Slide 1: Preliminary Results
Preliminary Results 52 Weeks to 30 March 2007 Merrill Lynch - Auditorium 7 June 2007
Slide 2: Nick Wharton, Finance Director
Nick Wharton Finance Director
Slide 3: Financial Highlights
Financial Highlights z Sales £744.0m (2006: £681.7m) z Operating profit £93.5m (2006: £89.1m) z Profit before tax and exceptional finance costs £83.5m (2006: £77.0m) z Net debt (including finance leases) £180.0m (2006: £173.7m) z 6KDUHEX\EDFNPVKDUHVDFTXLUHGDWDFRVWRI£P SHQFHSHUVKDUH z Basic EPS befor
Slide 4: Profit and Loss Account
Profit and Loss Account 2006/07 2005/06 Growth £m £m % Revenue 744.0 681.7 +9.1% Gross profit 376.1 346.7 +8.5% Gross profit % 50.6% 50.9% -30bps Net operating expenses (282.6) (257.6) +9.7% Operating profit 93.5 89.1 +4.9% Net finance costs1 (12.6) (12.1) +4.1% Profit before tax 80.9 77.0 +5.1% Bas
Slide 5: Sales Growth
Sales Growth 2006/07 2005/06 % % Like-for-like sales growth 5.3 6.1 Easter 0.7 0.0 Net new space 3.1 2.4 Total sales growth 9.1 8.5 Easter adjusted like-for-like comparatives: H1 H2 Full Year 2006/07 5.0% 5.6% 5.3% 2005/06 2.6% 9.6% 6.1% Consistent Sales Growth 5
Slide 6: Net Operating Expenses
Net Operating Expenses £m % Revenue 2005/06 operating costs 257.6 37.8% 2006/07 non comparables1 6.1 Space increase 6.6 Underlying cost inflation (4.8%) 12.3 2006/07 operating costs 282.6 38.0% Key Ratios (% Revenue): 2006/07 2005/06 Store Payroll 11.5% 11.8% Store Rent & Rates 11.3% 11.2% Advertisi
Slide 7: Property Portfolio Management
Property Portfolio Management z 15 portfolio transactions completed during the last 2 years z Property ratio (Retail space/Rental space) improved by 45% z Total rental cost reduced by 11% z Sales increase in line with supermezzanine experience z Total landlord contributions £4.5m (2006: £6.9m) 15 33
Slide 8: Balance Sheet
Balance Sheet 2006/07 2005/06 £m £m Growth Goodwill and intangible assets 257.8 258.8 -0.4% Property, plant and equipment 107.5 104.1 +3.3% Derivative financial instruments (1.0) 1.2 Net working capital1 45.7 40.4 +13.1% Net debt and cash (180.0) (173.7) +3.6% Creditors > 1 year (26.9) (28.3) -4.9%
Slide 9: Capital Expenditure Summary
Capital Expenditure Summary 2006/07 2005/06 £m £m New stores and re-sites 11.3 11.1 Store conversions 2.3 10.7 Czech Republic 0.4 0.0 Total portfolio 14.0 21.8 Head office systems 2.2 2.1 Store systems 4.2 0.5 Supply chain 0.5 0.5 Other 2.6 2.9 Total capital expenditure 23.5 27.8 z 2 year capital ex
Slide 10: Cash Flow and Net Debt
Cash Flow and Net Debt Operating cash flow £m Operating profit 93.5 Depreciation/Amortisation 20.9 Employee share scheme 2.1 Fixed asset write-off 0.6 Working capital (4.5) Operating cash flow 112.6 Halfords remains strongly cash generative 10
Slide 11: Cash Flow and Net Debt
Cash Flow and Net Debt Operating cash flow Free cash flow £m £m Operating profit 93.5 Op. cash flow 112.6 Depreciation/Amortisation 20.9 Net finance cost (8.3) Employee share scheme 2.1 Taxation (25.4) Fixed asset write-off 0.6 Dividends (29.5) Working capital (4.5) Capex Maintenance (3.8) Operating
Slide 12: Cash Flow and Net Debt
Cash Flow and Net Debt Operating cash flow Free cash flow Net debt1 £m £m £m Operating profit 93.5 Op. cash flow 112.6 Net debt 31.03.06 (173.7) Depreciation/Amortisation 20.9 Net finance cost (8.3) Free cash flow 45.6 Employee share scheme 2.1 Taxation (25.4) Share capital (30.0) Fixed asset write-
Slide 13: Debt
Debt z Operating at optimal level of debt targeted at c.£180m z Key metrics: Adjusted Net Debt/EBITDAR1 2.9x Fixed charge cover2 2.3x z Progressive dividend policy maintained z Buy back programme well progressed z Adequate free cash flow to fund UK and European organic expansion Basis of calcula
Slide 14: Financial Highlights
Financial Highlights z Sales £744.0m (2006: £681.7m) z Operating profit £93.5m (2006: £89.1m) z Profit before tax and exceptional finance costs £83.5m (2006: £77.0m) z Net debt (including finance leases) £180.0m (2006: £173.7m) z 6KDUHEX\EDFNPVKDUHVDFTXLUHGDWDFRVWRI£P SHQFHSHUVKDUH z Basic EPS befor
Slide 15: Ian McLeod, Chief Executive Officer
Ian McLeod Chief Executive Officer
Slide 16: Overview
Overview z Results reinforce leading position in each key market z Achieved sales growth in each key category z Demonstrates economic resilience and competitive advantage z Margin dilution effectively arrested z Strategic growth plan is working: Investing in the store portfolio Leveraging the Ha
Slide 17: Investing in the Store Portfolio
Investing in the Store Portfolio Portfolio Development (Excl. Bik ehut and Czech) z 426 stores now trading: 450 3,950 3,450 430 Store No: 2,950 376 superstores 33 metros 000 ft 2 410 2,450 390 1,950 15 neighbourhoods 2 Bikehuts 370 1,450 350 950 FY04 FY05 FY06 FY07 FY08 Financial Year z Space growth
Slide 18: Investing in the Store Portfolio
Investing in the Store Portfolio Superstores z Superstores remain format of choice z Prime retail park locations with A1 consents z Invested in every store over last 4 years Neighbourhood z Format developed for smaller catchments: z Range selection criteria clearly defined to optimise consumer offer
Slide 19: New Formats - Bikehut
New Formats - Bikehut “Run by cyclists …… for cyclists” z 2 Bikehuts open with 6 by Christmas 2007 z Colleagues enthusiastic and highly knowledgeable z Product offer 60% different to Superstore z Niche/specialist brands – Condor, De Rossa, Pashley, Gore-tex, Endura z Strong cycle accessory participa
Slide 20: International Development
International Development Republic of Ireland z 12 stores now trading z Further 6 to open in 2007/08 z At least 20 superstores planned z Strong return on investment z Neighbourhood format potential Central Europe z Strong market potential z First store opens June 29th in Prague z 2 more stores open
Slide 21: Leveraging the Halfords Brand: Car Maintenance
Leveraging the Halfords Brand Car Maintenance z Destination store status z Continued growth from a high margin category z Needs driven purchases with low price elasticity z “we fit” penetration continues to grow z Range breadth creates competitive advantage 21
Slide 22: Leveraging the Halfords Brand: Car Enhancement
Leveraging the Halfords Brand Car Enhancement z No. 1 Retailer of in-car technology MP3/iPod connectivity Satellite Navigation Mobile phone kits In-car DVD z Underpinned by fitting and demonstration capability z Broadening supplier base increasing competition z Growing participation of private label
Slide 23: Leveraging the Halfords Brand: Leisure
Leveraging the Halfords Brand Leisure Travel Solutions & Camping z Sub shop identity provides range clarity z Product redevelopment driving sales growth z Halfords camping range proving successful z Premium camping brand introduced z Capitalised on Child Seat legislation change 23
Slide 24: Leveraging the Halfords Brand: Cycling
Leveraging the Halfords Brand Leisure Cycling z 376 Bikehut sub-shops z Cycle maintenance & repair service, through dedicated workshops, growing sales z Bikehut now a £10m accessory brand z Apollo & Carrera re-launched this year z Exclusive range of GT bikes developed z Boardman and Voodoo exclusive
Slide 25: Leveraging the Halfords Brand: Boardman
Leveraging the Halfords Brand Boardman z Chris Boardman MBE: Britain’s most successful cyclist z R&D Director to British Cycling and Olympic team. z Exclusive range of bikes and accessories developed with Halfords z 30 frame sizes across 9 models up to £1,400 z Best performance to price ratio in the
Slide 26: Halfords Centenary Year
Halfords Centenary Year z Halfords store sponsored events across the country z Creating over 100 Halfords Heroes z Target over £100k to be raised z Pennine Way challenge: z Ian McLeod z Paul McClenaghan z Steve Whyman 26
Slide 27: Halfords.com
Halfords.com z Continues to benefit from significant growth z Continued increase in site visits and conversion rates z Improvements in site navigation and product imaging z New fulfilment system successfully introduced z Future developments to include “reserve on line, collect in-store” 27
Slide 28: Marketing Our Service Advantage
Marketing Our Service Advantage Over 1.2m fitting jobs completed including 275,000 technology solutions Now integral to all press and TV marketing Establishment of a “training stores” network to grow skill base and colleague availability 2,000 colleagues professionally trained to install child sea
Slide 29: Supply Chain Development
Supply Chain Development z Far East sourcing target of 20% achieved and looking to grow further z Margin benefits to mix increasing from earlier direct sourcing initiatives z Development in electronics proving successful z Sourcing expertise developed across all categories: Active Leisure Ripspeed a
Slide 30: Trading Update
Trading Update Current Trading – 9 weeks to 1 June 2007 Sales +12.3% (2006: +10.5%) LFL sales +9.2% (2006: +7.3%) Note: LFL are Easter comparable No further margin dilution incurred 30
Slide 31: Developing a Platform for Growth
Developing a Platform for Growth z Core category growth augmented by new product development z Active mix management arresting margin dilution z Potential for a further 130 stores 20+ annual store opening programme planned z Neighbourhood format paybacks encourage further expansion z 3 store Czech
Slide 32: Developing a Platform for Growth
Developing a Platform for Growth z Resilient and defensive business model z Margin stabilised z Growth driven across product range z Potential to exploit further growth opportunities z Confidence in future prospects Building Growth on a Solid and Robust Foundation 32