Halfords Group Plc · LSE:HFD
Halfords — J.P. Morgan London Small/Mid Cap Conference 2017
46 slides from Halfords's conference presentation, September 2017
Slide 1: Halfords Group plc
Halfords Group plc J.P. Morgan London Small/Mid Cap Conference 2017
Slide 2: Highlights
Highlights Introduction to Halfords and key markets Page 3 Moving Up A Gear strategy Page 12 Financial Guidance Page 25 FY17 Financial Performance Page 30 Appendices Page 35 2
Slide 3: Introduction to Halfords and key markets
Introduction to Halfords and key markets 3
Slide 4: Halfords Group
Halfords Group The UK’s leading retailer of motoring, cycling and leisure products and a leading independent operator in garage servicing and auto repair FY17: £938m 460 main chain sales, £101m stores across the UK and ROI RETAIL EBITDA 17 Cycle c.8,000 Republic and 4 colleagues Tredz shops FY17 EBI
Slide 5: Halfords Group Revenue Split
Halfords Group Revenue Split Car Car Travel Autocentres Cycling Maintenance Enhancement Solutions 53% 14% 33% 67% cycling motoring 5
Slide 6: Key Characteristics of Halfords
Key Characteristics of Halfords 80% 98% 85% of customers of Retail stores of online want advice or are profitable purchases are service with collected in their purchase store* Service-led retailer Stores are an asset * This statistic relates to Halfords.com sales 6
Slide 7: Motoring market
Motoring market Car parts, accessories, Car servicing & consumables aftercare and technology c. £7bn c. £9bn 3% annual 2% annual growth growth over last 3 years over last 3 years Note: Market size represents annual sales and the growth rates are in respect of 2012-2015 Source: Halfords estimates 7
Slide 8: Motoring market share
Motoring market share Other Grocers, discounters and online retailers Independent garages, chains and specialists Independent garages, chains and specialists Halfords Retail Halfords Autocentres Car parts, Car servicing accessories, and aftercare consumables and technology Source: Halfords estimates
Slide 9: Motoring market trends
Motoring market trends Increasing complexity of cars and parts Continued trend from ‘Do it Yourself” to “Do it For Me” Our target market is the “second life of the car” Anticipate market growth of 2-3% per annum on average over time Source: Department for Transport National Statistics 9
Slide 10: Cycling market
Cycling market £800m £750m Cycles PACs £100m 26% share Repair 16% share 10% share Note: Market size figures are annual market sales including VAT Source: Halfords estimates 10
Slide 11: Cycling market trends
Cycling market trends Fundamentals driving market growth E-bikes growth opportunity Market prices moving up due to Sterling depreciation against US dollar Anticipate market growth of 3-5% per annum on average over time 11
Slide 12: Moving Up A Gear Strategy
Moving Up A Gear Strategy for life’s journeys
Slide 13: Highlights
Highlights Strong progress across Market share growth in Service-related Retail Moving Up A Gear motoring and cycling sales growth of 18% strategic pillars Enhanced customer Group online sales Expanded Group’s data driving incremental up 11% reach and capabilities sales 13
Slide 14: Moving Up A Gear strategy
Moving Up A Gear strategy Service in our Better Shopping Building on our DNA Experience Uniqueness Putting Customers in Fit for the Future the Driving Seat Infrastructure 14
Slide 15: Service in our DNA
Service in our DNA Over 30 motoring and cycling services Service-related Retail sales up 18% Lowest ever colleague turnover (33%) Target “Gears” programme levels met Apprenticeship scheme growing New in-store services in FY18 15
Slide 16: Service in our DNA
Service in our DNA We have over 30 in-store services across motoring and cycling New motoring services in FY18: • Ad-blue top-up • Car key fob repair • Fuse fitting Trial of cycling services in FY18: • Bike personalisation • Bike radio frequency identification tagging 16
Slide 17: Better Shopping Experience
Better Shopping Experience Headsets to support Agile web colleagues and improve development customer service 17 Cycle Republic Launch of new store stores and website refresh concept 17
Slide 18: Better Shopping Experience
Better Shopping Experience Updated store refresh concept: • Evolution of successful previous concept • Strong sales uplifts and feedback so far • 5 updated store refreshes in FY17 • Around 40 to follow in FY18 • “Lite” version developed 18
Slide 19: Better Shopping Experience
Better Shopping Experience New Features: • Electric vehicle charging points • “Park up and Relax” lounge • Digital booking timetable • Colleague headsets • Dedicated hubs for Tradecard and Click & Collect 19
Slide 20: Building on our Uniqueness
Building on our Uniqueness Boardman wins awards New motorcycling range Market leading retailer launched and fitter of dash-cams Successful Wiggins Grew child seat sales Improved our Tradecard range and e-bikes twice as fast as the offer launched market in FY17 20
Slide 21: Building on our Uniqueness
Building on our Uniqueness Complementary bolt-on M&A in both cycling and motoring Tredz acquisition means we can now service all cycling customer segments Tredz & Wheelies performing well since acquisition with sales up over 20% Tyres on the Drive investment to enhance service and convenience creden
Slide 22: Putting Customers in the Driving Seat
Putting Customers in the Driving Seat Single customer view phase 1 complete Email traffic up triple digit percent 50% Retail customer sales match rate Over 1m additional website sessions Open rates of email campaigns at 35% 22
Slide 23: Fit for the Future Infrastructure
Fit for the Future Infrastructure Delivered “Dayforce” resourcing tool New third party warehouse in Daventry Piloting i-serve technology in-store Single view of stock completed Continued focus on “We Operate for Less” programme 23
Slide 24: Autocentres
Autocentres Long-term investment in colleagues: • New technician pay grading scheme • Apprenticeship programme growing Improved offer to customers: • Sunday & Bank holiday opening • Electric and hybrid vehicle servicing A year of transition: • Actions underway to improve profitability including revi
Slide 25: Financial Guidance
Financial Guidance for life’s journeys
Slide 26: Financial Targets
Financial Targets 1 Grow sales faster than the market* 2 Group EBITDA margin broadly flat prior to impact of FX 3 Grow the ordinary dividend every year** 4 Net Debt target of 1x EBITDA with a range up to 1.5x*** * Halfords principally operates in two markets: motoring and cycling. Management current
Slide 27: Net debt to EBITDA
Net debt to EBITDA Debt target of 1x (with range up to 1.5x for M&A) published in June 2016 27
Slide 28: Capital Allocation Priorities
Capital Allocation Priorities Pre-conditions of maintaining a strong balance sheet and operating in line with the debt framework 1 Investment for growth 2 Pay and grow the ordinary dividend 3 Appropriate M&A 4 Surplus cash returned to shareholders 28
Slide 29: FY18 Financial Guidance
FY18 Financial Guidance All of the following guidance is in respect of the Group: Capital Expenditure circa £40m Depreciation & Amortisation charge circa £33m Effective Tax Rate circa 20% 29
Slide 30: FY17 Financial Performance
FY17 Financial Performance 30
Slide 31: Group Financial Highlights
Group Financial Highlights +7.2% YoY Revenue: £1,095.0m +£73.5m YoY +2.7% LFL Underlying EBITDA: £108.7m -5.1% YoY -£5.9m YoY Underlying PBT: £75.4m -7.5% YoY -£6.1m YoY Basic Underlying EPS: 30.3p -8.7% YoY -2.9p YoY Ord Dividend Ord. Dividend: 17.51p +3.0% YoY Cover 1.73 c.£14m Special Net Debt gr
Slide 32: Retail Financial Highlights
Retail Financial Highlights +8.0% YoY Revenue: £938.4m +3.1% LFL -260 bps Gross Margin: 48.6% YoY +4.6% YoY Operating costs: £379.8m +2.4% LFL Underlying EBIT: £76.8m -£5.0m YoY Underlying EBITDA: £101.1m -£4.9m YoY Total Motoring sales up [x.x%] Notes: 1) All numbers represent performance for the 5
Slide 33: Retail Gross Margin – decline of 260 bps as expected
Retail Gross Margin – decline of 260 bps as expected FX Mitigations: 1) Working with suppliers 2) Improving processes and costs 3) Prices *The net of the adverse mix impact of faster cycling sales and the cycling promotion in the first half, partially offset by the accretive mix impact of service-re
Slide 34: Autocentres Financial Highlights
Autocentres Financial Highlights +2.4 YoY Revenue: £156.6m EBITDA by Quarter +0.6% LFL Gross Margin: 65.1% +80 bps YoY FY17 Operating costs: £99.8m +5.6% YoY FY16 Underlying EBIT: £2.2m -£1.6m YoY Q1 Q2 Q3 Q4 Underlying EBITDA: £7.6m -£1.0m YoY * All numbers represent performance before non-recurrin
Slide 35: Appendices
halfords for life’s journeys
Slide 36: Retail LFLs
Retail LFLs 9.9 8.8 7.9 7.5 7.8 6.6 6.8 7.0 5.9 5.7 4.6 3.5 3.1 1.1 3.5 0.4 0.3 0.0 (1.1) (1.2) (2.1) (2.3) (0.6) (2.8) (4.9) (4.8) (6.6)(6.8) (7.5) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY11 FY11 FY11 FY11 FY12 FY12 FY12 FY12 FY13 FY13 FY13 FY13 FY14
Slide 37: Retail LFLs
Retail LFLs 14.6% Cycling LFL 41.6% Car Maintenance LFL 11.8% 11.0% 10.4% 8.4% 21.3% 7.1% 7.1% 19.5% 15.5% 16.0% 6.1% 5.8% 5.9% 14.7% 13.3% 11.3% 7.6% 7.4% 3.4% 5.2% 2.7% 2.8% 2.2% 2.0% 1.7% 2.1% 1.2% 2.0% 1.1% 1.9% 1.9% 1.0% 0.5% -1.6% -0.5% -0.1% -8.8% -7.6% -1.7% -9.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 38: Group Components
Group Components Retail Autocentres Amortisation Group FY17 £m £m £m £m Revenue 938.4 156.6 - 1,095.0 Gross Profit 456.6 102.0 - 558.6 Operating Costs (379.8) (99.8) (1.9) (481.5) EBIT 76.8 2.2 (1.9) 77.1 EBITDA 101.1 7.6 - 108.7 Retail Autocentres Amortisation Group FY16 £m £m £m £m Revenue 868.5 1
Slide 39: Group Balance Sheet
Group Balance Sheet FY17 FY16 YOY Change £m £m £m Goodwill and Intangible Assets 394.1 362.9 +31.2 8.6% Property, Plant & Equipment 102.8 107.3 -4.5 -4.2% Investments 8.1 - 8.1 100% Derivative Financial 3.7 4.2 (0.5) -11.9% Instruments Net Working Capital 24.7 8.4 +16.3 +194.0% Net Debt (85.9) (47.9
Slide 40: Cash flow and Net Debt
Cash flow and Net Debt Operating Cashflow £m Free Cashflow £m Net Debt £m Operating Underlying EBIT 77.1 90.0 Opening Net Debt (47.9) Cashflow Non-recurring operating (3.4) Capital Expenditure (34.4) Free Cashflow 37.7 expenses Finance lease Depreciation, Amortisation 31.8 Net Finance Costs (0.8) pa
Slide 41: FY17 vs. FY16 Cash Flow
FY17 vs. FY16 Cash Flow £105.3m -£16.3m Working capital -£34.4m FY17 capex -£16.9m tax and other £37.7m -£33.5m ordinary dividend £4.2m -£20m special EBITDA after non- Free dividend -£22.1m recurring items Cash M&A -£38.0m Flow Net cash £112.9m -£12.6m outflow Working FY16 capital -£38.5m capex -£16
Slide 42: Halfords Retail Categories
Halfords Retail Categories CAR CAR TRAVEL CYCLING MAINTENANCE ENHANCEMENT SOLUTIONS below Retail average the highest-margin the lowest-margin the average-margin margin category category category Includes 3Bs Includes sat nav Includes child- Includes cycles, (bulbs, blades & GPS, audio, DAB safety se
Slide 43: Bike brands available across the Group
Bike brands available across the Group 43
Slide 44: Group site portfolio
Group site portfolio FY15 FY16 FY17 Halfords Retail 463 462 460 Halfords Autocentres 305 314 313 Cycle Republic 4 10 15 Tredz - - 4 Total 772 786 792 Number of Autocentres Acquired 223 Average FY11 230 remaining FY12 250 lease length FY13 283 Retail 6.6 years FY14 303 Autocentres 6.7 years FY15 305
Slide 45: Forward-Looking Statements
Forward-Looking Statements Included in this presentation are forward-looking management comments and other statements that reflect management’s current outlook for future periods These expectations are based on currently available competitive, financial, and economic data along with our current oper
Slide 46: Contact and Newsflow
Contact and Newsflow For further information, please go to www.halfordscompany.com or contact Adam Phillips Corporate Finance & Investor Relations Director adam.phillips@halfords.co.uk Landline: +44 (0)1527 513 113 Mobile: +44 (0)7703 890 142 Matt Beathe Investor Relations Manager matt.beathe@halfor
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