Slide 1: Halfords Group Plc Investment Case
HALFORDS GROUP PLC INVESTMENT CASE SEPTEMBER 2020
Slide 2: Investment Case summary
2 Investment Case summary Building a Market-leading Value-creating Cash generative Dividend services-focused business opportunities business returns business We are the UK’s largest In the medium-term, Our strategy will see The Group has always Until the COVID-19 retailer of motoring and half of our
Slide 3: Halfords' unique strengths
3 Halfords’ unique strengths Convenient Unique and Unique, services Strong Super-specialist differentiated technology driven proposition omnichannel expertise as a key products and proposition in our delivered in c.900 capabilities differentiator services physical estate locations Wide range of uniq
Slide 4: Opportunities for Halfords in a post-COVID-19 world
4 Opportunities for Halfords in a post-COVID-19 world Opportunity to Increase in Healthy living Further An ageing UK accelerate motoring and and climate consolidation of car parc reduction of cycling journeys change our competitor set property debt Continued avoidance Recessionary An increased focus
Slide 5: Group overview
5 Group overview Who we are FY20 financial highlights1 • UK and Ireland’s leading retailer of motoring and cycling products and services £1.1bn £55.9m +0.3% Revenue Profit Before Tax2 FY20 revenue growth • Trusted brand with over 125 years of heritage • Market leading brand awareness in our retail b
Slide 6: Market size, share and growth dynamics
6 Market size, share and growth dynamics Retail Motoring Autocentres Cycling Services Product Services Product Services (retail) Market size* £3.5bn Significant** £9.0bn £2.0bn £150m Halfords’ 20-25% High 2% 20-25% 8% market share* Market growth expectations With traditional markets in Halfords is a
Slide 7: Growth Opportunities
7 Growth Opportunities Product Autocentres has 2% market share in a very fragmented market Services with no market leader Size of bubble Autocentres represents relative Retail size of segment Motoring Services Market Growth Opportunity B2B Cycling Products Motoring Products Performance Retail Cyclin
Slide 8: Macro, consumer and industry trends are driving the need for change
8 Macro, consumer and industry trends are driving the need for change Macro trends Consumer trends Industry trends • Global economic, political and health crises • DIY to DIFM • Cars and parts lasting longer leading to low levels of consumer confidence and becoming more • Convenience complex • Compl
Slide 9: Our strategy: To inspire and support a lifetime of motoring and cycling
9 Our strategy: To inspire and support a lifetime of motoring and cycling 1 Inspire our customers through a differentiated, super-specialist shopping experience 2 Support our customers through an integrated, unique and more convenient services offer 3 Enable a lifetime of motoring and cycling “Evolv
Slide 10: Significant opportunity within each area of our strategy
10 Significant opportunity within each area of our strategy • A business more focused on what it is really known for – its core 1 Inspire our customers through a motoring and cycling offer • Products and services with features and benefits that are only differentiated, super-specialist shopping avai
Slide 11: Strategic Progress in FY20
11 Strategic Progress in FY20 • Fully integrated Group web platform, delivering best-in-class customer experience 1 Inspire our customers through a • Optimisation of cycling space in all Retail stores differentiated, super-specialist shopping • Sales growth of own brand and exclusive products was ah
Slide 12: Value-creating opportunities
12 Value-creating opportunities To become the UK’s largest Increasing Integrating online, garages, Growth in independent provider of customer retail stores and vans to automotive services, drive customer cross-shop, Services and maintenance and repairs, lifetime retention and higher basket B2B whils
Slide 13: Medium-term operating cost opportunities
13 Medium-term operating cost opportunities Unlocking value Opportunity Further within our across end-to- optimisation property estate end supply chain across the Group • Opportunity to dramatically • Significant opportunity to • Continued focus on reducing reshape our retail business operate with l
Slide 14: Unlocking value within our property estate
14 Unlocking value within our property estate Closing uneconomic locations This year Lower rentals on existing estate We expect to close up to 10% of the Group’s physical Of the 20 completed Retail lease agreements in FY20, 16 estate during FY21, which includes the 22 Cycle have resulted in downward
Slide 15: Retail lease profile gives flexibility for re-modelling our estate
15 Retail lease profile gives flexibility for re-modelling our estate Physical retail estate lease expiry / breaks cumulative number of stores In Retail, we have a flexible lease portfolio, with two-thirds of leases having expiries or breaks in the next 5 years. FY21 FY22 FY23 FY24 FY25 Expiry Break
Slide 16: Financial dynamics of each segment
16 Financial dynamics of each segment Note: These are indicative and relative to the Halfords average Product Services Motoring Cycling Retail Autocentres Medium-term growth Lower Average - Higher Higher Higher prospects Gross Average Lower Higher Higher margin (%) Opex as a % of Lower Higher Averag
Slide 17: Key metrics today vs 5 years time
17 Key metrics today vs 5 years time FY201 In 5 years Sales CAGR +0.3% • By implementing our strategy we will evolve into a services-focused business, with an ambition to double Gross our services revenue to 50% of 51.1% Margin % Group sales. Operating cost % • With a materially larger services 46.0
Slide 18: Capital Allocation Priorities
18 Capital Allocation Priorities 1 Maintaining a prudent balance sheet 2 Investment for growth 3 Maintain the ordinary dividend 4 Appropriate M&A 5 Surplus cash returned to shareholders
Slide 19: Appendix
19 halfords APPENDIX
Slide 20: Business Segments
20 Business Segments Note: This is representative of our Product Services business and not to be taken as exact Perf. Retail Cycling Cycling Retail Cycling Autocentres / Group Mobile Expert Revenue Services Retail Motoring Retail Motoring
Slide 21: Our ESG Strategy
21 Our ESG Strategy FY20 Highlights Focus for the year ahead • Accelerate our investment in training and • Published a report on E-bikes to better educate upskilling colleagues to better support Championing the shift consumers on the benefits of electric mobility. customers 1 to electric smart trave
Slide 22: Super-specialist proposition
22 Super-specialist proposition Developing our ‘Super-Specialist’ Proposition These propositions demonstrate the key areas and customer take-outs that we need to achieve for us to be seen as super-specialists within our market Inspire Support Lifetime Expertly Curated Range Ultimate Accessibility Cu
Slide 23: Management Team
23 Management Team Graham Stapleton Loraine Woodhouse Keith Jones Karen Bellairs Chief Executive Officer Chief Financial Officer Chief Operating Officer Group Customer and Commercial Director Andy Randall Paul O’Hara Neil Holden Managing Director – Group Property Group IT Director Halfords Autocentr
Slide 24: Contact and Newsflow
24 Contact and Newsflow For further information, please go to www.halfordscompany.com or contact: Andy Lynch Head of Investor Relations and Corporate Finance andrew.lynch@halfords.co.uk