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Motoring takes control at Halfords amidst electric vehicle trend

The motoring business drove performance, with retail cycling falling against a tough comparative and supply chain issues
Motoring takes control at Halfords amidst electric vehicle trend
  • Electric technicians will be doubled to meet demand for electric vehicle services
  • Full-year profit forecast upgraded

Halfords (HFD) posted robust half-year results with revenue and profit significantly above pre-pandemic levels. On the back of a performance driven by market share growth in its motoring business the motoring and cycling group raised its full-year profit before tax forecast to £80-90m, up from £75m, and reinstated the interim dividend.

The pandemic has had varied impacts on the group’s revenue streams. There was a boom in cycling demand during lockdown, as consumers escaped the sofa while abiding by pandemic restrictions, while the number of car journeys fell as travel was hindered. The obverse of this can be seen in the half-year results, which covers a period of less severe restrictions: like-for-like revenue against the comparative was up 41 per cent for motoring and down by a quarter for cycling.  

The consumer trend of using more electric modes of transport, such as e-bikes and e-scooters, has benefited Halfords. Electric revenues were up 140 per cent on 2 years ago. The group aims to train 2,000 electric technicians by the end of the fiscal year and double this next year, to take advantage of growing demand.  

Motoring accounted for more than two-thirds of group revenue. Touring products, such as roof boxes and cycle carriers, helped Halfords take advantage of the ‘staycation’ trend - sales in this area were up 45 per cent. Child travel products were up by a fifth over 2 years. Improvements in the group’s online service provision has been key to motoring success, with ecommerce sales growth up 80 per cent since 2019.  

Autocentre growth is promising. This part of the business provides car servicing and repair services. Sales were up to £156m, almost doubling since 2019, and represented over a fifth of group revenues.

Supply chain disruption remains a concern. The availability of cycling products, especially of premium items, was significantly impacted over the first half of the period. Management said that “we will see good sales in the categories hardest hit this year and we believe we are well set for Christmas trading”.

Investec is bullish about Halfords’ “effective, higher margin business model”. The broker has upgraded its FY2022 and FY2023 adjusted profit before tax forecasts to £88m and £86m respectively. A price to earnings ratio of 8 times for the next two years looks reasonable given growth prospects. With shares trading hands below this year’s summer peak, it is a good time for investors to get on their bikes. Buy.

Last IC view: Buy, 261p, 18 Nov 2020

HALFORDS (HFD)    
ORD PRICE:304pMARKET VALUE:£ 605m
TOUCH:301-308p12-MONTH HIGH:442pLOW: 228p
DIVIDEND YIELD:1.0%PE RATIO:10
NET ASSET VALUE:236p*NET DEBT:

49%

Half-year to 1 OctTurnover (£m)Pre-tax (£m)Earnings per share (p)Dividend per share (p)
202063955.422.8nil
202169564.326.63.00
% change+9+16+17-
Ex-div:09 Dec   
Payment:21 Jan   
*Includes intangible assets of £401.9m, or 202p per share