Halfords Group Plc · LSE:HFD
Halfords — H1 FY2019 Earnings Presentation
34 slides from Halfords's earnings presentation, Nov 8, 2018
Slide 1: FY19 Interim Results
HALFORDS GROUP PLC FY19 INTERIM RESULTS NOVEMBER 8TH 2018
Slide 2: Agenda
2 Agenda Introduction Graham Stapleton, CEO CEO update Graham Stapleton, CEO H1 financial performance & outlook Adam Phillips, Group Strategy & IR Director Summary Graham Stapleton, CEO Q&A
Slide 3: CEO Update
3 CEO UPDATE Graham Stapleton, CEO
Slide 4: Financial highlights
4 Financial highlights • Group revenue +2.5% LFL • Gross margin improved • Underlying PBT of £30.5m, down £6.3m; broadly in line with our expectations and principally reflecting one-off and timing impacts in operating costs • Free Cash Flow of £34.2m, up 10% • Net Debt at 0.7 times EBITDA; interim d
Slide 5: Operational and strategic highlights
5 Operational and strategic highlights • Good performance from less discretionary categories • Market share gains • Service-related sales and online sales grew faster than total sales • Good progress on our Autocentres transformation; on track for second year of profit growth • New strategy launched
Slide 6: Our new strategy
6 Our new strategy To inspire and support a lifetime of motoring and cycling 1 Inspire our customers through a differentiated, super specialist shopping experience 2 unique and more convenient services offer Support our customers through an integrated, 3 Enable a lifetime of motoring and cycling
Slide 7: Our new strategy: Inspire our customers
7 Our new strategy 1 Inspire our customers through a differentiated, super specialist shopping experience • A business more focused on what it is really known for – its core motoring and cycling offer • Products and services with features and benefits that are only available at Halfords • A more inn
Slide 8: Our new strategy: Support our customers through services
8 Our new strategy 2 Support our customers through an integrated, unique and more convenient services offer • An integrated, unique and more convenient services offer • A broader range of services, more easily accessed from one single website • 1,000 convenient service locations via a choice of mobi
Slide 9: Our new strategy: Enable a lifetime of motoring and cycling
9 Our new strategy 3 Enable a lifetime of motoring and cycling • A more focused and targeted approach to loyalty at a Group level • Accelerating the development of our CRM programme • Fully leveraging our Single Customer View and increasing the investment in customer data management
Slide 10: Our new strategy – infrastructure and enablers
10 Our new strategy – infrastructure and enablers • Customer strategy supported by: • Investments in IT and digital • A more dynamic property strategy • Equal focus on driving operational efficiencies • Capex to increase from prevailing guidance of c.£40m to between £40m and £60m and self funded ove
Slide 11: Early progress: Inspire
11 Early progress 1 Inspire our customers through a differentiated, super specialist shopping experience GOOD BETTER BEST Halfords Halfords Halfords Essentials Advanced Initial optimisation of space Own label development; car Strengthening of cycling offer implemented in all Retail stores bulbs is t
Slide 12: Early progress: Support
12 Early progress 2 Support our customers through an integrated, unique and more convenient services offer Trial of on-demand Retail Financial services trial in Raising awareness of our motoring services in garages Retail and Autocentres services through sponsorship of ITV Weather
Slide 13: Early progress: Enable
13 Early progress 3 Enable a lifetime of motoring and cycling Cross-group MOT promotion, bringing new customers from Retail into Autocentres
Slide 14: H1 Financial Performance
14 H1 FINANCIAL PERFORMANCE Adam Phillips, Group Strategy & IR Director
Slide 15: Group financial overview
15 Group financial overview +1.9% YoY Revenue £599.9m +£11.2m YoY +2.5% LFL Gross profit £296.3m +3.5% YoY +£10.0m YoY Underlying PBT £30.5m -17.1% YoY -£6.3m YoY Basic Underlying EPS 12.4p -16.2% YoY -2.4p YoY Free Cash Flow £34.2m +10.0% YoY +£3.1m YoY Interim Ord. Dividend 6.18p +3.0% YoY +0.18p
Slide 16: Retail financial overview
16 Retail financial overview +1.7% YoY Revenue £519.8m +2.3% LFL Gross margin £242.2m +3.6% YoY Operating costs £211.4m +8.0% YoY Underlying EBIT £30.8m -18.7% YoY Underlying EBITDA £44.6m -12.4% YoY Notes: 1) All numbers represent performance for the 26 weeks to 28 September 2018 and are before non
Slide 17: Retail operating costs
17 Retail operating costs 8% c. 2% 6% Planned investments c. 3% 4% One-offs and c. 1% phasing 2% Impact of weaker cycling market c. 2% Inflationary impacts
Slide 18: Autocentres financial overview
18 Autocentres financial overview +3.1% YoY Revenue £80.1m +3.3% LFL Gross profit £54.1m +2.9% YoY Operating costs £51.8m +1.4% YoY Underlying EBIT £2.3m +53.3% YoY Underlying EBITDA £5.2m +30.0% YoY Notes: 1) All numbers represent performance for the 26 weeks to 28 September 2018 and are before non
Slide 19: Group cash flow
19 Group cash flow +£7.2m -£13.9m £49.8m -£8.9m £34.2m -£23.8m £10.6m EBITDA Working Capex Tax and Free Cash Ordinary Net cash capital other Flow Dividend inflow & other Net debt of £77.2m representing 0.7 times underlying EBITDA
Slide 20: Financial Outlook
20 FINANCIAL OUTLOOK Adam Phillips, Group Strategy & IR Director
Slide 21: Outlook – Retail Sales
21 Outlook – Retail Sales A greater mix of less discretionary sales in H2 H1 H2
Slide 22: Outlook – FX impact on Retail gross margin
22 Outlook – FX impact on Retail gross margin c.£3m FX benefit in H2 Impact* of GBP:USD exchange rate on COGS** -115 -189 -215 -300 FY17 FY17 FY18 FY18 FY19 FY19 H1 H2 H1 H2 H1 H2 estimate * Expressed as YOY movement in gross margin in basis points ** COGS refers to ‘cost of goods sold’
Slide 23: Outlook - Retail Operating Costs
23 Outlook - Retail Operating Costs Lower operating cost growth in Retail 8% 6% 4% 8% 2% c. 3% H1 H2
Slide 24: FY19 outlook
24 FY19 outlook • No change to financial guidance • Full year outlook is reconfirmed: we continue to anticipate FY19 Underlying Profit Before Tax to be broadly unchanged from FY18 • Profit growth in H2 anticipated, reflecting: • Sales mix towards less discretionary categories • c. £3m of FX benefit
Slide 25: Summary
25 SUMMARY Graham Stapleton, CEO
Slide 26: Summary
26 Summary • Robust trading in challenging conditions • Underlying PBT in H1 broadly in line with our expectations • Strong cash generation • Full year profit guidance maintained • New strategy launched; momentum building
Slide 27: Q&A
27 halfords Q&A
Slide 28: To inspire and support a lifetime of motoring and cycling
To inspire and support a lifetime of motoring and cycling
Slide 29: Appendices
halfords APPENDICES
Slide 30: Medium-term financial targets
30 Medium-term financial targets 1 Grow sales faster than the markets in which we operate 2 Increased Free Cash Flow over the period FY19 to FY21 compared to previous 3 years 3 Grow the ordinary dividend every year 4 Net debt target of 1.0x EBITDA with a range of up to 1.5x for appropriate M&A
Slide 31: Capital allocation priorities
31 Capital allocation priorities 1 Maintaining a prudent balance sheet 2 Investment for growth 3 Grow the ordinary dividend 4 Appropriate M&A 5 Surplus cash returned to shareholders
Slide 32: Lease expiry profile
32 Lease expiry profile 120 Retail Lease Expiry & Breaks (228 sites) Autocentre Lease Break and Expiry (149 sites) 6 years 100 Average remaining 39 lease length 80 60 24 34 25 40 27 66 196 50 20 44 42 Number of leases 26 expiring or with breaks in next 3 years 0 FY19 FY20 FY21 FY22 FY23
Slide 33: Net debt to EBITDA
33 Net debt 1.8 1.6 1.4 Debt target of 1x (with range up to Net debt to EBITDA 1.2 1.5x for M&A) 1 0.8 0.6 0.4 0.2 0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY FY FY FY FY FY FY FY FY FY FY FY FY H1
Slide 34: Contact and newsflow
34 Contact and newsflow For further information, please go to www.halfordscompany.com or contact: Adam Phillips Group Strategy & Investor Relations Director adam.phillips@halfords.co.uk Mobile: +44 (0)7703 890142 Next newsflow: 22 January 2019: Q3 trading update