Halfords Group Plc · LSE:HFD
Halfords — H1 FY2025 Earnings Presentation
38 slides from Halfords's earnings presentation, Nov 26, 2024
Slide 1: Halfords Group plc: FY25 Interim Results
Halfords Group plc: FY25 Interim Results 26 November 2024
Slide 2: Agenda
Agenda 1. H1 FY25 Financial Performance 2. Business Update 3. Outlook 4. Q&A 2
Slide 3: H1 Overview: Controlling the Controllables
H1 Overview: Controlling the Controllables FY25 focus: optimising our platform to drive profit and cash generation Financial highlights: Strategic progress: ✓ c.£15m of cost savings offsetting similar levels ✓ Outstanding results and strong returns from of inflation to deliver broadly flat PBT YoY F
Slide 4: H1 FY25 Financial Performance
H1 FY25 Financial Performance
Slide 5: Basis of financial information
Basis of financial information H1 FY25 covers the 26-week period from 30 March to 27 September 2024. Unless otherwise stated: • Comparators are on a one-year basis • Numbers are post-IFRS 16 • Prior year income statement numbers are based on total operations (i.e. including the discontinued tyre and
Slide 6: Mitigations: optimising platform to offset labour inflation and weak consumer
H1 focused on optimising our platform to offset high labour inflation and a weak consumer backdrop Macro factors Text Elevated wage Weak consumer and Stable inflation Interest rates falling, growth (NLW +10%) challenged end-markets (CPI c.3%) but slowly Mitigations Price & Better Cost and Cash propo
Slide 7: H1 delivered good results in a challenging environment
H1 delivered good results in a challenging environment, against a very strong comparative period Operating cost LfL sales: Gross margin: % of sales: -0.1% YoY 49.4% (+8.2% Yo2Y) (+160bps YoY) 46.4% (+180bps YoY) Underlying PBT: Free cashflow: Net cash*: £21.0m +£28.1m £1.3m (-£0.3m YoY) (+£47.3m YoY
Slide 8: 160bps margin improvement offset inflationary headwinds to keep PBT in line
160bps margin improvement offset inflationary headwinds to keep PBT broadly in line with prior year Change H1 FY25 H1 FY24 vs. LY Revenue £864.8m £873.5m (1.0%) ✓ Flat LfL sales (+8.2% Yo2Y) Gross margin (%) 49.4% 47.8% 160bps ✓ Focus on gross margin, +160bps Operating costs (£401.1m) (£389.7m) (£11
Slide 9: PBT broadly flat despite c.£15m of inflationary headwinds
PBT broadly flat despite c.£15m of inflationary headwinds and continued end market challenges Group PBT Bridge Total Cost & Efficiency £14.6m Note: Throughout this document, H1 FY24 comparatives are inclusive of discontinued Viking and BDL wholesale tyres operations unless otherwise specified. 9
Slide 10: Market share performance reflects focus on profitable growth
Market share performance reflects focus on pursuing growth only where it is profitable to do so Autocentres Retail Consumer Tyres Motoring Retail Motoring Cycling Servicing Market growth expectation Broadly Broadly c. -2.0% -2.0% FY25 vs FY24 flat flat Actual market growth c. +0.8% +3.7% +2.5% -4.2%
Slide 11: Cycling volumes are c.33% below FY19 levels
Cycling volumes are c.33% below FY19 levels and our own Tyres data suggests replacement is still being delayed Cycling market volume vs. FY19 Share of tyre jobs where at least one tyre has <2mm tread 3,000,000 18% 2,800,000 2,600,000 16% 2,400,000 2,200,000 14% 2,000,000 1,800,000 12% 1,600,000 1,40
Slide 12: Segmental Performance
Segmental Performance
Slide 13: Retail profit grew 8.1% year on year driven by margin expansion
Retail profit grew 8.1% year on year driven by margin expansion; H2 impacted by elevated freight costs Retail EBIT Bridge Change vs. H1 FY25 H1 FY24 H1 FY24 (0.1%) YoY Revenue £516.1m £516.6m (0.7%) LfL 0.1% YoY - Motoring* £324.2m £323.9m (0.2%) LfL (0.6%) YoY - Cycling* £191.1m £192.3m (1.6%) LfL
Slide 14: Autocentres EBIT fell YoY; improving trajectory in H2
Autocentres EBIT fell YoY against strong comparatives and significant inflation; improving trajectory in H2 Autocentres Change vs. H1 FY25 H1 FY24 exc. Avayler H1 FY24 Autocentres (ex-Avayler) EBIT Bridge (2.4%) YoY Revenue £347.1m £355.7m 0.8% LfL 18.0% Yo2Y Gross margin 51.7% 50.4% 130bps (%) Oper
Slide 15: Cash and Balance Sheet
Cash and Balance Sheet
Slide 16: Net Cash of £1.3m reflects £48.3m improvement year on year
Net Cash of £1.3m reflects £48.3m improvement year on year, driven by strong working capital management • Closing net cash of £1.3m Group Net Debt • Stock down £18.8m YoY • Cash capex of £22.0m • Free cash inflow of +£28.1m vs £(19.2)m outflow in prior year • Net debt : EBITDA of 1.6x including leas
Slide 17: H1 Summary: Controlling the Controllables
H1 Summary: Controlling the Controllables to deliver PBT broadly in line with Prior Year ✓ LfL sales flat vs. tough prior year comparatives, especially in Autocentres ✓ Strong progress on gross margin up 160bps ✓ Broadly flat PBT YoY (£21.0m) with c.£15m of cost savings offsetting c.£15m of inflatio
Slide 18: Business Update
Business Update
Slide 19: Our priorities for FY25
• Header Our priorities for FY25 are to: 1. Optimise the unique platform we have created to deliver greater returns 2. Mitigate headwinds by driving cost and efficiency 3. Selectively prioritise existing and proven strategic initiatives 19
Slide 20: 1. Optimise the platform
1. Optimise the platform
Slide 21: H1 gross margin +160bps from leveraging our unique platform
H1 gross margin +160bps as we have focused on leveraging our unique platform to drive profitability Price Optimisation Better Buying Proposition Effectiveness £8.8m £5.7m £1.7m Note: Throughout this document, H1 FY24 comparatives are inclusive of discontinued Viking and BDL wholesale tyres operation
Slide 22: A more scientific approach to pricing and promotion
We have taken a more scientific approach to pricing and promotion, taking share only where profitable Matching pricing to demand and capacity To ensure price changes deliver anticipated results To predict the impact of price changes on demand To ensure prices are fair, competitive and profitable >2m
Slide 23: Better Buying programme in its second year
Our Better Buying programme is in its second year and continues to deliver meaningful results Supplier Own Group Buying Partnerships Brand Synergies Developing Ongoing tender activity External support partnerships in Retail generating annualised to develop and Garages across and in-year savings - be
Slide 24: Customer proposition changes supported mix shift to higher margin categories
Changes to our customer proposition have supported mix shift into higher margin categories E.g. Autocentres: technician upskilling driving ‘Additional Work Identified’ +3% YoY increase in mix +30% YoY towards higher margin SMR Retail: driving fitting service +5% YoY increase in services penetration
Slide 25: 2. Cost and efficiency
2. Cost and efficiency
Slide 26: c.£9m of cost savings delivered through focus on efficiency
c.£9m of cost savings have been delivered through a relentless focus on efficiency Embedded Delivered Effectively Reduced efficiencies in savings in restructured interest stores, garages Goods Not For tyre supply through cash and supply Resale chain management chain £3.6m £2.3m £2.1m £0.9m Note: Tot
Slide 27: 3. Strategic transformation
3. Strategic transformation
Slide 28: Halfords Motoring Club reaching over 4m members
Halfords Motoring Club continues to resonate with customers, reaching over 4m members >4m members (launched FY22) c.340k Premium members generating c.£17m of annual subscription revenue Efficiencies in marketing spend e.g. MOT marketing down >30% YoY Market-leading retention rate >70% 28
Slide 29: Fusion Motoring Services is our near-term strategic priority
Retail Car Park Fusion Motoring Services is our near-term strategic priority Connecting the Retail Car Park to the local Autocentre and rebranding as Halfords Garage Services Retail car park Fixed canopy and Automotive Services Manager Autocentre • Increased capacity (ramps, technicians) • Welcoming
Slide 30: Outstanding returns give confidence to roll out Fusion faster
Outstanding returns to date give us confidence to roll out Fusion further and faster ✓ 22 of 25 original planned sites delivered ✓ c.£200k each ✓ Payback c.2 years ✓ After just 3 months: ✓ Sales +50% ✓ Doubled profit ✓ Outperformance in National: larger garages with lower servicing mix ✓ Acceleratin
Slide 31: Summary
• Header Summary 1. Optimisation focus drove +160bps of gross margin expansion 2. Delivered c.£15m of savings 3. Invested selectively in strategic initiatives Note: Throughout this document, H1 FY24 comparatives are inclusive of discontinued Viking and BDL wholesale tyres operations unless otherwise
Slide 32: Outlook
Outlook
Slide 33: Comfortable with FY25 consensus with profit weighted to H1
Comfortable with FY25 consensus with expected profit strongly weighted to H1 Strong performance in H1: H2 considerations include: • Flat LfL sales against strong comps Uncertainty re: consumer outlook • 160bps of gross margin expansion Continued wage inflation plus incremental freight at lower • c.£
Slide 34: Budget measures add significant cost in FY26
Budget measures add significant cost in FY26 and we are assessing all mitigation levers at our disposal Impacts Mitigations under review c.£23m direct labour costs Pass-through in pricing • £9m expected and mitigated Further cost reductions (noting c.£85m cost savings delivered Impact on managed ser
Slide 35: Q&A
— ‘Malfords y wy _Jinobile expert ae! 1 i} Motoring services / } that come to you. Q&A b | a ~ Book online at halfords.o
Slide 36: Thank you.
Thank you. For further information, please visit www.halfordscompany.com or contact investor.relations@halfords.co.uk Halfords Group Plc Icknield Street Drive Washford West Redditch Worcestershire B98 0DE
Slide 37: Appendix
Appendix Title with image Option 7
Slide 38: Capital allocation priorities remain unchanged
Capital allocation priorities remain unchanged Capital allocation priorities: Dividend per Share Maintaining a prudent balance sheet Investment for growth 6.0 7.0 5.0 M&A focused on Autocentres Final Final Final Dividend covered by 1.5-2.5x 5.0 3.0 3.0 3.0 3.0 Profit After Tax Final Interim Interim