Halfords Group Plc · LSE:HFD
Halfords — FY2021 Earnings Presentation
39 slides from Halfords's earnings presentation, Jun 17, 2021
Slide 1: FY21 Preliminary Results
HALFORDS GROUP PLC FY21 PRELIMINARY RESULTS 17TH JUNE 2021
Slide 2: Agenda
2 Agenda FY21 Financial Performance and FY22 Outlook Loraine Woodhouse, CFO Strategic Update Graham Stapleton, CEO Summary Graham Stapleton, CEO Q&A
Slide 3: FY21 Financial Performance
3 FY21 FINANCIAL PERFORMANCE Loraine Woodhouse, CFO
Slide 4: Strong financial performance in an incredibly challenging year
Strong financial performance in an incredibly challenging year, with significant 4 revenue growth supported by robust management of gross margin, costs and cash Group Sales Growth • Strong Group revenue growth +13.1% (LFL revenue +13.9%) Group Gross Margin • Gross margin improvements offsetting mix
Slide 5: Non-underlying items and FY21 vs FY20 results
Non-underlying items, largely arising due to store and garage closures, amounted to 5 £35.0m. Impact of adopting IFRS 16 was a credit of £3.2m. FY21 vs. FY20 +13.1% YoY Revenue £1,292.3m +13.9% LFL Non-Underlying items -£35.0m Impact of adopting IFRS 16 £3.2m PBT after Non-Underlying items post-IFRS
Slide 6: FY21 Group PBT driven by strong performances across all businesses
6 FY21 Group PBT driven by strong performances across all businesses Group PBT Bridge -£2.2m £5.3m £9.8m -£33.3m £39.1m £21.7m £96.3m Retail underlying +£31.5m YoY £55.9m Note: Underlying numbers exclude business rates relief and COVID-19 costs. COVID-19 costs include £10.5m of furlough, which was r
Slide 7: Retail performance driven by strong revenue growth and cost control
Retail performance driven by strong revenue growth, 7 underlying margin improvements and tight cost control +9.4% YoY Revenue £1,039.8m +14.6% LFL Gross Margin 48.3% +10bps YoY Operating Costs* £410.6m +1.6% YoY Underlying EBIT* £91.4m +68.9% YoY Note: *numbers reported on a pre-IFRS 16 basis
Slide 8: Volatile and unpredictable trading environment throughout FY21
We experienced a volatile and unpredictable trading environment throughout FY21, 8 making operating the business extremely challenging Retail Weekly LFL Trend Retail LFL Sales Growth 56.2% 52.3% 54.1% 44% 40% 41% -9% -10% H1 H2 FY -3.0% -12.1% -30% -20.8% Motoring Cycling
Slide 9: Significant margin gains in Cycling mitigated adverse mix effect
Significant margin gains in Cycling mitigated the adverse mix effect of declining higher- 9 margin Motoring sales Retail Gross Margin % Gross Margin Improvement FY 21 48.3% 49.0% 48.0% 47.0% -220 bps 390 bps FY 20 48.2% 46.0% Better -60 bps 45.0% 48.2% 48.3% -100 bps 44.0% FY 19 43.0% 48.0% 42.0% FY
Slide 10: Strong FY21 Retail operating cost leverage
Strong FY21 Retail operating cost leverage, with efficiency savings helping to fund 10 strategic investments Retail Operating Costs Bridge -£9.6m £23.7m -£7.0m £7.5m -£33.1m £24.8m +3.6% YOY £418.9m -2.2ppts of sales £410.6m £404.3m
Slide 11: Autocentres performance rebounded after lockdown-impacted Q1
Autocentres performance rebounded after a lockdown-impacted Q1, as we took share 11 and grew our business organically and through acquisition +31.6% YoY Revenue £252.5m Autocentres LFL Sales Growth +9.7% LFL 19.8% 17.9% 16.3% Gross Margin 61.1% -440 bps Q1 Q2 Q3 Q4 Operating Costs* £141.6m +19.1% Yo
Slide 12: Underlying rate improvements partly offset mix impact
Significant underlying rate improvements partly offset the mix impact of significant 12 growth in businesses with lower, but improving, margins Margin per worked Hour +10% Autocentres Gross Margin % Bridge £32.69 £29.30 /hr 22bps /hr -376bps FY20 FY21 65.5% -227bps 72bps 32bps 38bps 61.1% Total Mix
Slide 13: Autocentres operating cost growth driven by acquisitions
Autocentres Operating Cost growth driven by annualisation of acquisitions, with 13 overall cost productivity Autocentres Operating Costs Bridge -£6.0m £5.3m £18.0m £0.9m £4.8m £142.6m £141.9m +4.8% YOY £118.9m +19.7% YOY -5.6ppts of sales
Slide 14: Autocentres underlying EBIT of £12.7m
Autocentres recorded an underlying EBIT of £12.7m, 14 89.6% higher than last year +31.6% YoY Revenue £252.5m +9.7% LFL Gross Margin 61.1% -440 bps Operating Costs* £141.6m +19.1% YoY Underlying EBIT* £12.7m +89.6% YoY Note: *numbers reported on a pre-IFRS 16 basis
Slide 15: Group gross margin bridge
For the Group overall, significant underlying rate improvements offset the adverse 15 mix impact of strong Cycling growth and acquisitions Group Gross Margin % Bridge 35bps -74bps -60bps -211bps 314bps -37bps 51.1% 50.8% 48.6% Total Mix impact of (248bps) Rate improvements totalling +349bps
Slide 16: Strong cash performance leaves Group well positioned to invest
Strong cash performance, some of which will unwind in FY22, leaves the Group in a 16 good position to invest in the strategy in FY22 FY21 FY20 YOY £m £m £m EBIT 64.5 23.3 41.2 FY21 working capital inflow Depreciation & Amortisation 39.7 40 -0.3 benefitted by approximately Working Capital 43.4 48.7 -
Slide 17: Proposed dividend of 5p in FY21 and 9p in FY22
17 Proposed dividend of 5p in FY21 and 9p in FY22 Dividend per share Capital Allocation Priorities Actual 1 Maintaining a prudent balance sheet Proposed 17.00p 17.50p 18.00p 18.57p 2 Investment for growth 9.00p 3 M&A focussed on Autocentres 6.18p 5.00p FY16 FY17 FY18 FY19 FY20 FY21 FY22 4 Progressiv
Slide 18: Current trading and FY22 outlook
Trading positive so far in FY22, albeit volatility has continued. Outlook for FY22 is 18 one of cautious optimism Current trading FY22 Outlook FY22 9 weeks YTD Tailwinds Headwinds (2 year LFL Sales) - More regular motoring journeys - Volatile and uncertain trading environment Group +17.9% - Staycati
Slide 19: Strategy Update
19 STRATEGY UPDATE Graham Stapleton, CEO
Slide 20: Reminder of our accelerated strategy
20 Reminder of our accelerated strategy “Evolve into a consumer and B2B services-focused business, with a greater emphasis on motoring, generating higher and more sustainable financial returns.”
Slide 21: Strong growth in our areas of strategic focus
21 Strong growth in our areas of strategic focus Sales Growth YOY % % of Group Sales Group B2B +40.0% 17.9% (+3.4ppts YOY) Group Services +23.0% 28.7% (+2.3ppts YOY) Group Online +110.0% 44.0% (+21ppts YOY)
Slide 22: To Inspire and Support a Lifetime of motoring and cycling
22 To Inspire and Support a Lifetime of motoring and cycling.
Slide 23: Strategic Pillars
23 Strategic Pillars 1 Inspire our customers with a differentiated, super-specialist offer 2 Support our customers through an integrated, unique and more convenient services offer 3 Enable a lifetime of motoring and cycling Underpinned by: Focus on Cost and Efficiency Investment in our Colleagues
Slide 24: A Reminder of our FY21 Priorities
24 A Reminder of our FY21 Priorities In July 2020, we highlighted the need to moderate our near term plan in light of the unprecedented impact and extreme uncertainty of the COVID-19 pandemic. The emphasis of our short-term plans were to build foundations from which to transform: 1. Continue to tran
Slide 25: Strategic Highlights: motoring services
25 Strategic Highlights Continue to build a unique and market-leading position for motoring services • Increased the scale of our Halfords Mobile Expert to 143 vans, 14 hubs and over 250 technicians achieving +200% growth. • Acquired Universal Tyres adding 20 garages and 89 vans to expand our commer
Slide 26: Strategic Highlights: web platform and digital experience
26 Strategic Highlights Enhancing our Group web platform and digital customer experience, to create an even more differentiated and specialist proposition • Over 160 customer enhancements to our Group website. o ‘Email me when back in stock’ o Frequently bought with adding additional items to 20% of
Slide 27: Strategic Highlights: cost and efficiency
27 Strategic Highlights A focus on cost and efficiency, creating a leaner and more profitable business • Cycling profitability improvements of +680bps: o Simplifying our ranges and componentry o Promotional effectiveness • Established HME hubs now profitable. • Sustainable working capital improvemen
Slide 28: Strategic Highlights: Investment in our Colleagues
28 Strategic Highlights Investment in our Colleagues • Prioritised colleague safety, including PPE and COVID protocols for stores and garages totalling £11m. • Supported our colleagues financially with over £4m of initiatives and schemes provided during the pandemic. • We launched a Wellbeing hub to
Slide 29: FY21 summary: strengthened foundations, ready to accelerate transformation
FY21 summary – we have strengthened our foundations, ready to accelerate our 29 transformation in FY22 FY21: Strengthening the foundations FY22: Transforming the of the business customer experience Improved Economics Property and Costs • Cycling gross margin +680bps, • GNFR and procurement saving ov
Slide 30: Our Strategic Focus for FY22
30 OUR STRATEGIC FOCUS FOR FY22
Slide 31: FY22 Strategic Focus
31 FY22 Strategic Focus Having transformed the economics of our business over the last 18 months, we have built strong foundations from which we will now transform the customer experience. In FY22, we will scale our Services business even “A different business will begin to further, making progress
Slide 32: Inspire customers through a super-specialist shopping experience
32 FY22 Strategic Focus Inspire our customers through a differentiated, super- specialist shopping experience • Project Fusion – exciting opportunity to provide a seamless, digital customer experience o 2-3 test towns o Destination Retail store and new garage formats • Further Digital enhancements o
Slide 33: Support customers through an integrated services offer
33 FY22 Strategic Focus Support our customers through an integrated, unique and more convenient services offer • HME – continue to scale our proposition; o 200 vans, more technicians and hubs o Achieve UK coverage of 80% o Greater range of services • Autocentres will take the next steps in becoming
Slide 34: Enable a lifetime of motoring and cycling
34 FY22 Strategic Focus Enable a lifetime of motoring and cycling • Loyalty – we will launch a unique market-leading motoring services club. • Cross Shop – Continues to be a lucrative opportunity o Initiatives to drive awareness of the benefits of shopping across the Group o Continue to enhance the
Slide 35: FY22 Strategic Focus: Investment in our Colleagues
35 FY22 Strategic Focus Investment in our Colleagues • Our frontline colleagues will benefit from the biggest investment in skills to-date, investing nearly £3m in Services training to deliver 40,000 skills across the business, enhancing our super- specialist credentials. • By the end of FY22, more
Slide 36: FY22 Strategic Focus: Cost and Efficiency
36 FY22 Strategic Focus Cost and Efficiency • Maximise opportunities in Rent negotiations • Established workstreams continue to target efficiency and cost reductions; o We Operate 4 Less o One-way o LED lighting o GNFR and procurement o Working capital and stock turn
Slide 37: FY21 summary: built strong foundations, ready to transform
37 FY21 summary – ‘we have built strong foundations, ready to transform’ FY21: Foundations FY22: Transformation • Fusion Concept stores Property and Cost Inspire • Even better Digital customer experience • Peloton 2 • Bigger HME and Garage business Improved Economics Support • Accelerate leadership
Slide 38: Q&A
38 halfords Q&A
Slide 39: Contact and Newsflow
39 Contact and Newsflow For further information, please go to www.halfordscompany.com or contact: Andy Lynch Head of Investor Relations and Corporate Finance Andy.Lynch@halfords.co.uk Next newsflow: 8th September 2021: FY22 20-week trading update