DJ Halfords Group PLC: Interim Results for the 26 weeks to 27 September 2024 Halfords Group PLC (HFD) Halfords Group PLC: Interim Results for the 26 weeks to 27 September 2024 26-Nov-2024 / 07:00
Halfords Group PLC Halfords Group PLC: Interim Results for the 26 weeks to 27 September 2024 26-Nov-2024 / 07:00 GMT/BST =---------------------------------------------------------------------------------------------------------------------- 26 November 2024 Halfords Group plc Interim Results for the 26 weeks to 27 September 2024 Strong first half delivers GBP21m underlying PBT; accelerating Fusion garage services rollout to c.40 locations.
-- Retail generated underlying EBIT of GBP21.2m with 200bps improvement in gross margin inpart reflecting pricing discipline in a better-than-expected Motoring Products market, while the underlying Cyclingmarket remains c.33% below FY19 volumes. -- The effect of the UK Budget on consumer behaviour and hence the trajectory of our end-markets is unclear.We have a greater ability to mitigate headwinds in the more needs-based Autocentres servicing business, wherepricing power is greater. Additional tactical and structural options to support mitigation are under review."I am really pleased with the progress we have delivered in the first half.
The steps we have taken in H1 are very clearly manifested in our gross margin performance, which increased by 160bps YoY to enable us to hold PBT flat vs. last year despite significant wage inflation across the business. Notes: Following the purchase of Wiggle by Frasers Group in Feb 24, Wiggle data, which was previously included in Bicycling Association Cycling data, was removed retrospectively and fully from that point forward. The data service also excludes Evans Cycles. GfK Tyres market reporting includes sales data from Tyre Specialists, Autocentres and Online Pure Players.
Meanwhile, Motoring Services performance was a highlight for the Group, taking share in a growing market where we are better able to price to reflect increases in our cost base. We have continued to take action to increase the volume of higher margin Service, Maintenance and Repair work in our garages, particularly in the sites acquired from National which historically focused on Tyres. We have seen a c.3% increase in the proportion of sales derived from SMR across the garage estate.
Halfords has absorbed some very significant inflationary pressures in recent years and the additional c.GBP15m of cost increases experienced in H1 take the cumulative total since the start of FY23 to c.GBP120m. While there are signs that some of these pressures are abating, most notably in relation to energy costs and FX, labour inflation continues to be a significant headwind with a c.10% increase in the National Living Wage coming into effect at the start of FY25 .
HMC cuts across both our Retail and Autocentres businesses and continues to resonate strongly in both its free and paid-for forms. HMC now has more than 4 million members having only launched at the end of FY22, with Premium membership signups in H1 tracking in-line with our 8 to 10% mid-term target. HMC members continue to shop more frequently, spend more when they visit, and are more likely than non-members to experience the full range of Halfords products and services .
The benefits of Fusion are particularly apparent in many of the garages acquired from National, which represent 13 of the 22 Fusion locations delivered so far this year and tend to be larger and more Tyres-focused than Halfords Autocentres locations. As such, they present a significant opportunity to increase capacity and expand into higher margin SMR work and hence we see Fusion as the key to unlocking the full potential of the National business in the coming years.
The second factor impacting progress towards our mid-term targets is inflation, which we had expected to start to ease in the years following the CMD. Announcements made at the recent UK Budget in relation to Employers' National Insurance and moves to align the National Minimum Wage rate for under-21s with the National Living Wage have materially impacted our cost assumptions for FY26, adding c.GBP23m to our direct labour costs, of which c.
H1 FY25 H1 FY24 Change GBPm GBPm 25 vs 24 Underlying Profit Before Tax from Continuing Operations 21.0 25.2 % Underlying Loss Before Tax from Discontinued Operations - Underlying Profit Before Tax - Total Operations 21.0 21.3 % The following table shows the same information but with total operations as the comparative . As previously discussed, the decision to outsource our tyre and warehousing operations to Bond delivers significant P&L benefit to the Group.
Looking ahead to FY26, changes announced in the Autumn UK Budget will add c.GBP23m of direct labour cost inflation to the business, of which c.GBP9m was already included in our planning assumptions. As highlighted in the CEO Report we may also see inflation in managed services while the impact on our end-markets is unclear. We are considering all mitigation options.
Garage Transformation Programme costs relate to professional fees incurred in reviewing and implementing improvements to operational processes and systems in the Group's garages, the benefits of which will be realised in future periods. Continuing Operations H1 FY25 H1 FY24 Change GBPm GBPm 25 vs 24 Revenue 348.7 348.7 0.8%* Gross Profit 181.0 179.0 1.1% Gross Margin 51.9% 51.3% +60bps Operating Costs 5.5% Underlying EBIT 7.8 14.8 % Non-underlying items 55.6% EBIT 6.4 13.9 % Underlying EBITDA 29.9 34.9 % *Change in revenue figures is on a LfL basis
The Autocentres segment reported revenue of GBP348.7m, flat vs. the previous year. Excluding the Avayler SaaS business, Autocentres generated revenue of GBP347.1m in H1 FY25, a LfL increase of 0.8% against a very strong prior year comparative . This performance is based on divergent trends in the two core autocentres markets of Tyres and Service, Maintenance and Repair .
As at 27 September 2024 there were a total of 770 vans in operation, 197 of which were Halfords Mobile Expert, 502 commercial vans and 71 vans supporting mobile tyre fitting in National .The reduced net finance expense YoY of GBP5.4m is primarily due to interest accruing on a higher average cash balance through the period, which was the result of disciplined working capital management including lower stock. Finance costs pre IFRS 16 also decreased compared to the prior year to GBP1.0m .
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