1st Jun 2016 11:15
LONDON (Alliance News) - Shares in Halfords Group PLC fell to the bottom of the FTSE 250 on Wednesday, after the car parts and bicycle retailer reported a fall in profit in its recently-ended financial year and warned that the cycling market may take some time to recover.
Shares in Halfords were trading down 4.9% at 417.30 pence on Wednesday afternoon, the worst performer in the FTSE 250.
In the year ended April 1, Halfords' pretax profit fell to GBP79.8 million from GBP83.8 million the year before, as revenue slipped slightly to GBP1.02 billion from GBP1.03 billion.
The prior year contained an extra week, and excluding this, revenue was GBP1.00 billion, meaning revenue did actually rise by 1.7% on a proforma basis. Like-for-like revenue rose by 1.5%.
However, profit on a proforma basis still fell below the GBP80.8 million figure reported the prior year, due to increased exceptional charges relating to organisational restructuring costs. Excluding those costs, profit would have risen on a proforma basis to GBP81.5 million from GBP81.1 million, which Investec said was 2% ahead of consensus.
By division, retail revenue grew on a proforma basis to GBP868.5 million from GBP857.9 million, but including the prior year's extra week fell on an audited basis from GBP875.1 million.
On a like-for-like basis, retail revenue was up 1.3% as 2.5% growth in motoring offset a 0.9% decline in cycling, the latter suffering a volatile year. Liberum said retail growth showed a "significant slowdown" on the previous two years.
The group's cycling business had performed well over the past couple of years, with sales of premium bikes growing 8% in the first quarter of the last financial year and cycle repair sales rising 24%, contributing to 2% like-for-like growth overall in that area of the business.
However, cycling like-for-likes deteriorated in the second quarter, falling 7.6%. In the key summer sales period covering the eight weeks to August 28, bicycle sales suffered an 11% drop. Overall, first-half cycling like-for-likes comprising the 26 weeks to October 2 declined 2.9%.
Halfords said at the time of its first-half results that it faced a strong comparative period a year earlier, which included the start of the Tour de France being held in Yorkshire, while poor weather and discounting across the market also contributed to the sales decline.
However, things started to pick up in the third quarter when cycling like-for-likes returned to growth of 1.1%, improving to 1.9% in the fourth quarter, although this wasn't enough to offset the poor first half.
"We have observed a gradual stabilising of market conditions, notwithstanding that it may take some time to return to consistent growth and the weather continues to have an impact on the timing of customer purchase. However we remain confident in the long-term growth prospects of the cycling market," Chief Executive Jill McDonald said in a statement on Wednesday.
"Participation in the UK is still low and there is large scope for new cyclists as well as increased spend from existing cyclists. This is supported by significant government support in London and in many other cities, as well as consumer trends towards healthy activities," she added.
As part of measures to pick up the cycling business, Halfords launched new collaborations with professional cyclist Bradley Wiggins and designer Orla Kiely towards the end of the year, both of which have been well-received, Halfords said. The Orla Kiely range comprises cycling and leisure products and accessories, and the Wiggins range comprises bikes for toddlers to teenagers.
In the new financial year, Halfords will partner on an exclusive collaboration with professional cyclist Laura Trott to create a range of limited edition performance bikes for women, due to be launched in July. The company is also launching its new Cycle Republic website in the next few weeks.
At the end of the last financial year, Halfords bought Tredz Ltd and Wheelies Direct Ltd for GBP18.4 million. Tredz specialises in the sale of premium bikes and cycling parts, accessories and clothing, while Wheelies provides bicycle replacements for insurance companies.
These measures came under Halfords' 'Moving Up A Gear' strategy which it announced last November.
The strategy aims to invest in customer data and insight capabilities, release exclusive products and unique partnerships, create a seamless customer experience both online and in store, and move from "fixing the basics to improving efficiency and fulfillment".
In addition to the new cycling collaborations, Halfords has introduced measures including e-receipts, tailored email campaigns, new in-store services such as windscreen chip repair and motorcycle bulb and battery fitting, improvements to online delivery services and investments into IT.
"As we look ahead there is plenty to do as we implement Moving Up A Gear, and we've already built good momentum. The year ahead will be a busy one, both for product developments and strategic progress," McDonald said.
Meanwhile, revenue in the smaller autocentres business grew on both an audited and proforma basis, growing to GBP153.0 million from GBP150.3 million on an audited basis including the prior year's extra week, and from GBP147.0 million on a proforma basis.
Like-for-like autocentres revenue was up 2.5%, which Halfords said was autocentres' 10th consecutive quarter of like-for-like growth, although growth did slow quarter-by-quarter. The first quarter of the last financial year saw growth of 4.0%, slowing to 2.6% in the second quarter, 1.9% in the third quarter and 1.7% in the fourth quarter.
11 new autocentres were opened in the year and two were closed, taking the total number to 314. 24 autocentres were refurbished, taking the total new or refurbished centres to just over 10% of the estate. Halfords plans to open 10 to 15 new centres in the new year.
Halfords will pay a total dividend of 17 pence for the year, up from 16.5p the year before.
Halfords confirmed that its pretax profit for the new financial year will be broadly unchanged on the financial year just ended due to the investments it is making to drive long-term growth.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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