Halfords Group Plc · LSE:HFD
Halfords — H1 2008/09 Earnings Presentation
35 slides from Halfords's earnings presentation, Nov 20, 2008
Slide 1: Interim Results
Interim Results 26 Weeks to 26 September 2008 City Presentation Centre 20 November 2008
Slide 2: David Wild, Chief Executive Officer
David Wild Chief Executive Officer
Slide 3: Introduction
Introduction z Strong, well managed business z Resilient, but not immune to economic cycle z Focus on ensuring cost base is appropriate z Creating platform for future growth 3 Halfords Group plc Interim Results – 20 November 2008
Slide 4: Nick Wharton, Finance Director
Nick Wharton Finance Director
Slide 5: Financial Highlights
Financial Highlights z Sales £407.1m +1.6% z Like-for-like sales -1.1% (Easter adjusted -0.5%) z Operating profit £55.0m +4.6% z Profit before tax £49.1m +3.2% z Basic EPS 16.7 pence +9.2% z During the period 4.7m shares bought back at a cost of £13.0m z Net Debt £174m, continued strong cash generat
Slide 6: Profit and Loss Account
Profit and Loss Account 2008/09 2007/08 H1 H1 Growth £m £m % Revenue 407.1 400.7 +1.6% Gross profit 210.0 204.0 +2.9% Net operating expenses (155.0) (151.4) +2.4% Operating profit 55.0 52.6 +4.6% Operating profit % 13.5% 13.1% Net finance costs (5.9) (5.0) +18.0% Profit before tax 49.1 47.6 +3.2% Ba
Slide 7: Sales Growth and Margin %
Sales Growth and Margin % 2008/09 2007/08 H1 H1 % % Underlying like-for-like sales growth -0.5 +5.5 Easter adjustment -0.6 0.0 Like-for-like sales growth -1.1 +5.5 Net new space +2.7 +3.0 Total sales growth +1.6 +8.5 2008/09 2007/08 H1 H1 H2 Full Year Like-for-like comparatives1 -0.5% 5.5% 2.5% 4.0%
Slide 8: Active Margin Management
Active Margin Management H1 Performance z Margin accretion of 70bps: Mix benefit Active margin management in all categories Ongoing sourcing benefits Macro Factors Halfords Factors z Currency headwind z Mix towards higher margin categories z Moderating inflation at source z Price architecture
Slide 9: Net Operating Expenses
Net Operating Expenses Operating expenses growth 2.4%, revenue ratio 38.1% (2007: 37.8%) Macro Drivers z Store rent inflation moderating z Utility / environmental cost pressure Halfords Factors z New store system depreciation z Increased advertising investment z Comparable level of landlord contribu
Slide 10: Operating Cost Efficiency
Operating Cost Efficiency z Ongoing focus on operating costs z Reorganisation activity currently in progress z H2 cost c.£2.0m with 6 - 8 month payback z New store systems benefits: z Cash / inventory reconciliation improvements – part time role eliminated z Rota capability eliminates staff hours or
Slide 11: Balance Sheet
Balance Sheet H1 H1 FY 2008/09 2007/08 Growth 2007/08 £m £m % £m Goodwill and intangible assets 258.8 258.2 0.2% 256.8 Property, plant and equipment 112.2 110.5 +1.5% 116.2 Derivative financial instruments2 5.9 (1.8) 1.6 Net working capital1 51.4 46.6 +10.3% 57.6 Cash and financial instruments (174.
Slide 12: Capital Expenditure Summary
Capital Expenditure Summary H1 H1 FY 2008/09 2007/08 2007/08 £m £m £m New stores and re-sites 3.7 5.5 12.1 Store conversions 1.6 0.8 1.8 Czech Republic (incl. Systems development) 1.0 1.0 1.5 Total portfolio 6.3 7.3 15.4 Head office systems 1.5 0.4 5.5 Store systems 0.4 4.1 6.3 Supply chain 0.1 0.6
Slide 13: Cash Flow and Net Debt
Cash Flow and Net Debt Operating cash flow Free cash flow Net debt1 £m £m £m Operating profit 55.0 Op. cash flow 72.6 Net debt 28.03.08 (181.7) Depreciation/Amortisation 11.5 Net finance costs (5.6) Free cash flow 31.1 Employee share scheme 0.7 Taxation (12.9) Share buy back (12.5) Fixed asset write
Slide 14: Balance Sheet Efficiency
Balance Sheet Efficiency Debt : Structure & Profile z £180m term loan, repayment July 2011 z £120m revolving credit facility z Coterminous £70m interest rate swap z Statutory full/half year represents peak borrowing requirement Key Metrics z Adjusted net debt/EBITDAR - 3.8x (FY08 – 3.9x) z Fixed cha
Slide 15: David Wild, Chief Executive Officer
David Wild Chief Executive Officer
Slide 16: Agenda
Agenda z Overview z Strategic Growth Plan z Outlook z Summary 16 Halfords Group plc Interim Results – 20 November 2008
Slide 17: Overview
Overview Results demonstrate unique strength of Halfords z Needs-driven Car Maintenance and growth in Cycles underpins sales resilience in tougher environment z Core category differentiation and competitive advantage through range, scale, and service z Market leadership positions enable margin lever
Slide 18: Strategic Growth Plan
Strategic Growth Plan Our strategic plan remains consistent, with revised emphasis z Investing in the Store Portfolio z Extending range and service advantage z Ongoing focus on cost control z Leveraging the Halfords brand in multi-channel 18 Halfords Group plc Interim Results – 20 November 2008
Slide 19: Investing in the Store Portfolio
Investing in the Store Portfolio UNITED KINGDOM Superstores z Format of choice on premium retail parks z 372 stores, 234 with mezzanine z Highly accessible, 90% consumers within 20 minutes z Ongoing programme to ensure stores remain contemporary in look and offer z Upcoming lease renewals provide op
Slide 20: Investing in the Store Portfolio: Republic of Ireland
Investing in the Store Portfolio REPUBLIC OF IRELAND z 19 Superstores now trading four years after market entry z Development of Neighbourhood format to extend reach z Market leadership achieved in core categories z Returns ahead of UK equivalent investments z Performance set-back in tough economic
Slide 21: Investing in the Store Portfolio: Central Europe
Investing in the Store Portfolio CENTRAL EUROPE Macro Factors: z Market characteristics remain attractive, Key Economic Statistics UK Czech Republic Poland with scale potential Population (millions) 61 10 40 Halfords Factors: GDP Growth 2003 – 2007 (%) 2.8 5.5 5.1 z Performance remains encouraging R
Slide 22: Central Europe Near Term Plan
Investing in the Store Portfolio CENTRAL EUROPE – NEAR TERM PLAN z Business model most effective at high market shares z Low infrastructure opportunity to accelerate to scale in Poland / Czech Republic: First store (Wroclaw) trading in December 2008 Multi-country / currency trading systems devel
Slide 23: Stand Alone Cycle Stores
Investing in the Store Portfolio STAND ALONE CYCLE STORES z FY08 Focus Establish offer credibility/reputation Improve customer experience & operating economics from smaller footprint Achieve pilot scale z FY09 Objectives Extend to national pilot Optimise labour & repair model Confirm per
Slide 24: Extending range and service advantage: Car Maintenance
Extending range and service advantage CAR MAINTENANCE z Destination store status through range authority, availability and increasingly wefit z Needs driven product resilient through economic cycle with above average gross margins z Ageing UK car parc positive for demand for key consumables z Rangin
Slide 25: Extending range and service advantage: Car Enhancement
Extending range and service advantage CAR ENHANCEMENT z Wide ranging category from resilient car cleaning staples to accessories & technology z Clear market leader in in-car technology z Market remains attractive, volume good but unit sales price in decline z Dynamic category with divergent competit
Slide 26: Extending range and service advantage: Cycling
Extending range and service advantage CYCLING z Significant and growing market driven by economy, sustainability and well-being z Destination store status with leadership brand through range, value and service z Scale and agile sourcing model ensures lowest cost procurement z Own and exclusive brand
Slide 27: Extending range and service advantage: Travel Solutions
Extending range and service advantage TRAVEL SOLUTIONS z Travel Equipment - Sub shop credibility established - Adversely impacted by poor weather - UK domestic holidays provide opportunity z Camping - Best ever camping season, opportunity to extend range - Still lowest market share z Child seats - G
Slide 28: Ongoing Cost Control
Ongoing Cost Control Continued focus ensures cost base appropriate for economic cycle z Ongoing programme complements interventions planned for H2 FY09 z Cost of Goods - Own label participation gives buying flexibility - Direct sourcing c. 25%, with further potential - Agile buying model to access l
Slide 29: Multi Channel Development
Multi Channel Development halfords.com z Slow start by Halfords into new channel. Still low participation z Key objective to drive customers to store z Rapid growth especially since “Reserve and Collect” launch z Margin now increasing z New site launched October 2008 with strong KPI improvements z 2
Slide 30: Strategic Growth Plan
Strategic Growth Plan z Investing in the Store Portfolio z Extending range and service advantage z Ongoing focus on cost control z Leveraging the Halfords brand in multi-channel 30 Halfords Group plc Interim Results – 20 November 2008
Slide 31: Outlook
Outlook FY09 H2: z Sales environment continues to be challenging z Active margin management and cost focus key priority z Switch in investment emphasis to outside UK z Full year trading profits anticipated to be in line with expectation 31 Halfords Group plc Interim Results – 20 November 2008
Slide 32: Summary
Summary z Solid earnings progression in toughening environment z Focus on protecting performance through economic uncertainty z Prudent UK store portfolio expansion z Acceleration of growth initiatives – Central Europe and Multi Channel 32 Halfords Group plc Interim Results – 20 November 2008
Slide 33: Appendices
Appendices 1. Portfolio by Store Type 2. Portfolio by Location
Slide 34: Portfolio By Store Type
Portfolio By Store Type Retail Space 3,809,154 ft2 Mezzanine Flat Neighbourhood Metro Bikehut Total SM/M F N Me BH Opening Number 231 159 24 31 5 450 New Store 2 4 1 0 1 8 Closures 0 (1) 0 (2) 0 (3) Conversions 1 (1) 0 0 0 0 Closing Number 234 161 25 29 6 455 08/09 store rollout Q1 Q2 New stores (8)
Slide 35: Portfolio by Type and Location
Portfolio by Type and Location UK RoI CZ Total Superstore 372 19 4 395 Neighbourhood 24 1 0 25 Metro 29 0 0 29 Bikehut 6 0 0 6 Total 431 20 4 455 35 Halfords Group plc Interim Results – 20 November 2008