Slide 1: Halfords Autocentre Analyst/Investor Visit
Halfords Autocentre Analyst/Investor Visit 20th May 2011 1
Slide 2: David Wild, Halfords Group CEO
David Wild Halfords Group CEO 2
Slide 3: Agenda
Agenda Halfords Autocentre Analyst/Investor Visit o Introduction and background David Wild o Overview and strategy Duncan Wilkes o Operations Bill Duffy o Financial mechanics Andrew Findlay o Autocentre tours 3
Slide 4: Background
Background Natural extension of Halfords business model o Feb 2010 - “Halfords Expands into Car servicing and repair” o £73.2m acquisition of Nationwide Autocentres funded from existing resources – 224 Centres o A natural extension of Halfords business model o Car maintenance is core category o Trus
Slide 5: Autocentres – Progress
Autocentres – Progress A year of significant progress What we said we‟d do in FY11: What we have done: o 12-18 new centres o 16 new centres opened – target 30 in FY12 o Migrate to Halfords branding o Halfords branding complete o Secure joint sourcing benefits o Sourcing benefits realised, particular
Slide 6: Autocentre Trading Update
Autocentre Trading Update Winning market share in a tough market o Underlying market remains tough o Trend to driving less o DfT data shows a reduction of 1.5% in car miles per annum* o Deferring services and repairs (“Amber Items”) o RAC report** 2010: 28% of motorists waiting longer for service o
Slide 7: Duncan Wilkes, Halfords Autocentres CEO
Duncan Wilkes Halfords Autocentres CEO Overview and Strategy 7
Slide 8: Highly Fragmented Market
Highly Fragmented Market o Consumer: Vehicles < 3 yrs = £1.0bn o UK car parc circa 33 mill cars + vans o Consumer : Vehicles > 3 yrs = £6.7bn o Service/Maintenance/Repair spend o B2B: Fleet Operators = £1.3bn = £9 bn* p.a. o Our target market is increasing Car parc by age (cars and LCVs) Millions of
Slide 9: Competitive Environment
Competitive Environment o Independents – c.53%** No brand or marketing capability Low (variable) credibility Soft franchises limited by inconsistency and “two tier” model Challenged to acquire tools, diagnostic equipment, data and skills Workshops declined by 52% over last 10 years* o Franchise Deal
Slide 10: MOT Frequency
MOT Frequency MOT frequency potentially changing from 3-1-1 to 4-2-2 o Would increase road deaths, emissions o Short term potential disruption and reduced sales o Long term benefit as encourages consolidation o Halfords actively involved in the consultation process o Political issue 10
Slide 11: Understanding our customer
Understanding our customer Exposed, vulnerable…potential negative mindset o Servicing / MOTing is a distress purchase o Majority lack knowledge re functionality of a car o Concern - can they trust their chosen service centre (quality of workmanship, fear of being „ripped off‟, unnecessary work)? o C
Slide 12: Autocentre Strategy
Autocentre Strategy As credible as a franchise dealer, as cost effective as an independent 12
Slide 13: Autocentre Strategy
Autocentre Strategy Consistent and effective strategy for growth Organic growth through o Maintaining and growing service advantage o Maintaining low cost structure o Investing in new centres o Leveraging the Halfords brand As credible as a franchise dealer, as cost effective as an independent 13
Slide 14: Service
Service Focus on service – Trust is critical o Net Promoter Scores measurement via quarterly surveys o 55 Responses per centre o Details available on line to managers o Green > 90 NPS o Amber 75 - 90 NPS o Red < 75 NPS o Action plan agreed for each Red centre o Red centres: o March 2007 55/208 centr
Slide 15: Autocentre Strategy
Autocentre Strategy Consistent and effective strategy for growth Organic growth through: o Maintaining and growing service advantage o Maintaining low cost structure o Investing in new centres o Leveraging the Halfords brand As credible as a franchise dealer, as cost effective as an independent 15
Slide 16: Autocentre Strategy
Autocentre Strategy Consistent and effective strategy for growth Organic growth through: o Maintaining and growing service advantage o Maintaining low cost structure o Investing in new centres o Leveraging the Halfords brand As credible as a franchise dealer, as cost effective as an independent 16
Slide 17: Invest in new centres
Invest in new centres Significant expansion opportunities o CACI analysis of potential catchments – 400 possibly up to 600 sites o Built evaluation model based on existing network o Strong pipeline of new sites consistent with 30 p.a. o New centre target criteria: o 4,500 sq ft “shoebox” in “motor a
Slide 18: Autocentre Strategy
Autocentre Strategy Consistent and effective strategy for growth Organic growth through: o Maintaining and growing service advantage o Maintaining low cost structure o Investing in new centres o Leveraging the Halfords brand As credible as a franchise dealer, as cost effective as an independent 18
Slide 19: Leveraging the Brand
Leveraging the Brand o Rebranded all Autocentres o Rebranded all marketing o Rebranded website o Spring launch campaign o Cross selling to Halfords customers National brand a major differentiator 19
Slide 20: Marketing – Existing Customers
Marketing – Existing Customers o Email (56% of addresses are captured) o Monthly + promotions o Summer/winter promo o “Sales” o Direct Mail – Centre/Customer specific o Service reminders o MOT reminders o Amber reminders o Centre Manager Phone follow up – Daily Print Out o Amber reminders o MOT remi
Slide 21: Marketing – New Customers
Marketing – New Customers o On-line: PPC and SEO (PPC £3.80 CPA)* o Mail/Email: Where we can obtain name, address and MOT due date o Radio: Began February 28, driving both awareness and web traffic o Partnerships *PPC – Pay per click, SEO – Search Engine Optimisation, CPA – Cost per acquisition Gene
Slide 22: Brand Launch
Brand Launch o First ever National advertising campaign o Impact: Weekly online bookings – YOY growth o January/February + 21% o March/April/May + 93% o Positive impact on LfL sales o Increasing Brand awareness o Spontaneous 15.7% pre ads – 23.5% Post Ads o Developing more effective customer segment
Slide 23: Halfords Autocentres.com
Halfords Autocentres.com Full multi-channel offering o Upgraded and rebranded website - linked to Halfords.com o Improvement in conversion of visits to bookings (7.1% to 8.6%) o Access to Halfords.com customers o Online bookings/enquiries provided o 18% of jobs in FY11 o 23% April 2011 o Online tyre
Slide 24: Our Fleet Business
Our Fleet Business Attractive Growth Opportunity o 3 Million Fleet cars focused on newer vehicles o Market decline – less fleet cars on the road o Halfords increasing market share o Nationwide coverage with consistent service and prices across all brands – significant competitive advantage o Margin
Slide 25: Fleet Offering
Fleet Offering o USP: A single, national, consistent, service and price across all brands o Economic advantage and convenience o Main Limiting Factor: The fleet‟s ability to direct drivers o Bookings: Almost 100% on-line o Service: Almost 100% collect + deliver o Process to sell additional work simi
Slide 26: Bill Duffy, Halfords Autocentres COO – Operations
Bill Duffy Halfords Autocentres COO Operations 26
Slide 27: Our Autocentres
Our Autocentres Characteristics of a typical centre o An MOT lane o 4 Technicians o 4 Ramps o 1 Apprentice o Oil Storage o 1 Manager o Compressor o £30k-40k sales per month o Tyre fitting machine o 250 Jobs per month o Wheel alignment equipment o £3,000 rent per month o Diagnostic equipment o Minima
Slide 28: Our Technicians
Our Technicians o 941 technicians – 650 ATA accredited o Industry average only 10% accredited o On-line access to data o 4,000 hours + technical training p.a. o Largest independent apprentice scheme in UK o 3 Year Programme o Graduated 215 apprentices over last 5 years o Important source of future s
Slide 29: What We Do
What We Do Full Mechanical Capability o Broader range of services than many of our competitors o Electronic Diagnosis (DS100 equipment throughout the network) o All parts meet OEM standards o All brands, All cars, All jobs - Clutches - Cambelts - Engines - Cylinder Heads - Misfueling - Steering - Su
Slide 30: Capacity Utilisation
Capacity Utilisation Significant potential to increase productivity o Average job 2.1 hours o Technicians work 44 hours/week o 2005 Ave. Jobs pp/wk = 12.0 (57% utilisation) o 2010/11 Ave. Jobs pp/wk = 14.0 (67% utilisation) Peak = 15.8 (76% utilisation) Best 50 centres c.18.7 (89% utilisation) o 16.
Slide 31: How We Manage
How We Manage Centre Manager is fundamental o Effective management of technicians and workflow o Strong relationship/knowledge of suppliers essential o CM maximises centre profitability through balancing cost of parts from individual suppliers with most efficient use of ramps o Converts sales/servic
Slide 32: How We Sell in the Centre
How We Sell in the Centre o Capture customer details and due dates: Manager in reception o Report honestly on vehicle: Technician, in the workshop via VRF using RAG o QA the red and amber items: Manager in workshop o Price the work and sell to customers: Manager on the phone o Explain the work & inv
Slide 33: Andrew Findlay, Halfords CFO – Financial Mechanics
Andrew Findlay Halfords CFO Financial Mechanics 33
Slide 34: FY11 Financials
FY11 Financials FY11 EBIT1 c.£7.0m – reflecting tough market Sales (FY11: c.£98m, –0.6% LfL) FY10 o Greater service intervals plus Proforma customers deferring work EBIT2 FY11 Outturn o No benefit of brand relaunch £8.4m £(0.6)m EBIT1 o Fleets revenues marginally up £0.1m £(0.5)m £0.1m £(0.5)m c.£7m
Slide 35: Financial mechanics
Financial mechanics High operational gearing - cash generative business o Operating costs (inc labour) predominantly fixed in mature centres o Typical mature centre currently generates c.£40k of annualised EBIT o 30 new centre openings targeted in FY12 - phased throughout year o FY12 EBIT start up l
Slide 36: Questions
Halfords Autocentre Visit Questions 36
Slide 37: Autocentre Tours
Bill Duffy Halfords Autocentres COO Autocentre Tours
Slide 38: What You'll See
What You’ll See 3 Autocentres: o Olton...Diagnostic Skills, Equipment & Training o Solihull...Retail & OEM Services & VRF process o Shirley...Technical capabilities, demo of cambelt fitment 38
Slide 39: Appendix
Appendix 39
Slide 40: Autocentres Tour
Autocentres Tour A B C David Wild Andrew Findlay Louise Richardson David Jeary Aurelie Caspar Nick Bubb Kate Calvert Andrew Mobbs Isabel Green Warwick Okines Sanjay Vidyarthi Jonathan Pritchard Assad Malic Paul Rossington John Stevenson Geoff Ruddle Andy Wade Mark Photiades Ben Spruntulis Katharine
Slide 41: Disclaimer
Disclaimer The preceding slides are only directed at persons to who this presentation may lawfully be communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on these slides or any of their content. These slides do not constitute any offering of securities o