Slide 1: FY17 Preliminary Results
FY17 Preliminary Results 25 May 2017
Slide 2: Market & performance update; Financial performance and guidance
Market & performance update CEO - Jill McDonald Financial performance and financial guidance CFO - Jonny Mason Summary Chairman - Dennis Millard Questions
Slide 3: FY17 highlights
FY17 highlights Strong progress across Market share growth in Service-related sales Moving Up A Gear motoring and cycling growth of 11.1% strategic pillars Enhanced customer Group online sales Expanded Group’s data driving incremental up 30.5%* reach and capabilities sales *Including the impact of t
Slide 4: Financial Target Review
Financial Target Review 1 Grow sales faster than the market* 2 Group EBITDA margin broadly flat prior to impact of FX 3 Grow the ordinary dividend every year** 4 Net Debt target of 1x EBITDA with a range up to 1.5x*** * Halfords principally operates in two markets: motoring and cycling. Management c
Slide 5: Market update – Motoring
Market update – Motoring Market share gains during the year Strong positions in fragmented markets Increasing complexity of cars and parts Continued trend from ‘Do it Yourself” to “Do it For Me” Our target market is the “second life of the car” Anticipate market growth of 2-3% per annum on average o
Slide 6: Market update – Cycling
Market update – Cycling Market share gains during the year Strong positions in fragmented markets Fundamentals driving market growth E-bikes growth opportunity Market prices moving up due to Sterling depreciation against US dollar Anticipate market growth of 3-5% per annum on average over time 6
Slide 7: Moving Up A Gear strategy
Moving Up A Gear strategy Service in our Better Shopping Building on our DNA Experience Uniqueness Putting Customers in Fit for the Future the Driving Seat Infrastructure 7
Slide 8: Service in our DNA
Service in our DNA Over 30 motoring and cycling services Service-related sales up 11.1% Lowest ever colleague turnover (33%) Target “Gears” programme levels met Apprenticeship scheme growing New services in FY17 - more in FY18 8
Slide 9: Better Shopping Experience
Better Shopping Experience Headsets to support Agile web colleagues and improve development customer service 15 Cycle Republic Launch of new store stores and website refresh concept 9
Slide 10: Better Shopping Experience
Better Shopping Experience 10
Slide 11: Better Shopping Experience
Better Shopping Experience Evolution of successful previous concept • Strong sales uplifts and feedback so far • 5 updated store refreshes in FY17 • Around 30 to follow in FY18 • “Lite” version being developed 11
Slide 12: Building on our Uniqueness
Building on our Uniqueness Boardman wins awards New motorcycling range Market leading retailer launched and fitter of dash-cams Successful Wiggins Grew child seat sales Improved our Tradecard range and e-bikes twice as fast as the offer launched market 12
Slide 13: Building on our Uniqueness
Building on our Uniqueness Complementary bolt-on M&A in both cycling and motoring Tredz acquisition means we can now service all customer segments Tredz & Wheelies performing well since acquisition with sales up 22% in FY17 Tyres on the Drive investment to enhance service and convenience credentials
Slide 14: Putting Customers in the Driving Seat
Putting Customers in the Driving Seat Single customer view phase 1 complete 5.3 million email addresses gathered 46% Retail customer sales match rate 1.2m incremental visits to the website Sales attributable to personalised email campaigns up 19% 14
Slide 15: Fit for the Future Infrastructure
Fit for the Future Infrastructure Delivered “Dayforce” resourcing tool New third party warehouse in Daventry Piloting i-serve technology in-store Single view of stock completed Continued focus on “We Operate for Less” programme 15
Slide 16: Autocentres
Autocentres Long-term investment in colleagues: • New technician pay grading scheme • Apprenticeship programme growing Improved offer to customers: • Sunday & Bank holiday opening • Electric and hybrid vehicle servicing A year of transition: • Actions underway to improve profitability including revi
Slide 17: Summary
Summary Service-led sales growth Continued market share gains Strong strategic progress Acquisitions performing well Strengthening of services proposition 17
Slide 18: FY17 Financial Performance & Financial Guidance
FY17 Financial Performance & Financial Guidance 18
Slide 19: Group Financial Highlights
Group Financial Highlights +7.2% YoY Revenue: £1,095.0m +£73.5m YoY +2.7% LFL Underlying EBITDA: £108.7m -5.1% YoY -£5.9m YoY Underlying PBT: £75.4m -7.5% YoY -£6.1m YoY Basic Underlying EPS: 30.3p -8.7% YoY -2.9p YoY Ord Dividend Ord. Dividend: 17.51p +3.0% YoY Cover 1.73 c.£14m Special Net Debt gr
Slide 20: Retail Financial Highlights
Retail Financial Highlights +8.0% YoY Revenue: £938.4m +3.1% LFL -260 bps Gross Margin: 48.6% YoY +4.6% YoY Operating costs: £379.8m +2.4% LFL Underlying EBIT: £76.8m -£5.0m YoY Underlying EBITDA: £101.1m -£4.9m YoY Total Motoring sales up [x.x%] Notes: 1) All numbers represent performance for the 5
Slide 21: Retail Sales
Retail Sales 11 weeks 15 weeks FY17 to to 31/03/17 28/04/17 Total LFL LFL LFL Sales Sales Sales Sales Retail +8.0% +3.1% -1.2% +3.9% 12% Motoring +1.8% +2.0% -2.5% +0.9% 19% 38% Car Maintenance +2.9% +3.1% -1.7% +0.2% Car Enhancement -2.9% -2.8% -6.1% -1.8% 31% Travel Solutions +7.8% +7.9% +2.1% +9.
Slide 22: Retail Gross Margin – decline of 260 bps as expected
Retail Gross Margin – decline of 260 bps as expected FX Mitigations: 1) Working with suppliers 2) Improving processes and costs 3) Prices *The net of the adverse mix impact of faster cycling sales and the cycling promotion in the first half, partially offset by the accretive mix impact of service-re
Slide 23: Retail Operating Costs – grew as expected
Retail Operating Costs – grew as expected Shop colleagues*: £110.2m +7.0% YoY Store Occupancy: £138.6m +0.2% YoY Warehousing & Distribution: £45.4m -0.7% YoY Support costs: £77.4m +1.8% YoY Sub total: £371.6m +2.4% YoY Tredz & Wheelies: £8.2m Sub total: £379.8m +4.6% YoY * Shop colleague costs incre
Slide 24: Autocentres Financial Highlights
Autocentres Financial Highlights +2.4 YoY Revenue: £156.6m EBITDA by Quarter +0.6% LFL Gross Margin: 65.1% +80 bps YoY FY17 Operating costs: £99.8m +5.6% YoY FY16 Underlying EBIT: £2.2m -£1.6m YoY Q1 Q2 Q3 Q4 Underlying EBITDA: £7.6m -£1.0m YoY * All numbers represent performance before non-recurrin
Slide 25: Another strong year of cash flow
Another strong year of cash flow £105.3m -£16.3m Working capital -£34.4m FY17 capex -£16.9m tax and other £37.7m -£33.5m ordinary dividend £4.2m -£20m special EBITDA after non- Free dividend -£22.1m recurring items Cash M&A -£38.0m Flow Net cash £112.9m -£12.6m outflow Working FY16 capital -£38.5m c
Slide 26: Stock increased because of FX and to support trading
Stock increased because of FX and to support trading £5.9m £13.2m £191.1m Tredz & Wheelies £14.1m Stock build due to £157.9m FX impact Easter timing, new ranges and growth categories Opening Stock Closing Stock 26
Slide 27: Outlook
Outlook Financial targets unchanged: • Grow sales faster than markets • EBITDA margin broadly flat* • Grow Ordinary dividend every year** • Net debt target of 1x EBITDA No change to capital allocation priorities FX impact brings a significant cost headwind, but mitigation plans gaining traction Cont
Slide 28: Summary
Summary for life’s journeys
Slide 29: Summary
Summary Good StrongGood and direction engaged set to drive direction team in growth place Good direction Good Clear Good direction strategic No change direction progress to financial made targets 29
Slide 30: for life's journeys
for life’s journeys
Slide 31: Appendices
Appendices halfords for life’s journeys
Slide 32: Group Income Statement
Group Income Statement FY17 FY16 Change £m £m Revenue 1,095.0 1,021.5 +7.2% Gross Profit 558.6 543.1 +2.9% Operating Costs (481.5) (458.6) +5.0% Underlying EBIT 77.1 84.5 -8.8% EBIT Margin % 7.0% 8.3% Underlying EBITDA 108.7 114.6 -5.1% EBITDA Margin % 9.9% 11.2% Net Finance Costs (1.7) (3.0) Underl
Slide 33: Retail Income Statement
Retail Income Statement FY17 FY16 Change £m £m Revenue 938.4 868.5 +8.0% Gross Profit 456.6 444.8 +2.7% Gross Margin 48.6% 51.2% -260bps Gross Margin exc. 49.4% 51.2% -180bps Tredz & Wheelies Operating Costs (379.8) (363.0) +4.6% Underlying EBIT 76.8 81.8 -6.1% EBIT Margin 8.2% 9.4% Underlying EBITD
Slide 34: Group Balance Sheet
Group Balance Sheet FY17 FY16 YOY Change £m £m £m Goodwill and Intangible Assets 394.1 362.9 +31.2 8.6% Property, Plant & Equipment 102.8 107.3 -4.5 -4.2% Investments 8.1 - 8.1 100% Derivative Financial 3.7 4.2 (0.5) -11.9% Instruments Net Working Capital 24.7 8.4 +16.3 +194.0% Net Debt (85.9) (47.9
Slide 35: Cash flow and Net Debt
Cash flow and Net Debt Operating Cashflow £m Free Cashflow £m Net Debt £m Operating Underlying EBIT 77.1 90.0 Opening Net Debt (47.9) Cashflow Non-recurring operating (3.4) Capital Expenditure (34.4) Free Cashflow 37.7 expenses Finance lease Depreciation, Amortisation 31.8 Net Finance Costs (0.8) pa
Slide 36: Group Cash Flow
Group Cash Flow FY17 FY16 £m £m Underlying EBITDA 108.7 114.6 Non-recurring operating expenses (3.4) (1.4) Change in inventories (33.2) (8.6) Change in receivables 2.3 (4.9) Change in payables 14.6 2.3 Change in provisions (0.2) (1.4) Other 1.2 3.1 Operating Cash Flow 90.0 103.7 Capital Expenditure
Slide 37: Group Components
Group Components Retail Autocentres Amortisation Group FY17 £m £m £m £m Revenue 938.4 156.6 - 1,095.0 Gross Profit 456.6 102.0 - 558.6 Operating Costs (379.8) (99.8) (1.9) (481.5) EBIT 76.8 2.2 (1.9) 77.1 EBITDA 101.1 7.6 - 108.7 Retail Autocentres Amortisation Group FY16 £m £m £m £m Revenue 868.5 1
Slide 38: Motoring market indicators
Motoring market indicators Source: Department for Transport National Statistics, BCA Used Car Market Report, SMMT, Statista 38
Slide 39: Retail in-store service menu
Retail in-store service menu New Motoring services in FY18: • Ad-blue top-up • Car key fob repair Trial of Cycling services in FY18: • Bike personalisation • Bike radio frequency identification tagging 39
Slide 40: Net debt to EBITDA
Net debt to EBITDA Debt target of 1x (with range up to 1.5x for M&A) published in June 2016 40
Slide 41: 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 41
Slide 42: Bike brands available across the Group
Bike brands available across the Group 39
Slide 43: Group site portfolio
Group site portfolio FY15 FY16 FY17 Halfords Retail 463 462 460 Halfords Autocentres 305 314 313 Cycle Republic 4 10 15 Tredz - - 4 Total 772 786 792 Number of Autocentres Acquired 223 Average FY11 230 remaining FY12 250 lease length FY13 283 Retail 6.6 years FY14 303 Autocentres 6.7 years FY15 305
Slide 44: 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 along with our current oper
Slide 45: Contact and Newsflow
Contact and Newsflow For further information, please go to www.halfordscompany.com or contact Adam Phillips Corporate Finance & Investor Relations Director adam.phillips@halfords.co.uk Landline: +44 (0)1527 513 113 Mobile: +44 (0)7703 890142 Next newsflow: 5th September 2017: Trading update for the