16th Jun 2022 11:23
(Alliance News) - Disappointing guidance from Halford Group PLC compounded a poor day for the retailing sector, with warnings over soaring costs and pressures on consumers abound from peers.
Shares in Redditch, England-based Halfords were down 21% at 156.50 pence each, adding to its disappointing share price performance in 2022, with the stock shedding 55%.
In the year ended March 31, pretax profit increased to GBP96.6 million from GBP64.5 million the year prior, and was up from GBP22.7 million in financial 2020. The company proposed a final dividend of 6.0 pence per share, up from 5.0p a year ago.
Underlying pretax profit dropped to GBP89.8 million from GBP99.5 million, but was up from GBP56.9 million two years ago.
Revenue improved to GBP1.37 billion from GBP1.29 billion the year before, and increased from GBP1.14 billion two years ago.
"Our Motoring business in Retail and Autocentres has shown strong growth. Cycling sales stepped back in the context of strong comparators and supply disruption," Halfords explained.
Year-on-year, Retail revenue slipped to GBP1.00 billion from GBP1.04 billion, but Autocentres revenue was up to GBP368.0 million from GBP252.5 million.
Halfords also noted sales of e-bikes, e-scooters and accessories were up 74% on two years ago, and servicing for electric cars in its garages has almost tripled year-on-year.
Chief Executive Graham Stapleton said: "While rising inflation and declining consumer confidence will naturally present short-term challenges for any customer-facing business like ours, we remain confident in Halfords's long-term growth prospects due to our service-led strategy and the enduring strength of our brand, people, products and services."
Looking ahead, the company said it is "not immune" to external challenges, citing reduced demand, particularly for higher ticket items, and cost inflation.
"Higher inflation began to emerge in the second half of our financial year, compounded by the onset of war in Ukraine. Although the impact on FY22 was limited, there is no doubt that the economic environment for UK companies and consumers has become tougher than six months ago," the company said.
Halfords is guiding for underlying pretax profit between GBP65 million and GBP75 million for the 2023 financial year - which at worst would be a 28% drop from the recently ended financial year.
According to company-compiled consensus, analysts had been looking for a profit figure of GBP83.3 million in the 2023 financial year, following by growth to GBP91.4 million in the 2024 financial year.
Liberum, which contributed to the consensus figure with a lowball prediction of GBP70.5 million, on Thursday issued a fresh estimate of GBP64.7 million, sitting marginally below the new guidance range.
For the 2024 financial year, Liberum now expects profit of GBP77.2 million.
"We acknowledge the low valuation and the transformation progress made under the strategy. However, at this stage given the uncertain outlook, we see limited near-term catalysts, and move to Hold," the broker said.
By Paul McGowan; [email protected] and Lucy Heming; [email protected]
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