Halfords’ (HFD) first-half top-line performance makes for better reading than the bottom line. Sterling’s depreciation continued to squeeze the retail division’s gross margin, which fell from 47.6 per cent to 45.7 per cent. Bosses say they are working to mitigate this currency impact, and if the pound stays at current levels they expect no further adverse effect for the year to March 2019. Cynics might argue this is a big 'if' – despite progress made on strategic goals, the shares fell 6 per cent in response.
Retail sales grew 4.5 per cent overall, but the cycling division was hurt by these movements in foreign exchange. Most bikes and parts are sourced from dollar-denominated markets, and so prices at Halfords have had to rise. Unsurprisingly, bike volumes fell. However, management thinks these will recover, and says it continues to earn a larger share of a fragmented market. Electric bikes may also represent a growth opportunity: these are relatively new to the UK, but established elsewhere in Europe.
Autocentre sales fell £0.5m to £77.7m, but the gross margin rose from 65 per cent to 67.7 per cent – in keeping with management’s renewed focus on higher-margin direct tyre sales and repair work.
Analysts at N+1 Singer forecast adjusted pre-tax profits of £81m and EPS of 32.7p for the year to March 2018, up from £75.4m and 30.3p in 2017.
| HALFORDS (HFD) | ||||
| ORD PRICE: | 314p | MARKET VALUE: | £626m | |
| TOUCH: | 314-315p | 12-MONTH HIGH: | 381p | LOW: 304p |
| DIVIDEND YIELD: | 5.6%* | PE RATIO: | 11 | |
| NET ASSET VALUE: | 204p** | NET DEBT: | 21% | |
| Half-year to 29 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 567 | 39.1 | 15.9 | 5.8 |
| 2017 | 589 | 36.6 | 14.7 | 6.0 |
| % change | +4 | -6 | -8 | +3 |
| Ex-div: | 07 Dec | |||
| Payment: | 19 Jan | |||
| *Excludes special dividend paid in Feb **Includes intangible assets of £395m, or 197p a share | ||||
