Halfords Group Plc · LSE:HFD
Halfords — FY2024 Earnings Presentation
60 slides from Halfords's earnings presentation, Jun 27, 2024
Slide 1: FY24 Full Year Results
FY24 Full Year Results Halfords Group PLC 27th June 2024 1
Slide 2: Agenda
Agenda Overview Graham Stapleton FY24 Financial Performance Jo Hartley Business & Strategic Update Graham Stapleton Outlook Graham Stapleton Q&A 2 Classification: Restricted
Slide 3: Overview
Overview • Successfully delivered on the areas within our control • Made good strategic progress • Headwinds outside of our control were worse than anticipated • FY25 focus is to further optimise the unique platform we have created and mitigate continued headwinds ‘Building a stronger and more resil
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Jo Hartley 4 Classification: Restricted
Slide 5: Basis of financial information
Basis of financial information • Covers the 52-week period from 1 April 2023 to 29 March 2024 • All comparators are on a one-year basis • All figures are post IFRS 16 unless otherwise stated • All figures relating to the Income Statement are based on ALL Operations (Continuing plus loss-making Disco
Slide 6: Our actions helped to mitigate the difficult macro-economic backdrop
Our actions helped to mitigate the difficult macro-economic backdrop Macro-economic Consumer High Interest Rates Wage and Energy Hedged USD FX rate Confidence for big- & Inflation Inflation ticket items Mitigating actions Growing Good cash Improving market share Cost & Efficiency management Autocent
Slide 7: Strong sales growth driven by share gains; cost savings mitigating inflation
Strong sales growth driven by share gains; Cost savings mitigating ongoing inflation; Very strong profit performance in Autocentres Strong revenue Gross margin Costs well managed in growth resilient challenging environment Group Gross Margin Cost as % Revenue LFL: +5.0% Total: +7.6% 48.2% 45.3% (-50
Slide 8: Weak demand for big-ticket, discretionary purchases had significant impact on results
Weak demand for big-ticket, discretionary purchases had significant impact on results Big ticket: 30% • Big ticket categories represent c. 30% of Group revenue Needs 5% Part Needs 30% 14% • Two-thirds of big-ticket revenue is purely Small Needs discretionary or part needs-based spend ticket: Group D
Slide 9: Impact of Discontinued Operations – Viking and BDL
Impact of Discontinued Operations – Viking and BDL • Announced in January 2024, we have restructured our tyre supply chain. This involved the closure of our loss making Viking and BDL operations and the outsourcing of these activities to Bond International, a specialist tyre distributor. FY24 FY23 A
Slide 10: Strong sales growth and cost actions partly mitigated inflation
Strong sales growth and cost actions partly mitigated inflation and challenging market conditions £m FY24 Vs FY23* +121.0 Commentary on key movements Revenue 1,712.8 +7.6% • Strong revenue growth driven by market share gains in all four Gross margin (%) 48.2% -50bps core markets. Autocentres growth
Slide 11: Group Underlying PBT Bridge vs FY23
Cost savings, share gains and profit growth in Autocentres largely offset £42m of cost inflation and market headwinds Group Underlying PBT Bridge vs FY23 Inflation & Market £42m 11
Slide 12: Inflation added £37m to the cost base
Inflation added £37m to the cost base and brought the cumulative impact to c. £120m in the last three years, well in excess of normal levels FX Rate Utilities Pay Freight Average exchange rate through Utilities costs have doubled National Minimum Wage YOY cost savings of £6m COGS $1.22 increases, +1
Slide 13: £35m of cost savings delivered in FY24
> £35m of cost savings delivered in FY24 - higher than original target due to outperformance of our Better Buying programme Outsourcing / Property & “Goods Not For Product Cost Organisational Warehousing Resale” Reduction Structure Savings Reduction c.£19m savings c.£6m savings c.£5m savings c.£5m s
Slide 14: Autocentres Group
AUTOCENTRES GROUP 14 Classification: Restricted
Slide 15: Underlying EBIT in Autocentres, excluding Avayler, up £12m
Underlying EBIT in Autocentres, excluding Avayler, up £12m year-on-year Autocentres, exc. FY24 vs. FY232 Avayler1 £101.6m Revenue £713.4m +16.6% (LFL +10.7%) Gross Margin % 49.3% +150bps -£47.5m Operating Costs -£336.8m +16.4% Growth & Optimisation % of revenue 47.2% -10bps £11.1m +£12.0m Underlying
Slide 16: Retail
RETAIL 16 Classification: Restricted
Slide 17: In Retail, share gains and better buying mitigated market declines
In Retail, share gains and better buying mitigated the impacts of market declines in discretionary products, a consolidating Cycling market, and FX headwinds Gross Margin Bridge – year-on-year £m FY24 vs. FY23* +2.0% YoY 1.8% Revenue 997.1 +2.2% LFL 0.3% 0.5% 1.2% +4.6% YoY Motoring 644.6 49.2% +4.9
Slide 18: Cash & Balance Sheet
CASH & BALANCE SHEET 18 Classification: Restricted
Slide 19: Good inventory management drove operating cashflow higher
Good inventory management in Retail drove operating cashflow £13m higher than FY23, leaving net debt broadly in line with last year 1 Operating cashflow2 £167.4m 1. Included in total depreciation and amortisation is £82.5m relating to amortisation and impairment of right of use assets 19 2. The sum
Slide 20: Mid-term ROCE target of >15%
Mid-term ROCE target of >15%. Attractive returns from targeted investments • Half of capex in FY24 was spent on maintaining the physical and digital estate • Remaining capex spent on projects FY24 Capex £46.5m with attractive returns – including Group website, motoring club, data capabilities, and A
Slide 21: Net debt excluding leases of £8.2m
Net debt excluding leases of £8.2m. Leverage below the guided range. £180m debt facility extended to April 2028 Net Debt £m Net Debt : EBITDA (FY24) 348.7 315.4 346.9 307.2 1.7x 0.1x 8.2 1.8 Net Debt : EBITDA Net Debt : EBITDA FY24 FY23 (pre lease debt) (post lease debt) (Cash)/Debt Lease debt • Net
Slide 22: Proposed final dividend of 5p per share
Proposed final dividend of 5p per share, bringing full year dividend to 8p Capital Allocation Priorities Maintaining a prudent balance sheet Dividend per share Investment for growth 7.00 6.00 M&A focused on Final Final 5.0 Autocentres 6.18 5.00 Interim Final 3.0 3.0 3.0 Dividend covered by 1.5x – In
Slide 23: FY24 Summary: delivered well on areas within our control
FY24 Summary: delivered well on the areas within our control 1. Strong revenue growth of +7.6% and +5.0% on a LFL basis. Market share gains in all core categories, above expectations 2. Autocentres delivered significant revenue and profit growth 3. Gross margin 50 bps below last year. Very strong ma
Slide 24: Business & Strategic Update
BUSINESS & STRATEGIC UPDATE Graham Stapleton 24 Classification: Restricted
Slide 25: The Group's purpose was set in 2018
The Group’s purpose was set in 2018 and remains as relevant as ever ‘‘ To inspire and support a lifetime of motoring and cycling ‘‘ 25 Classification: Restricted
Slide 26: The progress this year has delivered against our long-term strategy
The progress this year has delivered against our long-term strategy ‘‘ Our Strategy for the long-term To evolve into a consumer and B2B services- focused business, with a greater emphasis on motoring, generating higher and more sustainable financial returns. ‘‘ 26 Classification: Restricted
Slide 27: Our focus in the mid-term is clear
Our focus in the mid-term is clear ‘‘ To fully leverage our unique, digital and data-enabled omnichannel platform, driving improved financial returns. ‘‘ 27 Classification: Restricted
Slide 28: The strategic shift has resulted in a more resilient business
The strategic shift of the Group has resulted in a more resilient business, 60% larger than it was in 2019 FY19 FY24 Group Revenue £1.1bn £1.7bn 24% Revenue from Services 51% 12% 29% Revenue from B2B Revenue from Motoring 66% 79% Revenue from need-based 49% 65% categories1 1. Need-based categories i
Slide 29: Performance since the CMD has been mixed
Performance since the CMD has been mixed, with share gains and cost efficiency outperforming, but market volumes and inflation worse than anticipated Group PBT Bridge - FY23 to mid-term FY24 progress versus CMD £110m £90m £60m £50m FY23 Market Market Share Inflation Cost & Efficiency Leveraging Valu
Slide 30: Consumer tyres and cycling markets have underperformed expectations
Consumer tyres and cycling markets have underperformed expectations Autocentres Retail Market Volumes Consumer Tyres Motoring Servicing Retail Motoring Cycling Volume growth assumed Year 1 Broadly FY24 vs FY23 c.+2.6% c.+0.5% c. -1.0% flat Volume growth actual -1.3% +0.9% +0.9% -4.0% Market Volumes
Slide 31: We exceeded our original market share targets
We exceeded our original market share targets Autocentres Halfords Retail Consumer Tyres Motoring Servicing Retail Motoring Cycling Market Share Share expectation year 1 c.+0.2ppts c.+0.2ppts c.+0.6ppts +0.7ppts FY24 vs FY23 YOY YOY YOY YOY Share movement actual +0.4ppts +0.2ppts c.+1.3ppts c.+1.3pp
Slide 32: Market Share - Autocentres
Market Share - Autocentres The launch of several customer propositions drove share growth in Autocentres Better value & greater Tyre awareness convenience campaigns Motoring Club Market leading Better utilisation credit Dynamic pricing 32
Slide 33: Market Share – Motoring Club
Market Share – Motoring Club Motoring Club membership doubled to 3.4m in FY24, providing customers and Halfords with significant benefits The club is driving share in Retail and Consumer Garages, with membership reaching 3.4m people in FY24 45% c. 40% 8.0% of members joining in Of all MOTs are to of
Slide 34: Market Share - Retail
Product innovation and exclusivity continued to set Halfords apart Car Parts extended World’s first Kids Bikes growth & range and market truly smart Cycling innovation Market Share - Retail leading convenience 4G dash cam New pet travel range New Bulb & Oil Brands Tredz share gains 34
Slide 35: Market Share – Tredz
Tredz like-for-like revenue grew +11.1%, taking significant share and growing profit in a rapidly consolidating market Market Share – Tredz FY24 highlights +11.1% +19% LFL revenue Increase in growth customer base +3.0 %pt 4.7 Increase in Brand 4.7 Trustpilot score, awareness increasing 0.1 35
Slide 36: Acquisition synergies
Acquisition synergies Synergy delivery on track in Lodge and National • With the acquisition of Lodge, Halfords is • Synergy delivery on track, including: now the UK’s largest provider of ➢ Closed loss-making garages and commercial tyre services consolidated support structures • Synergies tracking a
Slide 37: FY24 Strategic Progress
FY24 STRATEGIC PROGRESS 37 Classification: Restricted
Slide 38: Restructuring tyre supply chain
Restructuring tyre supply chain Restructuring our tyre supply chain will deliver for customers, whilst improving ROCE through cost efficiencies and working capital benefits • Tyre supply chain now outsourced to specialists, Bond International • Customers will benefit from: • Same day delivery servic
Slide 39: Avayler
The strength of our Avayler SaaS business was demonstrated by major contract wins and an equity stake investment from Bridgestone UK • 15-year commercial agreement signed with Bridgestone • Bridgestone invest $3m Europe for 5% equity stake Avayler • Further Contract wins in the US with Triple A, Zip
Slide 40: FY24 Summary
FY24 Summary Headwinds outside of our control were worse than anticipated: ➢ Consumer Tyres and Cycling markets declined and remain depressed vs pre-Covid Cycling market consolidated at a faster rate, leading to gross margin pressure ➢ Elevated cost inflation continued in FY24, worse than we expecte
Slide 41: FY25 Focus
FY25 FOCUS Graham Stapleton 41 Classification: Restricted
Slide 42: FY25 focus is to further optimise the platform and mitigate headwinds
FY25 focus is to further optimise the platform and mitigate significant headwinds Context for FY25 Our response • Consumer confidence low, particularly • Further optimise the unique platform for big-ticket discretionary purchases we have created • Heavy rainfall in the spring impacted • Mitigate hea
Slide 43: FY25 building blocks of CMD plan
FY25 represents Year 2 of our CMD plan. Our expectations in this year are underpinned by the following building blocks Market MarketRecovery Volumes Market Share Market Share Inflation Cost CostEfficiency & Efficiency Note: direction and colour of arrows represent expectations for how each factor is
Slide 44: Expect market volumes to decline in FY25
Expect market volumes to decline in FY25 in Consumer Tyres and Cycling markets, with continued progress on market share gains Autocentres Retail Consumer Tyres Motoring Servicing Retail Motoring Cycling Market growth1 assumed Year 2 Broadly Broadly -2.0% FY25 vs FY24 c. -2.0% flat flat Market share1
Slide 45: In premium cycling, a new range of premium bikes
In premium cycling, we will attract the more resilient commuter/enthusiast cyclist with a new range of premium bikes • 40 new bikes, including adult mechanical and E-Bikes – across our Boardman, Voodoo, and Carrera brands • Priced from £1,000 to £5,500 • Offering unbeatable value, high specification
Slide 46: Expect to incur over £35m of net cost inflation
Expect to incur over £35m of net cost inflation. Uncertainty on sea freight rates given current market volatility Pay Utilities Freight Other National Minimum Wage 100% of FY25 energy Expected to cost £4-7m more Including business rates and FX increase of 10% requirements purchased than previously a
Slide 47: In FY25, we expect to deliver over £30m of cost savings
In FY25, we expect to deliver over £30m of cost savings. Adding to those achieved in FY24, this would significantly exceed our £51m mid-term CMD target Product Cost Tyre supply Leverage Other Reduction chain technology and Including higher utilisation, and warehouse restructuring data efficiencies 4
Slide 48: Roll-out further Fusion towns
Roll-out further Fusion towns to create a unique and market-leading Motoring Services business FY25 strategic actions • Results from Halifax and Colchester trials are compelling – in our garages, revenue grew by >100% and EBITDA doubled • In FY25, we will invest c. £5m to roll-out the highest return
Slide 49: Classification: Restricted
Classification: Restricted
Slide 50: Roll-out further Fusion towns
Roll-out further Fusion towns to create a unique and market-leading Motoring Services business FY25 strategic actions • Results from Halifax and Colchester trials are compelling – in our garages, revenue grew by >100% and EBITDA doubled • In FY25, we will invest c. £5m to roll-out the highest return
Slide 51: Investment in colleague and leadership capability
Investment in colleague and leadership capability to drive business performance • Significantly increased focus on leadership development and recruitment for garage managers • Hire up to 200 new Autocentre apprentices, building to 600 over 3 years • Reinstatement of performance related, variable fin
Slide 52: Avayler, our SaaS business, offers a market leading omnichannel solution
Avayler, our SaaS business, offers customers a market leading omnichannel solution FY25 strategic actions Deliver on existing Acquire new Develop the business accounts clients Drive implementation and Continue to Continued development adoption within our existing secure commercial of our software pr
Slide 53: Summary
SUMMARY Graham Stapleton 53 Classification: Restricted
Slide 54: Summary
Summary • FY24 has been a year of strategic and operational progress, but market headwinds have been worse than anticipated • We are building a stronger and more resilient platform, that will enable us to drive strong profit growth once markets recover • We are cautiously planning for headwinds to c
Slide 55: Q&A
Q&A 55 Classification: Restricted
Slide 56: Contact and Newsflow
Contact and Newsflow For further information, please go to www.halfordscompany.com or contact: Holly Cassell Director of Investor Relations and ESG investor.relations@halfords.co.uk 56 Classification: Restricted
Slide 57: Appendix
APPENDIX 57 Classification: Restricted
Slide 58: Impact of Discontinued Operations
Impact of Discontinued Operations Discontinued Autocentres Group Operations Continuing Total Result Continuing Total Result Operations Operations £m FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 Revenue 16.3 19.1 699.4 594.8 715.7 613.9 1,696.5 1,572.7 1,712.8 1,591.8 Gross profit 2.7 6.5 351.1
Slide 59: Autocentres Group
Autocentres Group Avayler Autocentres exc. Avayler Autocentres Continuing Total Result Continuing Total Result Operations Operations £m FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 Revenue 2.3 2.1 697.1 592.7 713.4 611.8 699.4 594.8 715.7 613.9 Gross profit 1.9 2.1 349.2 285.9 351.9 292.4 351.1
Slide 60: FY23 prior period restatement to underlying PBT
FY23 prior period restatement to underlying PBT of -£7.3m Full Year Central and Prior Period Restatement (FY23) Retail Autocentres Finance Group* costs FY23 Reported PBT (all operations) £58.6m £10.4m (£17.5)m £51.5m FX accounting adjustment - - - - Supplier arrangements & period end cut-off - (£7.3