Slide 1: Interim Results 26 Weeks to 30th September 2011
Interim Results 26 Weeks to 30th September 2011 City Presentation 10th November 2011 1
Slide 2: Introduction
David Wild Chief Executive Officer Introduction 2
Slide 3: Agenda
Agenda • Introduction - David Wild • Financials - Andrew Findlay • Business Update - David Wild • Current Trading and Summary - David Wild • Questions 3
Slide 4: Overview of Results
Overview of Results Performance in line with expectations • Group Revenue flat in tough environment • Gross Margin % down as expected • Costs well controlled • Balance sheet strong – buy-back continues, dividends maintained • Encouraging progress in Autocentres 4
Slide 5: Financials
Andrew Findlay Finance Director Financials 5
Slide 6: Financial Headlines
Financial Headlines 1 • Flat underlying Group revenue of £454.0m 1 • Retail gross margin 52.7% (H1 11: 54.0%) • Profit before tax of £54.7m, down 20.4% 2 • Adjusted basic EPS of 19.8p, a decline of 17.8% • Effective tax rate 26.9% • Net debt £140.7m • Interim dividend of 8.0p per share maintained Gr
Slide 7: Retail UK/ROI Performance
Retail UK/ROI Performance H1 12 H1 11 Growth £m £m % Revenue 400.6 405.4 -1.2% Gross profit 211.0 218.7 -3.5% Gross margin % 52.7% 53.9% -128bps Net operating expenses (156.0) (153.1) +1.9% Operating profit 55.0 65.6 -16.2% Operating profit % 13.7% 16.2% Focusing on cash returns 7
Slide 8: Retail Margin % Influences
Retail Margin % Influences • Increased promotional participation • Additional sales of lower-margin product ranges • Input-cost inflation Offset By: • Sourcing strategy • Fitting penetration & attachment rates • Own-brand leverage Focusing on cash returns 8
Slide 9: Retail UK/ROI Operating Costs
Retail UK/ROI Operating Costs H1 12 H1 11 Growth £m £m % Store Staffing 39.8 39.7 +0.2% Store Occupancy 70.9 68.6 +3.4% Warehouse & Distribution 13.4 14.6 -8.4% Support Costs 31.8 30.2 +5.4% Total 156.0 153.1 +1.9% Dep’n/Amort’n/Impairment 10.9 10.7 Continuing focus on cost control Note:. Depreciati
Slide 10: Inventories
Inventories £m Opening Stock 144.6 Inflation 2% • Underlying cost-price increases • Hold over of tent packs Tent packs 1% • Winter build and new ranges Winter build 1.5 1% • Improved availability Other 1% • Build of cycle ranges ahead of Closing Stock 152.0 Christmas % Change +5.1% Increased availab
Slide 11: Autocentres Performance
Autocentres Performance H1 12 H1 11 Growth £m £m % Revenue 53.4 49.1 +8.8% Gross profit 35.5 32.4 +9.6% Gross margin % 66.5% 66.1% +36bps Net operating expenses (32.5) (27.6) +17.8% Operating profit 3.0 4.8 -37.5% Operating profit % 5.6% 9.8% Investment to provide support for future expansion Note:
Slide 12: Capital Expenditure
Capital Expenditure H1 12 H1 11 £m £m Total Retail portfolio 5.0 2.4 Logistics 0.5 2.1 Infrastructure systems 1.2 2.1 Total Retail 6.7 6.8 Autocentres 1.6 1.1 Total Group Capital Expenditure 8.3 7.9 Group has a low capital expenditure requirement 12
Slide 13: Cash Flow and Net Debt
Cash Flow and Net Debt Operating Cash Flow Free Cash Flow Net Debt £m £m £m Operating profit 56.9 Op. cashflow 65.6 Net debt 1.4.11 (103.2) Dep/Amortisation 13.1 Capex (8.6) Free cash flow 40.4 Employee share 1.2 Net finance costs (2.2) Lease/Other (0.4) scheme Working capital (3.1) Taxation (14.4)
Slide 14: FY12 Guidance
FY12 Guidance • Full-year Retail gross margin down by at least 100bps • Retail operating costs up c.4% • Retail capex of around £20m • Autocentres capex of up to £5m • A Group interest charge of c.£6m 14
Slide 15: Business Update
David Wild Chief Executive Business Update 15
Slide 16: Value Proposition
Value Proposition Tough environment for customers Price Value Service Innovation Creating value for our customers 16
Slide 17: Retail Strategy
Retail Strategy Consistent and effective strategy for managing the business Extending range and service advantage Investing in store portfolio Ongoing focus on cost control Leveraging the Halfords brand in multi-channel 17
Slide 18: Range - Value Through Brands
Range - Value Through Brands Value Performance Carrera Boardman £ 60-130 £ 120-200 £ 280-750 £ 350-1600 £ 600-1800 • Launch of new premium range of Carrera • Strong sales of family range Apollo • Entry price Trax performed well • Growth in Cycle Accessories • New Apollo kids range for Christmas Exte
Slide 19: In-store Services
In-store Services Extending range and service advantage 19
Slide 20: Value Through Service
Value Through Service Central to Halfords proposition • Expert advice and information • Products lend themselves to added-value services • Competitive strength vs online Growth in revenue Total 3Bs Penetration YOY 2008 • 2009 Fitting up 40.0% 2010 2011 35.0% • Increased level of attachment 30.0% 25.
Slide 21: Investing in the Store Portfolio
Investing in the Store Portfolio Investing in the store portfolio 21
Slide 22: Value From Store Portfolio
Value From Store Portfolio Refresh and reconfiguration • Categories rebalanced and easier to shop • 53 stores completed in H1 • 25-30 targeted in H2 • Low cost and short payback Downsizing London stores Investing in the store portfolio 22
Slide 23: Cost Control
Cost Control Ongoing focus on cost control 23
Slide 24: Value Through Cost Control
Value Through Cost Control • Strong cost-control culture in Halfords • Procurement disciplines • W&D efficiency programme delivering expected savings • Store payroll flat - fitting and service improve • Priority on occupancy costs Ongoing focus on cost control 24
Slide 25: Leveraging brand in Multi-channel
Leveraging brand in Multi-channel Leveraging Halfords brand in multi-channel 25
Slide 26: Creating Value Online
Creating Value Online • Online penetration 8.6% and 21.8m visitors in H1 • True multi-channel retailer – 87% store collected • Rebalancing promotional activity Online Development • Mobile optimised site • Shopping app launched • Re-platformed site Leveraging Halfords brand in multi-channel 26
Slide 27: Halfords Autocentres
Halfords Autocentres 27
Slide 28: Autocentres
Autocentres Range and service • Growth in tyre sales • Launch of Brakes4Life Investment now to deliver future growth Maintaining low costs Growing range and Investing in new Maintaining low service Centres cost structure Advantage 28
Slide 29: Autocentres Leveraging Halfords Brand
Autocentres Leveraging Halfords Brand Halfords brand gaining traction in aftercare market • First above the line media campaign • Grown online bookings by 64% • Increasing brand awareness 16% to 33% • Active customer retention and acquisition programme Leveraging the Halfords brand 29
Slide 30: Trading Initiatives and Summary
Trading Initiatives and Summary 30
Slide 31: Trading Initiatives
Trading Initiatives Strong programme of sales activity 3Bs Radio Campaign Oil Top Gear Sat Nav Christmas Bikes 31
Slide 32: Christmas Advert
Christmas Advert 32
Slide 33: Summary
Summary Good progress in a tough consumer environment • Group revenue flat • No change to full-year guidance • Good cash generation – interim dividend maintained • Set up for Christmas and Winter campaign • Autocentres avenue for future growth 33
Slide 34: Questions
heiptut hKhalfords Questions ~
Slide 35: Appendices
Appendices • UK/ROI Retail sales • Group income statement • Group components • Retail revenue bridge • Balance sheet • Retail store portfolio • Autocentres portfolio 35
Slide 36: UK/ROI Retail Sales
UK/ROI Retail Sales LFLs by Category H1 12 H1 11 Car Maintenance -3.1% +0.9% Car Enhancement -9.8% -11.4% Leisure +3.9% -2.1% Total LFLs -1.9% -4.9% Sales by Category H1 12 H1 11 Car Maintenance 26.3% 26.6% Car Enhancement 26.4% 28.6% Leisure 47.3% 44.8% Strong cycling sales underpin Leisure outperf
Slide 37: Group Income Statement
Group Income Statement Excluding non-recurring H1 12 H1 11 Growth items £m £m % Revenue 454.0 456.3 -0.5% Gross profit 246.5 251.1 -1.8% Net operating expenses (189.6) (182.0) +4.2% Operating profit 56.9 69.1 -17.7% Operating profit % 12.5%% 15.1% -260bps Net finance costs (2.2) (0.4) +450% Profit b
Slide 38: Group Components
Group Components FY12 H1 Central Total Auto Amortis UK/ROI Europe Retail Centres –ation* Group £m £m £m £m £m £m Revenue 400.6 - 400.6 53.4 - 454.0 Gross profit 211.0 - 211.0 35.5 - 246.5 Net operating expenses (156.0) - (156.0) (32.5) (1.1) (189.6) Operating profit 55.0 (0.0) 55.0 3.0 (1.1) 56.9 FY
Slide 39: Retail Revenue Bridge
Retail Revenue Bridge H1 12 % Underlying LFL sales growth -2.5 Easter adjustment +0.6 Reported LFL sales growth -1.9 1 Currency +0.2 Net new space +0.1 Retail sales growth -1.6 Central Europe impact +0.4 2 UK/ROI Sales Growth -1.2 Notes 1. Translation of non-sterling denominated revenues. 2. Exclude
Slide 40: Group Balance Sheet
Group Balance Sheet H1 12 H1 11 YOY Growth £m £m £m % Goodwill and intangible assets 345.7 348.9 -3.2 -0.1% Property, plant and equipment 98.5 98.2 +0.3 +0.3% 1 Derivative financial instruments (2.1) (0.9) -1.2 +133% Net working capital 50.0 36.0 +14.0 +38.9% Net debt (140.7) (109.8) -30.9 +28.1% 2
Slide 41: Retail Portfolio by Store Type
Retail Portfolio by Store Type Retail Space Mezzanine Flat Compact Metro* Bikehut Total 3,850,139 ft2 Opening Number 243 159 29 34 1 466 New Store 0 0 0 1 0 1 Relocations 0 1 0 0 0 1 Closures 1 0 0 0 1 2 Closing Number 242 160 29 35 0 466 * Includes new London stores 41
Slide 42: Autocentres Portfolio
Autocentres Portfolio No. of Centres March 2010 224 Opened 16* *1 centre relocated March 2011 240 Opened 6 Sep 2011 246 42