23rd Nov 2006 07:01
Halfords Group PLC23 November 2006 23 November 2006 Halfords Group Plc ("halfords") Interim Results Announcement Halfords, the UK's leading auto, leisure and cycling products retailer,announces its interim results for the 26 weeks to 29 September 2006. Financial Highlights • Revenue £369.2m up 9.3% (2005: £337.7m) • Like-for-like sales up 6.5% with growth in all key categories • Operating profit £48.5m up 5.7% (2005: £45.9m) • Profit before tax and exceptional items £43.5m up 7.9% (2005: £40.3m) • Profit before tax £40.9m up 1.5% (2005: £40.3m) • Basic earnings per share before exceptional items 13.5p up 11.6% (2005: 12.1p) • Basic earnings per share 12.7p up 5.0% (2005: 12.1p) • Interim dividend up 8.8% to 4.35p (2005: 4.0p) • In the 6 weeks since 29 September trading in line with internal expectations Business Highlights • Significant reduction in margin dilution at 40 bps (2005: 140 bps) • 13 new store openings during the period • First standalone Bikehut store opened on 9 November 2006 in Brighton • Debt re-finance, comprising £180m non-amortising term loan and £120m revolving credit facility, generating interest margin benefit and greater capital flexibility • 5.2m shares purchased for £16.0m, representing one third of the £50m share buy-back programme Commenting on the results, Ian McLeod, Chief Executive, said:"With like-for-like sales up 6.5% we are pleased with Halfords tradingperformance during the first 26 weeks of this financial year. The Group hasmaintained its momentum within Car Enhancement and Car Maintenance, and we havealso delivered a strong performance within the Leisure categories of Cycling andTravel Solutions. Growing sales in all key categories has therefore provided uswith further confidence in our trading prospects for the second half." Enquiries:Halfords Group plcTony Newbould, Investor Relations 01527 513113 07753 809522 Gainsborough CommunicationsAndy Cornelius 0207 190 1703Julian Walker 0207 190 1705 Notes to Editors Halfords Group plcHalfords is the UK's leading auto, leisure and cycling products retailer, with420 stores and 10,000 employees. The company was established in 1892 and floatedon the London Stock Exchange in June 2004. The Group sells 11,000 differentproduct lines, ranging from car parts and cycles through to the latest in-cartechnology, alloy wheels, child seats, roof boxes and outdoor leisure andcamping equipment. Halfords' own brands include Ripspeed, for car enhancement,and Bikehut, for cycles and cycling accessories, including the Apollo andCarrera brands. Stores offer a "We'll fit it" service for car parts, childseats, satellite navigation and in-car entertainment systems and a "We'll repairit" service for cycles. In addition to the corporate website, www.halfordscompany.com, Halfords operatesan online retail website, which can be found at www.halfords.com. Cautionary Statement This report contains certain forward-looking statements with respect to thefinancial condition, results of operations, and businesses of Halfords Groupplc. These statements and forecasts involve risk, uncertainty and assumptionsbecause they relate to events and depend upon circumstances that will occur inthe future. There are a number of factors which could cause actual results ordevelopments to differ materially from those expressed or implied by theseforward-looking statements. These forward-looking statements are made only as atthe date of this announcement. Nothing in this announcement should be construedas a profit forecast. Except as required by law, Halfords Group plc has noobligation to update the forward-looking statements or to correct anyinaccuracies therein. Overview There has been a strong first half sales performance that has seen like-for-likegrowth in all of the key categories. Gross profit dilution has shown asubstantial improvement since the end of the financial year, which, with thecontinued focus on cost control, has delivered a 7.9% increase in profit beforetaxation and exceptional items Summary of Group Results Unaudited 26 weeks to 29 September 30 September Change 2006 2005 £m £m %Revenue 369.2 337.7 9.3%Gross profit 188.4 173.7 8.5%Gross profit % 51.0% 51.4% -40 bpsOperating profit 48.5 45.9 5.7%Profit before tax and exceptional items 43.5 40.3 7.9%Exceptional finance costs(1) (2.6) -Profit before tax 40.9 40.3 1.5%Basic earnings per sharebefore exceptional items 13.5 pence 12.1 pence 11.6%Basic earnings per share 12.7 pence 12.1 pence 5.0% Notes:1. The exceptional finance costs relate to the following items:(a) On 14 July 2006, the Group replaced its existing borrowings with afive-year term loan of £180m and a revolving facility of £120m. As aconsequence, a charge of £1.5m was made in respect of the acceleratedamortisation of the issue costs associated with the original borrowings.(b) On 29 September 2006 the Group closed out its existing interest rateswap at a cost of £1.1m. On the same date, the interest on the £180m term loanwas fixed for a three-month period. The Group has entered into a new interestrate swap for £70m commencing on 29 December 2006 for the length of the newfacility. Financial Review Income Statement Sales for 26 weeks to 29 September 2006 were £369.2m (2005: 337.7m) an increaseof 9.3% on the comparable period last year, representing like-for-like sales of6.5%. As noted in last year's interim report, there was no Easter period in the26 weeks ended 30 September 2005 and with a typical Easter worth 1.5% of salesin a 26-week period, the underlying like-for-like sales performance is 5.0%. Gross profit at £188.4m (2005: £173.7m) is 51.0% as a percentage of net salesand compares to last year's restated figure of 51.4%. As noted below thecomparative gross profit figures have been restated by £0.1m to reflect anappropriate absorption of rebate income into inventories that was previouslyrecognised in the Income Statement. The company has previously commented uponthe impact that the change in sales mix, towards lower margin in-car technologyproducts, has had upon gross profit per cent. However, it is pleasing to notethat the 40 basis point dilution in gross profit per cent represents asignificant improvement on both the 140 basis point and 260 basis point dilutionreported at the interim and preliminary results last year. This dilutionimprovement reflects the company's active margin management, the flow through ofFar East sourcing benefits and improved sales performance in higher margincategories. Operating expenses as a per cent of sales at 37.9% is at the same level as thecomparable period last year. An improvement in the selling and distributioncosts ratio, in part driven by the slowing down of rental inflation, has beenoffset by the increase in administrative expenses. Included within this period'sadministrative expenses there are a number of one-off project related expensesof £0.5m, which include the three store Czech Republic pilot, with the firststore scheduled to open in Summer 2007, legal costs associated with the group'scapital restructuring and the relocation of the Halfords Asia office. Landlord contributions during the period totalled £1.2m, compared to £3.5m lastyear. In line with the guidance previously given, the Company remains on trackto deliver contributions of approximately £4.0m (52 weeks to 31 March 2006:£6.9m) for the full year. Net finance costs for the half year were £7.6m (2005: £5.6m) and includedexceptional finance costs totalling £2.6m in respect of the write-off ofpreviously capitalised loan fees of £1.5m, arising from the repayment of thecompany's term debt and the close-out of an interest rate swap of £1.1m, as partof the debt re-financing exercise. Taxation The taxation charge is based upon an estimated effective tax rate of 30.1%(2005: 31.8%) on profit for the 52-week period ending 30 March 2007. Balance Sheet and Cash Flow Having undertaken a comprehensive review of the company's capital structure, theBoard took the decision to undertake a debt re-financing exercise, which wascompleted on 14 July 2006. The debt facility now comprises a £180m five-yearterm non-amortising loan with a £120m revolving credit facility. Total net debt at 29 September 2006 was £181.2m (31 March 2006: £173.7m) andincludes £12.5m (31 March 2006: £12.6m) in respect of the Head Office financelease. The company continues to generate strong net cash flows from operations, whichwere £60.7m at 29 September 2006 (2005: £61.0m) and included a small workingcapital inflow. Stock levels at 29 September 2006 were £137.7m (2005: £145.0m)and have fallen by 5.0% compared to the half-year position last year resultingin an improvement in stock turn. Stock turn in the 26 week period improved to2.6 times, compared to last year's 2.4 times. Since the beginning of thefinancial year stock levels have increased by £10.5m, reflecting the stock buildof in-car technology products such as satellite navigation devices and DVDunits. Capital expenditure during the first half totalled £10.8m (2005: £13.9m) and thecompany is forecast to spend approximately £25.0m for the full year (52 weeks to31 March 2006: £27.8m). The major spends during this period have been theopening of new stores, £5.2m (2005: £5.6m), and £1.9m (2005: Nil) in respect ofthe development of new store systems, which are planned to go live in 2007. Dividend and Share Buy back The Board continues to recognise the company's good performance and haveincreased the interim dividend by 8.8% to 4.35 pence per share (2005: 4.0 penceper share). The dividend will be paid on 8 January 2007 to shareholders on theregister on 1 December 2006. At the Preliminary results presentation on 8 June 2006, Halfords announced ashare buy-back programme that would purchase, for cancellation, up to £50m ofshare capital. In the period from the 8 June 2006 to 29 September 2006 Halfordshas purchased 5.2m of its own shares at a consideration of £16.0m, an average of308.0 pence per share. Operating Review Halfords has delivered encouraging results, which reflects a continuing focus onproviding a strong, well promoted, in-store offer supported by trained andhighly motivated staff. Last year we completed the store conversion programme to the new orange livery.The investment of £21.8m in converted stores and £18.2m in new stores during thelast two years means we are now trading in a modern environment with wellmerchandised product and knowledgeable staff. The trading teams in head office have been focused on providing compellingoffers through new and exciting ranges at better margins, helped by Far Eastsourcing opportunities, which has seen the teams optimise our position in newmarkets and take advantage of legislative changes that impact upon existingmarkets. The wettest May for 23 years generated a good start to the financial year forthe car maintenance category, with strong demand for windscreen products andlight bulbs. Halfords service proposition continues to have a positive impact oncar battery sales, as customers welcome the option of Halfords staff removingand disposing of old batteries. The satellite navigation market remains strong, with Halfords underpinning itsleading retailer status through its broad range of brands and productdemonstration. MP3 connectivity products, in conjunction with the "We'll fit it"proposition, have helped to grow sales in technology products. Within theperformance styling category Halfords has launched a national mobile fittingoffer for alloy wheel and tyre packages. There has been a successful roll outinto 250 stores of the standard wheel collection, predominantly aimed at non-Ripspeed customers looking to trade up. The learning taken from the experience of last year's active leisure ranges hasresulted in Halfords being able to provide a competitive entry-level range ofproducts sourced from the Far East. Therefore the combination of warm weather inJune and July with a strong camping offer based upon own label and value formoney generated good sales, especially in tents. The introduction of child seat safety legislation on 18 September 2006 has seenincreased demand for child seats and booster seats. Halfords advised customersof the change in legislation through in-store point of sale materials and builta large stock position well in advance of the new law, which provided betterstock availability than the competition when the law changed. The interest inchild safety generated an increase in footfall of both female shoppers andconsumers that had not shopped at Halfords before, leading to an increasedawareness of our stores. The first half-year was a good period for the cycling category with stronggrowth in the own brand Apollo and Carrera ranges. In addition, hybrid,commuting and folding bikes have performed particularly well. With more thanfour million cycle accessories sold under the Bikehut brand, in the first 26weeks, this area continues to demonstrate growth potential and providesencouragement for our trial of standalone Bikehut stores. Store Portfolio During the 26 weeks to 29 September 2006 the company opened 13 new stores andclosed one, resulting in 420 stores trading at the half-year end. We aim to openmore smaller format "neighbourhood" stores, with seven of these stores opened inthe first half. Of the remaining new stores five were opened with mezzaninefloors, of which four were the supermezzanine format. Space from new storescontributed 2.8% (2005: 2.1%) to the first half sales growth. At 29 September 2006 Halfords traded from 3.5 million square feet representingan additional 100,000 square feet since the beginning of the financial year. With the supermezzanine conversion programme virtually complete, the company'sfocus has shifted to opening new stores and identifying potential sites The company remains on track to have its first two standalone Bikehut storestrading by Christmas, the first of which was opened in Brighton on 9 November2006. International Expansion The roll out programme in the Republic of Ireland continues, with two of the newsupermezzanine format stores noted above having opened during the period, takingthe total number of stores in Ireland to ten. Progress continues to be made in developing three sites in the Czech Republicwith the first store scheduled to open in Summer 2007. In addition we haverecruited a "country" team that will be responsible for managing the trial onthe ground. Second Half Outlook and Current Trading With like-for-like sales up 6.5% we are pleased with Halfords tradingperformance during the first 26 weeks of this financial year. The Group hasmaintained its momentum within Car Enhancement and Car Maintenance, and we havealso delivered a strong performance within the Leisure categories of Cycling andTravel Solutions. Growing sales in all key categories has therefore provided theGroup with further confidence in its trading prospects for the second half. Inthe six weeks since 29 September 2006 Halfords has traded in line with internalexpectations. HALFORDS GROUP PLC Consolidated Income Statement 26 weeks to 29 September 2006 Restated (see note 1) 26 weeks to 26 weeks to 52 weeks to 29 September 2006 30 September 2005 31 March 2006 Unaudited Unaudited Audited Notes £m £m £m Revenue 369.2 337.7 681.7 Cost of sales (180.8) (164.0) (335.0)------------------ ----- ----------- ----------- ---------Gross profit 188.4 173.7 346.7 Operating expenses (139.9) (127.8) (257.6)------------------ ----- ----------- ----------- ---------Operating profit 48.5 45.9 89.1 Finance costs 3 (8.3) (5.6) (12.5)Finance income 3 0.7 - 0.4------------------ ----- ----------- ----------- --------- Profit before tax 40.9 40.3 77.0 Taxation 4 (12.3) (12.8) (23.4)------------------ ----- ----------- ----------- ---------Profitattributableto equityshareholders 28.6 27.5 53.6------------------ ----- ----------- ----------- --------- Earnings per shareBasic 6 12.7p 12.1p 23.6pDiluted 6 12.7p 12.1p 23.6p------------------ ----- ----------- ----------- --------- A final dividend of 8.75 pence per share for the 52 weeks to 31 March 2006 (8.3pence per share for the 52 weeks to 1 April 2005) was paid on 14 August 2006.The directors have approved an interim dividend of 4.35 pence per share inrespect of the 26 weeks to 29 September 2006 (4.0 pence per share for the 26weeks to 30 September 2005). HALFORDS GROUP PLC Consolidated Balance Sheet As at 29 September 2006 Restated (see note 1) 29 September 2006 30 September 2005 31 March 2006 Unaudited Unaudited Audited £m £m £m Non-current assetsGoodwill 253.1 253.1 253.1Other intangible assets 5.0 6.0 5.7Property, plant and equipment 105.2 101.3 104.1----------------------------- ----------- ----------- --------- 363.3 360.4 362.9Current assetsInventories 137.7 145.0 127.2Trade and other receivables 32.8 29.5 29.4Derivative financial instruments - 1.4 1.2Cash and cash equivalents 45.2 4.9 1.5----------------------------- ----------- ----------- --------- 215.7 180.8 159.3----------------------------- ----------- ----------- ---------Total assets 579.0 541.2 522.2 LiabilitiesCurrent liabilitiesBorrowings (34.7) (45.1) (63.5)Derivative financialinstruments (2.0) (3.6) -Trade and other payables (113.6) (143.9) (101.9)Current tax liabilities (13.3) (14.4) (13.1)Provisions (1.5) (1.4) (1.2)----------------------------- ----------- ----------- --------- (165.1) (208.4) (179.7)----------------------------- ----------- ----------- --------- Net current assets/(liabilities) 50.6 (27.6) (20.4) Non-current liabilitiesBorrowings (191.7) (130.5) (111.7)Derivative financialinstruments - - (2.1)Deferred tax liabilities (2.8) (4.8) (3.5)Accruals and deferred income (24.5) (14.6) (22.7) ----------------------------- ----------- ----------- --------- (219.0) (149.9) (140.0)----------------------------- ----------- ----------- --------- Total liabilities (384.1) (358.3) (319.7)----------------------------- ----------- ----------- --------- Net assets 194.9 182.9 202.5----------------------------- ----------- ----------- --------- Shareholders' equityOrdinary shares 2.2 2.3 2.3Share premium account 133.2 133.1 133.2Capital redemption reserve 0.1 - - Hedging reserve (2.0) (2.2) (0.8)Retained earnings 61.4 49.7 67.8----------------------------- ----------- ----------- --------- Total equity 194.9 182.9 202.5----------------------------- ----------- ----------- --------- HALFORDS GROUP PLC Consolidated Statement of Changes in Shareholders' Equity 26 weeks to 29 September 2006 Share Share Capital Hedging Restated Total capital premium redemption reserve retained equity account reserve earnings £m £m £m £m £m £m------------------------- ------- ------- ------- ------- ------- -------Balance at 1 April 2005Restated (see note 1) 2.3 132.9 - (2.9) 40.5 172.8 Profit for the period - - - - 27.5 27.5Shares issued - 0.2 - - - 0.2Cash flow hedges(net of tax):Fair value gains in the period - - - 0.7 - 0.7Employee share options - - - - 0.6 0.6Dividends - - - - (18.9) (18.9)------------------------- ------- ------- ------- ------- ------- -------Balance at 30 September 2005 2.3 133.1 - (2.2) 49.7 182.9------------------------- ------- ------- ------- ------- ------- ------- Share Share Capital Hedging Retained Total capital premium redemption reserve earnings equity account reserve £m £m £m £m £m £m------------------------- ------- ------- ------- ------- ------- -------Balance at 1 April 2005 2.3 132.9 - (2.9) 40.5 172.8 Profit for the period - - - - 53.6 53.6Shares issued - 0.3 - - - 0.3Cash flow hedges(net of tax):Fair value gains in theperiod - - - 3.2 - 3.2Transfers to inventory - - - (0.8) - (0.8)Transfers to net profit - - - (0.3) - (0.3)Employee share options - - - - 1.3 1.3Deferred tax on employeeshare options - - - - 0.4 0.4Dividends - - - - (28.0) (28.0)------------------------- ------- ------- ------- ------- ------- -------Balance at 31 March 2006 2.3 133.2 - (0.8) 67.8 202.5------------------------- ------- ------- ------- ------- ------- ------- Share Share Capital Hedging Retained Total capital premium redemption reserve earnings equity account reserve £m £m £m £m £m £m------------------------- ------- ------- ------- ------- ------- -------Balance at 31 March 2006 2.3 133.2 - (0.8) 67.8 202.5 Profit for the period - - - - 28.6 28.6Purchase of own shares (0.1) - 0.1 - (16.0) (16.0)Shares issued - - - - - -Cash flow hedges (netof tax):Fair value losses in theperiod - - - (2.9) - (2.9)Transfers to inventory - - - 1.2 - 1.2Transfers to net profit - - - 0.5 - 0.5Employee share options - - - - 0.7 0.7Deferred tax on employeeshare options - - - - 0.1 0.1Dividends - - - - (19.8) (19.8)------------------------- ------- ------- ------- ------- ------- -------Balance at 29 September 2006 2.2 133.2 0.1 (2.0) 61.4 194.9------------------------- ------- ------- ------- ------- ------- ------- HALFORDS GROUP PLC Consolidated Cash Flow Statement 26 weeks to 29 September 2006 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Notes £m £m £m------------------------------------- ----- ---------- ---------- ----------Cash flows from operating activitiesCash generated from operations 7 60.7 61.0 100.9Finance income received 0.6 - 0.4Finance costs paid (5.5) (5.4) (11.0)Exceptional swap close out costs (1.1) - -Gain/(costs) of forward foreignexchange contracts 0.1 - (0.9)Taxation paid (12.7) (11.9) (24.8)------------------------------------- ----- ---------- ---------- ----------Net cash from operating activities 42.1 43.7 64.6------------------------------------- ----- ---------- ---------- ----------Cash flows from investing activitiesPurchase of intangible assets (0.3) - (1.4)Purchase of property, plant andequipment (11.7) (12.9) (26.1)------------------------------------- ----- ---------- ---------- ----------Net cash used in investing activities (12.0) (12.9) (27.5)------------------------------------- ----- ---------- ---------- ----------Cash flows from financing activitiesNet proceeds from issue of ordinaryshares - 0.2 0.3Purchase of own shares (16.0) - -Repayment of bank borrowings (144.0) (26.0) (12.0)Proceeds from new bank borrowings 180.0 - -Issue costs of new bank borrowings (1.0) - -Finance lease principal payments (0.1) (0.1) (0.3)Dividends paid to shareholders (19.8) (18.9) (28.0)------------------------------------- ----- ---------- ---------- ----------Net cash used in financingactivities (0.9) (44.8) (40.0)------------------------------------- ----- ---------- ---------- ----------Net increase/(decrease) in cash and bank overdrafts 29.2 (14.0) (2.9)Cash and bank overdrafts at thebeginning of the period 8 (18.4) (15.5) (15.5)------------------------------------- ----- ---------- ---------- ----------Cash and bank overdrafts at theend of the period 8 10.8 (29.5) (18.4)------------------------------------- ----- ---------- ---------- ---------- These interim statements should be read in conjunction with the following notes. HALFORDS GROUP PLC Notes to Interim Report 26 weeks to 29 September 2006 1. General Information Basis of Preparation The financial information set out on pages 8 to 17 comprise the interimconsolidated financial statements of Halfords Group plc for the 26 weeks to 29September 2006. It has been prepared in accordance with the accounting policiesset out in the 2006 Annual Reports and Accounts, which are published on theHalfords Group website (www.halfordscompany.com) and are expected to be followedin the full financial statements for the 52 weeks to 30 March 2007. In additionto these policies, exceptional items have been separately disclosed within thisreport in respect of transactions that are non-recurring and material in nature. In addition to the subsidiaries as set out in the 2006 Annual Reports andAccounts, the consolidated financial statements include the results of HalfordsHoldings (2006) Limited. Halfords Holdings (2006) Limited is an intermediateholding company that was established on 7 June 2006 as part of the Group'sre-financing exercise. The accounting policies set out in the 2006 Annual Report and Accounts have beenconsistently applied to the periods presented. Therefore an adjustment has beenmade to the 30 September 2005 comparative financial information to reflect anappropriate absorption of rebate income into inventories that was previouslyrecognised in the income statement. The impact of this change has been todecrease profit before tax by £0.1m and to decrease inventories by £4.0m in thecomparative half-year period. This change was reflected in the full yearcomparative period. These interim consolidated financial statements have been prepared in accordancewith International Financial Reporting Standards ("IFRS") and IFRICinterpretations as endorsed by the European Union and comply with therequirements of the Listing Rules issued by the Financial Services Authority.The interim consolidated financial statements have been prepared under thehistorical cost convention as modified by the revaluation of certain financialinstruments. The Group has chosen not to adopt IAS 34 "Interim financialstatements" in preparing the interim consolidated financial statements. The interim financial report and accounts for the 26 weeks to 29 September 2006and for the comparative 26 weeks to 30 September 2005 are unaudited and do notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The comparative figures for the 52 weeks ended 31 March 2006 arederived from the statutory accounts filed with the Registrar of Companies. Theaudit report on the 2006 Annual Reports and Accounts was unqualified and did notcontain a statement under section 237 (2 & 3) of the Companies Act 1985. 2. Segmental Reporting The Group has one main business segment, which is retail, and one maingeographical segment, which is the United Kingdom. The business segmentreporting format reflects the Group's management and internal reportingstructure. 3. Net Finance Costs 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited £m £m £mFinance costs:Bank borrowings (4.9) (4.6) (9.7)Amortisation of issue costs onloans (0.3) (0.4) (0.7)Commitment and guarantee fees (0.1) (0.2) (0.3)Cost of forward foreign exchangecontracts - - (0.9)Interest payable on finance leases (0.4) (0.4) (0.9)---------------------------------- -------- -------- -------Finance costs before exceptionalfinance costs (5.7) (5.6) (12.5) Exceptional finance costs:Accelerated amortisation ofissue costs on loans(i) (1.5) - -Swap close out costs(ii) (1.1) - ----------------------------------- -------- -------- ------- (2.6) - ----------------------------------- -------- -------- -------Finance costs (8.3) (5.6) (12.5)---------------------------------- -------- -------- -------Finance income: Bank and similar income 0.6 - 0.4Gain on forward exchange contracts 0.1 - ----------------------------------- -------- -------- -------Finance income 0.7 - 0.4---------------------------------- -------- -------- -------Net finance costs (7.6) (5.6) (12.1)---------------------------------- -------- -------- ------- Exceptional finance costs: (i). On 14 July 2006, the Group replaced its existing borrowings with afive-year term loan of £180m and a revolving credit facility of £120m. As aconsequence, a charge of £1.5m was made in respect of the acceleratedamortisation of the issue costs associated with the original borrowings. (ii). On 29 September 2006 the Group closed out its existing interest rateswap at a cost of £1.1m. On the same date, the interest on the £180m term loanwas fixed for a three-month period. The Group has entered into a new interestrate swap for £70m commencing on 29 December 2006 for the length of the newfacility. 4. Taxation The taxation charge in the 26 weeks to 29 September 2006 is based on anestimated effective tax rate of 30.1% (2005: 31.8%) on profit before tax for the52 weeks to 30 March 2007. The underlying tax charge on trading is 31.4%, principally due to thenon-deductibility of depreciation charged on capital expenditure in respect ofmezzanine floors and other store infrastructure. The lower tax rate of 30.1% inthis financial period is due to the progression of the agreement of prior yeartax computations and the structure put in place, as part of the debt re-financeon 14 July 2006. 5. Dividends During the period the Group paid a final dividend of 8.75 pence per share (8.3pence per share for the 52 weeks to 1 April 2005) in respect of the 52 weeks to31 March 2006, which absorbed £19.8m of shareholder funds (2005: £18.9m). The directors have approved an interim dividend of 4.35 pence per share for the26 weeks to 29 September 2006 (4.0 pence per share for the 26 weeks to 30September 2005), which equates to £9.7m (2005: £9.1m) and will be paid on 8January 2007 to those shareholders on the share register at the close ofbusiness on 1 December 2006. 6. Earnings Per Share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the period. The weighted average number of shares excludes shares held bythe Employee Benefit Trust and has been adjusted for the issue/repurchase ofshares during the period. For diluted earnings per share the weighted average number of ordinary shares inissue is adjusted to assume conversion of all dilutive potential ordinaryshares. These represent share options granted to employees where the exerciseprice is less than the average market price of the Company's ordinary sharesduring the 26 weeks to 29 September 2006. 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Number Number Number m m m Weighted average number of shares in issue 226.2 227.9 228.0Less: shares held by EmployeeBenefit Trust (0.9) (0.4) (0.9)---------------------------------- -------- -------- -------Weighted average number of shares for calculating basic earningsper share 225.3 227.5 227.1Weighted average number of dilutive shares options 0.1 0.2 0.2---------------------------------- -------- -------- -------Total number of shares forcalculating diluted earnings pershare 225.4 227.7 227.3---------------------------------- -------- -------- ------- The alternative measure of earnings per share is provided because it reflectsthe Group's underlying performance by excluding the effect of exceptional items. Restated 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited £m £m £mBasic earnings attributable toequity shareholders 28.6 27.5 53.6Exceptional items:Finance costs (see note 3) 2.6 - -Tax on exceptional finance costs (0.8) - ----------------------------------- -------- -------- -------Underlying earnings before exceptional items 30.4 27.5 53.6---------------------------------- -------- -------- ------- 6. Earnings Per Share (Continued) Restated 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Basic earnings per ordinary share 12.7p 12.1p 23.6pDiluted earnings per ordinary share 12.7p 12.1p 23.6p---------------------------------- -------- -------- -------Basic earnings per ordinary sharebefore exceptional items 13.5p 12.1p 23.6pDiluted earnings per ordinary share before exceptionalitems 13.5p 12.1p 23.6p---------------------------------- -------- -------- ------- 7. Cash Generated from Operations Restated 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited £m £m £m Operating profit 48.5 45.9 89.1Depreciation - property, plant andequipment 9.4 9.8 19.6Amortisation - intangible assets 0.9 0.9 1.9Loss on sale of property, plant andequipment 0.1 - 0.5Share option scheme charges 0.7 0.6 1.3Increase in inventories (10.5) (36.7) (18.9)Increase in debtors (3.4) (5.9) (5.8)Increase in creditors 14.7 46.6 13.6Increase/(decrease) in provisions 0.3 (0.2) (0.4)---------------------------------- -------- -------- -------Cash generated from operations 60.7 61.0 100.9---------------------------------- -------- -------- ------- 8. Analysis of Movements in the Group's Net Debt in the Period At Other non At 31 March cash 29 September 2006 Cash flow changes 2006 Audited Unaudited Unaudited Unaudited £m £m £m £m Cash in hand and at bank 1.5 43.7 - 45.2Bank overdraft (19.9) (14.5) - (34.4)----------------------------- -------- --------- -------- --------- (18.4) 29.2 - 10.8 Debt due within one year (43.3) 44.0 (0.7) -Debt due after one year (99.0) (79.0) (1.1) (179.1)----------------------------- -------- --------- -------- ---------Total net debt excludingfinance leases (160.7) (5.8) (1.8) (168.3) Finance leases due within oneyear (0.3) 0.1 (0.1) (0.3)Finance leases due after oneyear (12.7) - 0.1 (12.6)----------------------------- -------- --------- -------- ---------Total finance leases (13.0) 0.1 - (12.9)----------------------------- -------- --------- -------- ---------Total net debt (173.7) (5.7) (1.8) (181.2)----------------------------- -------- --------- -------- --------- Non-cash changes relate to the finance costs of £1.8m in relation to theamortisation of capitalised debt issue costs. 9. Interim Report Copies of the interim report are available from the registered office ofHalfords Group plc, Icknield Street Drive, Washford West, RedditchWorcestershire, B98 0DE. Introduction We have been instructed by the company to review the financial information forthe 26 weeks ended 29 September 2006, which comprises a consolidated incomestatement, consolidated balance sheet, consolidated statement of changes inshareholder equity, consolidated cash flow statement and related notes. We haveread the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly we do notexpress an audit opinion on the financial information. This report, includingthe conclusion, has been prepared for and only for the company for the purposeof the Listing Rules of the Financial Services Authority and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 26 weeks ended29 September 2006. PricewaterhouseCoopers LLPChartered AccountantsBirmingham23 November 2006 Notes: (a) The maintenance and integrity of the Halfords Group plc web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site.(b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Halfords