A 26.6 per cent drop in Halfords' underlying pre-tax profit was marginally better than analysts had expected. But that wasn't enough to stop the shares slumping to 12-month lows after a "very disappointing" start to trading in the current financial year prompted a flurry of downgrades.
Although poor weather partly explained the weak trading, Halfords admitted that it could do a better job at meeting customers' needs and has launched a new strategy to revitalise growth. It will commit an additional £6m to retail operating expenditure, over half of which will be spent bulking-up its in-store car part fitting capability. A quarter of all bulbs, batteries and wiper blades sold in 2011 were also fitted, and Halfords believes it can capture an increasing proportion of this high margin business from garages and dealerships.
Cycling is also an important avenue of growth and, although bike sales climbed nearly 10 per cent last year, Halfords admitted that it needed to invest more in training to meet its ambition of being "the best cycle shop in town". However, the Autocentres business is blossoming under Halfords' ownership, with like-for-like sales growth here accelerating to 6 per cent over the full year.
Broker Investec expects underlying pre-tax profits of £78m for 2013, giving EPS of 29.9p (2012: £92.2m/33.7p last year).
HALFORDS GROUP (HFD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 256p | MARKET VALUE: | £ 510m | |
| TOUCH: | 255-256p | 12-MONTH HIGH: | 437p | LOW: 255p |
| DIVIDEND YIELD: | 8.6% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 144p* | NET DEBT: | 48% | |
| Year to 30 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 797 | 90.0 | 29.3 | 15.1 |
| 2009 | 810 | 78.0 | 26.6 | 15.9 |
| 2010 | 832 | 110 | 36.8 | 20.0 |
| 2011 | 870 | 118 | 40.7 | 22.0 |
| 2012 | 863 | 94.1 | 34.2 | 22.0 |
| % change | -1 | -20 | -16 | - |
Ex-div:04 Jul Payment:03 Aug *Includes intangible assets of £344m or 173p a share | ||||
