Halfords Group plc (LON:HFD) has reported first half revenue of £765.7m, on a three-year basis that represents growth of 31.3% or 13.3% when looking at a like-for-like comparison.
Revenue growth was driven by the Autocentres business segment, with growth both organic and acquisition based. Service based sales at the group level now account for 42.6% of revenue.
Year-over-year, underlying profit before tax fell £28.9m to £29.0m. Significant cost inflation, a fall in consumer confidence and a tough comparable period last year were all called out as reasons for the profit decline. Over a three-year period, the profit decline was £1.2m.
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The group’s delivered £10m in year-on-year cost savings over the half, expecting that figure to reach £20m by the year end – ahead of previous estimates of £15m.
Full year underlying profit before tax is now expected at the lower end of the guided £65-£75m range.
The board has declared an interim dividend of 3p.
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“Halfords’ decision to focus on building its more reliable service revenue stream couldn’t have come soon enough, as consumers battling cost pressures are moving away from more discretionary spend. This trend’s particularly visible within Halfords once booming cycling division, where sales are coming back down to earth after the pandemic boom.
Unfortunately for consumers, price hikes have been on the menu as a host of input costs have risen, with management warning further price rises might be needed next year.
Looking to the core business, it’s service-based sales that are in focus as Halfords looks to execute on its strategy to bring in more reliable revenue streams. Progress is promising, with service sales expected to reach half of total sales by.
Recent acquisitions, like Lodge Tyre, position the group as the largest commercial tyre business in the UK and with over 90% of its sales directly with businesses, it fits nicely with the strategic evolution.
A slight weakening in the outlook for profit is never ideal, and markets have reacted badly, but weakness was bound to make its way through to performance given the scale of the macro challenges.
Longer term, we’re supportive of the strategy shift, the old business was heavily reliant on cyclical revenue streams and recent changes increase exposure to more reliable sources of income – rarely a bad thing.”
Article by Matt Britzman, Equity Analyst at Hargreaves Lansdown