Slide 1: FY18 Interim Results
halfords for life’s journeys
Slide 2: Introduction
Introduction Dennis Millard – Chairman CEO update Jonny Mason – Interim CEO H1 financial performance & outlook Adam Phillips – Corporate Finance Director Summary Jonny Mason – Interim CEO Q&A
Slide 3: CEO update
CEO update Jonny Mason – Interim CEO
Slide 4: H1 Operational highlights
H1 Operational highlights Steady trading performance in challenging conditions Gained market share in both motoring and cycling Continued strategic progress Further strengthening of our unique services proposition 4
Slide 5: H1 Financial highlights
H1 Financial highlights Total Group sales +3.8%, Retail +4.5% and Autocentres -0.6% Retail Motoring +1.9% LFL and Cycling +2.0% LFL £15m increase in cost of goods from the weaker pound Profit before tax of £36.8m, down £4m year-on-year Net Debt at 0.8 times EBITDA, Interim dividend up 3% 5
Slide 6: Motoring market update
Motoring market update The motoring market Total UK car miles driven (billions) 254 Growing used car parc 253 247 247 248 245 244 245 75% of consumers prefer someone 240 241 240 240 245 to do their car maintenance for them* Increasing complexity of cars will accelerate the DIFM** trend Source:
Slide 7: Cycling market update
Cycling market update The cycling market Price rises to offset FX-related cost inflation; lower volumes Independents and smaller chain operators closing shops Fast growth in e-bikes, attracting new customer segments Market fundamentals remain strong Halfords’ position in it Strongest opera
Slide 8: Moving Up A Gear strategy
Moving Up A Gear strategy Service in our Better Shopping Building on our DNA Experience Uniqueness Putting Customers Fit for the Future in the Driving Seat Infrastructure 8
Slide 9: Service in our DNA
Service in our DNA Service-related Retail sales +19.3% +13.8% +10.0% Service-related Retail sales* up 19.3% (+35.7% 2-year growth) Over 50% of Group sales have a FY15 FY16 FY17 FY18 H1 H1 H1 H1 clearly identifiable service element** Retail colleague turnover down 7 percentage points in three y
Slide 10: Better Shopping Experience
Better Shopping Experience Store network remains fundamental to delivery of our services 40 stores refreshed in latest format by the end of this month Over 85% of Halfords.com orders collected in-store Cycle Republic roll-out continues with 18 operational to date Improvements to Group webs
Slide 11: Building on our Uniqueness
Building on our Uniqueness New in-store services including ad-blue top-up, key fob repair and fuse fitting Own-brand Carrera and Pendleton electric bikes launched Tradecard sales +21% as we continued to grow awareness ‘Cycle 2 work’ sales in strong growth, evidencing unique breadth of Group
Slide 12: Putting Customers in the Driving Seat
Putting Customers in the Driving Seat Transactions-to-customers match rate 67% 54% 54% of Retail transactions matched to 31% customers, up from 3% two years ago 3% 67% of Group transactions matched FY16 H1 FY17 H1 FY18 H1 FY18 H1 to customers (Retail) (Retail) (Retail) (Group) Smart analytics
Slide 13: Fit for the Future Infrastructure
Fit for the Future Infrastructure Third distribution centre in Daventry fully operational and delivering benefits Increased ‘store-friendly’ deliveries improving efficiency Next day click & collect and home delivery launched Single view of stock enhancing accuracy of stock availability Sho
Slide 14: Autocentres
Autocentres Focus on service, maintenance, repair and direct tyre sales Gross margin and profit up Colleague turnover improvements resulting from pay grading changes Electric and hybrid vehicle servicing Implementing best practice into underperforming garages following the operational revi
Slide 15: H1 financial performance & outlook
H1 financial performance & outlook Adam Phillips – Corporate Finance Director
Slide 16: Group H1 Financial Highlights
Group H1 Financial Highlights Group financial highlights +3.8% YoY Revenue: £588.7m +£21.4m YoY +1.5% LFL Underlying EBITDA: £54.9m -3.9% YoY -£2.2m YoY Underlying PBT: £36.8m -9.8% YoY -£4.0m YoY Basic Underlying EPS: 14.8p -10.8% YoY -1.8p YoY Interim Ord. Dividend: 6.0p +3.0% YoY Notes: 1) All nu
Slide 17: Retail Financial Highlights
Retail Financial Highlights Retail financial highlights +4.5% YoY Revenue: £511.0m +1.9% LFL -182 bps Gross Margin: 45.7% YoY Operating costs: -£195.8m +2.6% YoY Underlying EBIT: £37.9m -£3.9m YoY Underlying EBITDA: £50.9m -£2.8m YoY Notes: 1) All numbers represent performance for the 26 weeks to 29
Slide 18: Retail Sales
Retail Sales Retail sales Total sales LFL sales Retail +4.5% +1.9% Service- related Cycling +7.0% +2.0% sales +19.3% Motoring +1.8% +1.9% Car Maintenance +2.0% +2.2% Car Enhancement Online -2.1% -2.0% sales +8.9% Travel Solutions +6.9% +7.1% Notes 1) Like-for-like sales represent revenue from stores
Slide 19: Retail Gross Margin
Retail Gross Margin – decline of x bps as expected Retail gross margin 47.6% -300 bps 45.7% +173 bps -55 bps -182 bps FY17 H1 Increase in Mix impact** FX FY18 H1 COGS* from mitigation the weaker and other pound *COGS refers to ‘cost of goods sold’. **This comprises: a) Circa 20 bps from the net of t
Slide 20: Retail Gross Margin
Retail Gross Margin – decline of x bps as expected Retail gross margin Impact of weaker pound on COGS* The impact of the weaker FY17 FY17 FY18 FY18 pound on COGS has increased H1 H2 H1 H2** each half year since the EU referendum Impact peaked in H1 FY18 and -115 bps recedes in H2 -189 bps No f
Slide 21: Autocentres Financial Highlights
Autocentres Financial Highlights Autocentres financial highlights -0.6% YoY Revenue: £77.7m -1.3% LFL Gross Margin: 67.7% +270 bps YoY Operating costs: -£51.1m +2.4% YoY Underlying EBIT: £1.5m +£0.6m YoY Underlying EBITDA: £4.0m +£0.6m YoY Notes: 1) All numbers represent performance for the 26 weeks
Slide 22: Cash flow
Cash flow Cash flow +£3.6m -£14.8m £54.9m -£12.6m £31.1m -£23.0m -£7.1m £1.1m EBITDA Working Capex Tax and Free Cash Ordinary M&A Net cash capital other dividend Flow inflow 22
Slide 23: Financial Outlook
Outlook Financial Outlook Impact of weaker pound on cost of sales recedes in H2; no further impact in FY19 assuming current exchange rates No change to financial guidance for FY18 or the medium term financial targets We anticipate FY18 PBT to be in line with current market expectations 23
Slide 24: Summary
Summary Jonny Mason – Interim CEO
Slide 25: Summary
Outlook Summary Good trading performance in challenging conditions Gained market share in both motoring and cycling FX mitigation plans in place and working well Continued delivery of strategic progress Further strengthening of our unique services proposition Exciting plans for H2 25
Slide 26: Appendices
halfords for life’s journeys Ty QASHOAI
Slide 27: Group income statement
Group income statement Group Income Statement H1 FY18 H1 FY17 Change £m £m Revenue 588.7 567.3 +3.8% Gross Profit 286.3 283.4 +1.0% Operating Costs (248.0) (241.6) +2.6% Underlying EBIT 38.3 41.8 -8.4% EBIT Margin % 6.5% 7.4% Underlying EBITDA 54.9 57.1 -3.9% EBITDA Margin % 9.3% 10.1% Net Finance C
Slide 28: Retail income statement
Retail Income Statement Retail income statement H1 FY18 H1 FY17 Change £m £m Revenue 511.0 489.1 +4.5% Gross Profit 233.7 232.6 +0.5% Gross Margin 45.7% 47.6% -182 bps Operating Costs (195.8) (190.8) +2.6% Underlying EBIT 37.9 41.8 -9.3% EBIT Margin 7.4% 8.5% Underlying EBITDA 50.9 53.7 -5.2% EBITDA
Slide 29: Group balance sheet
Group Balance Sheet Group balance sheet H1 FY18 H1 FY17 YOY Change £m £m £m Goodwill and Intangible 394.5 391.8 +2.7 +0.7% Assets Property, Plant & Equipment 102.5 101.6 +0.9 +0.9% Investments 8.1 - +8.1 - Derivative Financial (4.9) 8.3 -13.2 - Instruments Net Working Capital 49.0 40.5 +8.5 +20.1% N
Slide 30: Cash flow and net debt
Cash flow and Net Debt Cash flow and net debt Operating Cashflow £m Free Cashflow £m Net Debt £m Operating Underlying EBIT 38.3 57.7 Opening Net Debt (85.9) Cashflow Non-recurring operating Capital (0.5) (14.8) Free Cashflow 31.1 expenses Expenditure Depreciation, Proceeds from issue Amortisation an
Slide 31: Group cash flow
Group Cash Flow Group cash flow H1 FY18 H1 FY17 £m £m Underlying EBITDA 54.9 57.1 Non-recurring operating (0.5) (1.5) expenses Change in inventories (14.9) (18.7) Change in receivables 1.2 (5.7) Change in payables 17.3 17.1 Change in provisions (0.2) (0.4) Other (0.1) 1.4 Operating Cash Flow 57.7 49
Slide 32: Group components
Group Components Group components Retail Autocentres Amortisation Group FY18 H1 £m £m £m £m Revenue 511.0 77.7 - 588.7 Gross Profit 233.7 52.6 - 286.3 Operating Costs (195.8) (51.1) (1.1) (248.0) EBIT 37.9 1.5 (1.1) 38.3 EBITDA 50.9 4.0 - 54.9 Retail Autocentres Amortisation Group FY17 H1 £m £m £m £
Slide 33: Retail operating costs
Retail Operating Costs Retail operating costs Store colleagues: £58.7m +4.1% YoY Store Occupancy: £71.4m +2.9% YoY Warehousing & Distribution: £25.3m +4.1% YoY Support costs: £40.4m -0.7% YoY Total: £195.8m +2.6% YoY Notes: 1) Tredz and Wheelies’ costs have been allocated to the above categories in
Slide 34: Motoring in-store service menu
Retail in-store service menu Motoring in-store service menu * Headlight restoration is currently in trial. 34
Slide 35: Cycling in-store service menu
Retail in-store service menu Cycling in-store service menu 35
Slide 36: Net debt to EBITDA
Net debt to EBITDA Net debt to EBITDA 1.8 1.6 1.4 Debt target of 1x (with range up to 1.5x for M&A) Net debt to EBITDA 1.2 published in June 2016 1 0.8 0.6 0.4 0.2 0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY FY FY FY FY FY FY FY FY FY FY FY H1 36
Slide 37: Capital allocation priorities
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 37
Slide 38: Group site portfolio
Group site portfolio Group site portfolio FY16 FY17 FY18 to date* Halfords Retail 462 460 460 Halfords Autocentres 314 313 315 Cycle Republic 10 15 18 Tredz - 4 4 Total 786 792 797 Number of Autocentres Acquired 223 Average FY11 230 remaining FY12 250 lease length FY13 283 Retail 6.5 years FY14 303
Slide 39: Forward looking statements
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
Slide 40: Contact and Newsflow
Contact and Newsflow Contact and Newsflow For further information, please go to www.halfordscompany.com or contact: Adam Phillips Corporate Finance 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@halfo