Slide 1: Preliminary Results 52 Weeks to 1st April 2011
Preliminary Results 52 Weeks to 1st April 2011 City Presentation 9th June 2011 1
Slide 2: Introduction
David Wild Chief Executive Introduction 2
Slide 3: Agenda
Agenda • Introduction - David Wild • Financials - Andrew Findlay • Growth Strategy - David Wild • Current Trading and Outlook • Summary • Questions 3
Slide 4: Overview of Results
Overview of Results Acquisition and cost control drives earnings and dividend growth • Solid performance in challenging environment • Clear focus on cost and margin management • Resilient performance in Car Maintenance and wefit services • Year of significant operational progress • Autocentres rebra
Slide 5: Financials
Andrew Findlay Finance Director Financials 5
Slide 6: Group Financial Highlights
Group Financial Highlights • Revenue £869.7m +4.6% • PBT before non-recurring items1 £125.6m +7.2% • PBT £118.1m +7.7% • Basic EPS before non-recurring items1 43.2p +8.8% • Effective tax rate 27.6% • Net debt £103.2m down £52.3m • Dividend 22.0p +10.0% Earnings per share2 up 8.8% despite difficult t
Slide 7: Group Components
Group Components FY11 Central Total Auto Amortis- Excluding non-recurring items1 UK/ROI Retail Centres ation2 Group Europe £m £m £m £m £m £m Revenue 769.7 1.9 771.6 98.1 - 869.7 Gross profit 419.9 0.1 420.0 65.0 - 485.0 Net operating expenses (296.2) (0.5) (296.7) (58.0) (2.2) (356.8) Operating prof
Slide 8: Retail UK/ROI
Retail UK/ROI Excluding non-recurring items1 FY11 FY10 Growth £m £m % Revenue 769.7 812.2 -5.2% Gross profit 419.9 441.8 -5.0% Gross margin % 54.5% 54.4% +16bps Net operating expenses (296.2) (319.9) -7.4% Operating profit 123.7 121.9 +1.5% Operating profit % 16.1% 15.0% +106bps Reduced costs drives
Slide 9: Retail UK/ROI Sales & Margin
Retail UK/ROI Sales & Margin LFLs by Category FY11 FY10 Car Maintenance +0.6% +8.1% Car Enhancement -12.3% -14.5% Leisure -3.0% +12.2% Sales by Category FY11 FY10 Car Maintenance 31.4% 29.6% Car Enhancement 28.4% 30.7% Leisure 40.2% 39.7% FY10 Gross Margin 54.4% Sales Mix Impact +82bps Margin declin
Slide 10: Retail UK/ROI Operating Costs
Retail UK/ROI Operating Costs Key Retail Costs1 FY11 FY10 Growth £m £m % Store Staffing 78.1 86.8 -10.0% Store Occupation 135.4 142.0 -4.6% Warehouse Distribution 27.5 27.8 -0.8% Support Costs 55.2 63.2 -12.7% Total 296.2 319.8 -7.4% Depn/Amortn/Impairment2 21.6 23.4 “Underlying” FY11 cost base c.£
Slide 11: Autocentres
Autocentres Excluding non-recurring items FY11 FY101 Growth FY10 £m Proforma % Reported £m £m Revenue 98.1 97.3 +0.8% 13.5 Gross profit 65.0 64.9 +0.1% 8.9 Gross margin % 66.3% 66.8% -51bps 65.5% Net operating expenses (58.0) (56.5) +2.4% (8.3) Operating profit 7.0 8.4 -15.6% 0.6 Operating profit %
Slide 12: Group Balance Sheet
Group Balance Sheet FY11 FY10 YOY Growth £m £m £m % Goodwill and intangible assets 346.7 348.7 -2.0 -0.6% Property, plant and equipment 102.6 102.9 -0.3 -0.3% Derivative financial instruments1 (2.0) 2.2 -4.2 -191% Net working capital 47.6 49.9 -2.3 -4.6% Cash and borrowings (103.2) (155.5) +52.3 -33
Slide 13: Capital Expenditure
Capital Expenditure FY11 FY10 £m £m New stores and relocations 3.6 3.6 Store refresh/downsizes 4.8 3.8 Total portfolio 8.4 7.4 Distribution centre 3.4 6.7 Group infrastructure systems 4.2 5.8 Autocentres 6.2 0.1 Other 0.6 0.1 Central Europe - 0.4 Total capital expenditure 22.8 20.4 Group has low cap
Slide 14: Cash Flow and Net Debt
Cash Flow and Net Debt Operating cash flow Free cash flow Net debt £m £m £m Operating profit 120.6 Op. cash flow 146.3 Net debt 3.4.101 (155.5) Dep/Amortisation 25.0 Capex (22.1) Free cash flow 54.7 Employee share 2.4 Net finance costs (2.1) Lease/Other (0.5) scheme Working capital 2.9 Taxation (25.
Slide 15: Share Buyback
Share Buyback • Buyback commenced April 7 • 5.3m of shares purchased by 3 June • Average price 386.4p • Earnings enhancing Debt metrics: FY11 FY102 Adjusted net debt1: EBITDAR 3.22x 3.55x Net Debt: EBITDA 0.67x 1.03x Buyback progressing Notes 1. Adjusted Net Debt = Net Debt + Capitalised Rent; EBITD
Slide 16: Growth Strategy
David Wild Chief Executive Growth Strategy 16
Slide 17: Challenging consumer environment
Challenging consumer environment What customers are feeling • Rising costs of everyday purchases • Uncertainty about jobs • Reluctance or inability to borrow • Higher transport costs What customers are doing • Making careful choices on spending • Using technology to compare prices • Waiting for barg
Slide 18: Retail growth strategy
Retail growth strategy Consistent and effective strategy for growth Extending range and service advantage Investing in store portfolio Ongoing focus on cost control Leveraging the Halfords brand in multi-channel 18
Slide 19: Our response
Our response Price Value Service Innovation Creating value for our customers 19
Slide 20: Range - value Through Brands
Range - value Through Brands Car Travel In Car Cycles Sat Nav Maintenance Solutions Entertainment Halfords Exclusive Brands Car Travel In Car Cycles Sat Nav Maintenance Solutions Entertainment Leading Brands Extending range and service advantage 20
Slide 21: Range - value through brands
Range - value through brands • Price architecture gives customer choice • Purchasing efficiency reduces prices and enhances margins • Specification control enables better value • Differentiation online and in store Extending range and service advantage 21
Slide 22: Range - value across the cycle market
Range - value across the cycle market Value Performance Carrera Boardman £ 60-130 £ 120-200 £ 280-750 £ 350-1600 £ 600-1800 • New ranges - Better designs • All exclusive • Bikes for every occasion • Value through Halfords design and build Extending range and service advantage 22
Slide 23: Value in Car Maintenance
Value in Car Maintenance • Focus on consumable products not hard parts • Unparalleled car parc coverage • Complexity of technology causes inflation • Fragmented and declining competition • Needs based and web resilient Extending range and service advantage 23
Slide 24: Range - value through brands
Range - value through brands Urban Escape Exodus Pampero Halfords Advanced Extending range and service advantage 24
Slide 25: Value through Global Sourcing
Value through Global Sourcing • Low cost and agile supply chain • Close working relationship with manufacturers and component producers • Offices across Asian region source 40% of sales • New product areas – Cambodia, Vietnam, Tunisia Extending range and service advantage 25
Slide 26: In-store Services
In-store Services Extending range and service advantage 26
Slide 27: Value through Service
Value through Service Central part of Halfords Proposition • Expert advice and information • Products lend themselves to added value services • Trend from DIY to “Do it For Me” in Car Maintenance • Competitive strength of independents especially in bikes • Key differentiator vs online and non-specia
Slide 28: Value through Service
Value through Service Total 3Bs Penetration YOY FY09 Growth in service 3 Bs Penetration FY10 FY11 0.28 FY12 • Continued rise in 3Bs fitting 0.23 0.18 • Still 57% unaware 0.13 • Bike Care Plan +28.3% 0.08 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 • Improved weekend coll
Slide 29: Investing in the Store Portfolio
Investing in the Store Portfolio Investing in the store portfolio 29
Slide 30: Value from store portfolio
Value from store portfolio Refresh and Reconfiguration • Categories rebalanced, locally tailored and easier to shop • Comprehensive Car Maintenance range • Increased Cycle and Cycle Accessories offer • Travel and Car Enhancement zones • Some ranges reduced, e.g. Styling, Accessories and Mechanical P
Slide 31: Value from store formats
Value from store formats • New store opportunities limited • Format flexibility is key in London Pilot stores • Halfords branded • High footfall locations • Ranges target local demographic • Cycling and “best of the rest” Investing in the store portfolio 31
Slide 32: Cost Control
Cost Control Ongoing focus on cost control 32
Slide 33: Value through Cost Control
Value through Cost Control • 2 Year efficiency programme completed • Strong cost control culture in Halfords • Limited scope for further major interventions in stores and logistics • Priority around occupancy costs • Some inflation difficult to avoid • Need for investment in key growth areas Ongoing
Slide 34: Leveraging brand in Multi-channel
Leveraging brand in Multi-channel Leveraging Halfords brand in multi-channel 34
Slide 35: Value through added service
Value through added service True Multi-channel Retailer • Halfords range benefits from expert advice and fitting service • >86% web transactions involve a store visit • Customers make additional purchases • Collection rates up YOY Leveraging Halfords brand in multi-channel 35
Slide 36: Creating value Online
Creating value Online Online growth • 40.5m Visitors (+10.5m) •Still only 9% of all sales • Significantly higher ATV • Customers research online first • Pipeline of Autocentres customers Leveraging Halfords brand in multi-channel 36
Slide 37: Value through online development
Value through online development Creating value online • Mobile site launched in Aug 2010, now 15% of traffic • 6,000 bundles delivering accessory sales • 53,000 customer reviews and 25,000 Ask and Answers • Websphere investment for better user experience and growth • Shopping app in development Lev
Slide 38: Halfords Autocentres
thats Halfords 4) Autocentres”
Slide 39: Creating Value through Autocentres
Creating Value through Autocentres Refurbished and rebranded Halfords Autocentres • Encouraging sales since relaunch • Continuous radio advertising campaign • Leveraging Halfords.com traffic through promotional activity • Targeted marketing campaign • New centre openings • Fleet sales potential • Ty
Slide 40: That's Helpful
That‟s Helpful Leveraging the Halfords brand 40
Slide 41: Telling customers about our value
Telling customers about our value Price Creating value for our customers Value Service Innovation 41
Slide 42: that's helpful that's halfords
„that‟s helpful that‟s halfords‟ • Strategy supported by new brand campaign • Reinforces Halfords unique service proposition • National „that‟s helpful‟ radio campaign launched end of February for Autocentres • National „that‟s helpful‟ TV campaign launched Easter for Retail business Leveraging the
Slide 43: that's helpful advert
„that‟s helpful‟ advert 4343
Slide 44: that's helpful advert
„that‟s helpful‟ advert 4444
Slide 45: Current Trading and Outlook
Current Trading and Outlook 45
Slide 46: Current Trading and Outlook
Current Trading • Current trading: 9 weeks to 3rd June 2011 • Halfords Retail +0.8% • Car Maintenance - 3.0% • Car Enhancement -10.6% • Leisure +11.1% • Autocentres +1.2% Outlook • Challenging consumer environment • Strong plan, creates value through price, innovation and service • Pressures on Gros
Slide 47: Summary
Summary • FY11 EPS of 43.2p +8.8% • Continued cash generation, dividend +10%, £75m share buyback • Retail growth strategy driving value for customers • Autocentres relaunch and roll-out progressing well • Launch of new advertising campaign covering both divisions • Sound start to FY12 in tough tradi
Slide 48: Questions
life on the move Questions
Slide 49: Appendices
Appendices • Group Income Statement • Retail revenue bridge • Non recurring expenses • Retail Store Portfolio 49
Slide 50: Group Income Statement
Group Income Statement Excluding non-recurring FY11 FY101 Growth items2 £m £m % Revenue 869.7 831.6 +4.6% Gross profit 485.0 452.7 +7.1% Net operating expenses (356.8) (333.0) +7.2% Operating profit 128.1 119.7 +7.0% Operating profit % 14.7% 14.4 +34bps Net finance costs (2.5) (2.6) -3.8% Profit bef
Slide 51: Retail Revenue Bridge
Retail Revenue Bridge FY11 FY10 % % Underlying LFL sales growth -4.9 +0.7 Easter adjustment +0.6 +0.6 Reported LFL sales growth -5.5 +1.3 Currency1 -0.4 +0.3 Net new space +0.2 +1.3 Retail sales growth -5.7 +2.9 Europe impact +0.5 -0.1 UK/ROI Sales Growth2 -5.2 +2.8 Notes 1. Translation of non-sterl
Slide 52: Non-Recurring Expenses
Non-Recurring Expenses FY11 FY10 £m £m Non-recurring expenses 7.5 7.4 • FY11 – provision for potential liabilities in respect of guarantees provided by Halfords to landlords of properties leased to Focus DIY which entered into administration in May 2011. • FY10 – costs relating to the closure of the
Slide 53: Retail Portfolio by Store Type
Retail Portfolio by Store Type Retail Space Mezzanine Flat Compact Metro Bikehut Total 3,845,443 ft2 Opening Number 240 166 291 321 2 469 New Store 2 1 0 2 0 5 Relocations 22 1 0 0 0 3 Closures 1 6 0 0 1 8 Closing Number 243 159 29 34 1 466 Notes 1 Reclassification of 4 stores from Compact to Metro