusion.
We have also invested in training and technology to aid
colleagues in selling total solutions to customer's needs in Retail
stores covering products, accessories, and services. When coupled
with changes to the store environment, such as the Parts desk which
helps to facilitate interaction with our colleagues, we can assist
customers through the more complex shopping journeys, such as
selecting the right bulbs, blades or batteries for their car or
Bike purchases. These changes have resulted in strong average
transaction value uplifts, as well as increases in customer
experience scores by +9 points.
New products and services
Our super-specialism is a key differentiator as we believe that
no other company can deliver the breadth of offer across the life
of a car or bike. We intend to continue to deepen this
super-specialism. This year we have launched our Electric Vehicle
charging solutions partnership with BOXT, rolled out E-bike trials
across our stores to give customers the chance to try before they
buy, and entered the second-hand bike market by launching Bike
Xchange. Bike Xchange creates a circular economy for bikes by
offering customers the opportunity to trade in used bikes in
exchange for money off future purchases, whilst also allowing us to
nationally range fully serviced and warrantied pre-owned bikes.
We have continued to focus on our own brand and exclusive ranges
of products deepening our specialism in Motoring and Cycling. We
have launched exclusive brands within car cleaning including
Yiannimize and Autobrite and our own brand ranges of bikes
including Carrera, Voodoo and Boardman continue to receive
excellent reviews and accolades including our Boardman SLR 8.8
winning the Road.cc award in May 2022.
Support our customers through an integrated, unique, and more
convenient services offer
Our Support pillar has arguably seen the most significant
transformation during FY22, in part driven by the acquisition of
National Tyres.
National Tyres
In December 2021, the Group undertook a GBP61.6m share placing
in order to acquire National Tyres. The acquisition added 234
garages, 68 vans and 1,200 highly skilled colleagues to our Group.
This has transformed our scale and will create very significant
levels of synergies across the Halfords Group - estimated at GBP18m
EBITDA by our third year of ownership. I am very pleased with the
progress to-date, and we remain confident of delivering year 1
synergies in line with the business case through the work done in
aligning to group purchasing contracts as well as moving National's
freight procurement onto our Group contract.
An important aspect of the National Tyres deal was the
acquisition of Viking, the wholesale tyre distribution network
which, in itself, will create very important strategic and
operational advantages for Halfords. This network gives us the
ability to supply tyres to our own Group businesses on a national
scale, having less reliance on third-party networks whilst
simultaneously reducing costs.
Halfords Mobile Expert
Our Halfords Mobile Expert business goes from
strength-to-strength and continues to deliver best-in-class
customer experience and convenience. Within two years we have grown
the business from 7 to 253 vans, offering a range of 17 services to
customers across over 75% of the UK. Revenues have grown +44% YoY
and over 300% vs FY20.
Avayler
Avayler is our market leading digital platform which underpins
our motoring services businesses. We have developed this platform
over a number of years, optimising the software which, in-turn,
optimises our business. The success of our business using Avayler
has enabled us to market the solution to third party service
providers and, as a result, we successfully entered the SaaS
market, supporting ATD and Tirebuyer in the US.
Enable a lifetime of motoring and cycling
Our lifetime pillar is focussed on establishing lasting
relationships with customers. Whilst growing, we know that only 4%
of our customers shop the breadth of our offer. This creates a
significant opportunity, with relatively modest changes to customer
behaviour required. Our research shows that those who shop across
the Group spend three to five times more than those shopping from a
single offer. This can increase further by forming a relationship
over a 3-year period.
Motoring Loyalty Club
To unlock these opportunities, we launched a unique Motoring
Loyalty club at the end of March 2022. Our club puts the customer
and their car at the centre of our proposition, allowing us to
harness data and form a relationship across the life of the car. We
can now offer customers bespoke advice, offers and savings, and
alongside our strategic investment in motoring pricing, we can give
customers better value and strengthen our service proposition.
The launch of the club is an important step forward in both our
lifetime pillar and overall strategy, but we see it as only the
beginning. The club has created a valuable platform from which we
will build further opportunities in the future, as we begin to
support customers through the life of their car.
Underpinned by Cost and Efficiency
The success of our transformation continues to be underpinned by
our focus on cost and efficiency. By creating a more profitable and
efficient business, we create the capacity to reinvest and generate
long term returns for shareholders. We have delivered strong cost
reduction in FY22, with some highlights including:
-- Settling 69 Retail lease renewals at an average of 26% below
existing rental levels
-- Delivering over GBP7.6m of goods not for resale savings and
cost mitigation, including freight and energy.
-- Saving a further GBP1.5m through Store efficiency programmes
across 20 initiatives.
Underpinned by our Colleagues
Colleagues are the heart of a services business, and we have
continued to invest in training as well as their health and
wellbeing:
-- Our "Here to Help" Fund, set up during the height of the
pandemic, has now delivered GBP0.4m of support tocolleagues that
need it the most.
-- "Wagestream" launched during the year, giving colleagues
early access to wages when needed.
-- We have trained over 100 mental health first aiders.
-- We have offered free winter flu jabs to all colleagues.
FY23 Strategic Focus;
I noted earlier that as one external challenge seemingly came to
an end, another was poised to take its place. We look to be through
the most severe impacts of COVID-19 in the UK, but we face a new
period of uncertainty, this time created by the worst cost of
living crisis in a generation. At the time of writing this update,
inflation is approaching double-digit percentages, interest rates
are increasing, and consumer confidence is at a 10-year low. With
this period of uncertainty ahead, we feel it is right to sharpen
our strategic focus to deliver what matters most to customers at
this time.
Inspire
In Fusion, we will leverage the learnings from our trial towns,
and roll out a capital efficient Fusion investment plan across the
estate, including;
-- Training colleagues in solution selling practices.
-- Car park referrals and managers in up to 100 Retail
sites.
-- Roll our further 3Bs and Click and Collect Hubs in
Retail.
-- Capacity increased in Autocentres through additional
colleagues.
We will further our super-specialism by deepening our ranges
within our core markets. This will include extending our Retail
offering by giving access to a broader range of car parts - a
market worth over GBP1bn.
Support
Our B2C business:
-- Integrate National Tyres to crystalise the next phase of
performance synergies. This will includeimplementing PACE across
the estate, installing MOT equipment in sites currently without
equipment and all otherequipment upgraded.
-- Continuing to rebrand sites.
-- Increase headcount and capacity.
Our B2B business:
-- Look to fill white space in our UK coverage by moving closer
to our commercial van target of 500.
Avayler:
-- We will continue our investment in Avayler, the platform that
underpins the success of our motoringservices operation. This will
optimise our own business further, but also allow us to drive
further opportunitieswith third party service providers, focussed
on the Automotive industry.
Lifetime
In Lifetime we will accelerate and optimise our Loyalty
platform:
-- Focus on driving memberships and VRN data capture, targeting
between 0.5 and 1.0 million customers by theend of FY23.
-- Utilise our Group Data platform and Loyalty club to engage
with customers through the life of their carand drive lifetime
value
-- Target 10% Premium mix to test subscription style
memberships,
Capital structure and dividend
Our capital allocation priorities remain unchanged:
1. Maintaining a prudent balance sheet.
2. Investment for growth.
3. M&A, focused on Autocentres.
4. Progressive dividend policy.
5. Surplus cash returned to shareholders.
Our Net Debt: EBITDA ratio, revised on an IFRS 16 basis, was
1.67 at the year-end, broadly in line with our expected range of
1.8x to 2.3x.
With a continued strong performance from our areas of strategic
focus, we will continue with our transformation plan. Our forecast
capital expenditure for the year is GBP45m to GBP50m, with
additional expenditure of up to GBP15m to complete the integration
of National and deliver the projected synergy benefits. Our growth
plan will be complemented by acquisitions if we are able to find
attractive targets with the right strategic fit for a fair price.
Our capital expenditure and acquisition strategy will be focussed
on scaling our motoring services business in line with our
strategy, cementing our market leading position in aftermarket
service, maintenance, and repair and growing our market share in
motoring products.
We understand the importance of the ordinary dividend to many of
our investors, and we updated our dividend policy at our
preliminary results in June 2021, reinstating the ordinary dividend
starting FY22 at 9p per share, intending this to be progressive.
Following the payment of an interim dividend of 3p per share on 21
January 2022, we are proposing an FY22 final dividend of 6p per
share to be paid on 16 September 2022, with the corresponding
ex-dividend date of 11 August 2022 and the record date of 12 August
2022.
As we have indicated previously, Loraine Woodhouse is stepping
down as CFO and will be replaced by Jo Hartley. This Director
change takes place on the 16th June 2022, when Jo Hartley will be
appointed as a Director of Halfords Group Plc and Loraine will
resign from the Board.
Graham Stapleton Chief Executive Officer, 15 June 2022
Halfords Group Plc
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 Autocentres represent the consolidation of the Halfords
Autocentres, McConechy's, Universal, National and Avayler (HSSD)
trading entities. Balance Sheet comparisons have been made on a
FY22 to FY21 basis. All references to Group represent the
consolidation of the Retail and Autocentres segments.
The "FY22" accounting period represents trading for the 52 weeks
to 1 April 2022 ("the financial year"). To provide a better
understanding of underlying performance, comparisons of sales and
profit will primarily be made relative to FY20, that is, on a
2-year basis unless otherwise stated. The disruption to last year
(FY21) from COVID-19 means that one-year comparators are more
difficult to interpret, albeit are provided within the tables below
for completeness. All numbers shown are on a post-IFRS16 basis,
unless otherwise stated.
Group Financial Results
FY22 FY21 FY20
FY22 versus FY21 FY22 versus FY20
(52 weeks) (52 weeks) (52 weeks)
change change
GBPm GBPm GBPm
Group Revenue 1,369.6 1,292.3 1,142.4 +6.0% +19.9%
Group Gross Profit 721.7 656.3 584.0 +10.0% +23.6%
Underlying EBIT 101.1 114.5 70.5 -11.7% +43.4%
Underlying EBITDA 207.1 233.0 188.6 -11.1% +9.8%
Net Finance Costs (11.3) (15.0) (13.6) -24.7% -16.9%
Underlying Profit Before Tax 89.8 99.5 56.9 -9.7% +57.8%
Net Non-Underlying Items 6.8 (35.0) (34.2) -119.4% -119.9%
Profit Before Tax 96.6 64.5 22.7 +49.8% +325.6%
Underlying Basic Earnings per Share 35.5p 41.7p 25.4p -14.9% +39.8%
Although COVID-19 restrictions started to ease in the early part
of our financial year, the reality was that FY22 was still a
heavily disrupted year for most consumer-facing businesses,
including Halfords. The UK targeted a quick return to normality
after the impact of the pandemic, but supply and demand conditions
remained unpredictable through much of our financial year. Other
countries, and the Far East in particular, mandated COVID-19
restrictions for longer, contributing to ongoing supply-chain
disruption. Subsequently, as we approached the end of FY22, both we
and our customers began to face into a new challenge brought about
by almost two years of supply and demand disruption. Higher
inflation began to emerge in the second half of our financial year,
compounded by the onset of war in Ukraine. Although the impact on
FY22 was limited, there is no doubt that the economic environment
for UK companies and consumers has become tougher than six months
ago, giving rise to both challenge and opportunity as we navigate
the year ahead.
Our strong financial results in FY22, with Group PBT of
GBP96.6m, +GBP73.9m versus FY20, reflect good strategic progress, a
sharpened focus on improving the profitability of our underlying
business and a necessarily agile approach to our operation in a
very challenging environment. Over the last two years we have
mitigated many headwinds, not least a complex and disrupted supply
chain, whilst simultaneously improving the profitability of our
business.
Despite the challenging external environment, we were pleased
with the progress we made against our Strategy in the year. Our
acquisition of Axle Group Holdings Limited (referred to as
"National") in December 2021, comprising National and Viking, was
an important step forward and testament to our commitment to grow
our Services business. The acquisition, on 9 December 2021, for
consideration of GBP61.5m, and the associated share placing, which
raised GBP61.6m of proceeds, was well supported by our
shareholders, demonstrating support for our Services-focused
strategy and the compelling opportunity of the acquisition itself.
As a result of this transaction, alongside smaller prior year
acquisitions, the Group is a very different business from two years
ago, financially stronger and with a greater proportion of revenues
coming from the more resilient and non-discretionary areas of
Motoring Services and B2B.
Group revenue in FY22, at GBP1,369.6m, was up 19.9% from FY20,
comprised of Retail revenues of GBP1,001.6m and Autocentres revenue
of GBP368.0m. This compared to FY20 Group revenue of GBP1,142.4m,
which saw Retail revenue of GBP950.6m and Autocentres revenue of
GBP191.8m. Retail Revenues grew +5.4% (+GBP51.0m) versus FY20, but
declined -3.7% versus FY21, primarily due to a normalised cycling
market after strong demand during the early COVID-19 period. Both
Motoring and Cycling revenue grew versus FY20 but, against FY21,
Motoring recovered significantly whereas Cycling declined versus
the strong peak seen in FY21. Autocentres revenue almost doubled
across the two-year period and grew +45.7% versus FY21, reflecting
good underlying LFL growth alongside the impact of our
acquisitions.
Group gross profit of GBP721.7m (FY20: GBP584.0m) was 52.7% of
Group revenue (FY20: 51.1%), comprising of Retail gross margin of
51.0%, up +277bps from FY20, partly offset by a decrease in the
Autocentres gross margin of 815bps to 57.3%. In Retail, our Cycling
profitability improvements delivered in FY21 annualised, offset in
part by our decision to invest in Motoring pricing to underpin our
Services business. In Autocentres, the acquired businesses
(Universal Tyres in March 2021 and National in December 2021) carry
lower gross margins due to a heavy focus on tyres, but with a lower
labour cost they have an operating margin potential in line with
the core Autocentres business.
Total underlying costs increased to GBP620.6m (FY20: GBP513.5m),
of which Retail comprised GBP420.9m (FY20: GBP395.6m), Autocentres
GBP196.6m (FY20: GBP115.8m) and unallocated costs GBP3.1m (FY20:
GBP2.1m). Unallocated costs represent amortisation charges in
respect of intangible assets acquired through business
combinations, namely the acquisition of Autocentres in February
2010, Boardman Bikes in June 2014, Tredz and Wheelies in May 2016,
McConechy's in November 2020, The Universal Tyre Company (Deptford)
Limited ("Universal") in March 2021 and National in December 2021,
which arise on consolidation of the Group.
The overall cost increase of 20.9% (+GBP107.1m) was in line with
revenue growth over the same period. Of the increase, over half
(+12.2%, +GBP62.4m) was a result of new acquisitions, or those
annualising part year ownership, with the remainder driven by
volumetric sales growth alongside investment in areas of strategic
importance such as customer contact, digital, and colleague
training. The Government continued to provide Business Rates Relief
through much of our first half, resulting in GBP11m of rates not
levied versus FY20, but notably lower than the GBP39m of relief
received in FY21.
We continued to focus on our cost and efficiency programmes,
delivering GBP7.6m of GNFR (goods not for resale) cost savings,
alongside cost reductions associated with our store and garage
closures in FY21 that gave rise to year-on-year benefits in the
first three quarters of FY22. We achieved rental savings in our
Retail estate on 69 lease renewals, with an average decrease of
approximately 26% in FY22. These underlying savings helped to
mitigate cost increases associated with the growth of the business
and to fund strategic investment.
Group Underlying EBITDA increased 9.8% to GBP207.1m (FY20:
GBP188.6m; FY21: GBP233.0m), whilst net finance costs were GBP11.3m
(FY20: GBP13.6m; FY21: GBP15.0m). Underlying Profit Before Tax for
the year increased 57.8% to GBP89.8m (FY20: GBP56.9m; FY21:
GBP99.5m). Non-underlying items totalled a GBP6.8m credit in the
year (FY20: GBP34.2m debit; FY21: GBP35.0m debit), following two
years of charges that arose from reorganisations of our physical
infrastructure and organisational redesign. After non-underlying
items, Group Profit Before Tax was GBP96.6m (FY20: GBP22.7m; FY21:
GBP64.5m).
Retail
FY22 FY21 FY20
FY22 versus FY21 FY22 versus FY20
(52 weeks) (52 weeks) (52 weeks)
change change
GBPm GBPm GBPm
Revenue 1,001.6 1,039.8 950.6 -3.7% +5.4%
Gross Profit 510.7 502.0 458.4 +1.7% +11.4%
Gross Margin 51.0% 48.3% 48.2% +270bps +277bps
Operating Costs (420.9) (398.3) (395.6) +5.7% +6.4%
Underlying EBIT 89.8 103.7 62.8 -13.4% +43.0%
Non-underlying items 8.9 (31.7) (30.7) -128.1% -129.0%
EBIT 98.7 72.0 32.1 +37.1% +207.5%
Underlying EBITDA 168.4 199.3 159.0 -15.5% +5.9%
Revenue of GBP1,001.6m reflected a 2 year like-for-like ("LFL")
sales increase of +15.2%. Total revenue in the year increased +5.4%
after adjusting for the impact of closing 64 Retail stores through
FY21. Revenues declined -3.7% versus FY21, significantly skewed by
COVID-19 in both Motoring and Cycling, with the latter dipping
versus a strong peak in FY21. The volatility of the trading
environment over the last two years was most evident in our Retail
business, which made forecasting particularly difficult. This is
demonstrated by the sharp changes in mix witnessed across the years
FY20, FY21 and FY22. Motoring mix fell by 12ppts from FY20 to FY21
as a result of fewer journeys made during lockdowns, but
represented 59.4% of the Retail business for FY22 as traffic began
to normalise. Pleasingly, our Motoring business had a strong
period, with revenues of GBP595m, total revenue growth of +6.5% and
LFL growth of +12.5% versus FY20, with revenue growth of +22.7%
versus FY21. This is positive given the importance of our Motoring
products business to the growth of our Services proposition and
demonstrates the strength and convenience of our Retail offer.
Cycling sales also performed well, growing LFL revenues +18.0%
versus FY20 (+2.7% total), although declining versus FY21 by 27.2%
in total. We did not expect Cycling revenues to grow versus the
peaks of lockdown cycling seen in FY21, but nevertheless supply
chain disruption and availability played its part in limiting its
potential.
The Retail Operational Review in the Chief Executive Officer's
Statement contains further commentary on the trading performance in
the year. Like-for-like revenues and total sales revenue mix for
the Retail business are split by category below:
FY22 FY22 FY21 FY20
LFL 2yr (%) Total sales mix (%) Total sales mix (%) Total sales mix (%)
Motoring +12.5 59.4 46.1 58.4
Cycling +18.0 40.6 53.9 41.6
Total +15.2 100.0 100.0 100.0
Gross profit for the Retail business, at GBP510.7m (FY20:
GBP458.4m) represented 51.0% of sales, an increase of +277bps on
FY20 (FY20: 48.2%). There were three key factors behind the
performance; firstly, substantial improvements in the Cycling gross
margins, up over +700bps versus FY20, following the margin
optimisation programme detailed in last year's report. The
improvement annualised this year versus FY21, but the full impact
can be seen versus FY20. Secondly, Motoring margins were also
stronger versus FY20, +60bps, despite our strategic investment in
Motoring pricing aimed at strengthening and underpinning the
Services business. And finally, the material swing in product mix
also impacted gross margin, albeit with materially less impact
versus FY20 than versus FY21. Of the +277bps improvement versus
FY20, +300bps is a result of rate changes, -60bps dilution driven
by growth in commissions as a result of our growing B2B business
and foreign exchange movements, and the balance reflected product
mix, which had a small positive impact vs FY20.
Retail operating costs before non-underlying items were
GBP420.9m (FY20: GBP395.6m) an increase of 6.4% on FY20. The focus
on operational efficiency and procurement continued in FY22,
offsetting the impact of the inflationary headwinds that began to
build during FY22, and funding our strategic investments across a
number of customer-facing initiatives. Some of the efficiency
highlights included GBP7.6m of GNFR costs removed from the Retail
business through an ongoing review of services and tendering
processes, the lease renewals detailed earlier, and GBP1.5m of
store payroll removed through our 'We Operate 4 Less' in-store
savings initiatives. Of the GBP11m Business Rates Relief afforded
to the Group, GBP9m was within Retail versus GBP33m in FY21.
Autocentres
FY22 FY21 FY20
FY22 versus FY21 FY22 versus FY20
(52 weeks) (52 weeks) (52 weeks)
change change
GBPm GBPm GBPm
Revenue 368.0 252.5 191.8 +45.7% +91.9%
Gross Profit 211.0 154.3 125.6 +36.7% +68.0%
Gross Margin 57.3% 61.1% 65.5% -380bps -815bps
Operating Costs (196.6) (141.2) (115.8) +39.2% +69.7%
Underlying EBIT 14.4 13.1 9.8 +9.9% +46.9%
Non-underlying items (2.1) (3.3) (3.5) -36.4% -40.0%
EBIT 12.3 9.8 6.3 +25.5% +95.2%
Underlying EBITDA 38.7 33.7 29.6 +14.8% +30.7%
Autocentres generated total revenues of GBP368.0m (FY20:
GBP191.8m), an increase of 91.9% on FY20, with a strong LFL
increase of 23.4%. Non-LFL revenues versus FY20 included either
full or part year benefits from our six acquisitions: Tyres on the
Drive and McConechy's acquired in October and November 2020
respectively, Universal Tyres in March 2021, Iverson Tyres in
December 2021, Axle Group in December 2021 and havebike in March
2022. Our acquisitions added approximately GBP125m of revenue
versus 2020 and c. GBP93m versus 2021.
In Q3 FY22, we entered the Software as a Service market through
our Avayler platform and were delighted to sign our first deal with
ATD for provision of the software.
Gross profit of GBP211.0m (FY20: GBP125.6m) was 57.3% of sales,
a decrease of 815 bps on FY20 but Gross Profit GBP was nearly 70%
ahead of FY20. The decrease in gross margin % was a result of the
annualisation of our acquisitions, which are gross margin rate
dilutive given their business model focus on tyres. Most notably,
Universal Tyres and McConechy's operate predominately within the
B2B commercial tyre sector and, as such, have a different operating
model of lower gross margin but strong margin per worked hour, and
more resilient revenues. National operates primarily within the B2C
sector, more aligned to our core Autocentres business, but also
with a heavy tyre mix and lower gross margins. Overall Autocentres
saw underlying rate improve by +320bps with the mix into
acquisitions worth almost -1,150bps overall. Going forward we are
confident that significant synergies are available to us through a
combination of greater scale and leveraging our digital operating
model, which will result in stronger operating margins across the
enlarged Autocentres group.
Operating costs were GBP196.6m, +GBP80.8m above FY20, of which
GBP62m was a result of the annualisation and growth of our
acquisitions from FY20 and FY21. The remaining cost increase was
the result of investment in the underlying business with
incremental investment in colleagues driving the very strong LFL
performance.
Underlying EBIT was GBP14.4m, (FY20: GBP9.8m) a strong
performance that reflected good organic growth complemented by
strategically important acquisitions. Underlying EBITDA of GBP38.7m
(FY20: GBP29.6m) was 30.7% higher than FY20.
Portfolio Management
In FY22 we continued to grow our Services business through the
acquisitions of National , Iverson Tyres and havebike.
The total number of fixed stores or garages within the Group
stood at 1,006, with a further 181 HME vans, 4 Cycling Vans, 68
vans supporting mobile tyre fitting and 192 Commercial vans as at 1
April 2022. The portfolio comprised 400 stores (end of FY21: 404)
and 606 Autocentres garages (end of FY21: 374).
The following table outlines the changes in the portfolio over
the year:
Stores Garages Vans
Relocations - - -
Leases renegotiated 69 7 -
Refreshed - - -
Openings/Acquisitions - 243 72
Closed 4 11 - In Retail, four stores closed during the year, three of them in the final quarter. When analysing the anticipated sales transfer to other channels and neighbouring stores, it was considered more profitable to the Group to close these stores and reduce the overall cost base.
The number of lease expiries, or breaks under option, continues
at a similar rate in the next five years. Retail will see three
quarters of stores experience optionality within five years,
allowing for a high degree of flexibility within the estate.
Within Autocentres, no garages were opened organically, but 243
locations were acquired in the year and 11 were closed, taking the
total number of Autocentre garages to 606 as at 1 April 2022 (end
of FY21: 374).
With the exception of nine long-leasehold and three freehold
properties in Autocentres, the Group's locations are occupied under
leases, the majority of which are on standard lease terms,
typically with a five to 15-year term at inception and with an
average lease length of under six years. The acquisition of
Universal resulted in the purchase of six freehold properties, but
all were sold and leased back in the first half of FY22.
Net Non-Underlying items
The following table outlines the components of the
non-underlying items recognised in the 52 weeks ended 1 April
2022:
FY22 FY21
GBPm GBPm
Organisational restructure costs (a) 0.3 5.9
Impairment of right-of-use assets (b) - (0.4)
Acquisition and investment-related fees (c) 2.8 0.6
One-off claims (d) (2.2) 2.9
Closure costs (e) (8.5) 26.0
Replacement of warehouse management system (f) 0.8 -
Net non-underlying items (6.8) 35.0 a. In the current and prior period, separate and unrelated organisational restructuring activities wereundertaken. A strategic redesign of the in-store operating model was undertaken to better meet our customers'expectations and deliver a consistent shopping experience across our estate. Redundancy costs of GBP0.3m (PY: GBP5.9m)were incurred during the transition to the new operating model. b. In light of the ongoing COVID-19 pandemic, the Group revised future cash flow projections for stores andgarages in FY20, which led to the recognition of an impairment in relation to stores or garages where the currentand anticipated future performance did not support the carrying value of the right-of-use asset and associatedtangible assets. During the prior year, GBP0.4m of this impairment was reversed as the stores and garages returned toa profitable position. c. In the current and prior periods, costs were incurred in relation to the investments in National,Iverson, havebike and Universal.
-- In FY22, GBP2.5m relating to professional fees in respect of
acquisition of National;
-- GBP0.2m related to the acquisition of trade and assets of
both Iverson and havebike;
-- GBP0.1m (PY: GBP0.6m) related to the acquisition of
Universal. d. During the prior period a provision of GBP2.9m was
held in the accounts in relation to the HMRC audit intoNational
Minimum Wage, based on management's best estimate using information
available at the time. During thecurrent period this has been fully
settled and paid, which has led to a release of the provision of
GBP2.2m. e. During FY20 and FY21 the group completed a strategic
review of the profitability of the physical estateand subsequently
closed a number of stores and garages. Assets were impaired and
costs associated with the ongoingonerous commitments under the
lease agreements and other costs associated with the property exits
were provided foraccordingly. In the current period GBP8.5m (costs
of GBP26m during FY21) of provisions and lease liabilities have
beenreleased as the group continues to negotiate lease disposals
and review provisions held in place. At the year endproperty
provisions carried forward included an amount of GBP10.2m in
relation to these store and garage closures.These will continue to
unwind as property exits are negotiated with landlords or tenants,
and could result infurther amounts being released to the income
statement due to the significant estimation uncertainty over
thetiming of exits and the final negotiated settlements. f. An
additional charge of GBP0.8m has been incurred during the current
year for the replacement of thewarehouse management system ("WMS").
Under the new IFRIC guidance on IAS 38, this cannot be capitalised
andtherefore, as it is not part of recurring business it is deemed
a non-underlying expense.
Finance Expense
The net finance expense (before non-underlying items) for the 52
weeks ended 1 April 2022 was GBP11.3m (FY21: GBP15.0m) reflecting
reduced interest on lease liabilities, plus the fact the Revolving
Credit Facility (RCF) was not drawn in the current year, partially
offset by additional non-utilisation fees.
Taxation
The taxation charge on profit for the 52 weeks ended 1 April
2022 was GBP18.9m (FY21: GBP11.3m), including a GBP1.7m charge
(FY21: GBP6.1m credit) in respect of non-underlying items. The
effective tax rate of 19.5% (FY21: 17.5%) differs from the UK
corporation tax rate (19%) principally due to increased
disallowable expenditure this year (in part relating to the share
issue and National acquisition) and prior period adjustments.
Earnings Per Share ("EPS")
Underlying Basic EPS post IFRS 16 was 35.5 pence and after
non-underlying items 37.9 pence (FY21: 41.7 pence and 27.1 pence
after non-underlying items), a -14.9% and 39.9% movement on the
prior year. Basic weighted-average shares in issue during the year
were 204.7m (FY21: 197.1m).
Dividend ("DPS")
Following the payment of an interim dividend of 3.0p per share
on 21 January 2022, the Board are proposing an FY22 final dividend
of 6.0p per share (FY21: 5.0p per share).
IFRS 16
IFRS 16 has had the effect of increasing profit by GBP2.5m. The
two main drivers for this being the increase in held over leases
which have decreased the depreciation charge in comparison to the
rental payments, and the increased ageing of the lease portfolio
which has led to a lower interest charge in comparison to the
rental payments.
Capital Expenditure
Capital investment in the 52 weeks ended 1 April 2022 totalled
GBP49.2m (FY21: GBP45.3m) comprising GBP31.1m in Retail and
GBP18.1m in Autocentres. Within Retail, GBP11.5m (FY21: GBP6.0m)
was invested in stores. Additional investments in Retail
infrastructure included a GBP17.9m investment in IT systems,
including the continued development of the new Group website.
The GBP18.1m (FY21: GBP22.0m) capital expenditure in Autocentres
principally related to the replacement of garage equipment and
replacement of fixtures and fittings, and further development of
PACE, our digital operating model in garages.
During the year, new IFRIC guidance was published relating to
IAS38 Intangible Assets, in particular the capitalisation of spend
on SaaS solutions. It was determined by Halfords that spend on a
new Warehouse Management System should be expensed, which resulted
in GBP0.8m being recorded in non-underlying costs due to the
non-recurring nature of the costs.
Inventories
Group inventory held as at the year-end was GBP222.1m (FY21:
GBP143.9m). Retail inventory increased to GBP194.5m (FY21:
GBP134.3m), reflecting normalised stock levels after a COVID-19
disrupted FY21.
Autocentres' inventory was GBP27.6m (FY21: GBP9.6m). The
increase in inventory primarily relates to the acquisition of
National and their stock holding of tyres.
Cashflow and Borrowings
Operating Cash Flow was GBP131.8m (FY21: GBP280.8m), reflecting
a working capital outflow of GBP70.0m, which arose due to the
normalisation of inventory levels as described above. After
taxation, capital expenditure, net finance costs and lease
payments, Free Cash Flow was -GBP14.9m (FY21: GBP133.2m) in the
year. Group Net Debt was GBP344.9m (FY21: GBP277.3m).
Principal Risks and Uncertainties
The Board considers the assessment of risk assessment and the
identification of mitigating actions and internal control to be
fundamental to achieving Halfords' strategic corporate objectives.
In the Annual Report and Accounts, the Board sets out what it
considers to be the principal commercial and financial risks to
achieving the Group's objectives. The main areas of potential risk
and uncertainty in the balance of the financial year are described
in the Strategic Report of the 2022 Annual Report and Accounts.
These include:
-- Business Strategy
?Capability and capacity to effect change
?Stakeholder support? Value proposition
?Brand appeal and market share
-Climate change & electrification
-- Financial
? Sustainable business model
-- Compliance
?Regulatory and compliance
?Service quality
?Cyber security
-- Operational
? Colleague engagement / culture
? Skills shortage
? IT infrastructure failure
? Disruption to end to end supply chain
Specific risks associated with performance include the success,
of peak trading periods (e.g., Christmas) as well as
weather-sensitive sales, particularly within the Car Maintenance
and Cycling categories in the Retail business.
Loraine Woodhouse Chief Financial Officer 15 June 2022
Glossary of Alternative Performance Measures In the reporting of
financial information, the Directors have adopted various
Alternative Performance Measures ("APMs"), previously termed as
'Non-GAAP measures'. APMs should be considered in addition to IFRS
measurements, of which some are shown below. The Directors believe
that these APMs assist in providing useful information on the
underlying performance of the Group, enhance the comparability of
information between reporting periods, and are used internally by
the Directors to measure the Group's performance.
The key APMs that the Group focuses on are as follows:
1.Like-for-like ("LFL") sales represent revenues from stores,
centres and websites that have been trading for at least a year
(but excluding prior year sales of stores and centres closed during
the year) at constant foreign exchange rates.
2.Underlying EBIT is results from operating activities before
non-underlying items. Underlying EBITDA further removes
Depreciation and Amortisation.
3.Underlying Profit Before Tax is Profit before income tax and
non-underlying items as shown in the Group Income Statement.
4.Underlying Earnings Per Share is Profit after income tax
before non-underlying items as shown in the Group Income Statement,
divided by the number of shares in issue.
5.Net Debt is current and non-current borrowings less cash and
cash equivalents, both in-hand and at bank, as shown in the
Consolidated Statement of Financial Position.
FY22 FY21 FY20
GBPm GBPm GBPm
Cash & cash equivalents 46.3 67.2 115.5
Borrowings - current (74.7) (63.6) (83.4)
Borrowings - non-current (316.5) (280.9) (511.9)
Net Cash/(Debt)* (344.9) (277.3) (479.8)
* The statutory 53-week period to 3 April 2020 comprises
reported results that are non-comparable to the 52-week period
reported in the current and prior period.
6.Net Debt to Underlying EBITDA ratio is the calculation of Net
Debt divided by Underlying EBITDA. Each component APM is defined
above.
7.Adjusted Operating Cash Flow is defined as EBITDA plus
share-based payment transactions and loss on disposal of property,
plant and equipment, less working capital movements and movement in
provisions; as reconciled below.
FY22 FY21 FY20 (53 weeks)
GBPm GBPm GBPm
Underlying EBIT 101.1 114.5 67.2
Depreciation, amortisation & impairment 106.0 118.5 118.7
Underlying EBITDA 207.1 233.0 185.9
Non-underlying operating expenses 6.8 (35.0) (34.2)
EBITDA 213.9 198.0 151.7
Share-based payment transactions 7.8 6.4 1.0
Loss on disposal of property, plant & equipment (5.2) 1.7 2.8
Working capital movements (70.0) 49.0 52.0
Provisions movement and other (14.7) 25.7 (3.1)
Adjusted Operating Cash Flow* 131.8 280.8 204.4
* The statutory 53-week period to 3 April 2020 comprises
reported results that are non-comparable to the 52-week period
reported in the current and prior period.
8.Free Cash Flow is defined as Adjusted Operating Cash Flow (as
defined above) less capital expenditure, net finance costs,
taxation, exchange movements, arrangement fees on loans, and lease
payments; as reconciled below.
FY22 FY21 FY20
GBPm GBPm GBPm
Adjusted Operating Cash Flow 131.8 280.8 204.4
Capital expenditure (47.3) (27.5) (33.6)
Net finance costs (10.6) (15.5) (13.2)
Taxation (12.2) (10.8) (16.3)
Sales and Leaseback 7.5 - -
Exchange movements 0.9 2.1 (2.0)
Lease payments (85.0) (95.9) (87.7)
Free Cash Flow* (14.9) 133.2 51.6
*The statutory 53-week period to 3 April 2020 comprises reported
results that are non-comparable to the 52-week period reported in
the current and prior period.
Halfords Group plc?
Consolidated Income Statement?
?
??????????????????????????For the 52 weeks to 1 April 2022?
?
?
?
For the period? ? 52?weeks to?1 April 2022? ? 52 weeks to?2 April 2021?
Before? Non-underlying?? Before? Non-underlying??
? ? Non-underlying?? items? Total? ? Non-underlying? items? Total?
items? (note 4)? items? (note 4)?
? Notes? GBPm? GBPm? GBPm? ? GBPm? GBPm? GBPm?
? ? ? ? ? ? ? ? ?
Revenue? ? 1,369.6 - 1,369.6 ? 1,292.3 -? 1,292.3
Cost of sales? ? (647.9) - (647.9) ? (636.0) -? (636.0)
? ? ? ?
Gross profit? ? 721.7 - 721.7 ? 656.3 -? 656.3
? ? ? ?
Operating expenses 2? (620.6) 6.8 (613.8) ? (541.8) (35.0) (576.8)
?
? ? ?
? ? ?
Results from
operating 3? 101.1 6.8 107.9 ? 114.5 (35.0) 79.5
activities?
? ? ?
Finance costs? 5? (11.3) - (11.3) ? (15.0) - (15.0)
? ? ?
? ? ?
Profit before ? 89.8 6.8 96.6 ? 99.5 (35.0) 64.5
income tax?
Income tax expense 6? (17.2) (1.7) (18.9) ? (17.4) 6.1 (11.3)
?
? ? ?
Profit for the
financial period
attributable to ? 72.6 5.1 77.7 ? 82.1 (28.9) 53.2
equity
shareholders?
? ? ? ? ? ? ? ? ?
Earnings per share ? ? ? ? ? ? ? ?
?
Basic?earnings per 8? 35.5p 37.9p 41.7p ? 27.1p
share?
Diluted?earnings 8? 34.0p 36.4p 40.7p ? 26.4p
per share
? ? ? ? ? ? ? ? ?
?
The notes on pages?31?to?38?are an integral part of these
condensed consolidated financial statements.?
Halfords Group plc?
?
Consolidated Statement of Comprehensive Income?
?
For the?52?weeks to?1 April 2022?
? ? ? ?
? ? 52?weeks to? 52 weeks to?
1 April?? 2 April
? ?
2022? 2021
? Notes? GBPm? GBPm?
Profit for the period? ? 77.7 53.2
? ?
Other comprehensive income? ?
Cash flow hedges:? ?
Fair value changes in the period? ? 6.5 (9.6)
Income tax on other comprehensive income? 6? (1.3) 1.6
Other comprehensive income for the period, net of income tax? ? 5.2 (8.0)
? ?
Total comprehensive income for the period attributable to equity shareholders? ? 82.9 45.2
? ? ? ?
All items within the Consolidated Statement of Comprehensive
Income are classified as items that are or may be recycled to the
Income Statement.?
?
? The notes on pages 31?to?38 are an integral part of these
condensed consolidated financial statements.?
?
Halfords Group plc
Consolidated Statement of Financial Position
For the 52 weeks to 1 April 2022
1 April 2 April
2022 2021 Restated*
Notes GBPm GBPm
Assets
Non-current assets
Intangible assets 442.4 398.3
Property, plant and equipment 101.7 81.3
Right-of-use assets 350.2 282.8
Derivative financial instruments - 0.1
Deferred tax asset 14.7 12.3
Total non-current assets 909.0 774.8
Current assets
Inventories 222.1 143.9
Trade and other receivables * 92.6 74.1
Assets held for sale - 6.0
Derivative financial instruments 4.2 0.5
Current tax assets 3.9 3.1
Cash and cash equivalents 9 46.3 67.2
Total current assets 369.1 294.8
Total assets 1,278.1 1,069.6
Liabilities
Current liabilities
Borrowings (0.2) (0.2)
Derivative financial instruments (0.5) (5.9)
Lease liabilities 10 (74.5) (63.4)
Trade and other payables * (299.6) (258.2)
Current tax liabilities (4.0) -
Provisions (20.5) (24.5)
Total current liabilities (399.3) (352.2)
Net current (liabilities)/assets (30.2) (57.4)
Non-current liabilities
Borrowings - -
Derivative financial instruments - (0.4)
Lease liabilities (316.5) (280.9)
Trade and other payables (4.9) (3.3)
Provisions (6.4) (15.0)
Total non-current liabilities (327.8) (299.6)
Total liabilities (727.1) (651.8)
Net assets 551.0 417.8
Shareholders' equity
Share capital 2.2 2.0
Share premium 212.4 151.0
Investment in own shares (11.6) (10.0)
Other reserves 2.0 (1.8)
Retained earnings 346.0 276.6
Total equity attributable to equity holders of the Company 551.0 417.8
*See note 11 for further details
The notes on pages 31?to?38 are an integral part of these
condensed consolidated financial statements.
Halfords Group plc
Consolidated Statement of Changes in Shareholders' Equity?
For the?52 weeks to 1 April 2022?
? ? Attributable to the equity holders of the Company?
?
? ? ? ? Other reserves? ?
? ?
? ? ? ? ?
Share? Investment? Capital?
Share? premium? in own? redemption Hedging? Retained? Total?
? reserve?
capital? account? shares?? reserve? earnings? equity?
? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm?
Closing balance at 3 April 2020 2.0 151.0? (10.0) 0.3? 4.6 217.9 365.8
? ? ? ? ? ? ? ?
Total comprehensive income for the period? ? ? ? ? ? ? ?
Profit for the period? - - - - -? 53.2 53.2
? ? ? ? ? ? ? ?
Other comprehensive income? ? ? ? ? ? ? ?
Fair value changes in the period? - - - - (9.6) - (9.6)
Income tax on other comprehensive income? - - - - 1.6 - 1.6
Total other comprehensive income for the - - - - (8.0) - (8.0)
period net of tax?
Total comprehensive income for the period? - - - - (8.0) 53.2 45.2
Other - - - - - (1.3) (1.3)
Hedging gains and losses transferred to the - - - - 1.3 - 1.3
cost of inventory?
? ? ? ? ? ? ? ?
Transactions with owners?? ? ? ? ? ? ? ?
Share options exercised? - - - - - - -
Share-based payment transactions? - - - - -? 6.4 6.4
Income tax on share-based payment - - - - -? 0.4 0.4
transactions?
Dividends to equity holders? - - - - -? - -
Total transactions with owners? - - - - -? 6.8 6.8
Balance?at?2 April 2021? 2.0 151.0 (10.0) 0.3 (2.1) 276.6 417.8
?
?
The notes on pages?31?to?38 are an integral part of these
condensed consolidated financial statements.?
Halfords Group plc?
Consolidated Statement of Changes in Shareholders' Equity
(continued)?
? ? Attributable to the equity holders of the Company?
?
? ? ? ? Other reserves? ?
? ?
? ? ? ? ?
Share? Investment? Capital?
Share? premium? in own? redemption Hedging? Retained? Total?
? reserve?
capital? account? shares?? reserve? earnings? equity?
? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm? GBPm?
Closing balance at 2 April 2021 2.0 151.0 (10.0) 0.3 (2.1) 276.6 417.8
? ? ? ? ? ? ? ?
Total comprehensive income for the period? ? ? ? ? ? ? ?
Profit for the period? - - - - -? 77.7 77.7
? ? ? ? ? ? ? ?
Other comprehensive income? ? ? ? ? ? ? ?
Fair value changes in the period? - - - - 6.4 - 6.4
Income tax on other comprehensive income? - - - - (1.3) - (1.3)
Total other comprehensive income for the - - - - 5.1 - 5.1
period net of tax?
Total comprehensive income for the period? - - - - 5.1 77.7 82.8
Other - - - - - - -
Hedging gains and losses transferred to the - - - - (1.3) - (1.3)
cost of inventory?
? ? ? ? ?
Transactions with owners?? ? ? ? ?
Shares issued 0.2 61.4 - - - - 61.6
Acquisition of Treasury shares - - (3.0) - - - (3.0)
Share options exercised - - 1.4 - - - 1.4
Share-based payment transactions? - - - - - 7.8 7.8
Income tax on share-based payment - - - - - 0.4 0.4
transactions?
Dividends to equity holders? - - - - - (16.5) (16.5)
Total transactions with owners? 0.2 61.4 (1.6) - - (8.3) 51.7
Balance?at?1 April 2022 2.2 212.4 (11.6) 0.3 1.7 346.0 551.0
?
The notes on pages 31?to?38 are an integral part of these
condensed consolidated financial statements. Halfords Group
plc?
Consolidated statement of cash flows
For the?52?weeks to?1 April 2022?
? ? 52?weeks to? 52 weeks to?
1 April?? 1 April
? ? 2022 2021
? Restated*
? Notes? GBPm? GBPm?
Cash flows from operating activities? ? ? ?
Profit after tax for the period, before non-underlying?items? ? 72.6 82.1
Non-underlying?items? ? 5.1 (28.9)
Profit after tax for the period? ? 77.7 53.2
Depreciation - property, plant and equipment ? 20.6 21.0
Impairment - property, plant and equipment (0.3) 2.8
Amortisation?and impairment?of right-of-use assets? ? 69.9 81.8
Amortisation?- intangible assets? ? 15.8 12.9
Net finance costs? ? 11.3 15.0
Loss on disposal of property, plant and equipment?and intangibles? ? 1.8 1.7
Gain on sale and leaseback of assets held for sale (0.4) -
Gain on disposal of leases (6.6) -
Equity-settled?share-based?payment transactions? ? 7.8 6.4
Exchange movement? ? 0.9 2.1
Income tax expense? ? 18.9 11.3
(Increase)/ decrease in inventories ? (66.7) 35.0
(Increase)/decrease in trade and other receivables* ? 1.3 (22.4)
(Decrease)/increase in trade and other payables* ? (4.6) 36.4
(Decrease)/ increase in provisions ? (14.7) 25.7
Income tax paid?? ? (12.2) (10.8)
Net cash from operating activities? ? 120.5 272.1
? ?
Cash flows from investing activities? ?
Acquisition of subsidiary, net of cash acquired? ? (58.5) (11.5)
Proceeds from sale of assets held for sale 7.5 -
Purchase of intangible assets? ? (22.0) (11.8)
Purchase of property, plant and equipment? ? (25.3) (15.7)
Net cash used in investing activities? (98.3) (39.0)?
? ?
Cash flows from financing activities? ?
Proceeds from issue of share capital 61.6 -
Repurchase of treasury shares (3.0) -
Finance costs paid (1.6) (5.5)
Proceeds from share options exercised 1.4 -
Repayment of borrowings? ? - (180.0)
Interest paid on lease liabilities* (9.0) (10.0)
Payment of capital element of leases ? (76.0) (85.9)
Dividends paid?? ? (16.5) -
Net cash used in financing activities? ? (43.1) (281.4)
Net (decrease)/increase?in cash and bank overdrafts? 9? (20.9) (48.3)
Cash and cash equivalents at the beginning of the period? ? 67.0 115.3
Cash and cash equivalents at the end of the period? 9 46.1 67.0
* See note 11 for further details
The notes on pages?31?to?38?are an integral part of these
condensed consolidated financial statements.?
Halfords Group plc
Notes to the condensed consolidated financial statements
For the 52 weeks to 1 April 2022
1. General information and basis of preparation
The financial information set out below does not constitute the
Group's statutory accounts for the periods ended 1 April 2022 or 2
April 2021 but is derived from those accounts. Statutory accounts
for 2021 have been delivered to the Registrar of Companies, and
those for 2022 will be delivered in due course. The auditor has
reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
The financial statements are presented in millions of UK pounds,
rounded to the nearest GBP0.1m.
The accounts of the Group are prepared for the period up to the
Friday closest to 31 March each year. Consequently, the financial
statements for the current period cover the 52 weeks to 1 April
2022, whilst the comparative period covered the 52 weeks to 2 April
2021.
The consolidated financial statements of Halfords Group plc and
its subsidiary undertakings, together "the Group", have been
prepared in accordance with International Financial Reporting
Standards ("IFRSs") and IFRS Interpretations Committee ("IFRS IC")
Interpretations as adopted by the European Union and with those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS. The financial statements are prepared on a going
concern basis and under the historical cost convention, except
where adopted IFRSs require an alternative treatment. The principal
variations relate to financial instruments (IFRS 9 "Financial
instruments"), share-based payments (IFRS 2 "Share-based payment"
and leases (IFRS 16 "Leases").
Adoption of new and revised standards
There have been no new or amended standards effective in the
period which has had a material impact on the consolidated
financial information.
New standards and interpretations not yet adopted?
?
All other standards and related adoptions which have been
published but not yet adopted are not expected to have a? material
impact on the consolidated results or financial position of the
Group.?A full listing will be provided in the statutory
accounts.?
2.??? Operating expenses?
For the period? ? 52?weeks to? 52 weeks to?
1 April?? 2 April
? ?
2022? 2021
? ? GBPm? GBPm?
? ? ? ?
Selling and distribution costs? ? 472.6 422.9
? ? 472.6 422.9
Administrative expenses, before non-underlying?items? ? 148.0 118.9
Non-underlying?administrative expenses? ? (6.8) 35.0
? ? 141.2 153.9
? ? 613.8 576.8
3. Operating profit
For the period 52 weeks 52 weeks
to to
1 April 2 April
2021
2022
GBPm GBPm
Operating profit is arrived at after charging/(crediting) the following expenses/
(incomes) as categorised by nature:
Expenses relating to leases of low-value assets, excluding short-term leases of low 1.6 0.7
value assets
Expenses relating to short term leases 6.8 5.6
Rentals receivable under operating leases (2.6) (2.7)
Landlord surrender premiums (0.8) 0.1
Loss on disposal of property, plant and equipment and intangibles 1.8 1.7
Amortisation of intangible assets 15.8 12.9
Amortisation of right-of-use assets 69.9 69.6
Depreciation of:
owned property, plant and equipment 20.6 21.0
Impairment of:
- owned property, plant and equipment (0.3) 2.8
- impairment of right-of-use assets - 12.2
Trade receivables impairment 0.1 0.1
Staff costs 314.4 299.6
Cost of inventories consumed in cost of sales 654.6 629.1
4. Non-underlying items
For the period 52 weeks to 52 weeks to
1 April 2 April
2022 2021
GBPm GBPm
Non-underlying operating expenses:
Organisational restructure costs (a) 0.3 5.9
Impairment of right-of-use assets (b) - (0.4)
Acquisition and investment related fees (c) 2.8 0.6
One-off claims (d) (2.2) 2.9
Closure costs (e) (8.5) 26.0
Replacement of warehouse management system (f) 0.8 -
Non-underlying items before tax (6.8) 35.0
Tax on non-underlying items 1.7 (6.1)
Non-underlying items after tax (5.1) 28.9
a. In the current and prior period, separate and unrelated organisational restructuring activities wereundertaken. A strategic redesign of the in-store operating model was undertaken to better meet our customers'expectations and deliver a consistent shopping experience across our estate. Redundancy costs of GBP0.3m (PY: GBP5.9m)were incurred during the transition to the new operating model. b. In light of the ongoing COVID-19 pandemic, the Group had revised future cash flow projections for storesand garages in FY20, which led to the recognition of an impairment in relation to garages where the current andanticipated future performance did not support the carrying value of the right-of-use asset and associated tangibleassets. During the prior year, GBP0.4m of this impairment was reversed as the stores and garages had returned to aprofitable position. c. In the current and prior periods, costs were incurred in relation to the investments in National,Iverson, havebike and Universal.
-- In FY22, GBP2.5m relating to professional fees in respect of
the acquisition of National;
-- GBP0.2m related to the acquisition of trade and assets of
both Iverson and havebike;
-- GBP0.1m (PY: GBP0.6m) related to the acquisition of
Universal. d. During the prior period a provision of GBP2.9m was
held in the accounts in relation to the HMRC audit onnational
minimum wage, which was based on management's best estimate using
information available at the time.During the current period this
has been fully settled and paid which has led to a release of the
provision ofGBP2.2m. e. During FY20 and FY21 the group completed a
strategic review of the profitability of the physical estateand
subsequently closed a number of stores and garages. Assets were
impaired and costs associated with the ongoingonerous commitments
under the lease agreements and other costs associated with the
property exits were provided foraccordingly. In the current period
GBP8.5m (costs of GBP26m during FY21) of provisions and lease
liabilities have beenreleased as the group continues to negotiate
lease disposals and review provisions held in place. At the year
endproperty provisions carried forward included an amount of
GBP10.2m in relation to these store and garage closures.These will
continue to unwind as property exits are negotiated with landlords
or tenants, and could result infurther amounts being released to
the income statement due to the significant estimation uncertainty
over thetiming of exits and the final negotiated settlements. f. An
additional charge of GBP0.8m was incurred during the current period
as a result of the replacement ofthe Warehouse Management system.
Under the new IFRIC guidance in regards to IAS 38 this cannot be
capitalised andtherefore, owing to the nature of this cost
(non-trading cost), this is disclosed as a non-underlying expense.
5. Finance costs
Recognised in profit or loss for the period 52 weeks 52 weeks
to to
1 April 2 April
2022 2021
GBPm GBPm
Finance costs:
Bank borrowings (0.1) (2.5)
Amortisation of issue costs on loans (0.7) (1.1)
Commitment and guarantee fees (1.5) (1.1)
Other interest payable - (0.3)
Interest payable on lease liabilities (9.0) (10.0)
Net Finance costs (11.3) (15.0)
6. Taxation
For the period 52 weeks to 52 weeks to
1 April 2 April
2022 2021
GBPm GBPm
Current taxation
UK corporation tax charge for the period 15.9 16.9
Adjustment in respect of prior periods (0.4) (1.0)
15.5 15.9
Deferred taxation
Origination and reversal of temporary differences 3.4 (4.7)
Effect of changes in tax rates (1.7) -
Adjustment in respect of prior periods 1.7 0.1
3.4 (4.6)
Total tax charge for the period 18.9 11.3
The tax charge is reconciled with the standard rate of UK
corporation tax as follows:
For the period 52 weeks to 52 weeks to
1 April 2 April
2022 2021
GBPm GBPm
Profit before tax 96.6 64.5
UK corporation tax at standard rate of 19% (2020: 19%) 18.4 12.3
Factors affecting the charge for the period:
Depreciation on expenditure not eligible for tax relief 0.3 0.9
Impact of super deduction capital allowances uplift (1.3) -
Employee share options 1.5 (1.3)
Other disallowable expenses 0.8 0.6
Adjustment in respect of prior periods 1.3 (0.9)
Impact of overseas tax rates (0.3) (0.3)
Impact of 130% capital allowances deduction (1.8) -
Total tax charge for the period 18.9 11.3
An increase to the main rate of corporation tax to 25% from 1
April 2023 was substantively enacted on 24 May 2021. This will
increase the Company's future current tax charge accordingly. The
closing deferred tax asset at 1 April 2022 has been calculated at
the rates expected to apply when the temporary differences
unwind.
The effective tax rate of 19.5% (2021: 17.5%) is higher than the
UK corporation tax rate principally due to increased disallowable
expenditure this year (in part relating to the share issue and
National acquisition) and adjustments in respect of prior
periods.
The tax charge for the period was GBP18.9m (2021: GBP11.3m),
including a GBP1.7m charge (2021: GBP6.1m credit) in respect of tax
on non-recurring items.
The Group engages openly and pro-actively with tax authorities
both in the UK and internationally, where it trades and sources
products, and is considered low risk by HM Revenue and Customs
("HMRC"). The Company is fully committed to complying with all of
its tax payment and reporting obligations. 7. Dividends
For the period 52 weeks to 52 weeks to
1 April 2 April
2022 2021
GBPm GBPm
Equity - ordinary shares
Final for the 52 weeks to 2 April 2021 - paid 5.0p per share (53 weeks to 3 April 2020: 9.9 -
nil)
Interim for the 52 weeks to 1 April 2022 - paid 3.0p per share (52 weeks to 2 April 2021: 6.6 -
nil)
16.5 -
In addition, the Directors are proposing a final dividend of 6p
per share (2021: 5.0p) in respect of the financial period ended 1
April 2022. 8. Earnings per share
Basic earnings per share are calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period. The weighted
average number of shares excludes shares held by an Employee
Benefit Trust and has been adjusted for the issue/purchase of
shares during the period.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. These represent share options
granted to employees where the exercise price is less than the
average market price of the Company's ordinary shares during the 52
weeks to 1 April 2022.
The Group has also chosen to present an alternative earnings per
share measure, underlying earnings per share, with profit adjusted
for non-underlying items because it better reflects the Group's
underlying performance.
For the period 52 weeks to 52 weeks to
1 April 2 April
2022 2021
Number of shares Number of shares
m m
Weighted average number of shares in issue 205.7 199.1
Less: shares held by the Employee Benefit Trust (weighted average) (1.0) (2.0)
Weighted average number of shares for calculating basic earnings per share 204.7 197.1
Weighted average number of dilutive shares 9.0 4.9
Total number of shares for calculating diluted earnings per share 213.7 202.0
52 weeks to 52 weeks to
1 April 2 April
For the period
2022 2021
GBPm GBPm
Basic earnings attributable to equity shareholders 77.7 53.2
Non-underlying items (see note 4):
Operating expenses (6.8) 35.0
Tax on non-underlying items 1.7 (6.1)
Underlying earnings before non-underlying items 72.6 82.1
For the period
52 weeks to
52 weeks to 1 April
2 April
2022
2021
Basic earnings per ordinary share 37.9p 27.1p
Diluted earnings per ordinary share 36.4p 26.4p
Basic underlying earnings per ordinary share 35.5p 41.7p
Diluted underlying earnings per ordinary share 34.0p 40.7p
9. Analysis of movements in Group's net debt in the period
At 2 April At 1 April
Cash flow Other non-cash changes
2021 2022
GBPm GBPm GBPm GBPm
Cash and cash equivalents at bank and in hand 67.0 (20.9) - 46.1
Debt due after one year - - - -
Total net debt excluding leases 67.0 (20.9) - 46.1
Current lease liabilities (63.4) 85.0 (96.1) (74.5)
Non-current lease liabilities (280.9) - (35.6) (316.5)
Total lease liabilities (344.3) 85.0 (131.7) (391.0)
Total net debt (277.3) 64.1 (131.7) (344.9)
Non-cash changes include additions of new leases, modifications
to leases and foreign exchange movements and changes in
classification between amounts due within and after one year.
Cash and cash equivalents at the period end consist of GBP46.3m
(2021: GBP67.2m) of liquid assets and GBP0.2m (2021: GBP0.2m) of
bank overdrafts. 10. Leases
All leases where the Group is a lessee are accounted for by
recognising a right-of-use asset and a lease liability except
for:
-- Leases of low value assets; and
-- Leases with a term of 12 months or less. i. Amounts
recognised in the consolidated statement of financial position
Right-of-Use Assets
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
At 2 April 2021 279.9 2.9 282.8
Additions on acquisition of subsidiary 82.0 - 82.0
Additions to right-of-use assets 44.6 5.0 49.6
Amortisation charge for the year (66.4) (3.5) (69.9)
Effect of modification of lease 6.8 0.4 7.2
Derecognition of right-of-use assets (1.3) (0.2) (1.5)
Impairment - - -
At 1 April 2022 345.6 4.6 350.2
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
At 3 April 2020 344.0 5.9 349.9
Additions on acquisition of subsidiary 2.7 - 2.7
Additions to right-of-use assets 12.5 0.6 13.1
Amortisation charge for the year (66.1) (3.5) (69.6)
Effect of modification of lease 5.8 - 5.8
Derecognition of right-of-use assets (6.8) (0.1) (6.9)
Impairment (12.2) - (12.2)
At 2 April 2021 279.9 2.9 282.8
Lease Liabilities
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
At 2 April 2021 340.6 3.7 344.3
Additions on acquisition of subsidiary 73.2 - 73.2
Additions to lease liabilities 44.6 4.9 49.5
Interest expense 8.8 0.2 9.0
Effect of modification to lease 6.8 0.4 7.2
Lease payments (81.7) (3.3) (85.0)
Disposals to lease liabilities (7.0) - (7.0)
Foreign exchange movements (0.2) - (0.2)
At 1 April 2022 385.1 5.9 391.0
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
At 3 April 2020 409.8 6.2 416.0
Additions on acquisition of subsidiary 2.7 - 2.7
Additions to lease liabilities 12.6 0.5 13.1
Interest expense 9.8 0.2 10.0
Effect of modification to lease 5.9 - 5.9
Lease payments (92.7) (3.2) (95.9)
Disposals to lease liabilities (6.8) - (6.8)
Foreign exchange movements (0.7) - (0.7)
At 2 April 2021 340.6 3.7 344.3
1 April 2 April
Lease liabilities 2022 2021
GBPm GBPm
Maturity analysis - contractual undiscounted cash flows
Less than one year 81.2 71.2
Between one and two years 80.5 68.8
Between two and three years 72.7 64.4
Between three and four years 59.4 55.1
Between four and five years 39.0 43.2
Between five and six years 26.9 28.4
Between six and seven years 18.7 19.3
Between seven and eight years 12.7 12.1
Between eight and nine years 10.7 5.3
Between nine and ten years 8.2 3.5
After ten years 9.0 3.5
Total contractual cash flows 419.0 374.8 ii. Amounts recognised in the consolidated income statement
Land and Equipment
Total
buildings GBPm
GBPm
GBPm
52 weeks ended 1 April 2022
Amortisation charge on right-of-use assets 66.4 3.5 69.9
Interest on lease liabilities 8.8 0.2 9.0
Expenses relating to short-term leases 6.8 - 6.8
Expenses relating to leases of low-value assets, excluding short-term leases of - 1.6 1.6
low-value assets
52 weeks ended 2 April 2021
Amortisation charge on right-of-use assets 66.1 3.5 69.6
Interest on lease liabilities 9.8 0.2 10.0
Expenses relating to short-term leases 5.6 - 5.6
Expenses relating to leases of low-value assets, excluding short-term leases of - 0.7 0.7
low-value assets iii. Amounts recognised in the consolidated statement of cash flows
The total cash outflow for leases for the period ended 1 April
2022 was GBP85.0m (2021: GBP95.9m). 11. Prior Period Adjustment
During the preparation of the financial statements, a mapping
error was identified relating to the reduction in the Cycle to Work
contract liability in respect of expected breakage. This reduction
in the liability had in previous years been mapped to Prepayments
and Accrued Income in the financial statements rather than being
mapped to the Cycle to Work liability in Accruals and Deferred
Income.
GBP12.0m was incorrectly included in Prepayments and Accrued
Income as at the prior period end of 2 April 2021. The error at the
period end of 3 April 2020 is GBP8.2m.
To correct for this error, in the Consolidated Statement of
Financial Position, Trade and other receivables at 2 April 2021
have been reduced by GBP12.0m with a corresponding adjustment to
Trade and other payables. Within net cash from operating activities
in the Consolidated Statement of Cash Flows, Increase in trade and
other receivables has increased by GBP3.8m with a corresponding
adjustment to Increase in trade and other payables.
In correcting this error, there is no impact on the Consolidated
Income Statement or Net Assets.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00B012TP20
Category Code: ACS
TIDM: HFD
LEI Code: 54930086FKBWWJIOBI79
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 168589
EQS News ID: 1376775
End of Announcement EQS News Service
=------------------------------------------------------------------------------------
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