Halfords Group Plc · LSE:HFD
Halfords — H1 FY24 Earnings Presentation
44 slides from Halfords's earnings presentation, Nov 29, 2023
Slide 1: FY24 Interim Results
FY24 Interim Results Halfords Group PLC 29th November 2023 1
Slide 2: Agenda
Agenda H1 FY24 Financial Performance Jo Hartley Business & Strategic Update Graham Stapleton Outlook Graham Stapleton Q&A 2 Classification: Restricted
Slide 3: H1 Overview – strong sales, profit and market share growth
H1 Overview – strong sales, profit and market share growth. • Strong start to the year despite poor summer weather and Cycling and Tyre markets underperforming. • Significant inflation negatively impacting gross margin. Focusing on what we can control: ➢ Growing market share across all categories. ➢
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Jo Hartley 4 Classification: Restricted
Slide 5: Basis of financial information
Basis of financial information • Covers the 26-week period from 1 April 2023 to 29 September 2023 • All comparators are on a one-year basis. • All figures are post IFRS 16 unless otherwise stated 5 Classification: Restricted
Slide 6: Macro-economic backdrop and strategic actions
The macro-economic backdrop remains difficult, but our strategic actions are mitigating the headwinds. Macro-economic Consumer High Interest Rates Utilities Inflation USD FX rate Confidence & Inflation Strategic Actions Growing Improving Garage Cost & Efficiency market share utilisation 6 Classifica
Slide 7: Strong sales and profit growth despite inflationary headwinds
Strong sales and profit growth despite inflationary headwinds and slower than expected market recovery. Very strong Autocentres performance. Significant Group Strong LFL Strong Underlying Revenue Growth Growth Profit Growth Group Total Revenue Group PBT Group LFL Growth YoY £21.3m Growth YoY +13.9%
Slide 8: Strong and profitable sales growth with costs well controlled
Strong and profitable sales growth with costs well controlled. H1 24 vs H1 23* +£106.4m • Vs FY23 – Strong revenue growth, with LFL growth of 8.3%, driven by Retail Motoring Revenue £873.5m and Autocentres. +13.9% • Vs FY23 - Retail margin down 330bps reflecting FX and inflation in COGS; Autocentres
Slide 9: H1 Prior Period Restatement of Underlying PBT
H1 Prior Period Restatement of Underlying PBT of -£10.6m. FY23 Impact -£7.3m. No impact on FY23 cash or Mid-Term CMD targets. H1 Full Year Prior Period Restatement (FY23) Retail Autocentres Group* Retail Autocentres Group* H1 FY23 Reported PBT £34.8m £2.0m £29.0m £58.6m £10.4m £51.5m FX accounting a
Slide 10: Despite £20m of inflation we have grown underlying PBT by 15.8%
Despite £20m of inflation we have grown underlying profit before tax by 15.8% Total inflation of £20.1m 10
Slide 11: £20m of inflation has impacted H1 FY24
£20m of inflation has impacted H1 FY24, broadly in line with expectations. FX Rate Utilities Pay Freight Average exchange rate through Utilities costs have doubled National Minimum Wage (NMW) YOY cost savings of £4m COGS $1.26 increases of 10% Our FY23 FX and energy hedging policy postponed inflatio
Slide 12: £16.6m of cost & efficiency savings delivered in H1
£16.6m of cost & efficiency savings delivered in H1 - higher than expected, due to earlier phasing of better buying benefits. Outsourcing / Property & “Goods Not For Product Cost Organisational Warehousing Resale” Reduction Structure Savings Reduction c.£5.9m savings c.£4.0m savings c.£3.0m savings
Slide 13: Retail
RETAIL 13 Classification: Restricted
Slide 14: Retail: strong revenue growth through market share
In Retail, strong revenue growth through market share across needs-based motoring products, helping to mitigate the impacts of FX and market declines across discretionary products. Gross Margin Bridge – year-on-year HY 24 vs. H1 23 1.1% +3.2% YoY Revenue £516.6m 2.7% +4.1% LFL 50.2% 0.8% 0.7% +7.9%
Slide 15: Autocentres Group
AUTOCENTRES GROUP 15 Classification: Restricted
Slide 16: Autocentres: very strong profit growth
Very strong profit growth due to market share growth and focus on optimisation. H1 24 vs. H1 23* +33.9% YoY Revenue £356.9m +18.0% LFL Gross Margin % 50.6% (60)bps YoY* £7.2m Operating Costs £169.5m +21.2% YoY Underlying EBIT £10.9m +£14.1m YoY • Strong revenue and gross profit growth driven by acqu
Slide 17: Cash & Balance Sheet
CASH & BALANCE SHEET 17 Classification: Restricted
Slide 18: Net debt elevated due to working capital outflow
Net debt elevated due to working capital outflow; expected to normalise through H2. Operating cashflow £64.3m 18 Classification: Restricted
Slide 19: Net debt excluding lease debt of £47.0m
Net debt excluding lease debt of £47.0m. Leverage including lease debt within guided range. Net Debt £m Net Debt : EBITDA (H1 FY24) 372.3 348.7 2.0x 325.3 346.9 0.3x Net Debt : EBITDA Net Debt : EBITDA 47.0 (pre lease debt) (post lease debt) 1.8 H1 FY24 FY23 (Cash)/Debt Lease debt • Net debt (post l
Slide 20: Proposed interim dividend of 3p per share
Proposed interim dividend of 3p per share. Capital Allocation Priorities Maintaining a prudent Dividend per share balance sheet Investment for growth 7.00 6.00 Final Final M&A focused on Autocentres 6.18 5.00 Interim Final 3.0 Interim 3.0 Interim 3.0 Interim Dividend covered by 1.5x – 2.5x underlyin
Slide 21: H1 FY24 Summary: Resilient results
H1 FY24 Summary: Resilient results, against a continuing challenging backdrop. 1. £21.3m of PBT delivered, in line with expectations despite over £20m of year-on-year market and inflationary headwinds. 2. Significant revenue growth of +13.9% year-on-year and LFL growth at +8.3% with increased market
Slide 22: Business & Strategic Update
BUSINESS & STRATEGIC UPDATE Graham Stapleton 22 Classification: Restricted
Slide 23: Digital and data-enabled omnichannel platform
‘‘ To fully leverage our unique, digital and data-enabled omnichannel platform, driving improved financial returns. ‘‘ 23 Classification: Restricted
Slide 24: Capital Markets Day plan to £90-110m PBT mid-term
At our Capital Markets Day, we outlined a plan to get £90-110m PBT in the mid-term. Market recovery, share, cost inflation, and efficiency were the most material moving parts. Group PBT Bridge - FY23 to mid-term Group Revenue c.£1.6bn Group Revenue c.£1.9bn Operating Margin c.3-4% Operating Margin c
Slide 25: Market Volumes: expected recovery through FY24
We expected most of our main markets to begin recovery through FY24. Retail Autocentres Market Volumes Retail Motoring Cycling Consumer Tyres Motoring Servicing Growth Assumed Year 1 Broadly FY24 vs FY23 c.+0.5% c.-1% c.+2.6% flat 25
Slide 26: Market Volumes: markets underperforming
Macro-economic impacts in H1 have resulted in markets underperforming. Retail Autocentres Market Volumes Retail Motoring Cycling Consumer Tyres Motoring Servicing Growth Assumed Year 1 Broadly FY24 vs FY23 c.+0.5% c.-1% c.+2.6% flat Market Volume movement – +3.5% H1 YOY +0.9% -5.8% -0.2% Sources: Ma
Slide 27: Market Share: confident in growing share
We remain confident in our ability to grow share across all markets. Halfords Retail Autocentres Retail Motoring Cycling Consumer Tyres Motoring Servicing Market Share Share expectation year 1 c.+0.6ppts c.+0.7ppts c.+0.2ppts +0.2ppts FY24 vs FY23 YOY YOY YOY YOY 27
Slide 28: Market Share: growing across all core markets
We are growing share across all four core markets. Halfords Retail Autocentres Retail Motoring Cycling Consumer Tyres Motoring Servicing Market Share Share expectation year 1 c.+0.6ppts c.+0.7ppts c.+0.2ppts +0.2ppts FY24 vs FY23 YOY YOY YOY YOY Share Movement c.+3.8ppts c.+1.8ppts c.+0.4ppts est.+0
Slide 29: Market Share – Retail Motoring
Market Share – Retail Motoring Extended range and product innovation driving growth. Car Parts Revenue Growth YoY +400% World’s first Smart Dash Cam Own Brand Child Seats • Video-monitoring and AI- • Latest Safety Legislation. powered sensing technology. • Recycled Fabrics. • National exclusivity th
Slide 30: Market Share - Cycling
Innovation and market consolidation presenting further opportunities for share growth Market Share - Cycling • Considerable market consolidation across 35 large Continued innovation in Halfords Independent Bike Dealers, 2 large chains, Retail Cycling offer 2 Brands, 3 Distributors • Tredz well place
Slide 31: Market Share – Consumer Tyres
Market Share – Consumer Tyres Share growth driven by a focus on value and convenience Value for money Convenience • Never beaten on price promise • 20% of all customers opting and buy now pay later options for same day tyres in our • Improved own brand budget National garages tyre range • NPS of sam
Slide 32: Profitable Share Growth
Dynamic pricing and better utilisation in our Autocentres business delivering profitable market share growth. Profitable Share Growth Better utilisation and improving returns • Driving demand to under-utilised garages. • Utilisation improved +7% in H1 versus our full year target of 10%. • High margi
Slide 33: Mid to Long-Term Strategic Progress
MID TO LONG-TERM STRATEGIC PROGRESS - Consumer Motoring Services - B2B 33 Classification: Restricted
Slide 34: Motoring Loyalty Club now has c.3 million members
Our Motoring Loyalty Club now has c.3 million members. 40% NPS +6pts Strategic Progress new to Halfords higher than vs 31% LY non members 10% Cross Shop In year >5x ahead of non Premium Mix members Renewal +81% Breadth of shop rates versus non ahead of members expectations 34
Slide 35: Fusion towns generating outstanding financial results
Our Fusion towns are generating outstanding financial results. • In our trial Fusion towns- Colchester and Halifax, we have seen: Strategic progress ➢ Our Halifax garage move from 200th to 2nd sales ranking across our garage estate ➢ Sales performance across the garages more than doubled versus pre
Slide 36: B2B business providing predictable recurring revenues
Our B2B business is providing highly predictable recurring revenues. Cycle2work B2B Strategic Progress • UK’s largest Cycle2work provider 37% of total group • Continuing to grow customer base and market share revenue • Launched new portal for SME customers Commercial Fleet Services (‘CFS’) Cycle2wor
Slide 37: Avayler SaaS omnichannel solution
our SaaS business offers customers a market leading omnichannel solution. What is Avayler? What do we do? Strategic Progress 37
Slide 38: Avayler and Bridgestone 15-year Commercial Agreement
Avayler and Bridgestone begin landmark 15-year Commercial Agreement. Strategic Progress Bridgestone is a powerful catalyst for US & worldwide Avayler growth: Significant 15-year commercial agreement to implement our Avayler technology across 2000 US garages and fleet of mobile vans Bridgestone acqui
Slide 39: Contracted global opportunity of over 100,000 garage locations
We have a significant contracted, global opportunity of over 100,000 garage services locations. 1,970 garage services locations across Europe Strategic Progress Global Opportunity 80,000 garage services locations across the US 18,000 garage services locations across the US 2,000 garage services loca
Slide 40: Outlook & Guidance
OUTLOOK & GUIDANCE Graham Stapleton 40 Classification: Restricted
Slide 41: Outlook & guidance
Outlook & guidance • B2B and needs based categories continue to show very strong growth. • Trading in H1 has been volatile - some recent softening in high ticket discretionary spend. • We continue to expect PBT to be weighted towards H2. • Assuming trading conditions on average continue to reflect w
Slide 42: Conclusion & summary
Conclusion & summary • Strong financial performance and good strategic progress in H1. • Outstanding sales growth, with good market share and LFL growth. • Cycling and tyre markets remain challenging, with no short-term improvement forecast. • Strategic investments provide strong platform for growth
Slide 43: Q&A
Q&A 43 Classification: Restricted
Slide 44: Contact and Newsflow
Contact and Newsflow For further information, please go to www.halfordscompany.com or contact: Louise Richardson Interim Head of Investor Relations louise.richardson@halfords.co.uk Next newsflow: 25 January 2024: FY24 Q3 trading update 44 Classification: Restricted